Wednesday, June 18, 2008

Make the decision loop faster to beat your competitors

Platon IM2008 June 18th, 09:25 – 10:10
In 2004 Dr. Morten Middelfart wrote a PhD in Business Intelligence, called CALM (Computer Aided Leadership and Management).
In Dr. Middelfart’s perspective the art of running a business much resembles warfare tactics and thus much of his PhD takes offset in theories about maneuver warfare tactics.
Reporting is any extraction of data in reports, dashboards etc. while analysis is about pivoting data, drilling up and down and so forth. That is, traditionally speaking.
However, with CALM things look different. Targit wanted to go in another direction – what is an ideal form of leadership? “Things are moving faster and faster, we must make decisions based on more and more information” is what we used to say. But the internet is making a big impact.
Morten was at A.P. Moeller Maersk in the mid 90’. They had the world’s largest electronic network at the time and the power of being able to transmit data about cargo traffic all over the world in an instance gave Maersk a tremendous advantage over its competitors. But over night the competitors were able to do the same things due to the arrival of the internet!
This paved way for new ways of thinking about business: “Isn’t it more important to know where the cargo is than whether the cargo goes on our ship or not?” I.e. the information is what really matters! In this way Maersk could optimize the planning of shipping regardless of which carrier the cargo was on.
Going back to the internet: The fact that the internet is so effective means that the costs of providing services and products have decreased dramatically. This means that the entry cost for new companies is very low, so you don’t know who is going to be your competitor tomorrow.
This is the hyper-volatile world: CHAOS!
A chaos system is sensitive to initial conditions and it is impossible to know all the initial conditions.
We need to know our core competences and how to apply them to any challenge or threat at the company.
In war the Americans had a disadvantage with their Sabre against the MIG15. Using the ODA loop (Observe, Decide, Action) by John Boyd, the idea was to win by making this loop shorter. This will also help a company win over its enemies.
The ODA loops are prevalent throughout the business at all levels. It is NOT one big loop – it is many small loops all over the company. The most changes will happen where the rubber meets the road, i.e. in the operational parts of the company. The basic KPIs are still turnover and gross profit – this is not about to change. But the way we use and apply this information is crucial.
The CALM circle
The CALM circle has 4 phases.
Observation phase
Agents will give relevant employees information about significant events such as unexpected values of KPIs, automatically.
Orientation phase
Observation requires orientation, so it is important that users can go directly from the Observation phase to the Orientation phase, i.e. be able to analyze the data in a report or agent directly and interactively.
Decision phase
The decision phase must be supported by having access to unstructured data, e.g. e-mails, documents.
Action phase
Actions include calling someone an idiot – this will not go out of style anytime soon. But why not put up storyboards or dashboards on large screens in the offices so the whole organization will be oriented towards company KPIs and thus company goals?
In Dr. Middelfarts opinion too much time is spent on creating reports. Why not spend more time making sure we get the right information at the right time? Create intelligent agents that keep all employees informed about important information.
What’s in a click?
A click (with the mouse) is a measure of the effort associated with moving around the ODA loop. Every click takes time, imposes a threat of errors and it requires more education. So the number of clicks is a measure of the cost/time to move around the ODA loop that we want to minimize.
The number of clicks can be reduced through intelligent application design and even artificial intelligence. For example the system can automatically highlight relevant data in reports and it can remember previous actions and use that information to help the user get to the same information later.
Some important technologies relating to CALM:
  • Ad-hoc agents. Everyone must be able to create an agent, not just administrators and super users. Reacting fast to actual data is easier and more powerful than creating forecasts. Not that one should not make budgets and so on but fast reaction is more powerful.
  • Hyper-relations. Any click on data will let the user view relevant, related data.
  • Intelligent analysis. Suggestions by the system for how to analyze certain KPIs. A Smiley can show you trends in the underlying data, so you can click the Smiley to find out what is wrong.
  • Search in unstructured data.
  • Storyboards.
Dr. Middelfart predicts than the next years will be spent doing well-known activities such as ensuring data quality. Search will be more and more predominant and new things will happen in the Action phase. But all this will require a solid foundation in form of trustworthy data sources and data warehouses.
Dr. Middelfart’s warfare perspective is an interesting way of regarding BI as a weapon to fight down your competitors and will certainly appeal to some. However, it can be questioned whether such a perspective will allow companies to ensure ethics such as social and environmental responsibilities.

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