by sravan ankaraju on May 23, 2010
in Execution
I am not here to promote the capabilities of Auburn University to respond to Deepwater Horizon Oil Spill. But their research paper highlighted areas of expertise that will be required in assessing and mitigating the impact of the disaster. Some of the capabilities required to respond post leak stoppage –
- Containment and Clean-up
- Environmental Assessments – Impact of the spill on Coastal wetlands. Coastal wetlands prove habitat for fauna and flora, hurricane mitigation, carbon sequestration, pullutant filtration, and in sustaining local to regional economies. Some of the impact on the wetlands will be seen years following this disaster.
- Remediation – Adding nutrients to Ocean water to increase microbial activity.
- Public Health – Managing health risks and communications.
- Hydrodynamic modeling of contaminated areas – Model the fate and transport of oil spills within estuaries and also in the rivers.
- Managing the impact on wildlife – handle and treat injured birds of prey, and in removing oil from birds & turtles.
- Managing the impact on Seafood – Process to monitor within the oil spill path marine bacteria in fish and shell fish that cause human illnesses in order to prevent human consumption of contaminated seafood.
- Ensuring Availability of Right Equipment – Gas Chromatographs fitted with various detectors to measure hydrocarbon, residues discharged, and partitioning characteristics of the non-aqueous phase (NAPL) oils.
This is few of the many capabilities that will have to be brought to bear to manage this disaster.
We have had many disasters over the decade – 9/11, Asian Tsunami, Haiti Earthquake, Gulf Oil Spill etc. The capability for first responders in managing every one of these crises is different.
- Haiti Earthquake – managing the immediate human death, disease control, and rebuilding of basic public infrastructure;
- Gulf Oil Spill – contain the spill, limiting the damage to the environment; and manage the immediate impact on wildlife & Seafood, and health.
Managing the crisis/disaster is different is from managing the risk of project. While one focuses on limiting the damage, the other focuses on prevention. The focuses of the firm on one or more of these functions depend on their own capabilities. Capability mapping – what capabilities should firms own and outsource others? BP America, Halliburton, and Transocean are three main companies that are working together on the Deepwater Horizon rig. What capabilities did these firms bring to the table and were they executed well? Risk Management (safety) is a big function – what processes were put in place to mitigate the risk?
Should we even be deep-water drilling? The answer to the issue may be as simple as expediting our investments in alternative energies. But understanding the capabilities of the new Energy companies firm is as important.
What are your thoughts?
by sravan ankaraju on May 2, 2010
in Execution
Talking about theoretical models and frameworks, and practical applications of the same, I have been fascinated by Mechanism Design & Complex Event Processing.
Per Alex Tabarrok at reason.com, mechanism design is to markets what genetic algorithms are to life. He also writes that – “Mechanism design is a very general way of thinking about institutions. An institution or mechanism takes as input "messages" or "signals" from agents and it responds with an outcome. The idea of mechanism design is to create institutions that produce a desirable outcome while respecting the fact that agents have private information and are self-interested. It turns out that designing mechanisms that work well while respecting information and self-interest constraints is very difficult”.
While Mechanism Design is an economic theory, Complex Event Processing (CEP) is the use of technology to predict high-level events likely to result from specific sets of low-level factors.
A typical complex event processing use case can be found in automated stock trading using Financial Services algorithmic trading. Prior to the advent of complex event processing engines, stock traders often sat at a desk manually monitoring 5-8 screens to identify patterns in the market that indicated an opportune moment for a trade. Analytic information and patterns were often manually tracked in a spreadsheet. Today, this type of tracking can be entirely done in the complex event processing engine and a trade automatically triggered when the patterns are right. While the System is monitoring real-time market conditions, the traders gain time and mindshare to evaluate the performance of their algorithms and refine them for desirable outcomes (the premise of Mechanism Design)
Smart market (Auction) is one of the practical applications of Mechanism Design.
A complex event is what one infers from the simple events. Social Networks (a blog post, a tweet), Matching Systems (profile/preferences match), GPS Tracking and Monitoring – every single & simple event, can be combined through Complex Event Processing to drive larger more practical consumable applications that assist in desirable outcome.
Professors Øystein Fjeldstad and Charles Stabell have developed a framework of three generic types of business models –
- Solution Shops – Employ experienced intuitively trained experts whose job is to diagnose problems and recommend solutions. High-end consulting, law, advertising firms, R&D organizations, and specialist physicians’ diagnostic activities in hospitals are examples. The firms abilities to deliver value to customers are dependent on the people who work there; standardized processes are uncommon in solution shops.
- Value Chains – Manufacturing, retailing, and food service companies are examples. These companies bring inputs of materials into one end of their premises, transform them by adding value, and deliver higher-value products to their customers at the other end. The ability to deliver value is embedded in strong, standardized processes.
- Facilitated User Networks – Telecommunications, Insurance, and Banking are facilitated user networks. Participation in the network typically isn’t the primary profit engine for participants. Rather, the network is a supporting infrastructure that helps the buyers and sellers make money elsewhere. The company that makes money in a user network is the one that facilitates the network.
Pankaj Ghemawat in his book on the subject, Redefining Global Strategy, presents two strategic frameworks to help companies operate across borders. Two specific frameworks are – ADDING Value Scorecard and AAA.
The ADDING Value Scorecard is a framework to help companies assess whether a particular strategic move makes sense to add value to the business both locally and globally.
The acronym stands for –
- A – Adding volume, or growth;
- D – Decreasing costs;
- D – Differentiating or increasing willingness—to—pay;
- I – Improving industry attractiveness or bargaining power;
- N – Normalizing (or optimizing) risk;
- G – Generating and deploying knowledge (and other resources and capabilities).
One more framework to help companies deal with cross-border differences; it’s called the AAA triangle which stands for adaptation, aggregation and arbitrage.
- Adaptation strategies are designed to help companies adjust to differences across borders;
- Aggregation strategies are designed to help companies overcome some country differences by grouping them based on similarities;
- Arbitrage strategies seek to profit from some of these national differences rather than treating them as constraints.
Pankaj Ghemawat also has a blog, What in the World, on globalization. For my blog “Get off the drawing board”, the context of “learn-to-burn ratio” that he talks about in his blog entry is topical.
- Recognize the value of options (alternatives) in an uncertain world. Strategy options often vary greatly in their "learn-to-burn" ratios – the rate at which they generate information about which scenario will come to pass versus the rate at which they commit resources to particular scenarios. Once you take this kind of option value into account, it opens the door to additional strategic possibilities: e.g., mixed supply chains (rather than complete offshoring or onshoring), toeholds as ways of exploring new markets and, more generally, sequenced strategies.
