Title: International Summer School on MCDM 2006
1Sapientia et doctrina
International Summer School on MCDM 2006 Kainan
University, Taiwan, July 3-15, 2006 THE KM-MCDM
INTERFACE TRADEOFFS-FREE INNOVATION AND
SOLUTION BY DISSOLUTION
Milan Zeleny Fordham University _at_ Lincoln
Center Management Systems, 626E GBA New York, NY
10023-7484 U.S.A. E-mail mzeleny_at_fordham.edu
2From decisions to action
- Management is decision making.
- (Herbert Simon)
- Traditional decision-making theory is based on
establishing criteria and assessing options for
action relative to those criteria. - Action and implementation must follow decisions
if they are to have value. - Giving managers information in the form of
symbolic descriptions is next to useless if not
followed by action. - Decision making is not just an informational
input, but a purposeful coordination of action of
the entire decision-making process. - A decision, by itself, changes nothing.
- Decision making without the responsibility for
subsequent action is just judgment. - It is the responsibility and purpose of decision
making to generate alternatives leading to
action, not just assess and evaluate given
alternatives that do not. - Tradeoffs delay or prevent action, make decision
makers immobile. Tradeoffs-free alternatives lead
to action.
3Tradoffs on Productivity frontier
Cost
4Tradoffsfree solution
High
Value
Low
High
Low
Cost
5Tradeoffs eliminationSystem I
6Tradeoffs eliminationSystem II
7Mass Customization
Poor fit
Mass Production
Low cost
Mass Customization
Good fit
Custom Made
High cost
8Mass Customization
- Mass customization is a good example of
delivering value for the customer as a guide to
the innovation process. - Mass Customization (MC) represents a new way of
understanding (eliciting customer preferences),
designing, implementing (producing and
distributing) and operating (selling and using)
processes, products and services fitted,
individualized and customized for specific
customers, yet provided at the cost of
mass-produced, standardized, off-the-shelf items.
- MC emerges from a special fusion of two
traditional approaches mass production and
custom made modes. MC retains the best features
of both low cost and good fit for use. - MC creates innovative advantages for the business
and customer - First sell, then produce cash at the start of
production - No finished products inventory
- No retail outlets, no unsold or returned goods
- No anonymous customer
- No intermediaries
9Conflict dissolution
10Intensity of conflict
11What is Optimality?
- What is determined or given a priori cannot be
subject to subsequent optimization and thus,
clearly, does not need to be optimized it is
already given. - What is not given must be selected, chosen or
identified and is therefore, by definition,
subject to optimization. - Consequently, different optimality concepts can
be derived from different distinctions between
what is given and what is yet to be determined in
problem solving or decision-making formulations.
12Eight Concepts of Optimality
13Variance does not measure risk
- Some financial writers, unfortunately, have come
to look upon the standard deviation of the
distribution of returns as a measure not only of
the variability (which it is) but of the risk
inherent in a project (which it is not). In
everyday usage, risk means the probability of a
loss or the probability that a return will be
lower than some target level.
E. Lerner - E. Lerner, Managerial Finance, Harcourt Brace
Jovanovich, New York. 1971, p. 328.
14Portfolio management
15Taxonomy of Knowledge
- Knowledge is the purposeful coordination of
action - All doing is knowing, and all knowing is doing
- Bringing forth a world of coordinated action is
human knowledge - Data ? Information ? Knowledge ? Wisdom
-
- (? Enlightenment)
16 Taxonomy of Knowledge (Zeleny, M. (1987)
Management Support Systems Towards Integrated
Knowledge Management, Human Systems Management,
Vol. 7, No. 1, pp. 59-70.)
17All About Adding Value
- Knowledge is real and tangible
- Knowledge, wisdom, and ethics are measurable
- Relationship between knowledge and value creation
is tangible - Knowledge, wisdom and ethics MUST ADD VALUE
- (Data and information are inputs into the
value-adding processes) - Process of creating new value
- Adding value to the business
- Adding value to the customer
18Stan Shihs Smiling Curve
19Adding Value for the Customer
Maximum price
Value for customer
Price paid
Value Created
Profit
Value for business
Wages and salaries
Cost
Direct and indirect materials and services
purchased
20Adding value
- First, the customer pays for the service or
product the price paid. - The producer subtracts the cost incurred.
- The difference is the added value for the
business. - This added value can also be interpreted as the
value of knowledge. - In order to pay wages and salaries, the
production process and its coordination must
generate this added value. Added value is the
only source of corporate wages and salaries and
profits. If the added value does not cover the
wages and salaries, then these must be
correspondingly lowered. If no value has been
added, then the value of knowledge is zero and no
payment can be due to it. The business must add
enough value in order to cover at least its
workers and managers, their salaries and wages.
If even more value has been created, then profits
can be realized, up to the price received. - A business which does not generate sufficient
added value cannot cover its wages and salaries,
has no profits, and cannot function over an
extended period of time. Added value is the key
to assessing the quality of human knowledge in
business. - The customer, of course, must be willing and
ready to pay more for the service/product than he
actually paid. The maximum price the customer
would be willing to pay must exceed the price the
producer has asked for. The difference is the
added value for the customer.
21Recent book
22Bye bye