One of the most difficult ideas to convey is the difference between
an Integrated Planning Model and all the other types of models used by
managers to improve their effectiveness. The clearest contrast can be
shown by defining the role that information and logic play in models.
If we consider the horse as the logical truth of a situation and the cart
as information that is a reflection of that truth, then ideally we would
like to put the horse before the cart. Define the logical connections and
then get the data.
In a data-rich society that is deeply entrenched in the Information Age,
however, those who build and use models assume that the model must be
driven by objective data. If that data cannot be obtained, either "proxy"
data is substituted that is assumed to act like the data desired, or the
model is restructured in such a way that real data can be used. Economists
and scientists make important contributions by using this approach to
explain our world.
Management, on the other hand, has an entirely different set of
objectives that turn wholly on effectiveness. Reducing costs, increasing
revenues, and maximizing profits form the basis of their reason for being.
In this context, management must be concerned about what is true.
This means that a manager must begin with understanding. In an ideal
world the availability of data would follow the need. But the world is
not ideal, and many things that are important, even critical, are not
easily quantifiable. The outcome of an event will be determined not by
the available data but by the truth. It is therefore incumbent upon the
manager to use every means at his or her disposal to enhance that understanding.
IMS Quantum Corporation (IQ) begins with a tight, logical, and integrated
understanding of the factors that influence markets, operations, and the
business environment, to build the Integrated Planning Model as if all
necessary data were available. This understanding becomes the horse that
pulls the information cart. The IPM is used to determine the important data.
If it is available, it is used. If it is not, then subjective estimates are
made until the determination is made as to the importance of the information
and/or its future availability. In any case, the process tells the manager
what is important, what he has, and what he needs. Finally, the IPM is a way
for management to expose current understanding to scrutiny, focus dialogue,
and thereby improve that understanding. IQ is committed to a paradigm shift
in the use of models by management. A model changes from being an objective
instrument to yield answers, to a more subjective instrument to reflect what
management believes is true. Garbage in, garbage out no longer has the same
meaning with regard to an Integrated Planning Model. Because of the model's
transparency, management takes responsibility for all the numbers in the
model. What management seeks through shared understanding and dialogue is
better understanding, better decisions, better plans, better strategies,
and higher levels of profitability.
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