issues of complexity in enterprise & quality management

Issues of Complexity in Enterprise & QualityManagement

Nicola Mezzetti, Ph.D.

Department of Information Engineering and Computer ScienceUniversity of Trento

[email protected]

A.A. 2014/2015

Nicola Mezzetti, Ph.D. Issues of Complexity in Enterprise & Quality Management

Everyone knows that not all change is good or even necessary. Butin a world that is constantly changing, it is to our advantage tolearn how to adapt and enjoy something better.

Ken Blanchard1

1In the foreword of ”Who moved my cheese?” by Spencer JohnsonNicola Mezzetti, Ph.D. Issues of Complexity in Enterprise & Quality Management

Overview

Quality is a concept that covers many aspects across thewhole enterprise, seen as a system, and its processes.

Quality can be seen as an aspect of Enterprise SystemsEngineering.

This discipline has emerged in direct response to the increasingcomplexity of enterprises.

We will review the basic concepts of Enterprise SystemsEngineering in order to understand:

The system approach principle which is important for qualitymakers,The tools it enables to quality makers, andIssues about quality management in complex environments.


Dealing with Messes

In a real sense, problems do not exist. They are distractionsfrom real situations. The real situations from which they areabstracted are messes.

A mess is a system of interrelated problems. We should beconcerned with messes, not problems.

The solution to a mess is not equal to the sum of the solutionto its parts. The solution to its parts should be derived fromthe solution of the whole; not vice versa.

Science has provided powerful methods, techniques and toolsfor solving problems, but it has provided little that can help insolving messes. The lack of mess-solving capability is themost important challenge facing us.

Russ Ackoff, University of Pennsylvania


Messes & Complexity

Experiencing a mess often indicates that we are dealing withcomplexity.

Complexity

Complexity is that property of a model which makes it difficult toformulate its overall behavior in a given language, even when givenreasonably complete information about its atomic components andtheir interrelations.

Complexity (Organizational)

Condition of having many diverse and autonomous but interrelatedand interdependent components or parts linked through many(dense) interconnections. In the context of an organization,complexity is associated with (1) interrelationships of theindividuals, (2) their effect on the organization, and (3) theorganization’s interrelationships with its external environment.


Complexity Science

Complexity Science is a novel approach developed for studyinginterdisciplinary phenomena. Complexity science:

spans many disciplines, including physics, biology, and systemstheory.

is not a single technological innovation, but a shift in scientificapproach with the potential to profoundly affect business,organizations and government.

strives to uncover the underlying principles and emergentbehavior of complex systems.

The goal of complexity science is to understand complex systems,what ”rules” govern their behavior, how they adapt to change,learn efficiently, and optimize their own behavior.


Business Success is a Matter of Complexity!

Despite the importance of strategy in the business literature, thereis a paucity of understanding and consensus around foundationalissues in the discipline.

What exactly is the nature of those intangible competencies,capabilities, resources, and assets that enable one enterpriseto succeed while another stumbles?

Must an enterprise’s strategy fit the environment, or can itsuccessfully shape its environment to suit its existingcapabilities?

Business success and failure are outcomes of complex interactionsbetween an organization and its changing environment, withoutsimple cause and effect relationships.


What’s an Enterprise?

Enterprise (Oxford Dictionary)

A business or company;

An enterprise consists of a purposeful combination ofinterdependent resources (e.g., people, processes, organizations,supporting technologies, and funding) that interact with

each other to coordinate functions, share information,allocate funding, create workflows, and make decisions, etc.;and

their environment(s) to achieve business and operationalgoals through a complex web of interactions distributed acrossgeography and time2.

2Rebovich, G. and B.E. White (eds.). 2010. Enterprise SystemsEngineering: Advances in the Theory and Practice. Boca Raton, FL, USA:CRC Press.


Other definitions

The term enterprise has been defined as follows:

1 One or more organizations sharing a definite mission, goals,and objectives to offer an output such as a product or service.(ISO 2000)

2 An organization (or cross organizational entity) supporting adefined business scope and mission that includesinterdependent resources (people, organizations andtechnologies) that must coordinate their functions and shareinformation in support of a common mission (or set of relatedmissions). (CIO Council 1999)

3 A complex, (adaptive) socio-technical system that comprisesinterdependent resources of people, processes, information,and technology that must interact with each other and theirenvironment in support of a common mission. (Giachetti2010)


Purposes of an Enterprise

An enterprise must accomplish two purposes:

1 Develop things within the enterprise to serve as either externalofferings or as internal mechanisms to enable achievement ofenterprise operations, and

2 Transform the enterprise itself so that it can most effectivelyand efficiently perform its operations and survive in itscompetitive and constrained environment.


Enterprises and Organizations

The terms enterprise and organization are not equivalent:

There are enterprises that are not organizations;

In self-organizing enterprises the sentient beings in theenterprise will find for themselves some way in which they caninteract to produce greater results than can be done by theindividuals alone. This kind of enterprise is often more flexibleand agile than organized ones.

There are organizations that are not enterprises;

Giachetti (2010)3 distinguishes between enterprise andorganization:

an organization is a view of the enterprise which defines thestructure and relationships of the organizational units, people,and other actors in an enterprise.

3Giachetti, R.E. 2010. Design of Enterprise Systems: Theory, Architecture,and Methods. Boca Raton, FL, USA: CRC Press, Taylor and Francis Group.


The New Enterprises

Enterprises are evolving in a highly complex manner and themanagement approaches applied are shifting from the modern topostmodern.

There is a growing need for enterprises to operate on a global level,thus considering an expanded set of factors, which includes:

the economical, legal and political context;

technological innovation;

culture and multiculturalism;

management of natural resources;

the social and ecological impacts of decisions and action;


The Enterprises’ Stakeholder

In any complex enterprise thereare multiple stakeholders.

i.e., any group or individualwho can affect or is affectedby the achievements of theorganization’s objective

The stakeholder set involved inthe design, development, andsustainment of modernenterprises is large and representsmany diverse perspectives.

Balancing the needs of allstakeholder is the critical successfactor for today’s enterprises.


The Creation of Value

Business is the activity of providing goods and services involving

financial, commercial, and industrial aspects.

http://sebokwiki.org/w/images/0/01/ESE-F01.png


Enterprise Value Framework

From Lean Enterprise Value (Murman et al, 2002)


The Enterprise Value Chain


Value Enablers

Projects, Programs and Businesses:

Programme: a temporary flexible organization structurecreated to coordinate, direct and oversee the implementationof a set of related projects and activities in order to deliveroutcomes and benefits related to the organization’s strategicobjectives.Project: unique activity focused on the creation of a set ofdeliverables within agreed cost, time and quality parameters.

Knowledge:

What people know, how they work together, and how well theyare organized and motivated.

Quality Management

Resource Optimization

Systems Engineering


Enterprise Systems Engineering

Enterprise Systems Engineering (ESE) is defined as the applicationof Systems Engineering principles, concepts, and methods to theplanning, design, improvement, and operation of an enterprise.

To enable more efficient and effective enterprise transformation,the enterprise needs to be looked at as a system, rather thanmerely as a collection of functions connected solely by informationsystems and shared facilities (Rouse 2009).

Enterprise Systems Engineering includes

1 those traditional principles, concepts, and methods that workwell in an enterprise environment, and

2 an evolving set of newer ideas, precepts, and initiatives derivedfrom complexity theory and the behavior of complex systems(such as those observed in nature and human languages).


Welcome to the middle of the lecture...

... let’s talk about Systems’ Theory & Engineering


System Theory in Quality Management

Without profound knowledge of processes, potential variations inproducts and the psychology of people, management action cancause significant ruination (Demings, 1991).

Deming’s System of Profound Knowledge for quality managementcomprises four interconnected parts:

1 Theory of Systems: A system is a series of functions or activitiesthat work together within an organization to achieve theorganization’s aim (Deming, 1991).

2 Theory of Variation: The organization experiences higher costs ofoperation because management is unable to isolate the cause of thevariation (Deming, 1986).

3 Theory of Knowledge: managers should use scientific processes -explain, predict and control - to gain more knowledge about thesystems and processes in the organizations.

4 Knowledge of Psychology: managers need to know how peopleinteract, their individual needs, their working and learning styles.


What’s a System?

System

Collection of parts (or subsystems) integrated to accomplish anoverall goal. Every System has at least two parts, and these partsare interconnected.

Systems have:

input,

processes,

outputs,

outcomes.


System Properties

The system’s overall behavior depends on its entire structure(not the sum of its various parts).

If one part of the system is removed, the nature of the systemis changed.

Systems can be considered in two ways: closed or open.

Systems have boundaries which separate them from theirenvironments.

Boundaries are very difficult to delineate in social systems,such as organizations.

Systems tend to seek balance with their environments.

Feedback from the environment help finding a steady state.

Systems that do not interact with their environment tend toreach limits.

A system is composed of subsystems of lower order and is alsopart of a supra-system.


Open Systems

The open system can be viewed as a transformation model. In adynamical relationship with its environment, it receives variousinputs, transforms these inputs in some way, and exports outputs.

External Environment

The external environment includes a wide variety of phenomenathat can affect the organization, but which the organization cannotdirectly control.

Open systems have permeable boundaries between itself and abroader supra-system.Open systems exchange information, energy, or material withtheir environments.Open systems appear to move in the direction of greaterdifferentiation, elaboration and a higher level of organization.An open system may attain a state where the system remainsin a dynamic equilibrium through the continuous inflow ofmaterial, energy, and information.


For the Sake of Completeness...

Complex System

A complex system is compose of numerous, varied, simultaneouslyinteracting parts (or agents).

A system can become more complex due to an increase in size aswell as with an increase in the amount of data, variables, or thenumber of fields that are involved in the design.


Systems Engineering

Systems Engineering (SE) is an interdisciplinary approach andmeans to enable the realization of successful systems4

It considers both the business and the technical needs of allcustomers with the goal of providing a quality product thatmeets the user needs:

it deals with work processes, optimization methods, and riskmanagement tools.it overlaps technical and human-centered disciplines (e.g.,organizational studies and project management).

It integrates all of the disciplines and specialty groups into ateam effort forming a structured development process thatproceeds from concept to production to operation.

SE’s approach is inherently complex since the behavior of andinteraction among system components is not always clear orknown.

Defining and characterizing systems, subsystems and theinteractions among them is one of SE’s goals.

4Definition from System Engineering Handbook, INCOSE, 2004Nicola Mezzetti, Ph.D. Issues of Complexity in Enterprise & Quality Management

Systems Engineering (cont.)

It focuses on defining customer needs and requiredfunctionality early in the development cycle, documentingrequirements, then proceeding with design synthesis andsystem validation while considering the complete problem:

OperationsPerformanceTestManufacturingCost & ScheduleTraining & SupportDisposal

The difference with traditional engineering lies primarily in thegreater emphasis on defining goals, the creative generation ofalternative designs, the evaluation of alternative designs, andthe coordination and control of the diverse tasks that arenecessary to create a complex system.


The Systems Engineering Process


Achievement of System Engineering

The continuing evolution ofsystems engineering comprisesthe development andidentification of new methodsand modeling techniques.

Popular tools that are often usedin the systems engineeringcontext were developed duringthese times, including

Universal Systems Language

Unified Modeling Language

Quality FunctionDeployment

Integration DEFinitionQFD’s House of Quality


System Engineering & Complexity

Systems engineering encourages the use of tools and methods tobetter comprehend and manage complexity in systems, for instance:

System model, Modeling, and Simulation,

System architecture,

Optimization,

System dynamics,

Systems analysis,

Statistical analysis,

Reliability analysis, and

Decision making


Applying System Engineering

The principles of systems engineering can be applied to any systemprovided systems thinking5 is employed at all levels.

In [5] it is shown that

the optimal effort spent onsystems engineering is about15-20% of the total projecteffort.

systems engineeringessentially leads to reductionin costs among otherbenefits. The scope of systems engineering activities.

5the process of understanding how things, regarded as systems, influenceone another within a whole (http://en.wikipedia.org/wiki/Systems thinking).


Some System Design Tools

Concurrent Engineering: a team of specialists from allaffected areas is established and collectively responsible forthe design of a product or process.

Quality Function Deployment: procedure to assure thatcustomer needs drive the product design and productionprocess by translating them into the technical requirements ofthe product and then into a process for delivering aproduct/service that meets those requirements.

Human-Factors Engineering: focus on integrating thehuman element into systems analysis, modeling, and design.

Failure Mode-Effect Analysis: a methodical approach forevaluating the robustness of a product design and foranalyzing potential failures, as well as the impact of suchfailures.


Quality Function Deployment: Matrix Relationships


The V Model of System Development


Spiral Model of System Development


Some Systems Analysis Tools

Modeling and SimulationQueuing methodsDiscrete-event simulation

Enterprise-Management ToolsSupply-chain managementGame theory and contractsSystems-dynamics modelsProductivity measuring and monitoring

Financial Engineering and Risk Analysis ToolsStochastic analysis and value-at-riskOptimization tools for individual decision makingDistributed decision making (market models and agencytheory)

Knowledge Discovery in Databases:

Data miningPredicting modelingMachine learning


Some System Control Tools

Statistical Process Control: with SPC a provider of a givenprocedure can know if that procedure is within acceptablelimits, and, if not, whether corrective actions should be taken.

Control Charts: a way of detecting whether a process is undercontrol; a limited number of measurements are made overtime, and the mean and range are then calculated.

Scheduling: operations method of matching supply anddemand to achieve desired goals or objectives.

before scheduling can begin, however, key processes must beanalyzed and optimized, and work, workload, and forecasteddemands must be measured.


Other System Engineering Tools

Requirements Management: Stakeholder Map, Model BasedSystem Engineering, Viewpoint Analysis, Functional Modeling, NeedMeans Analysis, Function Means Analysis, Holistic RequirementsModel

Design: Value Stream Mapping, Taguchi Method, Design StructureMatrix, N2 Analysis, Matrix Diagram

Project Management: Earned Value Management System, GanttChart, Project Evaluation and Review Technique, SIPOC Diagram

Problem Solving: System Optimization, System Dynamics,Ishikawa Diagram, 5 Whys, Quality Clinic Process Charts, RelentlessRoot Cause Analysis, Mistake Proofing, Functional Failure Modeand Effects Analysis

Collaboration: Nominal Group Technique, Material flow analysis,Affinity Diagrams, Context Diagram, Benchmarking

Decision Making: Risk Cubes, Cost-Risk-Benefit Analysis, PughMatrix


Ok, now let’s get back to Enterprise SystemsEngineering


Doing Enterprise (Systems) Engineering

Enterprise design does not occur at a single point in time like the designof most systems. Instead, enterprises evolve over time and are constantly

changing, or are constantly being designed.

(Giachetti 2010)

The body of knowledge for enterprise engineering is evolving under suchtitles as enterprise engineering, business engineering, and enterprisearchitecture... Many systems and software engineering principles are

applicable to enterprise engineering, but enterprise engineering’s uniquecomplexities require additional principles... Enterprise engineering’s intent

is to deliver a targeted level of enterprise performance in terms ofshareholder value or customer satisfaction... Enterprise engineering

methods include modeling; simulation; total quality management; changemanagement; and bottleneck, cost, workflow, and value-added analysis.

(Joannou 2007)


Enterprises are Social Structures

Social structures are essentially contrived systems. They are madeof men and are imperfect systems. They can come apart at theseams overnight, but they can also outlast by centuries thebiological organisms which originally created them. The cementwhich holds them together is essentially psychological rather thanbiological. Social systems are anchored in the attitudes,perceptions, beliefs, motivations, habits, and expectations ofhuman beings.6

Enterprises allow three levels of analysis:

the level of the environment.

the level of the organization as a system.

the level of subsystems (human participants) within theorganization.

6D. Katz, R.Kahn, The social psychology of organizations (1966)Nicola Mezzetti, Ph.D. Issues of Complexity in Enterprise & Quality Management

Holistic View of the Enterprise

Enterprises must be viewed holistically as a complex integratedsystem.

Understanding the enterprise in terms of its subsystems is madehard by the complex process structure:

Enterprise processes must cover a comprehensive set:

e.g., product development cannot be effectively accomplishedwithout the extensive involvement of other life cycle processessuch as manufacturing, supply chain and customer.

Leadership and enabling processes, in particular organizationaland information infrastructure issues, must all be consideredin parallel and in an integrated fashion with the lifecycleprocesses needed to produce a product.


The Enterprise Structure


A Process Framework Example

Nightingale, D. and Mize, J., Development of a Lean Enterprise Transformation Maturity Model (2002)


Extended Enterprises

In some cases (e.g., modeling, assessment, quality management,and decision making) it could be important to observe an enterprisebeyond the boundaries of the single organizations involved in it.

Extended Enterprise

Wider organization representing all associated entities - customers,employees, suppliers, distributors, etc. - who directly or indirectly,formally or informally, collaborate in the design, development,production, and delivery of a product (or service) to the end user.

The extended enterprise could include upstream suppliers,downstream consumers, and end user organizations, and perhapseven ”sidestream” partners and key stakeholders.


Enterprises and their Environment

Organization

A social unit of people that is structured and managed to meet aneed or to pursue collective goals. All organizations have amanagement structure that determines relationships between thedifferent activities and the members, and subdivides and assignsroles, responsibilities, and authority to carry out different tasks.Organizations are open systems – they affect and are affectedby their environment.

As open systems, enterprises can not be separated from theirenvironment.

In their environment, enterprises experience risks in form of:

threats

opportunities


The Complexity of Enterprises’ Environment

For an enterprise, the external environment is the combination ofdifferent aspects:

Culture

Unions and other social parties

Economy

Politics

Law

Social structure and composition

Natural phenomena and climate

Scientific research

Governative and non-governative authorities

... and so on!


An Example of Strategy in Organization Systems


Managing Quality in Complex Environments

Quality management strategies must consider theenvironment in its complexity, for instance

Law determines how quality has to be delivered.Culture and social responsibility can strongly influenceperceived quality7.

Quality is a perspective for seeing opportunities in thechanges affecting the environment

Consumer expectations about quality have increased to thepoint where it is assumed to be the primary requisite for entryinto the market sphere (Schneider and Bowen, 1994).Quality, it is almost universally agreed, is fundamental tosuccess in the emerging environment confronting organizations(Grove, 1999).

7Romenti, S. et al. Organisations’ conversations in social media: applyingdialogue strategies in times of crises (2014)


Concluding Remarks

There are more things in heaven and earth, Horatio,Than are dreamt of in your philosophy.

(W. Shakespeare, Hamlet)

(Enterprise) Systems Engineering provides us with mindset andtools for managing those dimensions of complexity that we canrationally describe and treat.

World’s complexity goes far beyond what we understand; a formalapproach is not enough to drive real world’s enterprises to success.

Business success, and quality as well, will always depend on ourability to see opportunities and to combine common sense andpreparation.


References

Ackoff, R., ”Towards a System of Systems Concepts”. Journalof Management Science, Vol. 17 n.11 , July 1971

Ackoff, R., ”From mechanistic to social system thinking”.System Thinking in Action Conference, November 1993

Nightingale, D., and Rhodes, D., ”Enterprise SystemsArchitecting: Emerging Art and Science within EngineeringSystems”. MIT Engineering Systems Symposium,Massachusetts Institute of Technology, Cambridge, MA, 2004.

Romenti, S., Murtarelli, G., & Valentini, C. (2014).Organisations’ conversations in social media: applying dialoguestrategies in times of crises. Corporate Communications: AnInternational Journal, 19(1), 10-33.

Honour, E. C. (2004, June). Understanding the value ofsystems engineering. In Proceedings of the INCOSEInternational Symposium (pp. 1-16).


issues of complexity in enterprise & quality management

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