Ideas that change everything... Ideas that change everything...
Specialists in the Science of Business and Human Development
Nonlinearities
Why Training Fails | Harnessing Discontent | Engineer | Nonlinearities \ Model T Management\ Conducting Your Life
The Engineer in the Enterprise:
Non-linearities in Technical and Business Systems.
Board Member The Council on Realizing Excellence in Management
Abstract:
There is a deep connection between systems created by engineers, such as information, communication, or transportation systems, and systems created by business people to serve the public and create wealth. Two examples are given here: how the ancient pyramid builders operated very much like today's business managers, and how the new field of non-linear dynamics contributes to a paradigm for technical people to understand business cycles.
Engineer Stereotype
The engineering or technical research function of your organization has a unique culture. This culture comes in part from company values, but also from the different education, background, and life expectations of the engineers. Business oriented people, such as financial analysts, or marketers, or the top executives, tend to view engineers as a peculiar bunch. They seem to like to stick together, and are not inclined to participate in important business decisions, such as defining a market, or generating a strategic plan to take the company into the future. Cultural differences tend to reinforce these stereotypes, and keep the engineers in their own corner of the company. Companies thus develop the "dual ladder" system, with a "separate but equal" path of advancement for engineers.
It is up to the engineers to break the stereotype.
My experience is that engineers can gain an understanding and appreciation of business rather quickly, because it is easy to put business practice into engineering terms. On the business side, it helps to have a mission and vision that can be a source of pride and inspiration for everyone in the company, including engineers.
Managers and Pyramid Engineers
To show the similarities between business and engineering, I like to think of an analogy between modern business managers and ancient engineers. The engineers who built the pyramids make a fine example. These engineers had no real theory to guide their enterprise. Yet by trial and error they developed sophisticated techniques and rules that resulted in monumental stable structures that are older and bigger by some measures than anything else mankind has built and is still standing. We know these engineers had failures, probably quite a lot of them, and we know they started small, developing the huge pyramids only after a lot of experience with smaller ones. We also know that these engineers could learn from mistakes: Seneferu's pyramid at Dahshur changes slope abruptly from steep to less steep half way up. It is likely that some event caused the engineers to fear a collapse, so they abruptly changed the slope, to reduce the weight of the top section, and avoid a calamity. We can also be pretty sure that these engineers had unnecessary rules. For example, there may have been religious rituals invoked as each block was placed, and other observances that we today might call superstitious.
Modern business managers are in a position a lot like the ancient pyramid engineers. They do not have a complete theory to guide them (it may well be that such a theory is not possible), yet they have to plan and make decisions and project how their business will be built. They have many rules about what works and what doesn't, but mainly they have a record of trial and error of past business builders. Occasionally, when a business nears collapse, businessmen try to figure out why and make changes to avoid the calamity. And some things are certainly done in the belief that they are necessary; but it could be that they are really superstition.
So it helps for engineers to see business people as fellow engineers in a field where the basic science is undeveloped and sure-fire methods don’t exist.
Business and Non-linear Dynamics
Nonetheless, a new science, still developing, has quite a lot to say about how businesses operate. This is the science of non-linear dynamics. It is a salient feature of operating business systems, and is readily understood by engineers. Business managers see it as consistent with their intuition. This is the science that can be exploited to give engineers an appreciation of business.
I would like to give a very brief example of nonlinear dynamics applied to business using Eq. 1 and Figure 1 below. A typical start-up business begins with a new idea and a lot of enthusiasm--their idea catches on and they begin to grow. But when they get to a certain size, they will begin to deplete their resources: employee training lags behind, suppliers can't keep up with demand, competitors move in and take some customer share, so the business may level off or even decline. The decline may actually be good, and allow training to catch up, and suppliers to deliver, so business picks up again, only to go into another cycle. This qualitative behavior is captured in a simple nonlinear iterated map, called the logistics map. (A map is just an equation that can produce a sequence of numbers, when its output is used as a subsequent input.) Let xn be a measure of business success for time period n, and xn+1 is the business measure for the next period. Let g and d be real numbers with certain restrictions. Then the logistics map is the iteration of the following equation:
xn+1 = xn ( g - d xn) . Eq. 1
In this demonstration, g is the growth coefficient, and d is the coefficient of depletion. If d = 0 (no depletion) each iteration of this equation would grow, provided g > 1. With a finite value of d, growth will occur for small enough xn. But if xn gets too big, anything could happen. This is what is illustrated in Figure 1.
Note the exponential growth in xn for the first 10 or so iterations. The smaller growth factor g = 2.8 leads to a steady state. The larger one g = 3.8 in fact leads to mathematical chaos. This is a mathematical model showing that fast growth combined with resource depletion can result in large oscillations in business, which is a serious threat to business survival. Note that bad intentions or sloppy execution are not necessary for these oscillations. The system defines the values of g and d, and only changing the system can bring the results under control.
Now, I doubt that Eq. 1 is a valid mathematical description of any business, and even if it were, there is no reason to think that the coefficients g and d would stay constant very long in the real world. The point is, this simple expression captures the qualitative behavior of many business systems with growth and resource depletion. The behavior as the map is iterated is indeed similar to the behavior of real things, including business cycles. Even though one may not be able to identify precise coefficients, one can still identify the feedback loops that create the system, and take steps to mitigate the oscillations.
Summary: Every enterprise develops its own culture, and engineers in the enterprise develop their own version. This engineering culture leads to stereotypes accepted more or less by both engineers and business managers. The stereotypes are a barrier to effective use of engineering talent in making informed business decisions. They are also a barrier in career development for engineers. It is up to the engineers to break the stereotypes, by studying and coming to terms with business methods.
This coming to terms can be accomplished in hands-on exercises showing how the practice of building a business resembles conventional engineering. In particular, business is a type of engineering in a field without a comprehensive theory to guide decisions. Non-linear dynamics is a developing technical field easily presented to technical people, that provides a ready explanation of business dynamics.
Engineers who appreciate the challenges of building a business are more likely to seek participation. Companies with engaged and motivated engineers will reap rewards in the market place.
© 2000 Arthur Davidson
Send mail to webmaster@bhdtech.com with questions or comments about this web site.
Copyright © 2005, 2006, 2007 BHD Technologies, Inc.
