DeSASim Business Performance Systems - White Paper (Helping Business Cope with Change)

Stress and change are facts of life in the business world. They are partners, the cause and effect behind much of what we call "work". And they are becoming more pronounced! Customers are more demanding and more individualistic. They want the right product of the highest quality with the latest technology now rather than later. Today, time takes a place alongside cost as a key driver of business performance. Both are sources of stress in business management.

Today’s business teams are more exposed to what’s available, to what can be achieved, and to what’s expected of them and of their suppliers than at any time in the history. Instant accessibility to vast and diverse experience as well as the rapid transfer of information and knowledge between consumers, customers, suppliers and colleagues creates an overwhelming, if not stressful body of information to consider and use wisely.

So how does stress lead to change? Fundamentally, stress is the principal dynamic mover of any system whether it’s a natural living system or an active and dynamic business system. Without stress, nothing changes; this is the kinetic driving force in any system. Any system under stress tends to make changes to reduce that stress. However, there is always some minimum threshold of stress that must be reached before any action for change is taken. Beyond that threshold, the higher the level of stress, the faster the changes are accepted and adopted. These concepts are illustrated in Figure 1.

As shown in Figure 1, at any point in time a business will be operating under conditions different from those that would maximize business success. As time goes on, without correction, the business will find itself operating further and further away from the optimum, e.g., product offerings may be becoming obsolete or may have become "out of fashion"; they may cost too much or take too long to produce, etc. At first these deviations from the optimum are manageable and can be handled with minor "tweaking" of the business. However, at some point the stress of offering less than the desired product or service becomes so great that the "Critical Stress Level" or CSL is reached. At this point a major change in the state of the business must be made to overcome the condition.

In an ideal world this change would be made rapidly to bring the business closer to an optimum position for continued success and survivability, at which point the cycle would repeat. In the real world, however, change does not come so easy and is further complicated by the fact that the optimum position for success is generally dynamic and changes from time-to-time, usually at a rate much faster than that to which a business can respond.

The CSL that triggers change in a business is not easily quantified. It’s subjective and depends on who’s making the quantification. Typically, the CSL is a function of time and cost/performance-oriented variables. These variables "quantify" a set of conditions which, when exceeded, will force an individual or an organization to take some action to correct the disparity. It’s a dynamic variable that tends to vary with type of business, management make-up and experience, and the perceived problem. The CSL frequently changes from time-to-time depending on current and expected operating conditions. It’s usually felt by the businessperson as "pressure" to do something - to make a change.

There is, of course, a cost/benefit side of stress that affects the CSL. In other words, a certain level of stress can be tolerated because the cost of relieving that stress exceeds the benefit to be gained. Occasionally one gets into situations where costs may be inflated or benefits downgraded in order to avoid taking action to relieve a stress. More often, the effects of any relief are not totally understood and true costs associated with any resulting change cannot be ascertained.

Every business and, indeed, every individual is different. But, in general, most respond to stress or "pressure" by making changes in five attributes that basically control most business marketing & production operations. [Note: Changes needed to meet government imposed regulations and for solving/avoiding personnel problems are ignored in this argument.] They are:

Each of these attributes could well absorb all the attention of management at any point in time. However, most businesspersons must "manage" all of them simultaneously all of the time, otherwise the business gets out of hand. In any case, juggling many balls at one time is a difficult task, both physically and mentally.

In most businesses, the CSLs represent significant deviations from the norm or from desired goals. In other words, it takes a broad deviation from the norm (the optimal route to success or survival) before stress reaches a level where any change in business direction is made. As businesses become larger, their organizational complexity increases and stress becomes depersonalized, the combination of which tends toward higher and higher CSL levels. It is almost axiomatic that the bigger the business the more inertia involved in its decision-making and the slower it reacts to change. Change in large organizations usually takes a great deal of time and costs a great deal of money. Mistakes are very expensive.

Knowing what, when and how to change is not easy. When faced with the need to change, the decision-maker – or those responsible for the decision - will usually turn to experienced personnel for suggestions and advice. The decision-maker relies on them to extract, relate and help integrate the information in an efficient manner. This assumes, of course, that experienced resource personnel are available and that their knowledge covers the problem at hand. These resource personnel (to include their representatives and support structure) will usually spend a lot of time gathering background information and then will apply their expertise to the change situation as they perceive it. Their perception is based, at least in part, on their personal "mental models" or internal pictures about how the world works relative to the task at hand.

Unfortunately one’s mental model of a business may or may not accurately represent just how that organization will truly behave in response to a particular change being contemplated. Each person’s view or perception of the business will be different and each will tend to be based on personal past experience, level and field of expertise and degree of interest in the area of the problem being addressed. Mental models are always changing, albeit slightly, and rarely can be duplicated from one problem to the next. Personal biases, opinions, etc., are all involved. Hidden agendas and unknown motivators frequently drive the decision process rather than logic and experience.

In addition to the above, the actual effects of proposed changes to a business are difficult to predict and are usually impossible to test. In the business world, changes generally defy linear cause and effect analysis - any singular change normally involves nonlinear feedback often affecting many related but non-obvious business system variables. Typically a person can mentally handle the consequences of up to three or four feedback loops but real business is made up of in excess of 100 such loops all operating simultaneously and many of which are interrelated.

Not only are the results of change difficult to predict, but substantial time usually passes before all the effects of a change are fully apparent - if they ever are. If this isn’t bad enough, change never occurs just once. Change must follow change in order to keep up with the stress - the dynamics - of the marketplace. These changes tend to be interrelated, interdependent and/or interactive. Many times sequential business changes become escalatory or counterproductive.

To add to the chaos and complexity of the situation, change in the marketplace usually occurs faster than change can be effected in a business supplying that market. So change once thought needed may not be needed at the time when it actually becomes effective. Is it no wonder, then, that many businesses are reluctant to change and to accept whatever the marketplace offers them?

Under the best conditions, the pressure of time and cost limit the ability of an organization to consider only a few alternate solutions to a problem before taking action to implement a solution. The result of this process is a decision to make a change that frequently may be less than optimum or, worse, one that unknowingly can have serious short and long-term consequences on the business.

One way to improve the change-making ability of an organization is to create a computer simulation of the fundamental, dynamically interrelated processes that make up the business. A simulation like this would permit individuals within the organization to explore - virtually test - business behavior under many possible conditions and do it quickly and inexpensively.

The Business Observation System ^TM (or BWS ^TM ), is a new DeSA technology that offers such a simulation by means of the DeSASim Product Line. These products offer the decision-maker a way to:

The BWS is much different from anything else in the marketplace. It’s not another simulation language or software package. It’s not a consulting service offering to build a business model. The BWS is a total package that incorporates all the steps that formerly had to be taken to create and implement a validated business simulation model. Further, the BWS incorporates comprehensive generic business expertise to include the "Feedback Mathematics of Business ^TM."

We're well aware that, in the past, computer-based simulations as a class may not have lived up to expectations. We suggest that’s because, in the past, the art of simulation was not sufficiently developed to do the job expected. The BWS now overcomes those weaknesses by means of its unique and comprehensive design. It's an advanced, pre-built simulation system that only needs to be "tuned" to become business specific. All the time, expense, aggravation and the inherent risk of building a business simulator are avoided. It’s the most comprehensive business simulation system available – an intelligent system that offers unparalleled flexibility for use in many different business situations.

Specifically and uniquely, the BWS provides the decision-maker the means to examine the effect of what he or she is planning to do and helps to define what should be done next. It helps individuals gain new knowledge and reduce or eliminate uncertainty in their decision-making.

But the BWS offers much more! It's a tool that can be used by individuals to gain consensus within their organization in order to facilitate change. As such the BWS becomes part of the very important action phase of the learning-change process.

Through example, demonstration or testing, the BWS provides the means to assure that the right action is taken at the right time to meet desired business goals. The natural reluctance of individuals and organizations to make change in the face of uncertainty is reduced when a creditable and proven simulator of reality like the BWS is available.

As a result of this consensus building process - which is ideally facilitated by the partnership of the BWS technology and the human/organizational process - the business is better fortified to take the necessary steps - the actions - required for success and survival. And, this is what the Business Observation System is all about.