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Hard or Soft: Does it matter?. Michael Lyons Manager, Strategic Analysis and Research. ST P R Services. Strategic Analysis Commercial Scenarios/ Futures Conceptual Models Computer Simulations Spreadsheet System Dynamics Agent-based models Game theory. The Change Process.

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Hard or Soft: Does it matter?

Michael Lyons

Manager, Strategic Analysis and Research


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STPR Services

  • Strategic Analysis

    • Commercial

    • Scenarios/ Futures

  • Conceptual Models

  • Computer Simulations

    • Spreadsheet

    • System Dynamics

    • Agent-based models

    • Game theory


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The Change Process

Sensing the need for change

Exploring possible change strategies

Deciding change strategies

Planning & Implementing change

Consolidating within organisation

Become common practice in many organisations

Change Process

Strategic Models


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Why do models fail?

  • Developed after decision made (ex post justification)

  • Internal vs. external validity

  • Multiple, ill-defined objectives

  • Model as solution to problem –jumping to conclusions


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Approaches to Planning

  • Rationalists - find optimum strategy

    • Planning

    • Forecasts

  • Evolutionists - strategies emerge.

    • Complex world

    • Political processes

    • All rational processes irrelevant

  • Processualists - intermediate.

    • Future uncertain, but not entirely unpredictable

    • Scenario planning

    • Computer simulations: explore options


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Types of Models

Financial

Regressions

Optimisation

Forecasting

‘Soft’

Hard

Exploratory

Flight simulators

Business games

Conceptual models


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Exploratory Models

  • Conceptual models

    • clarify concepts/ relationships

    • common language

    • represent (shared) mental models

  • Simulations

    • Quantify the conceptual models

    • Reveal importance of different processes

    • Outcomes


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The Future Information Industry: ETSI SRC6 Model

end user

service

broker

service

provider

info

broker

info

provider

info

owner

terminal

equipment

supply

communication

and networking

of information

information

creation support

application

creation

information processing

and storage service

provision

telecommunications

service provision


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Simulations

  • Flight Simulators

    • stand-alone

    • key variables

  • Business Games

    • competitive

    • multiple strategies


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Pursuing a goal/ vision

Planning

Inventing the future

Preparation

Decision-taking

Action

Adapting to change

Environmental monitoring

Spotting the weak-signals

Position

Conversation

Organisational learning/ capabilites

Decision-taking

Action

Strategy


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Decision-making in a complex world: non-rational but not irrational

  • Rational decision-making:

    • Rationality, bounded rationality:

    • Optimisation, sufficing

  • Real decision-making

    • Role of emotion

    • Business strategy

      • Planning

      • Vision, ethics, culture

    • Experience: ‘rule of thumb’

    • Habit/ tradition: learned behaviour

    • ‘Gut feeling’

  • Why OR?

    • Improve decision-making

    • Need both soft and hard


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Managing Complexity

changing business environment

Simulations

recognised strategic issue

knowledge base

mental models

assumptions

maps & diagrams

executive debate & dialogue

dynamic simulation

models

strategy for change


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Setting Boundaries

Choice of Frames

Problem Structuring(within frame)

Interpreting Structure

Assigning referents

Defining Vision; defining problem

Analysis (SSM, SODA, CM, scenarios planning)

Conceptual models; Influence diagrams

Exploration of conceptual model - alternative scripts. Simulations

Data (market surveys etc.)

Procedural intelligence


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Why Simulations?: Cognitive problems

Issues

  • Most people deal with only 3-4 variables at a time, and only through 1-2 time steps (de Guess).

  • Effect of interdependence

  • Effect of delay

    Simplifying assumptions

  • Single cause/ effect

  • No delays

  • Systems simple/ independent

    Need simulations

  • Quantitative results

  • Reveal importance of different processes

  • Outcomes


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Exploring the Future: Scenarios

Driving

Forces

Uncertainty

Scenario 1

Alternative Futures

Present

Scenario 2


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Scenarios Planning & Modelling


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Models: a Process not an End

What is the question?

Analysis

Customer Workshop

Conceptual model

Modelling team

Construct Simulation

Investigate ‘What-ifs’


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Benefitting from the Model

  • Identify the problem

  • Build the model with the ‘customer’

  • Involve as many parties as possible

  • Diagrams help identify conflicting views

  • Where data ‘missing’ get expert advice

    • base case

  • Flight simulator: test by doing ‘what-ifs’


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Hard or soft: does it matter? Yes and no.

  • Armed camps or Complementary

  • Different purposes/roles: procedural levels

  • Soft comes first?

  • Better seen as a spectrum?

  • What are the bridges:

    • Model building seen as a process, not an end

    • Exploratory models

    • Complex (adaptive) systems and complexity theory

    • People: intermediaries

    • Evidence-based policy-making?

  • What is better decision-making?

    • What is OR for?

    • Outcomes & Values

    • Utilitarianism vs conviction


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