How to Solve a Complex Problem

(Content updated) 

There are different takes on the following fictitious story. Read and enjoy. 

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Golden Rocket Science Inc was famous for building high quality, bargain basement rockets. Their current rocket project was a hybrid of many different rocket designs.  Using a non-scaleable Agile approach, their engineers built the rocket and discovered that it was inoperable. Regardless of their lack of a Big Tangible Picture, they has to solve this problem.  The engineers walked through the design for many days and were not able to determine the root cause of the problem.

The CEO pressed the chief engineer on why the rocket must be fixed in the next 36 hrs. 

For a moment, the chief engineer panicked and was lost on what was going to be his next move.    Suddenly a light bulb went on in his mind,  he dashed to his Rolodex, found the business card of Mr. Marshal, the "The Ace of all Rocket Consultants" and contacted him for immediate help.

Mr. Marshal instantaneously replied by telling him that he will be there later today. His note included a request on how he wanted the project documentation to be organized. 

One hour before sunset, Mr. Marshal arrived at the front door of Golden Rocket Science and was greeted by the chief engineer. The chief engineer briefed him on the urgency of the situation and took him immediately to  the rocket testing room. The consultant went to the drawing table and viewed many pages of blue prints. Then he went to the "alpha" workstation and quickly read  through the many e-documents.   

Marshal then spent the next many hours, slowly encircling around the opened rocket, analyzing the system and the devices inside the rocket, while sipping a bottle of apple juice.  

He retrieved an audio recorder from his right jacket pocket and started to record his observations.

His energy began to wane at 2100 hours. Marshal took 10 to 12 minutes to brew a pitcher of hot Dragon Well green tea. 

Before the assessment began, he started to attached single or multiple paged documents on a wall-sized white board for the purpose of seeing the entire "Compass View" of the rocket.

Side note
The Compass View is an idealistic schema of understanding  how everything connects in terms of the order, the cycles and the sequences.

At midnight, Marshal looked at the white board again and the entire schematic of the rocket was displayed in front of him and began a mental walk-through from the base of the rocket to the ignition portion of the rocket and then to the various trigger points while attentively focusing on understanding the grand connectivity of the principal system components by pinpointing its individual cycles, its individual coverages and the various conditions. The understanding of the grand configuration behind the rocket began to seeped into his mind. 

It was 3:33 am, he started to sip another cup of tea and  began to reflect on the grand connectivity behind the Big Tangible Picture of the rocket.

Marshal began to tinker with the rocket's hardware by using his unique "assess, test, divide and re-assess" approach. After a long session of trial and err, he methodically isolated the problem to a few points.

At high noon, the "consultant of the consultants"  withdrew a red sharpie pen from his left shirt pocket and made several "cross-hairs" markings on the vertical section of the rocket base and a few more cross- hair markings on a specific blueprint.   He then wrote a few long paragraphs that described the exact location of the problem and the reasoning behind it. 

At 1230 hr, Marshal e-mailed a message to the chief engineer that the problem was solved. The chief engineer entered into the test room at 13:00 hr, immediately noticed that the consultant was gone, and immediately saw the red markings on the rocket and the marked blueprint that was taped on top of the first red markings.

He immediately contacted his engineers. They dashed to the test room, read the note, and made the proper adjustments to the problematic rocket. At the end of that working day, the rocket was operable.

The next day, Mr. Marshal e-mailed an invoice of $80,000 to the chief engineer while sitting in his fishing boat.  The chief engineer immediately responded with a question about the price of $80,000. Mr. Marshal answered with the following specifics: $12,000 for the markings and $68,000 for his experience of making the right cross-hair markings in less than 21 hrs.

The chief engineer understood the value of Mr. Marshal and sent him his desired payment. There was now peace in the rocket company and that everyone was now happy.

--- The End ---

Comments From The Compass Desk
Mr. Marshal started by studying the rocket in terms of these four phases: the objective, the approach, the executable means and the modes that supported the means. Then he applied those four phases to the following stages: the design stage, the construction stage, the testing stage and the reviewing stage.

During the assessment process, he slowly understood the connective results (the configuration, the cycle and the coverage) from subsystem to subsystem while be mindful of the macro tangible picture of how the grand system works. 

That is one approach to viewing a complex system.

Food For Thought: Strategic Pointers

Quick Pointers from the Compass Desk

• The collection of quality intelligence sometimes determines the state of the assessment.
• The assessment of certain situations determines the criteria of the goals.
• The goals and the approaches dictate the processes.
• The processes govern the resources.
• The performance of the implementers usually concludes the success of the goals. 

It begins by knowing the Big Tangible Picture. Then, pinpointing which of the nine strategic situations are in play, is the next step. 

With a tangible plan (or a Tangible Vision), one knows when to stay on course and when to adjust while executing the strategy. 

By following the mentioned pointers, one could succeed at some point of time.

* In a future post, we will touch on the tactical specifics behind those strategic pointers.

The Compass Tradition

Our friends at Cook Ding Kitchen reminded us to follow good pragmatic traditions.

During the winter season, some of the group are currently practicing this tradition and other unique strategic customs that will enables them to hone their skills as a strategist.  ... One of the following weekends, some of the group will be re-reading some of the following books:

• Against the Gods;
• Dao De Jing;
• The Protracted Game;
• The Tao of Deception;
• The Tao of Physics; 
• The Romance of the Three Kingdoms; and
• other unique strategic classics.

Here is an abridged list of the current "hot" books that we are reading:

• Anti-Fragile 
• The Signal and The Noise: Why So Many Predictions Fail- but Some Don't 
• Turing's Cathedral: The Origins of the Digital Universe

For those who are audio listeners, we recommended the following:

• Sawyer's Seven Military Classics of Ancient China

The rest of us will also be working on our Tangible Vision and our Compass Script.

Read, reflect and adjust.  That is the sequence of a good strategic thinker.

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# Updated on 12/29/2012

The Dao of the Unorthodox Play (5)

The following article is something that most businesses can learn from the "Russian Blitz" that occurred in the 17th of August 2008. ... The outcome can be described as the immediate effect of properly implemented strategic power

Military Analysis
Russian Blitz Meld Old-School Onslaught With Modern Military Tactics
By Thom Shanker
WASHINGTON — Russia’s victorious military blitz into the former Soviet republic of Georgia brought something old and something new — but none of it was impromptu, despite appearances that a long-frozen conflict had suddenly turned hot.

The Russian military borrowed a page from classic Soviet-era doctrine: Moscow’s commanders sent an absolutely overwhelming force into Georgia. It was never going to be an even fight, and the outcome was predictable, if not preordained.

/// Finding even parity in any "real" competition, is quite rare. The 2 on 1 is the minimum standard in most extreme street fights. ///

At the same time, the Russian military picked up what is new from the latest in military thinking, including American military writings about the art of war, replete with the hard-learned lessons of Iraq and Afghanistan.

/// The emphasis of most strategic classics is to provide the direction and the tactical view for  completing one's own objective.  ...  Most strategic readers (chief decision makers) faltered on their reading of the situations.   They usually become too entrenched with their obsolete belief. ///

So along with the old-school onslaught of infantry, armor and artillery, Russia mounted joint air and naval operations, appeared to launch simultaneous cyberattacks on Georgian government Web sites and had its best English speakers at the ready to make Moscow’s case in television appearances.

If the rapidly unfolding events caught much of the world off guard, that kind of coordination of the old and the new did not look accidental to military professionals.

“They seem to have harnessed all their instruments of national power — military, diplomatic, information — in a very disciplined way,” said one Pentagon official, who like others interviewed for this article disclosed details of the operation under ground rules that called for anonymity. “It appears this was well thought out and planned in advance, and suggests a level of coordination in the Russian government between the military and the other civilian agencies and departments that we are striving for today.”


/// In our modern society,  securing the political-social support of spectators has been a high priority for any relevant competitors.  ///


In fact, Pentagon and military officials say Russia held a major ground exercise in July just north of Georgia’s border, called Caucasus 2008, that played out a chain of events like the one carried out over recent days.

“This exercise was exactly what they executed in Georgia just a few weeks later,” said Dale Herspring, an expert on Russian military affairs at Kansas State University. “This exercise was a complete dress rehearsal.”

///  We presumed that the Russians spent much of their time preparing and rehearsing their implementation. They knew their Big Tangible Picture and were able to perform well-devised scenario modeling sessions.   In summary,  these activities increased their strategic effectiveness.

Russian special ops are famous for their synchronized offensive tactics. ///

Q:  Do you know how to perform scenario modeling?

Compass Rule of Preparation: 
The time that it takes to deploy one's plan is inversely proportional to the time that is spent planning your plan and preparing your team.

Our Compass AE process requires the project implementers to review and rehearse their recently-built Tangible Vision process before connecting to it. ///

Russian commentators have countered that more than 1,000 American military personnel were in Georgia for an exercise last month. But that exercise focused on counterinsurgency operations to prepare a Georgian brigade for duty in Iraq, a different mission than the seizing of territory or denying an aggressor a new stake on the land.

Even as the Russian military succeeded at its most obvious objectives — taking control of South Ossetia and Abkhazia, humiliating the Georgian government and crippling the republic’s army and police units — serious shortcomings on the Russian side were revealed during the brief fighting, Pentagon and military officials said.

To the surprise of American military officers, an impaired Georgian air-defense system was able to down at least six Russian jets. The Sukhoi-25, an aging ground attack plane, appeared to be the most vulnerable.

Georgia never has fielded an integrated, nationwide air defense system, and those ground-to-air weapons that survived early Russian shelling operated without any central control — and some without battle-command radars, as they were destroyed by Russian strikes.

That they bloodied the Russian air wing was taken as a clear sign of poor Russian aircraft maintenance, poor Russian piloting skills — or, most likely, years of insufficient funds for adequate flight training.

Russian-language media and unofficial national security Web sites in Moscow, which since the days of the disastrous Soviet foray into Afghanistan have developed a skeptical independent streak, also noted other shortcomings.

A Russian general in command of the 58th Army was wounded in the leg when he led a column of 30 armored vehicles toward the capital of South Ossetia, apparently without sufficient intelligence from scouts on the ground or surveillance aircraft overhead to know a Georgian ambush was awaiting.

The Russians also suffered losses as they came through the Roki Tunnel, which connects South Ossetia to the neighboring region of North Ossetia in Russia proper. Russian national security analysts said there was no air cover to protect Moscow’s forces in their first minutes on Georgian soil outside the safety of the mountain tunnel.

Despite these failings, the Russian military was able to coordinate infantry advances with movement of airborne troops, simultaneously with the deployment of armor and artillery. To be sure, they only had to travel short distances, but Russia was able to inject 9,000 to 10,000 troops, 150 tanks and 700 other armored vehicles onto Georgian territory in the first weekend of fighting, officials said.

Russian warships moved off the coast of Georgia, and Russian special operations forces infiltrated into Georgia through Abkhazia, according to Pentagon and military officials.

“This was not the Russian Army from the humiliation of Afghanistan, and it’s not the Russian military that had to flatten Chechnya to save it,” said one Pentagon official knowledgeable of how the fighting unfolded. Another said: “The Russian military is back. They are to be contended with.”

Despite a recent increase in Russian long-range bomber flights along old, cold war routes near United States airspace, the offensive into Georgia gave little indication of a renewed capacity or renewed interest in global projection of power by the Russians.

But Moscow’s military is wholly capable of pressing the Kremlin’s designs on hegemony over the formerly Communist states along the border that Russian leaders call “the near abroad.”

Russia prepared the battlefield in the months leading up to the outbreak of fighting.

In April, Russia reinforced its peacekeeping force in Abkhazia with advanced artillery, and in May it sent construction troops to fix a railroad line linking that area with Russia.

Georgia’s overmatched army of about 30,000 was able to field four combat brigades of about 3,300 soldiers each.

At the start of the fighting, the Georgian Army’s First Brigade was in Iraq, and subsequently was airlifted home aboard American aircraft — but without their war-fighting gear. The Fourth Brigade was in training for the next rotation to Iraq. The Second and Third Brigades were in western Georgia, closer to Abkhazia than to South Ossetia, where the fighting started.

The American military training for the Georgian troops has been described as involving counterterrorism for domestic security and counterinsurgency for the Iraq mission, with little emphasis on taking ground, holding ground or defending against invasion.

The influx of American training and American support might have left the Georgians feeling that their far smaller military could stand up to Russia in asserting sovereignty over South Ossetia and Abkhazia.

But Georgian command and control withered quickly under the Russian attack, and army and police units were operating on their own, often at cross purposes or overlapping missions.

/// Opposing operational responsibilities usually create internal conflicts. It also wastes time and resources. Poor leadership culture is the usual cause.

With our Compass AE strategic process, the implementers always know their operational objectives and how each objective is connected to each other in a sequentially mode.   ///

Although the Georgian units had been taught that speed of operations brings a mass all its own to the battlefield, and that improving accuracy in firepower brings a mass all its own, the lesson of the conflict is that, in some cases, mass has a mass all its own.

Russia easily smothered the smaller Georgian force.

The Importance of Momentum:
"When torrential water tosses boulders, it is because of momentum; ... When the strike of a hawk breaks the body of its prey, it is because of timing. ... Thus the momentum of one skilled in war is overwhelming, and his attack precisely regulated. His potential is that of a fully drawn crossbow; his timing, the release of the trigger. ... " - Art of War, 5

Source: NYT
http://www.nytimes.com/2008/08/17/world/europe/17military.html?pagewanted=all


The Compass View 
Successful professionals of this caliber are usually capable of coordinating and implementing multiple processes in a parallel order.

With a Big Tangible Picture, one can coordinate multiple processes sequentially while anticipating the next step. This reduces the competitor to the stage of grinding one objective at a time. This standard of performance does not always happen when competing against a competitor with greater resources and manpower.

Any project team can achieve this level of performance. They must build a strategic overview  that allows their implementers to view the "multiple process" in a geometric order. By understanding how everything is connected strategically, the team knows how to respond in certain circumstances. 

A project team that connects to their Big Tangible Picture, increases their efficiency while eliminating their redundancy. They are usually pre-positioned to move with momentum. 

In summary, this "automatic blitz" is the way of usurping the competitor's position. One will see more of this approach in business and some sports.

If you are interested in knowing more about our Compass AE process, please contact us at this link.

Thoughts on Creating a New Course for 2012

wikimedia

Thriving in the information economy means having the right set of ideas that motivate its followers to a high goal. Finding them require some thinking time.

The Schema

Decide on a timeline between now and the next three days. Choose a quiet setting. Reflect on the compass of your settings. Assess your Big Tangible Picture in terms of your competitive terrain. Identify the competitive influences that connects to the grand terrain.

Write down your resolutions. Build your Tangible Vision. Delineate each particular point in terms of priorities, approaches and changes. Script the steps for each resolutions. At that point, analyze whether each resolution is based on your experience, your beliefs, your faith, your observation, assessed intelligence or a combination of the previously mentioned points. Review and re-edit again.

The Implementation

Throughout the year, there will be a time to re-edit and update one's own Tangible Vision. The best part of the process is the action of crossing out the completed objectives.

Observation:

While the goal-driven strategists write their resolutions in ink, the process-minded strategists usually scripted their resolutions in pencil and slowly update it in ink. (That is a Compass rule.)

Good luck!

The Dao of Strategy: The Map

Following are some food for thought:

• What is your "success" map in this grand setting of risk and uncertainty?
• Do you know the big picture?
• Do you know what is your grand goal?
• Do you know what are your priorities?
• When you assess the big picture, do you know your next move?
• How many moves do you usually think ahead?

When your goal has the proper tangible specifics, you will have the basics of a Tangible Vision.

The final question is: do you have the attitude and the aptitude to transform your aspiration into a tangible reality?

The Dao of Preparation: Using the Checklist

One of our associates loaned us a copy of this Amazon.com's best seller.

The conundrum of planning is that it requires some forethought. The complication occurs when one has no foresight of opportunities or any experience in maximizing those circumstances. Sometimes the predictability of the settings and the experience of the operational strategist determine the quality of planning.

The Gist of a Checklist

A basic checklist has always enabled us to be prepared in a predictable setting. It also reduced the stress and allows for fewer surprises.

Our View

The book is slightly bloated and repetitive for the experienced strategic reader. However, we highly recommend this book for the strategy neophyte. It is a short readable and sensible book

More information on this book can be found at the author's web site.

Our View

While amateurs create lists, the professionals build scripts.

In our case, we built Tangible Visions, mind maps and scripts.

Our Tangible Vision process enables the implementers to understand their end in mind, by getting a strategic overview of the grand situation.

They would be able to focus on their objective while being mindfully aware of the Big Tangible Picture. The Big Tangible Picture allows them to recognize their opportunities and mitigate the risks. ...

With the Tangible Vision, your team will be able to focus toward completing the goal regardless of the strategic predictability of the grand situation.

Developing a Tangible Strategic Model (The Tangible Vision)

To build a tangible strategic model, one must understand the following:

• the definitive goal;
• the competitive position;
• the seasonal cycle of that position;
• the risk that comes with it; and
• the connections that comes from the impact

In our case, we usually transform those listed points into our strategic model that gives the reader a comprehensive overview.

Our strategic overview is consisted of some of the following attributes:

• the current state of the targeted terrain;
• the objective;
• the various risk/benefit scenarios;
• the ranking of value points;
• a tangible representation of the venture; and
• a tangible delineation of its connections to the bigger picture.

The next step is developing an operational plan that supports the strategic model. It is a specific project milestone-based chart that includes the contingencies for capitalizing on certain opportunities and mitigating strategic risks.

Our planning process criteria is based on the complete understanding of the weaknesses and the strengths of the client's operational team while minding the capability of the targeted opposition.

More Quality Intelligence. Less Risks

Most projects accrue more changes in the timeline and costs due to the lack of information transparency. ... Most people possessed the tendency to assume the best circumstance without ever probing for a worst case scenario. ... 

While the quantity of information transparency determines the severity of risk, the quality of specific intelligence determines the effectiveness of the decision-making.

The Bottom Line
In an economy of limited resources, the successful strategy professional must focus on lowering costs and maximizing the profits. The first step is to assess the grand picture of tangibility. 
Ask the following questions:

• How do you assess the grand picture? 
• Does it have general points or specific points? ... 
• Do the specific points contain both technical measures and a cyclical state of tangibility? 

If your grand picture does not have it, your assessment is flawed. .. .

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If you are interested in learning more about our strategic consulting services, please contact us at service [aattt] compass360consulting [ddoott]com

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September 13, 2009
Unboxed
Wall Street’s Math Wizards Forgot a Few Variables
By STEVE LOHR

IN the aftermath of the great meltdown of 2008, Wall Street’s quants have been cast as the financial engineers of profit-driven innovation run amok. They, after all, invented the exotic securities that proved so troublesome.

But the real failure, according to finance experts and economists, was in the quants’ mathematical models of risk that suggested the arcane stuff was safe.

The risk models proved myopic, they say, because they were too simple-minded. They focused mainly on figures like the expected returns and the default risk of financial instruments. What they didn’t sufficiently take into account was human behavior, specifically the potential for widespread panic. When lots of investors got too scared to buy or sell, markets seized up and the models failed.

That failure suggests new frontiers for financial engineering and risk management, including trying to model the mechanics of panic and the patterns of human behavior.

“What wasn’t recognized was the importance of a different species of risk — liquidity risk,” said Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University. “When trust in counterparties is lost, and markets freeze up so there are no prices,” he said, it “really showed how different the real world was from our models.”

In the future, experts say, models need to be opened up to accommodate more variables and more dimensions of uncertainty.

The drive to measure, model and perhaps even predict waves of group behavior is an emerging field of research that can be applied in fields well beyond finance.

Much of the early work has been done tracking online behavior. The Web provides researchers with vast data sets for tracking the spread of all manner of things — news stories, ideas, videos, music, slang and popular fads — through social networks. That research has potential applications in politics, public health, online advertising and Internet commerce. And it is being done by academics and researchers at Google, Microsoft, Yahoo and Facebook.

Financial markets, like online communities, are social networks. Researchers are looking at whether the mechanisms and models being developed to explore collective behavior on the Web can be applied to financial markets. A team of six economists, finance experts and computer scientists at Cornell was recently awarded a grant from the National Science Foundation to pursue that goal.

“The hope is to take this understanding of contagion and use it as a perspective on how rapid changes of behavior can spread through complex networks at work in financial markets,” explained Jon M. Kleinberg, a computer scientist and social network researcher at Cornell.

At the Massachusetts Institute of Technology, Andrew W. Lo, director of the Laboratory for Financial Engineering, is taking a different approach to incorporating human behavior into finance. His research focuses on applying insights from disciplines, including evolutionary biology and cognitive neuroscience, to create a new perspective on how financial markets work, which Mr. Lo calls “the adaptive-markets hypothesis.” It is a departure from the “efficient-market” theory, which asserts that financial markets always get asset prices right given the available information and that people always behave rationally.

Efficient-market theory, of course, has dominated finance and econometric modeling for decades, though it is being sharply questioned in the wake of the financial crisis. “It is not that efficient market theory is wrong, but it’s a very incomplete model,” Mr. Lo said.

Mr. Lo is confident that his adaptive-markets approach can help model and quantify liquidity crises in a way traditional models, with their narrow focus on expected returns and volatility, cannot. “We’re going to see three-dimensional financial modeling and eventually N-dimensional modeling,” he said.

J. Doyne Farmer, a former physicist at Los Alamos National Laboratory and a founder of a quantitative trading firm, finds the behavioral research intriguing but awfully ambitious, especially to build into usable models. Instead, Mr. Farmer, a professor at the interdisciplinary Sante Fe Institute, is doing research on models of markets, institutions and their complex interactions, applying a hybrid discipline called econophysics.

To explain, Mr. Farmer points to the huge buildup of the credit-default-swap market, to a peak of $60 trillion. And in 2006, the average leverage on mortgage securities increased to 16 to 1 (it is now 1.5 to 1). Put the two together, he said, and you have a serious problem.

“You don’t need a model of human psychology to see that there was a danger of impending disaster,” Mr. Farmer observed. “But economists have failed to make models that accurately model such phenomena and adequately address their couplings.”

When a bridge over a river collapses, the engineers who built the bridge have to take responsibility. But typically, critics call for improvement and smarter, better-trained engineers — not fewer of them. The same pattern seems to apply to financial engineers. At M.I.T., the Sloan School of Management is starting a one-year master’s in finance this fall because the field has become too complex to be adequately covered as part of a traditional M.B.A. program, and because of student demand. The new finance program, Mr. Lo noted, had 179 applicants for 25 places.

In the aftermath of the economic crisis, financial engineers, experts say, will probably shift more to risk management and econometric analysis and concentrate less on devising exotic new instruments. Still, the recent efforts by investment banks to create a trading market for “life settlements,” life insurance policies that the ill or elderly sell for cash, suggest that inventive sales people are browsing for new asset classes to securitize, bundle and trade.

“Good or bad, moral or immoral, people are going to make markets and trade via computers, and this is a natural area of financial engineers,” says Emanuel Derman, a professor at Columbia University and a former Wall Street quant.

Copyright 2009 The New York Times Company
http://www.nytimes.com/2009/09/13/business/13unboxed.html

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