System Dynamics and the O-O-D-A Maneuver Approach to Change Management

1. System Dynamics and the O-O-D-A Maneuver Approach to Change Management Winning Through Intuition and Analysis Process Of Ongoing Improvement Clarence J. Maday, Jonah Professor Emeritus Mechanical and Aerospace Engineering North Carolina State University CJMaday 2012

2. BACKGROUND • Forrester’s Industrial Dynamics -- 1961, Sterman’sBusiness Dynamics -- 2000 • Deming’s PDCA (including DMAIC) -- 1950’s … • Profound Knowledge • Hopp and Spearman, Factory Physics, 3rd Edition, 2008 • Boyd’s O-O-D-A Maneuver – Implicit Cascaded Feedback Dynamics, Intuitive Application of the Principle of Optimality. Mental modeling and mental simulation -- 1996 • Rizzo’s Model-Predictive Control -- 2010 • Goldratt’s TOC & TP -- 1984 + ….. • Casparis’ Management Dynamics -- 2004 • Debra Smith’s The Measurement Nightmare -- 2000 CJMaday 2012

3. EXCERPTS FROM THE POWER OF INTUITION BY GARY KLINE • Neither analysis nor intuition alone is sufficient for effective decision making. Therefore, we need to explore the connection between them, highlighting what can go wrong if we rely excessively on intuition and what can go wrong if we rely too much on analysis. p.64 • The synthesis between intuition and analysis that seems most effective is when we put intuition in the driver’s seat so that it directs our analysis of our circumstances. This way, intuition helps us recognize situations and helps us decide how to react, and analysis verifies our intuitions to make sure they aren’t misleading us. p.64 • Conditions favoring the Intuitive approach: Time Pressure, Ill-defined Goals, Dynamic Conditions and Experienced Participants. p.67 • Conditions favoring the Analytical approach: Conflict Resolution, Optimization, Justification and Computational Complexity. p.67

4. EXCERPTS FROM THE POWER OF INTUITION BY GARY KLINE(cont) Strategies to Coordinate Analysis with Intuition, p.86 • Start with intuition, not with analysis. • Accept the zone of indifference. (Flip a coin) • Map the strengths and weaknesses of options without attaching numbers. • Use mental simulation to evaluate the options. • Simplify the comparisons. • Bring in the intuition of an outsider to check your analyses. • Don’t try to replace intuitions with procedures.

5. MOTIVATION • This is my current view of the unification of the many flavors of the month in the business and management literature. . all of them can be regarded as a menu of subsets of System Dynamics and Boyd’s O-O-D-A Maneuver. For completeness I add Goldratt’s thought processes for change management. Of course, change management can be seen as a subset of System Dynamics. Donnella H. Meadows emphasizes the dynamics of change. She brings together disparate views of systems. In her ‘Thinking in Systems’ she opens with a 1979 quote from Russell Ackoff:”Managers are not confronted with problems that are independent of each other, but with dynamic situations that consist of complex systems of changing problems that interact with each other. I call such situations messes…. Managers do not solve problems, they manage messes.” I suggest that Ackoff’s managers were not fluent with Forrester’s Industrial Dynamics (1961).The work of Forrester, Sterman and, more recently, Boyd brings order to these “messes”. See especially Sterman’s Business Dynamics and the archived journals of the Systems Dynamics Society. • I recommend Chet Richards web site, Fast Transients. The name is most appropriate. • Change is a dynamic process as seen in O-O-D-A and System Dynamics, both supported by Newton’s Calculus and “Laws” of Motion. • There are several views of change/dynamics in the management/business community. They include • System Dynamics • O-O-D-A • Monte Carlo methods • Event Driven Systems • Buffered Systems such as DBR , Critical Chain, Cost and Revenue Flows (Caspari and Caspari) CJMaday 2012

6. O-O-D-A • Observe-Orient-Decide-Act • It is a loop that contains internal or cascaded feedback. • Richards calls it a “loop” with power. CJMaday 2012

7. SOME NEXT BIG THINGS • Let’s look at two successful BIG THINGS first; Man on the Moon and Return; CURIOSITY ROVER on Mars. • The APOLLO mission made extensive use of Newton’s “Laws” of Motion, Computers, and some very sophisticated Mathematics (variational calculus), Engineering and Physics. Project management was a real challenge so people skills were needed and used. • The CURIOSITY mission; all the above and much more; adaptive control systems and unmanned guidance, especially at Mars since it takes minutes for a signal to be transmitted from Earth to Mars. • IMO one next ‘big thing’ will be the acceptance and implementation of dynamics of change. TOC has led the way with its emphasis on buffers that change with time. In BUSINESS DYNAMICS, buffers are “stocks” connected by “flows”, (similar to DBR). Mathematically, these are parts of conservation principles; STORAGE RATE = INPUT RATE - OUTPUT RATE + CREATION RATE – DESTRUCTION (DECAY) RATE. • SYSTEM DYNAMICS and O-O-D-A complete the picture with the incorporation of time in the decision making processes. TOC is similar with its Thought Processes approach to change. The ‘people aspects’ of change, the dynamics of change, can be modeled and simulated as done by Forrester and Sterman.

8. SOME NEXT BIG THINGS (cont) • J.W.Forrester wrote, ”Knowledge about the system includes an understanding of the problem that is to be corrected. One does not model a system, one models the cause of the problem. The first requirement on a model is that it must show how the problem of interest is being caused. Only after understanding the cause does one move on to an improvement” • Not too different than Deming’s Profound Knowledge. • Goldratt’s Thought Processes provide a convenient starting point for the dynamics of change. Looks like a good PhD dissertation(s). • This will put us on the way to “Decision–by–Wire”, an even bigger NEXT BIG THING. Why not? We have fly-by-wire aircraft and the beginnings of drive-by-wire cars. Decision-by-wire follows.

9. APPROACH • OBSERVE AND MEASURE CURRENT STATE; CASH. MATERIAL, INFORMATION • SET AND QUANTIFY GOALS • COMPARE AND MEASURE THE DIFFERENCES • ORIENT - PRIORITIZE THE DIFFERENCES • DECIDE - STRATEGY • ANALYTICAL MODEL OR INTUITIVE MODEL • ANALYTICAL SIMULATION(MONTE CARLO, BUSINESS DYNAMICS) OR INTUITIVE SIMULATION(MENTAL) • WHICH DIFFERENCES TO REDUCE AND BY HOW MUCH • CONTROL ALGORITHM • ACT - TACTICS • MEASURE RESULTS - OBSERVE AGAIN • REFINE MODEL AND/OR GOALS AS NEEDED • RETURN TO 1. AND REPEAT. THIS IS A COMBINATION OF THE WORK OF GOLDRATT, BOYD, FORRESTER AND STERMAN; THE PROCESS OF ONGOING IMPROVEMENT (POOGI). CJMaday 2012

10. DYNAMICS OF CHANGE O-O-D-A JOHN BOYD SYSTEM DYNAMICS JAY W. FORRESTER AND JOHN STERMAN INTUITION THOUGHTWARE HUNCHES ANALYSIS SOFTWARE DIGITAL PROFOUND KNOWLEDGE PROFOUND KNOWLEDGE MENTAL MODELS ANALYTICAL MODELS MENTAL SIMULATION ANALYTICAL SIMULATION CONTROL ENGINEERING FORMAT COMPARE CONTROL ALGORITHM DECIDE INTUITION ANALYSIS + PLANT SYSTEM RESULTS OUTPUT ACT ORIENT GOALS CMaday 2012 OBSERVE Feedback

11. O-O-D-A, POOGI, SYTEM DYNAMICS Analysis Intuition, Feedback and Feedforward everywhere OBSERVE Current Reality TACTICS ACT Implement Changes • SYSTEM • (BUSINESS) • DYNAMICS • MODEL • ACTUAL STRATEGY DECIDE What to Change • RESULTS • MODEL • ACTUAL COMPARE ORIENT Goal(s) What to Change to CJMaday 2012

12. OBSERVE • Set Goals ( Legally, Ethically and Morally) • Victory • Money • Mislead or Confuse Opponent • Your Goal? • OBSERVE Current Reality; Compare With Goals; then Work to Realize the Goals. Get and absorb all the information you can by whatever means possible. This usually takes time, years even. Can we do it faster? We had better!

13. ORIENT • ORIENT • This is the essence of the process and is supported by the Observe, Decide and Act contributions.. It is formed at least by genetic heritage, surrounding culture, experience and previous learning. • The mind combines all or part of this background to form the “many-sided cross-references”, implicit and explicit, which then become a new orientation.

14. ORIENT(cont) • ORIENT • Seek out and find data that don’t fit your conventional wisdom or biases….QUICKLY!! • Analysis and Synthesis • Axiomatic Design • System • Project • Process • Product • Optimization • Design of Experiments • Design of Components • Dynamic Programming • Linear Programming • Variational Calculus • TRIZ

15. ORIENT (cont) • Available Tactics Menu - Factory Physics which Include or is augmented with • Constraints Management (TOC) • Drum-Buffer-Rope • Supply Chain Management • Lean • 6 Sigma • Slack • Finite Capacity Scheduling (FCS) • CONWIP • JIT • Kanban CJMaday 2012

16. ORIENT (cont) • Available Tactics (cont) • QFD • MRP I and II • ERP • Efficiency • Cash Flow • Material Flow • Information Flow • ……. • ……. CJMaday 2012

17. DECIDE • DECIDE • Intuitive competence or implicit decision making (agility) based on Observation, Orientation and Profound Knowledge. • Explicit analytical decision making based on System Dynamics modeling and simulation, Optimality Principle or Dynamic Programming, Design of Experiments, TOC, Lean, Six Sigma, TRIZ, Monte Carlo Methods et al. This can lead to software competence. Current computational speeds provide some agility. • Set Strategy

18. ACT • ACT • Deception • Ambiguity • Generate Surprise and Panic • Seize the initiative and keep it • Practice, Test and Evaluate • Equivalent to Complex ans Chaotic Domains in Cynefin Framework • Implement Tactics

19. INTUITIVE COMPETENCEand ANALYTICAL COMPETENCE • Rizzo points out • that humans handle small systems; such as cars, bicycles, some aspects of flight and video games. This uses intuitive competence. • that humans cannot handle large systems; such as open loop unstable aircraft, power plants, large airports, etc. This requires modeling competence (aka decision-by-wire or analytical competence) CJMaday 2012

20. OVERVIEW • Merge/Integrate Business Dynamics, Factory Physics, and O-O-D-A to form an innovative and winning strategy in competition. O-O-D-A contains much, if not all, of Sun Tzu’s Art of War and Deming’s Profound Knowledge. • The term “dynamics” is used in the systems or engineering sense, continuous, discrete, deterministic, stochastic. • Merge these concepts using a feedback control system framework to confuse, outsmart, and overcome your opponent and achieve your goal. CJMaday 2012

21. APPROACHES AND TOOLS • Decisions within decisions. Cascaded feedback system. Variation and Disturbances may be manageable. • Qualitative and Quantitative approach to problem solving. • Value Streams (Cash, Material, and Information) • Profound knowledge. • Intuitive (implicit/mental) competence – small systems. • Analytical (explicit/digital) competence – large systems. CJMaday 2012

22. PDCA • Deming’s Plan-Do-Check-Act. Can be enhanced by adding a 5th step, Evaluate, followed by a feedback loop to return to Plan. Chet Richards might refer to this as the PDCA “loop” with power. CJMaday 2012

23. SYSTEM DYNAMICS • System Dynamics • Model the system to be controlled • Controller dynamics – feedback • Simulation • Software Competence • How does change occur? CJMaday 2012

24. OVERALL GOAL • CREATE DISORDER AND CONFUSION - OUTSMART THE COMPETITION - WINNING STRATEGY • Faster decision cycle-----air-to-air-combat, intuitive competence • Different decision cycle-----outside the box • Decision-by-wire competence (System Dynamics) CJMaday 2012

25. Feedback Diagram • This diagram is not meant to be unique. It is a guide to be used in your situation. Essential features include feedback and Implicit Guidance and Control. It is qualitative but becomes quantitative when applied. CJMaday 2012

26. OVERVIEW REVIEW Intuition, Feedback and Feedforward OBSERVE Current Reality TACTICS ACT Implement Changes • SYSTEM • (BUSINESS) DYNAMICS • MODEL • ACTUAL STRATEGY DECIDE What to Change • RESULTS • MODEL • ACTUAL Compare goal(s) to current reality ORIENT Goal(s) What to Change to CJMaday 2012

27. OVERVIEW • TOC, Drum-Buffer-Rope and Critical Chain Project Management use buffer management such that the buffers provide the feedback signals that allow the control processes to successfully deal with variation. • Is buffer feedback the reason for their effectiveness? IMO YES! • CONWIP is a process that combines feedback and feedforward implicitly. Total WIP is controlled explicitly. An innovative and insightful approach; clever, that is!

28. MORE OVERVIEW • Apply System Dynamics and O-O-D-A • Identify the problem, make sense of it • Use Cynefin Framework to Orient or categorize problem • Simple or Complicated = Small; Implicit or Intuitive Decision Making • Complex or Chaotic = Large; Explicit Decision Making -- aka Decision-by-Wire CJMaday 2012

29. Some Necessary Requirements • Profound Knowledge • Understand goal and context – choose form of decision analysis • System Dynamics Model • Implicit and intuitive • Explicit computer model • Feedback algorithm CJMaday 2012

30. WHAT NEXT? • How to sell Analytical Decision Making? • How to model the system? • HOW TO BRIDGE THE GAP BETWEEN ANALYSIS AND INTUITION ? (Many thanks to Jim Bowles for this input!) CJMaday 2012

31. References • Science, Strategy and War, F. P. B. Osinga, Routledge 2007 • The Power of Intuition, Gary Klein, Random House • Industrial Dynamics,J. W. Forrester, The MIT Press, 1961. • Business Dynamics, John Sterman, McGraw Hill 2000. • The Art of War, Sun Tzu, Filiquarian Publishing • Model-Predictive Control, A. Rizzo, PDI institute, 2010. • Kelvyn Youngman, www.dbrmfg.co.nz CJMaday 2012

32. References (cont) • “A Leader’s Framework for Decision Making”, David J. Snowden and Mary E. Boone, Harvard Business Review, November 2007. • Certain to Win, Chet Richards, Xlibris 2004 • Fasttransients.wordpress.com, Chet Richards • The Mind of War, Grant T. Hammond, Smithsonian Books, 2001 CJMaday 2012

33. ACKNOWLEDGEMENTS • Jim Bowles • Clarke Ching • Steve Holt • Larry Leach • Rob Newbold • Tony Rizzo • Robert Roy • Jack Vinson • Scott Weller • Kelvyn Youngman CJMaday 2012