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International Summer School on MCDM 2006

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System II. 7. Mass Customization. Mass. Production. Custom ... (Data and information are inputs into the value-adding processes) Process of creating new value ... – PowerPoint PPT presentation

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Title: International Summer School on MCDM 2006


1
Sapientia 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
2
From 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.

3
Tradoffs on Productivity frontier
Cost
4
Tradoffsfree solution
High
Value
Low
High
Low
Cost
5
Tradeoffs eliminationSystem I
6
Tradeoffs eliminationSystem II
7
Mass Customization
Poor fit
Mass Production
Low cost
Mass Customization
Good fit
Custom Made
High cost
8
Mass 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

9
Conflict dissolution
10
Intensity of conflict
11
What 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.

12
Eight Concepts of Optimality
13
Variance 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.

14
Portfolio management
15
Taxonomy 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.)
17
All 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

18
Stan Shihs Smiling Curve
19
Adding 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
20
Adding 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.

21
Recent book
22
Bye bye
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