Hard or Soft: Does it matter?

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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
info broker
info provider
service provider
service broker
info owner
communication and networking of information
terminal equipment supply
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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Strategy

• 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

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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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Procedural intelligence

• 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.)

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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