System dynamics is a very elaborate theory since the works of Forrester but in cognitive psychology we enphasize its qualitative aspect which is often the only one to be practically represented namely by managers because they lack of the pertinent data to be able to perform rigorous calculation

Benchimol, Guy

English

CogPrints Cognitive Sciences Eprint Archive

The role of qualitative knowledge in decision making

Cognitive Sciences ePrint Archive

Let's focus onto the increasing complexity of present organizations 
and the 
difficulty we have to manage it. As a A. T. Kearney's study (1) shows 
it, increased 
complexity originates from growth. Even if it would be possible to 
reduce it by 
outsourcing some activities, it remains necessary to maintain the 
"variety" required 
by users. This study does not reveal any metrics but a valuation in 
terms of number 
of products/services, markets, channels, customization combinations 
and so on. Of 
course, you might translate these figures into graphs such as Petri 
nets, reckon the 
probabilities of transition from one state to another and infer any 
complexity 
entropy-based indicator uttered in bits (following to the Shannon 
formula): it is a very pleasant result indeed especially 
if you have to compare different solutions of reengineering related to 
architecture, 
processes, workflows, M & A, investment/disvestment and so on; but is 
a hard job 
to be compared with Herculean labours, without any guarantee of 
accuracy. 
Nevertheless, some intersting studies allow to solve problems in some 
peculiar 
cases (2). We may quote D. C. Mikulecky of Medical College of Virginia 
Commonwealth University (3): "The system's important attributes are 
beyond 
algorithmic definition or realization by algorithms and therefore not 
computable". 
Complexity is not a goal in itself and is a source of costs and 
heaviness and that 
you have to remove it when it is not necessary; but you must engage 
with it when it 
is useful to make you more influent, more resilient, more competitive 
and more 
able to attract customers; dealing with complexity means dealing with 
all kinds of 
difficulties occurring because of complex relationships. 
First of all, we have to do an historical survey for complexity is 
cumulative and the 
trend is the superposition of structures and products that are more or 
less profitearning 
and source of improductive costs. In fact, it is tantamount to adapt 
oneself 
to the necessity and the environment. Managing complexity is to 
arbitrate between 
what is the most profitable for the firm and adding value for its 
customers -not only 
in the short term- and what is less , making allowance of the increase 
of complexity 
and its possible cost. This method is similar to value analysis but 
takes into account 
the complexity cost which you can only evaluate by having a holistic 
point of view. 
Indeed, the main feature of complexity is that it results from 
interdependence of 
almost every component hence the metaphoric analogy of complex 
organizations 
with living systems either at an individual level or at the level of 
social one; it involves recursive definitions, iterative processes, 
non-linear relations, delayed impacts, numerous feedbacks, positive or 
negative, being some times multi-nested without speaking of more 
unpredictable phenomena such as so-called "attractors" and emergence. 
complex systems behave as a whole and when you modify something in one 
point, 
it may have repercussions upon others we might wish to remain 
unchanged; the 
recursive mechanisms which take place in complex systems propagate the 
consequences of any disturbance, either it is caused by the management 
or by the 
environment; for instance, if you delete a product, it may diminish 
the production 
of a component used in another product and so increase the price of 
this product; 
you will have to sell this product at a higher price; the sales will 
be lower and the 
unitary cost will increase; this is an endless spiral; you have in 
this very simple 
example, not only a recursive relationship but a negative feedback 
loop which in turn 
will have other consequences. That is why models (4) are so useful to 
better seize the 
dynamics of systems and understand what takes place when changing the 
value of a 
key variable. You will find some interesting thoughts about it into a 
paper from 
Mani and Li (5). 
Numerous methods were designed to understand and act upon complex 
systems but, pratically, their limits are fastly reached for want of 
being able to quantitatively express the necessary parameters. 
For instance, the concept of elasticity used by economists has meaning 
only if you get at hand statistical data over a sufficiently long 
period.; on one hand, those data are seldom representative of a usable 
sample to perform regression computing because they don't cover a 
large enough scope; on the other hand, in the case of a long period of 
time, elasticity itself may change under the influence of various 
factors and this leads to a kind of mata-elasticity no manager will 
try to tackle. 
Consequently, we must not discard those methods but use them if it is 
not possible otherwise in a qualitative way, which is nevertheless a 
good approach to appreciate the direction toward which we have to 
orientate our decision making. 
It will be interesting to benefit by the Forrester model which calls 
into play flows and stocks linked to information, material, orders, 
money, labour and assets (6) while taking into consideration their 
interactions through non-linear relationships and ideed recursive 
ones, feedback loops and the lag of their influencing such and such 
parameters. 
The role of managers is namely to understand and act upon the 
structures, the functions, and the behaviour of organizations as 
Gharajedaghi underlines it; he adds that only an iterative approach 
may improve a system as a whole by successively changing these 
characteristics. 
. 
(1) The Complexity Challenge, A. T. Kearney Inc., 2004 
(2) B. M. Arteta, R.E. Giachetti, A measure of agility as the 
complexity of the 
enterprise system, Robotics and Computer-Integrated Manufacturing 
20(2004) 
495-503, Elsevier Ltd 
(3) http://www.people.vcu.edu/~mikuleck/ 
(4) Jamshid Gharajedaghi, A Holistic Language of Interaction and 
Design: Seing Through Chaos and Understanding Complexity, Interact, 
February 2004 
(5) Kambiz Maani, Anson Li, Counter-Intuitive Managerial Interventions 
in 
Complex Systems, The University of Auckland Business School, Auckland 
NZ) 
(6) Bernhard J. Angerhofer, Marios C. Angelides, System Dynamics 
Modelling in Supply Chain Management: Research Review, Proceedings of 
the 2000 Winter Simulation Conference, J. A. Joines, R. R. Barton, K. 
Kang, P. A. Fishwick, eds 


The role of qualitative knowledge in decision making

Abstract

Similar works

Full text

Available Versions

CogPrints Cognitive Sciences Eprint Archive

Cognitive Sciences ePrint Archive