Planning and Decision Aids Chapter 9

Learning Objectives Explain knowledge management and how it creates value for organizations. Describe the basic features of the Delphi technique, simulation, and scenario forecasting aids. Use Osborn’s creativity model to stimulate adaptive and innovative decisions. Apply three quality management decision and planning aids: benchmarking, the Deming cycle, and the balanced scorecard model.

Fostering Knowledge Management Knowledge management (KM) involves recognizing, generating, documenting, distributing, and transferring between persons useful to improve organizational effectiveness. KM is generally viewed as consisting of three main components:  Explicit Knowledge  Tacit Knowledge  Enabling Technologies

Knowledge Management Drivers Knowledge is becoming more valuable than physical or financial assets, or even natural resources. Organizations that are reevaluating knowledge strategies are finding shortcomings such as:  Productivity and opportunity loss  Information overload  Knowledge attrition  Reinventing the wheel

Knowledge Management Targets The application of KM has three natural targets:  an organization’s teams P&G, Innovation Net  Customers Xerox, Eureka, tips  Workforce Clarica Life Insurance

Enabling Technology Technology provides the foundation for solutions that automate sharing of knowledge and fostering innovation. Choosing technologies involve addressing two critical issues:  technologies should deliver only relevant information, but quickly from every feasible source  technologies need to comprise a variety of devices, from telephone to laptop computers

Enabling Culture Culture is often the greatest barrier to successful implementation of KM. To help create a sense of trust and positive cultural response in the InTouch service at SchlumbergerSema the following implementation was used::  A knowledge champion was assigned as a focal point  Extensive input from the field employees was sought  A knowledge-sharing culture was developed

Fostering Forecasts Forecasting involves projecting or estimating future events or conditions in an organization’s environment. Common forecasting pitfalls include:  listening to the media  assuming that things are going to return the way they used to be  hearsay  tunnel vision

Delphi Technique The Delphi technique is a forecasting aid based on a consensus of a panel of experts. Uses experts to make predictions and forecasts about future events without meeting face-to-face. The heart of the Delphi technique is a series of questionnaires.

Delphi Technique The Delphi technique typically involves at least three phases.  A questionnaire is sent to a group of experts  A summary of the first phase is prepared  A summary of the second phase is prepared Three phases are recommended; however, experts tend to drop out after the third phase because of time constraints.

Delphi Technique Step 1 — A problem is identified Step 2 — Group members are asked to offer solutions to the problem Step 3 — Responses of all group members are compiled and sent out Step 4 — Members are asked to generate a new individual solution

Simulation A simulation is a representation of a real system. A simulation  imitates something real, but  is not real itself, and  can be altered by its users

Examples of Business Simulation (adapted from Table 9.1) Budget Models  All levels of organization Treasury and Financial Models  Cash management  Income statements  Cash flow projections  Stock and commodity prices Marketing Models  Sales budgets  Pricing  Market share projections  Advertising and marketing plans Operations Models  Inventory costs  Material costs  Production costs Human Resources Models  Compensation  Optimum staffing levels  Measures of productivity Strategic Planning Models  Scenario planning  Political/economic forecasts  Business war-gaming

Stages in the Creative Process (adapted from Figure 9.1) 5. Verification 1. Preparation 2. Concentration 3. Incubation 4. Illumination

Osborn’s Creativity Model Osborn’s creativity model is a three- phase decision-making process that involves:  Fact finding  Idea finding  Solution finding

Brainstorming Brainstorming is an unrestrained flow of ideas in a group with all critical judgments suspended. A technique used to enhance creativity that encourages group members to generate as many novel ideas as possible on a given topic without evaluating them.

Brainstorming Process

Brainstorming Criticism is ruled out Freewheeling is welcomed Quantity is wanted Combination and improvement are sought

The Benchmarking Process (adapted from Figure 9.2) 1. Define the domain Benchmarking 2. Identify the best performers 3. Collect and analyze to identify gaps 4. Set improvement goals 5. Develop and implement plans to close gaps 6. Evaluate Results 7. Repeat evaluations

The Deming Cycle (adapted from Figure 9.3) Start Repeat PDCA 4. Act1. Plan 3. Check2. Do Repeat PDCA Improvement and learning over time

The Deming Cycle 1. What we are trying to accomplish? 2. What changes can we make that will result in improvement? 3. How will we know that change is an improvement?

 Provides a process for an organization to gain deeper knowledge and understanding of its strategic decisions by considering the role of finances, customers, internal processes, and learning/growth  Provides a broad perspective in planning and decision making  Takes account of financial and nonfinancial measures Balanced Scorecard Model

Balanced Scorecard Model (adapted from Figure 9.4) Financial Perspective Goals Measures Internal Perspective Goals Measures Customer Perspective Goals Measures Innovation/Learning Perspective Goals Measures Balance OutcomesActivities