9-1 Ch. 9: Planning and Decision Aids Ch. 9: Planning and Decision Aids 9-7

9-1 Ch. 9: Planning and Decision Aids Ch. 9: Planning and Decision Aids 9-7

9-1 Ch. 9: Planning and Decision Aids Ch. 9: Planning and Decision Aids 9-7




After studying this chapter, the student should be able to:

1.Explain knowledge management as a means ofand how it createsing and utilizing an information base and building on anvalue for organization’s intellectual assets.

2.Explain DescribeDescribe the basic featuresessentials of the scenario, of the Delphi technique, and simulation, and scenario forecasting aids.

23.Apply two aids for fostering creativity -Use Osborn's creativity model toand the cause and effect diagramfor stimulatinge adaptive and innovative decisions.

34.Describe three aids for helping to achieve total quality management -Apply twohree quality management decision and planning aids: — benchmarking, and the, Deming cycle, and the balanced scorecard model., and Pareto analysis

4.Explain one project management aid - the program evaluation and review technique.

 PPT 9.12: Learning Objectives for Chapter 9. 


Preview: Electronic CommerceMike Turillo of KPMG on Knowledge ManagementSchlumbergerSema’s InTouch Service

As Chief Knowledge Officer of KPMG, Mike Turillo suggests that we are moving as a culture from knowledge-hoarding to knowledge-sharing. This shift to sharing is hardest on those ages 30 to 50 who have to unlearn habits and patterns. Just like the crystal radio changed information exchange, technology will allow us to manipulate information and data and then collaborate in real-timeA field engineer at a SchlumbergerSema oil-drilling site in Indonesia had programmed the wrong instructions into a computerized drilling tool, creating a serious problem. Engineers placed a call to the company’s InTouch service in Houston and had a solution within 15 minutes. The InTouch service is designed to put subject-matter experts in immediate contact with on-site employees who need answers. As such, it is one example of how companies are using online decision aids to manage knowledge. The InTouch program has reduced time needed to resolve technical questions by 95% and saved SchlumbergerSema more than $150 million annually.Electronic commerce encompasses all types of commercial transactions via computer-based networks that involve the processing and transmission of between retailers and end-users. Some forecasters believe that by 2010 shopping malls will be in the decline stage and 55% of shopping will occur through nonretail channels - the Internet, CD-Rom catalogs, and interactive television. Forrester Research has made a more conservative forecast: Internet shopping will rise from about $520 million in 1997 to more than $7 billion by 2001. The immediate threat to retail stores ($300 billion in apparel sales alone) is minimal, but the threat to the nonstore retail industry is very real. On-line retailers offer a variety of products and delivery options, including customized products. Customers don't have to drive, park, wait, enter a store, or deal with crowds; they can shop from the convenience of their own homes.

 To learn more about Forrester ResearchKPMGSchlumbergerSema, visit - .

Learning Objective 1: Explain Knowledge Management as a means ofand How It Creatinges and Utilizing an Information Base and Building on anValue for Organization’s Intellectual Assets.

  1. Fostering Knowledge Management
  1. Knowledge Management
  1. a. art and science of creating, measuring, distributing, enhancing, evaluating, and integrating the information base of an organization and building on its intellectual assets.involves recognizing, generating, documenting, distributing, and transferring useful

information between

ppersons useful information to improve organizational effectiveness


a.three main components

explicit knowledge

  • published andin internally generated reports and manuals, books, magazines and journals, government data and reports, online services, newsfeeds, etc.

tacit knowledge

b.tacit knowledge

  • employee information, competencies, and experience held by employees, including professional contacts and cultural and interpersonal dimensions
  • may be subconsciously understood and applied, difficult to express, often developed from direct experiences and action, and shared through conversations

c. enabling technologies

  • iInternet, intranets, search engines, and work-flow software

 PPT 9.23: Components ofFostering Knowledge Management. 

This slide defines knowledge management and shows the three components of knowledge management: 1) explicit knowledge, 2) tacit knowledge, and 3) enabling technologies.

B.Knowledge Management ShortcomingDrivers

1.productivity and opportunity lossInformation and Knowledge

a.the new competitive weapons

2.Risks of Not Managing Knowledge Assets

a.productivity and opportunity loss

lack of knowledge where and when it is needed

an unusable knowledge base

b.information overload

too much unsorted and nontargeted information

c.knowledge attrition

organizations may lose up to ½ their knowledge base every 5 to 10 years through obsolescence and is lost by employee and customer turnover

d.reinventing the wheel

lack of standards and infrastructure for creating, capturing, sharing, and applying best practices or lessons learned

Web Insight: Knowledge, Inc.

The monthly online newsletter Knowledge, Inc. covers knowledge and intellectual capital management. Click The Smart Enterprise and then click one of the case studies listed. What did you learn? At the site, students will find twelve case studies that highlight how intellectual capital was stimulated and applied to goal achievement. For example, Steelcase, a manufacturer of office furniture, focuses heavily on customer needs and are now selling workplace performance solutions. Someday your office chair may allow you to connect to the Internet.

 To find the case studies, go to

C.NaturalKnowledge Management Targets

1.tThree nNatural tTargets for mManaging kKnowledge

a.organization’s teams

collaboration among teams allowsknowledge management provides a method for both the sharing of ideas and the identification of best practices in design and developmentacross teams


tracking customer issues, buying patterns, and expectations is essential for ongoing contact with customers developsing and improvesing relationships with customers


knowledge management can track employees’ skills and abilityies, facilitate performance reviews, deliver training, provide up-to-date company information, and manage benefits, and improve employee knowledge and morale

D.Enabling Technology


a. permits thatprovides foundation for solutions that automate and centralize the sharing of knowledge

and fosterings innovation

ab.should delivers only relevant information quickly from every feasible source

bc.must works over a variety of devices to transmit knowledge over a variety of devices to where informationit is needed

2.Expert Systems

a.computer-based technologies developed to perform functions normally associated with

human intelligence

b.store, retrieve, and manipulate data, diagnose problems, and make limited decisions

based on detailed information about a particular problem

E.Enabling Culture

The Competent Manager: Dave Snowden, Director, Center for Action Research in Organizational Complexity, IBM

“We never start from a zero base when we design a knowledge system, all players in that system come with baggage, positive and negative derived from multiple histories.”

To learn more about the Center for Action Research in Organizational Complexity at IBM,


E.Enabling Culture

1.Trust and cCultural iIssues

a. are the greatest barriers to successful implementation of knowledge management

ab.sense of trust is essential for members to actively share sharing knowledge, especially tacit

knowledge and innovation is valued and rewarded in an organization

Planning and Administrativeon Competency: Mitre’s Introduction of Knowledge Management

Even as an information technology company, Mitre realized that knowledge was being held prisoner within each company unit. TheyIt decided to use technology to allow all employees access to the knowledge base of the company. To make individual expertise accessible, theyit created an employee database which provides individual contact information plus personal profiles and publication material. A library of best practices related to key software systems was made available throughout the company. All human resource documents, tracking reports, property inventory forms went online and reports can be filled out online. The overall goal is to make the people network available to everyone and to make all of the company’s expertise available for the benefit of the customer.

 To find out more, go to

A Visit to the Forrester Home Page (6/1/98). 

A recent U.S. Commerce Department report, "The Emerging Digital

Economy," suggests that investments in information technology have made the

economy stronger and argues that the cost savings associated with electronic

commerce will drive economic growth for years to come.

Driven by four types of activities, this growth will accelerate across all sectors

of the economy:

Building out the Internet

Electronic commerce among businesses

Digital delivery of goods and services

Retail sale of tangible goods

With investments and transactions on the rise, the Commerce Department

suggests that $327 billion worth of business-to-business electronic commerce,

which was projected by 2002 in Forrester's "Sizing Intercompany Commerce"

Report, will be realized.

Consumers will also benefit from the digital delivery of goods and services.

The Commerce Department cites Forrester's prediction that revenues from

on-line advertising, subscriptions, and transaction fees will grow to $8.5 billion

in five years as consumers embrace electronic content (see the August, 1997

Media & Technology Strategies Report, "Branding On The Web" and the

November, 1997 Media & Technology Strategies Report, "Valuing On-line

Audiences" ).

Learning Objective 12: Explain the Essentials of the ScenarioDescribe the Basic Features of the, Delphi Technique, Sand Simulation, and Scenario F Forecasting AAids.

A.Fostering Forecastsing


a.Predicting, projecting, or estimating future events/conditions

ab.primarily external events or conditions beyond the organization's organization’s control

bc.most forecasting is based on extrapolation

extrapolation is the projection of some tendency from the past or present into the future

2.Four Forecasting Pitfalls

a.listening to the media

b.assuming things are going to return to the way they used to be

c.hearsay – assuming a trend exists because of rumors

  1. tunnel vision – limited information

3.Three Common Forecasting Aids

a.Delphi technique scenarios

b.simulation Delphi technique




1.Provide Possibilities

a.a broad vision of possible events

b.assist in the identification of events that warrant the development of contingency plans

c.help managers and others identify patterns, generalizations, and interrelationships

2. Three Common Scenarios

a.most probable scenario

b.pessimistic scenario

c.optimistic scenario

 PPT 9.2: Reasons for Using ScenariosComponents of Knowledge Management. 

This slide shows 4 functions of scenarios: 1) provide a wide range of possibilities against which to evaluate strategies, 2) provide a broad vision of possible events, 3) assist in the identification of events that warrant the development of contingency plans, 4) help managers and others identify patterns, generalizations, and interrelationships.the three components of knowledge management: 1) explicit knowledge, 2) tacit knowledge, and 3) enabling technologies.

Global Awareness Competency: Royal Dutch/Shell's PlanningWeb Insight: Forecasts

What types of forecasts are available through this online service? Forecasts available include global economic forecasts, currency and balance of payment projections, financial market analysis, interest rate forecasts, and U.S. quarterly forecasts of key indicatorsRoyal Dutch/Shell began using scenario planning in 1968. The company began exploring questions about oil resources in the year 2000 and into the next century. A primary concern for the company was expressed as, "Is there life for this company after oil?" Scenario planners at Royal Dutch/Shell try to grasp the meaning of changes in social values, technology, consumption patterns, political thinking, and international finance in various parts of the world. Once written, scenarios are tested and quantified with the help of simulation models and the company's energy and economic data banks. Shell's scenario planners foresaw: the energy crises of 1973 and 1979, the growth of energy conservation, reduction in the demand for oil, the evolution of the global environment movement, and even the breakup of the Soviet Union. This type of foresight achieved through scenario planning gives Royal Dutch/Shell an important competitive advantage.

 To learn more about Royal Dutch/Shell, visit .Go to

 Ask students to envision the year 2020. What will be the primary sources of energy? How reliant will the world still be on fossil fuels?

 How will student demographics for your school change over the next 20 years? How might scenario planning help your college/university be more competitive?

  1. Delphi Technique – forecasting based on a panel of experts
  1. 1. What is the Delphi Technique?

a.Fforecasting Aaid Bbased on cConsensus of a Ppanel of EexpertsThree Steps

  1. first series of questionnaires

first is more general; subsequent ones more specific

  1. Three Phases
  2. sent to a group of experts who are unknown to one another

 requestsing numerical estimates of specific technological or market possibilities and assignment of probabilities to possibilities

Communication Competency: Communicating Trends in Safety Management

This competency reports an example of the Delphi technique, describing the four-phase process used to achieve consensus among the panel of experts. 120One hundred twenty American Society of Safety Engineers were initially contacted, and 54 responded to the first questionnaire, producing almost 200 predictions of safety trends expected during the next 10 years. By the end of the fourth phase, 33 respondents remained in the study, with 46 predictions.

  1. summary of the first roundphaseis prepared

shows ranges of responses

revised questionnaire

  sent to respondents asking them to revise earlier estimates or justify original opinions

  1. summary of the second roundphaseis prepared

ed.experts asked in a third questionnaire if they support the emerging consensus

encouraged to find reasons not to join consensus to avoid blind agreement

 PPT 79.39: The Three3Three Basic StepsPhases of the Delphi Technique. 

This slide shows the three basic steps in the Delphi technique: 1) a questionnaire is sent to a group of experts, 2) a summary of the first round phase is prepared, and 3) a summary of the second round phase is prepared.

 Bill Gates, CEO founder of Microsoft, forecasted recently that one third of all food sales would be conducted electronically by 2005. Ask students to come up with a list of experts (15-20) to address Gates’ prediction using the Delphi technique.

2.Delphi Questionnaires

a. first round is broadly worded, with subsequent rounds becoming more specific (built on responses to preceding questionnaires)

  1. Simulation
  1. What is Simulation?
  1. representation of a real system
  2. represented in quantitative and/or qualitative terms
  3. b.ggoal is to reproduce or test reality without actually experiencing it
  4. c.allows management to ask “what -if” questions

 PPT 9.411/Table 9.1: Examples of Business Simulation. 

This slide lists the common types of business simulation models: budget models, treasury and financial models, marketing models, operations models, human resources models, and strategic planning models.

Planning and Administration Competency: The Industry Restructuring Simulation

This competency reports on the use of an industry restructuring simulation by an electric utility’s senior management team. The utility was facing transformation from regulated monopoly into a competitive commodity industry. The competency shows how the restructuring simulation assisted senior managers in forecasting and planning.

1.Based on Cause and Effect Relationships

2.Advanced BusinessTango! Simulations

a.offered by Celemi, a Swedish training and consulting firm

teams of four or five members model the business for 4 or 5 “years” progress

customers have to be matched with the correct talent

higher market value in Tango! is defined as the sum of financial and intellectual assets

b.require the use of advanced computing technology

4.Typical Simulation Questions and Variables

a.What effect will certain changes in the economy have on the organization if its primary strategies remain unchanged?

b.What will be the specific effects on the organization if a particular strategy is selected in anticipation of those changes in the economy?

c.Are there any particular combinations of strategies that will enable the organization to gain a competitive advantage?

532.Virtual RealitySpreadsheet Simulations

  1. a.a surrogate environment created by communications and computer systemsused to create hypothetical financial reports so that planners can experiment with how the future might look based on different sets of assumptions

fulfills the human requirement for sight, sound, and movementpro forma income statements and balance sheets

b.as a planning aid it allows for experimentation of time, speed, or various realities

Planning and Administrative Competency: IBM's Supply-Chain Simulation

This competency describes how IBM PC Company’s management used simulation to help identify, analyze, and recommend the most cost-effective changes for IBM Europe's PC manufacturing and distribution operations. As part of the project, an IBM team developed a supply-chain simulation model designed to quantitatively assess the impact of various operational strategies on cost and customer service levels. This simulation helped management identify symptoms, underlying problems, and alternative solutions; make timely decisions; take calculated risks and anticipate the consequences; and develop plans and schedules to achieve specific goals efficiently.

To learn more about IBM PC Company, visit its home page at

Ask students to use the Internet to find an example of how simulation is used in employee training and development. Bring articles to the following class for discussion.

 Ask students to form small discussion groups. Use the articles on simulation and training to develop a list of the advantages and disadvantages of using simulation in employee training and development.

  1. Scenarios
  1. 1. What are Scenarios?
  1. Pprovide Ppossibilities

a.a broad vision of possible events or alternative pathsstories that help people recognize and adapt to changing features of their


  1. b.

assist in the identification of events that warrant the development of contingency action plans

  1. help managers and othersa way to identify patterns, generalizations, and interrelationshipsalternative paths for the future and the actions involved in them
The Competent Manager: Greg Jacobus, Director, Procurement Risk Management Group, Hewlett-Packard Co.

“Over the last two years we’ve found that we’ve improved our ability to estimate uncertainty. If we know what our exposure is to margins and revenue under different scenarios, then we can engage suppliers in constructive discussions about alternatives....”