How can we quantify risks ? A deceptively simple question indeed.
The state of the art in risk management would lead one to the following approaches to
quantify risks.
1.The probabilistic approach
2.The statistical approach
3.The operations research approach
4.The aritifical intelligence approach
The probabilistic approach seeks to find the probability of each occurence and the payoff
associated with it. This leads us to a decision tree with the payoffs associated with each
outcome. The expected monetary value (EMV) is then found out for each outcome.
My experience in modelling real life problems is that it is very hard to find out the probability of each outcome. Nevertheless a probabilistic distribution can be inferred if there is
enough data. A more powerful technique is Bayesian modelling. A common scenario that
I have modelled is the following.
Given that a supplier has delivered the material 10 days late last month, what is the
probability that he will deliver on time this month ?
Bayesian statistics is a rapidly evolving branch and is the basis of forecasting engines such
as Demantra. At the heart of it though is the Bayes theorem. My current work
involves improving the accuracy and stability of forecasts by tuning the forecasting engine.
Quantification of credit risks for fixed income securities is another area where I have used
probabilistic techniques.
Statistical approaches rely on inferring based on data. Regression analysis is a common
technique. I have quantified marketing risks using JMP in the past.
MINITAB is another friendly tool for statistical analysis. It is not as heavy duty as SAS
but is powerful enough for many practical applications. Some of the scenarios where I have
used are finding the factors that lead to mutual fund redemptions . I know my cousin
used it to quantify the factors that lead to the risk of malnutrition - specifically fluorosis.
The OR based approaches typically formulate a linear/non linear model and try to solve it.
SOLVER is a powerful tool here. I have used it for the quantification of strategic supply chain
risks and what if scenarios. I have also used it to find out the amount of insurance required
for factories. The other powerful technique for risk quantification is Monte Carlo simulation.
Crystall Ball is a powerful tool here. I have used it to quantify project schedule risks,
budget risks, the probability of background processes getting delayed , compensation risks
and in post acquisition integrations.
Some of the AI approaches to risk quantification include neural networks, data mining and
fuzzy logic. Fuzzy logic , developed by Prof.Zadeh is used in consumer devices such as
washing machines. Fuzzy sets differ from regular sets in that they each member of a
fuzzy set has a degree of association with that set from 0 to 1 while regular sets either have
members (degree =1 ) or do not have them (degree = 0). I have read about fuzzy logic having been used to reduce the risk of overdoze of anesthesia administered to patients.
I tried fuzzy logic almost a decade ago but I think I should revisit that approach in the light of the business knowledge that I have gained over the years.
Neural networks are powerful but have been less prevalent in the industry.
The amount of data needed to train a neural network has been an issue .
Oracle's DARWIN is a powerful suite for data mining algorithms. There are tons of them. I have used them in the past to improve forecast accuracy where data was sparse.
Finally we should not disregard the quasi quantiative techniques such as FMEA-
failure mode and effects analysis. FMEA does not require one to be a mathematician.
On the other hand it takes into account the inputs from all stakeholders to quantify
risks. The outcome , therefore, is generally acceptable to all , although FMEA might
involve conducting several sessions (sometimes heated) with the stakeholders to ensure
convergence of opinions.
I have used FMEA in scenarios such as assessing project risks, evaluating design options,
enforcing KYC regulations in the banking sector etc. FMEA is a key component of the six sigma
methodology and is a technique developed during the second world war.
Thursday, January 21, 2010
Friday, December 12, 2008
Characterizing terrorism
Vinay Deshmukh
Terrorism has emerged as one of the most dangerous hazards in recent times. The risk of terrorism carries with it the potential to destroy civilian life , disrupt businesses and the global economy and cause untold suffering to innocent citizens. This article attempts to characterize terrorism by taking a “systems” approach.
Adaptivity
First and foremost, the threat of terrorism is adaptive which means if you plug one part of the system , the other part is rendered vulnerable. Terrorists diverted their attention to the seas and the railways once they realized that airports and aircrafts became virtually impgrenable. With railway security having been tightened , it is likely that they may focus their attention on the other means of transport. The adaptive nature of terrorism implies that governments have to identify the soft spots in the system apriori and deploy adequate resources to mitigate the risk. Techniques like failure modes and effects analysis (FMEA) developed during the second world war could be utilized to identify such soft spots. FMEA attempts to enumerate various risks and prioritize them using what is called a risk priority number (RPN).
RPN = probability of occurrence * severity of impact * detectability
The probability, likelihood and detectability of a risk is assigned a value from say 1 to 5 ,
1 being least likely and 5 being most likely for probability. A value of 1 would imply negligible impact and 5 would imply total devastation. Similarly a value of 1 would imply low detectability and 5, a high detectability. If an event can be detected apriori, it is detectable. For example, a full scale attack on the country is often a detectable event (detectability=5)
while an guerilla attack is often undetectable (detectability). In the case of 11/26 , one would have assigned a probability of 5 (strictly speaking , probability can only take a value from 0 to 1.) , a severity of 5 and a detectability of 3 ; thus giving an RPN = 75. Detectability is directly related to the efficiency of the country’s intelligence.
A highly efficient intelligence ensures high detectability and thus helps the internal and external security agencies take this risk on the highest priority.
Also the probability of occurrence is directly related to the branding of the establishment being targeted. Well known Indian brands like TATA, RELIANCE, BIRLA or well known tourist brands such as The GATEWAY OF INDIA carry a greater risk of being attacked compared to little known brands. After all , terrorists perform a cost-destructivity analysis of their missions and only undertake those that are likely to provide maximum destruction.
Power Law
Power law is often used to characterize earthquakes. For every 1000 earthquakes of magnitude 4 on the Richter scale, there are a 100 of magnitude 5 and 10 of magnitude 6 and 1 of magnitude 7 on the same scale. If we observe the pattern of terrorist attacks in the last few years , power law becomes evident. The bombings carried out in multiple cities in India were analogous to 10 earthquakes of magnitude 6 and the attack of 11/26 was analogous to an earthquake of magnitude 7. A corollary to this law is often expressed as follows.
“We have not had a major attack for a while now. Therefore something must be on the anvil.”
Asymmetry
To be successful , security forces must win 100% of the time. However to be successful , terrorists need win only 1% of the time. Terrorists want to die , citizens want to live – that’s the fundamental asymmetry. Citizens create, terrorists destroy. The asymmetrical nature of the war against terrorism puts enormous strain on limited government and private resources. The keys to mitigating this asymmetry are prioritization and critical parameter management. While we discussed prioritization using RPN above , critical parameter management is another effective technique. All systems are overloaded today – be it the government, business, finance or technology. The key to managing them is identifying the critical parameters governing security in each of these systems and managing them. For example, the issue of cell phones , the sale or lease of property, the issue of credit cards are processes that need to be tightly controlled. The source, usage and purpose (SUP) of financial instruments such as credit cards need to be assessed rigorously. Financial institutions that fail to do so should be held responsible for not having adequate anti money laundering safeguards. One major obstacle to critical parameter management in India is the lack of a national identification number along the lines of a social security number in the US. In lieu of a national identification number, governmental/private agencies need to verify the individual’s criminal, credit and rental histories using every source of information.
Creativity (destructivity)
It sounds macabre but there is no denying that terrorists have a creative brain.
They have a battery of thinkers and an equally strong battery of doers. The attack of 11/26 was planned meticulously and executed precisely. They are adaptive because they are highly creative. Governments will have to employ professional risk consultants to forecast risk scenarios. The job of a risk consultant is to assess risks, prioritize and suggest ways to mitigate them. Risk consultants are equipped with techniques such as “what if simulation” , “mind mapping” , state of the art risk and process modeling techniques and above all some well known and time tested “heuristics”. Since terrorists often think out of the box , it is likely that the next attack may not be conventional but could be chemical, biological or nuclear. It is also likely that they might attempt to bleed India and other countries using what is called “death by a thousand wounds”. Such attempts could include attacks on the country’s IT networks or subtle cultural invasions. The other element of terrorist creativity is their impeccable sense of time and space. They choose their “time” and “space” such that people are caught by surprise while ensuring that their missions attract the most international attention. Hardly would anybody have expected an attack at 10 p.m on a working day on one of the busiest railway stations or one of the best hotels in the country. However since it was night time , they could sneak into lanes and alleys quite easily and ensure maximum devastation .
Support networks
Terrorists have a global support network which ensures that there is not a single point of failure. Indeed terrorists think and act like global multinationals . They think globally and act locally through their local henchmen . Their global network ensures continuous replenishment of their resources such as men, material, money, motivation and machinery.
In the ultimate analysis , it is important to take a holistic view of all systems operating within the country , identify the soft spots and mitigate them to deter future attacks. Professional risk consultants could be employed to assess and prioritize these risks and suggest actions that would mitigate them in close coordination with various agencies as well as the public.
The author , an alumnus of the MIT Sloan School of Management and the MIT School of Engineering and the Indian Institute of Technology,Roorkee has served several multinational companies at senior management levels.
Vinay Deshmukh
Terrorism has emerged as one of the most dangerous hazards in recent times. The risk of terrorism carries with it the potential to destroy civilian life , disrupt businesses and the global economy and cause untold suffering to innocent citizens. This article attempts to characterize terrorism by taking a “systems” approach.
Adaptivity
First and foremost, the threat of terrorism is adaptive which means if you plug one part of the system , the other part is rendered vulnerable. Terrorists diverted their attention to the seas and the railways once they realized that airports and aircrafts became virtually impgrenable. With railway security having been tightened , it is likely that they may focus their attention on the other means of transport. The adaptive nature of terrorism implies that governments have to identify the soft spots in the system apriori and deploy adequate resources to mitigate the risk. Techniques like failure modes and effects analysis (FMEA) developed during the second world war could be utilized to identify such soft spots. FMEA attempts to enumerate various risks and prioritize them using what is called a risk priority number (RPN).
RPN = probability of occurrence * severity of impact * detectability
The probability, likelihood and detectability of a risk is assigned a value from say 1 to 5 ,
1 being least likely and 5 being most likely for probability. A value of 1 would imply negligible impact and 5 would imply total devastation. Similarly a value of 1 would imply low detectability and 5, a high detectability. If an event can be detected apriori, it is detectable. For example, a full scale attack on the country is often a detectable event (detectability=5)
while an guerilla attack is often undetectable (detectability). In the case of 11/26 , one would have assigned a probability of 5 (strictly speaking , probability can only take a value from 0 to 1.) , a severity of 5 and a detectability of 3 ; thus giving an RPN = 75. Detectability is directly related to the efficiency of the country’s intelligence.
A highly efficient intelligence ensures high detectability and thus helps the internal and external security agencies take this risk on the highest priority.
Also the probability of occurrence is directly related to the branding of the establishment being targeted. Well known Indian brands like TATA, RELIANCE, BIRLA or well known tourist brands such as The GATEWAY OF INDIA carry a greater risk of being attacked compared to little known brands. After all , terrorists perform a cost-destructivity analysis of their missions and only undertake those that are likely to provide maximum destruction.
Power Law
Power law is often used to characterize earthquakes. For every 1000 earthquakes of magnitude 4 on the Richter scale, there are a 100 of magnitude 5 and 10 of magnitude 6 and 1 of magnitude 7 on the same scale. If we observe the pattern of terrorist attacks in the last few years , power law becomes evident. The bombings carried out in multiple cities in India were analogous to 10 earthquakes of magnitude 6 and the attack of 11/26 was analogous to an earthquake of magnitude 7. A corollary to this law is often expressed as follows.
“We have not had a major attack for a while now. Therefore something must be on the anvil.”
Asymmetry
To be successful , security forces must win 100% of the time. However to be successful , terrorists need win only 1% of the time. Terrorists want to die , citizens want to live – that’s the fundamental asymmetry. Citizens create, terrorists destroy. The asymmetrical nature of the war against terrorism puts enormous strain on limited government and private resources. The keys to mitigating this asymmetry are prioritization and critical parameter management. While we discussed prioritization using RPN above , critical parameter management is another effective technique. All systems are overloaded today – be it the government, business, finance or technology. The key to managing them is identifying the critical parameters governing security in each of these systems and managing them. For example, the issue of cell phones , the sale or lease of property, the issue of credit cards are processes that need to be tightly controlled. The source, usage and purpose (SUP) of financial instruments such as credit cards need to be assessed rigorously. Financial institutions that fail to do so should be held responsible for not having adequate anti money laundering safeguards. One major obstacle to critical parameter management in India is the lack of a national identification number along the lines of a social security number in the US. In lieu of a national identification number, governmental/private agencies need to verify the individual’s criminal, credit and rental histories using every source of information.
Creativity (destructivity)
It sounds macabre but there is no denying that terrorists have a creative brain.
They have a battery of thinkers and an equally strong battery of doers. The attack of 11/26 was planned meticulously and executed precisely. They are adaptive because they are highly creative. Governments will have to employ professional risk consultants to forecast risk scenarios. The job of a risk consultant is to assess risks, prioritize and suggest ways to mitigate them. Risk consultants are equipped with techniques such as “what if simulation” , “mind mapping” , state of the art risk and process modeling techniques and above all some well known and time tested “heuristics”. Since terrorists often think out of the box , it is likely that the next attack may not be conventional but could be chemical, biological or nuclear. It is also likely that they might attempt to bleed India and other countries using what is called “death by a thousand wounds”. Such attempts could include attacks on the country’s IT networks or subtle cultural invasions. The other element of terrorist creativity is their impeccable sense of time and space. They choose their “time” and “space” such that people are caught by surprise while ensuring that their missions attract the most international attention. Hardly would anybody have expected an attack at 10 p.m on a working day on one of the busiest railway stations or one of the best hotels in the country. However since it was night time , they could sneak into lanes and alleys quite easily and ensure maximum devastation .
Support networks
Terrorists have a global support network which ensures that there is not a single point of failure. Indeed terrorists think and act like global multinationals . They think globally and act locally through their local henchmen . Their global network ensures continuous replenishment of their resources such as men, material, money, motivation and machinery.
In the ultimate analysis , it is important to take a holistic view of all systems operating within the country , identify the soft spots and mitigate them to deter future attacks. Professional risk consultants could be employed to assess and prioritize these risks and suggest actions that would mitigate them in close coordination with various agencies as well as the public.
The author , an alumnus of the MIT Sloan School of Management and the MIT School of Engineering and the Indian Institute of Technology,Roorkee has served several multinational companies at senior management levels.
Monday, April 30, 2007
Wrapping up
I am done with my studies at MIT.
The last two semesters have been hectic with dozens of courses,projects,thesis,assitantships
and internship.
I will be visiting Japan this month along with two fellow Sloanies and two professors to help solve strategic problems for an international airline. The trip is fully sponsored by the airline and we look forward to it.
Life will never be the same again without MIT and Sloan. It has been a wonderful learning experience from both theoretical and practical perspectives.
The last two semesters have been hectic with dozens of courses,projects,thesis,assitantships
and internship.
I will be visiting Japan this month along with two fellow Sloanies and two professors to help solve strategic problems for an international airline. The trip is fully sponsored by the airline and we look forward to it.
Life will never be the same again without MIT and Sloan. It has been a wonderful learning experience from both theoretical and practical perspectives.
Tuesday, January 09, 2007
The democratization of information
Prof.Carl Malone of Sloan spoke on the democratization of information at the manufacturing conference at MIT-Sloan last month. With the internet reaching the nook and corner of the
world , information is now accessible to the common person across the globe at a reasonable cost.The implications of this phenomenon are profound and are given below.They are by no
means exhaustive .
1.Information asymetries are slowly going away.Simply put the "special" advantage that
certain sections of the society enjoyed by virtue of their access to information is fading.
Lewitt and Dubner explain this in their book 'Freakonomics' by citing the example of a real
estate agent whose privilege of special information is slowly declining.
2.The gulf between the haves and the have nots will slowly decline with the unfettered access to
information to the later sections of the society.
3.Teir 2 and tier 3 schools are improving their academic standards. In India , the IIX's
(IIT's,IIM's,IIFT etc.) have historically enjoyed special status - a lot of it had to do with the tight fisting of information (while fully acknowleding their superior academic standards). With students from tier2 and tier3 schools getting free access to the world's information , the information assymetries are going away.
4.Success in the corporate and academic worlds would lie in sharing information, not
suppressing it.As a corollary,power can be wielded by distributing information not by suppressing it.
5.The Indian government seems to have realized this phenomenon and has enacted a legislation called the right to information.Citizens just need to petition the district's information officer to solicit any kind of information.The idea might have been that if the government does not provide information,citizens would get it anyway through the internet and other modern media.
6.Both service providers and service beneficiaries will be better informed. A simple keyword search on google provides critical information.
However as with every phenomenon the democratization of information has limitations.
1.While information is available for free,wisdom comes through experience. Experiential knowledge is still not free especially to the weaker sections of the society.
2.The masses in general have profound wisdom and a robust common sense. It is likely that all the reserach available on the internet will not add much to the general wisdom of the masses.
3.Human expertise is indispensable.You still consult a doctor no matter how much information is out there on the internet.
world , information is now accessible to the common person across the globe at a reasonable cost.The implications of this phenomenon are profound and are given below.They are by no
means exhaustive .
1.Information asymetries are slowly going away.Simply put the "special" advantage that
certain sections of the society enjoyed by virtue of their access to information is fading.
Lewitt and Dubner explain this in their book 'Freakonomics' by citing the example of a real
estate agent whose privilege of special information is slowly declining.
2.The gulf between the haves and the have nots will slowly decline with the unfettered access to
information to the later sections of the society.
3.Teir 2 and tier 3 schools are improving their academic standards. In India , the IIX's
(IIT's,IIM's,IIFT etc.) have historically enjoyed special status - a lot of it had to do with the tight fisting of information (while fully acknowleding their superior academic standards). With students from tier2 and tier3 schools getting free access to the world's information , the information assymetries are going away.
4.Success in the corporate and academic worlds would lie in sharing information, not
suppressing it.As a corollary,power can be wielded by distributing information not by suppressing it.
5.The Indian government seems to have realized this phenomenon and has enacted a legislation called the right to information.Citizens just need to petition the district's information officer to solicit any kind of information.The idea might have been that if the government does not provide information,citizens would get it anyway through the internet and other modern media.
6.Both service providers and service beneficiaries will be better informed. A simple keyword search on google provides critical information.
However as with every phenomenon the democratization of information has limitations.
1.While information is available for free,wisdom comes through experience. Experiential knowledge is still not free especially to the weaker sections of the society.
2.The masses in general have profound wisdom and a robust common sense. It is likely that all the reserach available on the internet will not add much to the general wisdom of the masses.
3.Human expertise is indispensable.You still consult a doctor no matter how much information is out there on the internet.
Saturday, December 09, 2006
Steve Balmer at the Harvard business school
Microsoft CEO,Steve Balmer spoke at HBS recently.He is an HBS undergrad and a Stanford
MBA dropout. The following are the highlights of his highly energetic and engaging presentation.
1.Microsoft's multi core strategy , the four cores being
A.Personal productivity software
B.Enterprise productivity software
C.Online world
D.Entertainment world
2.To be a successful leader in the hi tec world you need
A.Broad curiosity
B.Knowledge of technology and business
C.Empathy
3.Target costing for developing countries based on Mukesh Ambani's principle.
Mukesh happens to be his classmate at Stanford and also a dropout.
A.Figure out the selling price based on the market's willingness to pay.
B.Subtract from A the profit margins.
C.Arrive at target cost.
D.Ask your team to come up with products and services honoring the target cost.
4.Market segmentation for developing countries.
A.Top echelons of the society - Serve them the products that you would sell to all rich people in the world.The needs of the rich are the same globally.
B.Middle class - Localize the products.Give teams in developing countries the autonomy to
define and develop such products and features.
C.Lower class - Pay for use model. Similar to Unilever's pay for a drop model for shampoos. The idea here is to pay for each drop of information.
mailto:5.Hissteveb@microsoft.com
6.Microsoft's strategy is to not let anybody ride free. He admits zoon is not making money but is competing nevertheless with ipod.
MBA dropout. The following are the highlights of his highly energetic and engaging presentation.
1.Microsoft's multi core strategy , the four cores being
A.Personal productivity software
B.Enterprise productivity software
C.Online world
D.Entertainment world
2.To be a successful leader in the hi tec world you need
A.Broad curiosity
B.Knowledge of technology and business
C.Empathy
3.Target costing for developing countries based on Mukesh Ambani's principle.
Mukesh happens to be his classmate at Stanford and also a dropout.
A.Figure out the selling price based on the market's willingness to pay.
B.Subtract from A the profit margins.
C.Arrive at target cost.
D.Ask your team to come up with products and services honoring the target cost.
4.Market segmentation for developing countries.
A.Top echelons of the society - Serve them the products that you would sell to all rich people in the world.The needs of the rich are the same globally.
B.Middle class - Localize the products.Give teams in developing countries the autonomy to
define and develop such products and features.
C.Lower class - Pay for use model. Similar to Unilever's pay for a drop model for shampoos. The idea here is to pay for each drop of information.
mailto:5.Hissteveb@microsoft.com
6.Microsoft's strategy is to not let anybody ride free. He admits zoon is not making money but is competing nevertheless with ipod.
Wednesday, May 17, 2006
Hofstede's cultural dimensions
I came across Prof.Geert Hofstede's cultural dimensions while reading a book on international management . He studied IBM employees from more than 70 countries between 1967 and 1973 . His web site http://www.geert-hofstede.com provides insights into various cultures across the world .
He used dimensions such as power distance , masculinity vs feminity , collectivism vs individualism , short term vs long term and finally uncertainty avoidance to measure various cultures . India and China are alike in their high power distance (defined as the distance between the highest and the lowest ranked individual in any institution) . The managerial implication of high power distance is that most employees want to become managers (also called manager mania) and that the technical ladders are not considered as lucrative .
Critics of Prof.Hofstede's work cite the following weaknesses though .
1.The survey was done long ago . Cultures have changed a lot since then due to rapid globalization.
2.A more accurate was of describing behaviours is through probabilistic distribution , mean and
standard deviation of the mean instead of an absolute number .
Despite the criticism , the web site should be quite useful to those who have the responsibility of managing individuals from various different cultural backgrounds .
He used dimensions such as power distance , masculinity vs feminity , collectivism vs individualism , short term vs long term and finally uncertainty avoidance to measure various cultures . India and China are alike in their high power distance (defined as the distance between the highest and the lowest ranked individual in any institution) . The managerial implication of high power distance is that most employees want to become managers (also called manager mania) and that the technical ladders are not considered as lucrative .
Critics of Prof.Hofstede's work cite the following weaknesses though .
1.The survey was done long ago . Cultures have changed a lot since then due to rapid globalization.
2.A more accurate was of describing behaviours is through probabilistic distribution , mean and
standard deviation of the mean instead of an absolute number .
Despite the criticism , the web site should be quite useful to those who have the responsibility of managing individuals from various different cultural backgrounds .
Tuesday, May 16, 2006
Technology strategy
Lively class by Prof.Mary Tripsas , I would say . A lot of participation from the students .
Here is the summary of tools learnt in this class . The best part I believe is using these tools one can get a very good understanding of technolgies that one has no prior experience or knowledge about .
One often finds oneself confronted by new technologies , thrown at you with the expectation that you would master them quickly . These tools , I believe would help managers and architects deal with such situations .
Tech strategy – Summary of tools
1.Cash inflow analysis
2.Decision trees
3.Appropriability vs complementary assets
4.S curve- technology and diffusion .
5.Business models
6.Value chain
7.Network effects
8.Focus/broad vs low/plain
9. Role of IP
10.Modular vs vertically integrated product/enterprise .
11.Pie concept - Expanding the pie , expanding your share of the pie .
12.Porter’s 5 force analysis coupled with TEE’s analysis .
13.Price elasticity of demand .
14.Fixed vs variable cost and its impact to the business model .
15.Switching cost .
16.Economic vs industrial vs firm average
17.Standards
Here is the summary of tools learnt in this class . The best part I believe is using these tools one can get a very good understanding of technolgies that one has no prior experience or knowledge about .
One often finds oneself confronted by new technologies , thrown at you with the expectation that you would master them quickly . These tools , I believe would help managers and architects deal with such situations .
Tech strategy – Summary of tools
1.Cash inflow analysis
2.Decision trees
3.Appropriability vs complementary assets
4.S curve- technology and diffusion .
5.Business models
6.Value chain
7.Network effects
8.Focus/broad vs low/plain
9. Role of IP
10.Modular vs vertically integrated product/enterprise .
11.Pie concept - Expanding the pie , expanding your share of the pie .
12.Porter’s 5 force analysis coupled with TEE’s analysis .
13.Price elasticity of demand .
14.Fixed vs variable cost and its impact to the business model .
15.Switching cost .
16.Economic vs industrial vs firm average
17.Standards
Sunday, May 14, 2006
Organizing for innovative product development - Prof.Tom Allen
Very interesting class .
The approach is very different from what the run of the mill management consultants in the market take.
The professors approach stands out because of his highly scientific and analytical treatment of
an intrinsically subjective topic .
Some of the principles learnt are summarized below.
Principles-
1.Communication takes place for 3 reasons -coordination,information and inspiration .
2.Innovation brings together the market and thetechnology .
3.Time and coordination can be interchanged. Shorter the time (needed to complete a project) greater the coordination.
4.Remove specialists from their departments and assign to project teams for better innovation .
5.department vs. projects - departments are closer to technology , projects are closer to the customers. Power and glory may tend to shift to the departments since they are closer to the customers.
6.Rate of innovation vs. interdependencies in product structure determine how R&D should be organized. A third factor is project duration.
7.physical layout of the building should facilitate concentration and communication BOTH.
8.sources of ideas - internal - low quantity,high quality ideas. external - high quantity , low quality ideas. Still people consult external sources more often . Negative impedence at the boundary of the external source. High internal impedence.
9. Most information comes through personal contact.
10.Gatekeepers-Both high technical performers and high communicators.Beware -Visiting foreign engineers and scientists may not have local rapport and hence may not be goodgatekeepers in spite of their good foreign contacts . Instead a better method is to take a personal who has good local contactsand send him/her abroad for a while to develop foreign contacts.Other characteristics of gatekeepers are visibility andapproachability.
11.Dual ladder system - Do not make the technical ladder a dumping ground for failed managers.
12.Performance of project teams drops after 3 years .Keep the team young by rotating people.When managing an old team , be hard nosed .Give stiff targets to senior persons in the team.
13.Probability of email/phone communication is high if probability of face to face communication is high.We only email/phone those whom we talk to .
14.Beware of bandwidth limitations of emails and phones . This restricts the ability to convey complex information.
15.Vertical separation is disastrous for communication .
16.Visual contact between floors.
17.Science , technology and the customer linkage.
The approach is very different from what the run of the mill management consultants in the market take.
The professors approach stands out because of his highly scientific and analytical treatment of
an intrinsically subjective topic .
Some of the principles learnt are summarized below.
Principles-
1.Communication takes place for 3 reasons -coordination,information and inspiration .
2.Innovation brings together the market and thetechnology .
3.Time and coordination can be interchanged. Shorter the time (needed to complete a project) greater the coordination.
4.Remove specialists from their departments and assign to project teams for better innovation .
5.department vs. projects - departments are closer to technology , projects are closer to the customers. Power and glory may tend to shift to the departments since they are closer to the customers.
6.Rate of innovation vs. interdependencies in product structure determine how R&D should be organized. A third factor is project duration.
7.physical layout of the building should facilitate concentration and communication BOTH.
8.sources of ideas - internal - low quantity,high quality ideas. external - high quantity , low quality ideas. Still people consult external sources more often . Negative impedence at the boundary of the external source. High internal impedence.
9. Most information comes through personal contact.
10.Gatekeepers-Both high technical performers and high communicators.Beware -Visiting foreign engineers and scientists may not have local rapport and hence may not be goodgatekeepers in spite of their good foreign contacts . Instead a better method is to take a personal who has good local contactsand send him/her abroad for a while to develop foreign contacts.Other characteristics of gatekeepers are visibility andapproachability.
11.Dual ladder system - Do not make the technical ladder a dumping ground for failed managers.
12.Performance of project teams drops after 3 years .Keep the team young by rotating people.When managing an old team , be hard nosed .Give stiff targets to senior persons in the team.
13.Probability of email/phone communication is high if probability of face to face communication is high.We only email/phone those whom we talk to .
14.Beware of bandwidth limitations of emails and phones . This restricts the ability to convey complex information.
15.Vertical separation is disastrous for communication .
16.Visual contact between floors.
17.Science , technology and the customer linkage.
Saturday, May 13, 2006
Product design and development - Prof Dan Whitney and Prof.Pat Hale
-We had the grande finale of the PDD class today . I thought all the teams did very well both in terms of content and presentation . Product design and development is about technique and temperament , BOTH.
Although I have been doing this for over a decade now , there is always something new to learn.
The best part I like about the class is a spirit of cooperation among competing teams creating a beautiful harmony all around . The concept of 'coopetition' , as taught by a management expert who conducted a workshop in the iap session this year , is a mix of 'cooperation' and 'competition' . The equivalent concept in Indian classical music is 'Jugalbandhi' . The way 'Jugalbandhi' works is as follows.
There are (at least) two artists on the stage . Each artist plays a note spontaneously and the other one is expected to repeat it using her own instruments or vocally . The notes get progressively difficult as the show progresses . There is thus competition among them but all of them are contributing to the harmony of the system and enjoying their own part .
Hear for example the maestros Balamurali Krishnan and Kishori Amonkar at
http://www.musicindiaonline.com/l/6/s/artist.2227/
The day ended on a positive note for our team because our product happened to generate
a lot of interest among the audience. Of course rave reviews do not necessarily imply revenues,
I thought it was certainly a morale booster for the team .
Let's see how far the product goes.
Some of the lessons learnt are summarized below .
1.Pugh's concept selection technique taught by Prof.Pat Hale is very useful in software .
We , software guys just don't seem to do it enough . It can be applied to user interface design,
data model design , backend design . Also as part of the concept selection we need to consider
out of the box alternatives like , can this be done manually or using an spreadsheet ? Can this be done mechanically , electrically , biologically or electronically instead of doing via software ?
2.Prof.Whitney was brilliant in his treatment of design for manufacturing and his outsourcing model . I actually applied DFM to the HP's case study by Prof.Mary Tripsas and was among the
three guys in the class who got the org structure right .
DFM is an 80's concept but continues to pervade the world of manufacturing and supply chain.
Also Prof.Whitney's knack of hitting the nail on its head instantly is amazing .
Some examples from the class are -
1.He asked us why we did not use a linear program in our software . Exactly the approach that
the big vendors take.
2.He remarked that if one of the teams had used finite element analysis in the weight of the product would have reduced by at least a third .
3.Another lesson is , to get your product to be successful you need to ensure that the following
elements are successful .
3.A Politics (internal - Buy in of colleagues and superiors and external - customer and government)
3.B Company's financials
3.C Company's marketing strategy
3.D Engineering -
Vinay
Although I have been doing this for over a decade now , there is always something new to learn.
The best part I like about the class is a spirit of cooperation among competing teams creating a beautiful harmony all around . The concept of 'coopetition' , as taught by a management expert who conducted a workshop in the iap session this year , is a mix of 'cooperation' and 'competition' . The equivalent concept in Indian classical music is 'Jugalbandhi' . The way 'Jugalbandhi' works is as follows.
There are (at least) two artists on the stage . Each artist plays a note spontaneously and the other one is expected to repeat it using her own instruments or vocally . The notes get progressively difficult as the show progresses . There is thus competition among them but all of them are contributing to the harmony of the system and enjoying their own part .
Hear for example the maestros Balamurali Krishnan and Kishori Amonkar at
http://www.musicindiaonline.com/l/6/s/artist.2227/
The day ended on a positive note for our team because our product happened to generate
a lot of interest among the audience. Of course rave reviews do not necessarily imply revenues,
I thought it was certainly a morale booster for the team .
Let's see how far the product goes.
Some of the lessons learnt are summarized below .
1.Pugh's concept selection technique taught by Prof.Pat Hale is very useful in software .
We , software guys just don't seem to do it enough . It can be applied to user interface design,
data model design , backend design . Also as part of the concept selection we need to consider
out of the box alternatives like , can this be done manually or using an spreadsheet ? Can this be done mechanically , electrically , biologically or electronically instead of doing via software ?
2.Prof.Whitney was brilliant in his treatment of design for manufacturing and his outsourcing model . I actually applied DFM to the HP's case study by Prof.Mary Tripsas and was among the
three guys in the class who got the org structure right .
DFM is an 80's concept but continues to pervade the world of manufacturing and supply chain.
Also Prof.Whitney's knack of hitting the nail on its head instantly is amazing .
Some examples from the class are -
1.He asked us why we did not use a linear program in our software . Exactly the approach that
the big vendors take.
2.He remarked that if one of the teams had used finite element analysis in the weight of the product would have reduced by at least a third .
3.Another lesson is , to get your product to be successful you need to ensure that the following
elements are successful .
3.A Politics (internal - Buy in of colleagues and superiors and external - customer and government)
3.B Company's financials
3.C Company's marketing strategy
3.D Engineering -
Vinay
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