UPDATED:: Quake in Japan illustrated fragility of “Global Supply Chain” & flaws in conventional “wisdom”


Business continuity planning life cycle

Business continuity planning life cycle (Photo credit: Wikipedia)

The case for a Company to maintain a current and comprehensive Business Continuity Plan does not come much better than this example from HP!

Modern global supply chains, experts say, mirror complex biological systems like the human body in many ways. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness — as if a tiny tear in a crucial artery were to cause someone to suffer heart failure.

via Quake in Japan Broke a Link in Global Supply Chain – NYTimes.com

Of course EVERYONE hopes that they never have to contend with what the Japanese nation have had to live through. But, at a time in the history of our planet, when the impact of events on the other side of the planet have truly global repercussions, “HOPE” isn’t much of a strategy! 

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Power Laws & Complexity Management


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Mark Buchanan is one of the best writers on this most complex of subjects and this article (click on image for link) covers exactly what it says on the tin!

I particularly appreciate that he tackles key aspects of the wider subject in such a manner as to make it readily understood by anyone with a desire to learn and apply what the knowledge.

Business leaders NEED to understand the nature of  complexity and the threat of self-generated risk (excessive complexity for poor structure, processes, etc.): risk resulting from the execution of the processes that facilitate functionality.

Also, to appreciate the systemic risk exposures communicated by organisations with whom they trade…without which they would fail…reinforces the most pressing need for in-depth assessment of existing and prospective partners…both up and downstream.

MB illustrates this point and the exposure that comes from Global Supply Networks “beautifully”, by recounting the sorry tale of the enforced departure of Swedish company Ericsson from the mobile handset market thanks to a factory fire in Mexico!

 

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Living with Black Swans: balancing the books in uncertainty


OK I’m a self-confessed fan of NNT but early on in this interview with his former Professor he again hits the nail on the head. He reminds us of the lessons that every business (and political!) leader needs to learn..

“…You have to avoid debt because debt makes the system more fragile. You have to increase redundancies in some spaces. You have to avoid optimization. That is quite critical for someone who is doing finance to understand because it goes counter to everything you learn in portfolio theory…. I have always been very sceptical of any form of optimization. In the black swan world, optimization isn’t possible. The best you can achieve is a reduction in fragility and greater robustness. You may have heuristics, but not an optimization rule. I hope the message will finally get across because I haven’t succeeded yet.

People talk about black swans but they don’t talk about robustness, which is the real lesson of the black swans.”

Business Leaders of the current culture are not, generally, “agents of change”. As I have said before we need to cultivate Risk Leaders. Those who, not only,  recognise the flaws of the current culture but are motivated to create, champion, execute and capitalise upon new models and strategies.

Apart from the clamour, from better informed and more demanding consumers, for greater transparency, accessibility and demonstrable sustainability, the pressing NEED is for this new breed to embrace the concept that robustness (or NNT’s anti-fragility) can ONLY come from by creating (and maintaining) a sound business infrastructure…from the bottom up or, as I feel is even more appropriate, from the “inside out”: i2o”.

The relevance of scaling and causality

Such problems as Taleb highlights can only be addressed if the owner can view the business (or system) at the appropriate “scale”. Otherwise how would one know where and by how much to “increase redundancy” to build RESILIENCE in order to survive unforeseen and unforeseeable future events?

After all redundancy and robustness cost NOW and need to be maintained, so, have an ongoing impact upon profitability.

Complexity: Interdependence lessons from nature (& Ghandi)


It is always reassuring to discover that you are not the only one blogging frantically in an effort to convey the message that complexity isn’t new or only found within modern technology. Nothing could be further from the truth! It is a subject that, for so long, has been overlooked – or, at least, fallen between too many stools.

Perhaps because of the very nature of the issue, complexity has become a subject much beloved by the Academic community. Whilst the subject matter is absolutely fascinating, for obvious reasons, my focus has been very much upon practical business applications.

Ontonix Srl, under the leadership of Dr Jacek Marczyk have broken new ground in this area so it is really exciting times for us and our clients. Identifying and managing complexity within business systems for a wide variety of purposes is already bringing major benefits.

Critical elements of fundamental “systems thinking” are INTERDEPENDENCE and SUSTAINABILITY. As important to a dynamic business system as it is in nature and has been throughout the history of our civilization. There is a significant resource of complexity-related reading within the Box.net widget on the main page and in the About Complexity page.

But if you want more, particularly with an emphasis upon sustainability and complexity in nature, I can commend Dave Pollard’s blog How to save the world. It contains more information than you could shake a stick at!

Thanks to Dave for allowing me to share these graphics with you.

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“Interdependence is and ought to be as much the ideal of man as self-sufficiency. Man is a social being. Without interrelation with society he cannot realize his oneness with the universe or suppress his egotism. His social interdependence enables him to test his faith and to prove himself on the touchstone of reality. If man were so placed or could so place himself as to be absolutely above all dependence on his fellow beings he would become so proud and arrogant as to be a veritable burden and nuisance to the world…”

If you aren’t already familiar with these wise words I should first point out that they were not written about the current financial crisis but were “coined” some time ago by Ghandi.

Think on!!!

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