This beer distribution game was a simulation of a supply chain from retailer to warehouse to manufacturer. No actual beer is used (sigh). It’s a simple game with orders and back orders, inventory shortages and excesses, customer demand and production shortages. The players always get frustrated and disappointed because they manage by event. They blame, accuse, doubt and use unpleasant words as they pursue a level inventory and a happy customer. If you would like to play the online version of the beer game, get three other people with computers (and a few beverages) and start distributing.
God is great, beer is good, and people are crazy – Billy Currington
Event vs. systems management
As data systems analysis progressed from an event managed to a component managed and most recently to a systems managed approach, business systems are also undergoing a similar change. Business focused on the sales event, the ad event, the transaction event, or the shipping event. Then the components were tied together in more of a component approach where sales and marketing teamed up, ordering and shipping reduced warehouse time, and customer service and product development consulted with each other for better products.
The value chain is based on microeconomic principles that focuses on long-term success by viewing the individual functions of the business as cost components which use assets to combine into a good or service. The focus is on the processes and control of the individual parts. It’s too complex to use in real management discussions and instead a ‘lite’ version using a diagram to show competitive advantages is sometimes used. This mid-80s style is not a systems approach but an event management style.
The better systems approach via ITIL
A systems approach to business is what the Information Technology Infrastructure Library (ITIL) strives to define through a framework of processes, functions and a definition of service management for both business and IT. Policies and objectives for business are defined in the Service Strategy volume. Business change and transformation are worked out in Service Design, Transition, and Operation volumes. And the Continual Service Improvement volume is interested in how we learn and improve. Studying ITIL will point the way for a modern systems based business management framework.
System dynamics, a framework for thinking how company policies interact to shape business performance, was derived from cybernetics in the 1960s. John Sterman and John Morecroft, both from MIT’s Sloan School of Management, are names most associated with this framework. They would say that the end results are determined by influence and information which is governed by policies controlling actions decided by initial conditions. Models based on system dynamics fuel discussions for strategic thinking and helps simplify scenarios vital to understanding business interactions.
Applying a systems approach
Taking a look at your own life, you want to start asking some systems questions to get a better handle on why you may be focused on the details rather than the big picture. On a personal level this means that you should look at your personal goals. If you are a social networker,
- do you have a plan for which sites your visit?
- do you know who you want to influence?
- do you track your conversations or comments?
- do you have a plan for leveraging this network?
- do your contacts value your networking?
- do you have a plan that guides your reading inputs?
- do you have a list of topical outputs that your readers expect?
- do you have a set of keywords that Google can index so new readers can find you?
- do you know what the value of your information is to you?
- do you know the value of the information to your readers?
- do you have a customer profile for your ideal customer?
- do you have a list of buying funnel traits that tell you how close a sale is and what to do next?
- do you have a plan for using customer feedback to improve the organization?
- do you know what your customers expect from you?
- do you know what to expect from the business departments that you depend on?
Image by notanyron via Flickr