Tuesday, June 1, 2010

A Story about Systems Thinking

In a class a few years ago, we asked students to talk about quality-related projects on which they were currently working. The class comprised a number of people from several business units. At one table, a project leader stood and told us all about his project for the marketing unit: they were exploring server consolidation. They knew that only a fraction of the capacity of each of many of their servers was in use; they had a large number of servers, therefore, that could be consolidated. Because this business unit "rented" the servers from the Shared Services unit, they figured they could save $250,000 per year by consolidating servers and turning them back over to Shared Services. The class politely applauded.

Next up was a person from the Shared Services unit, who talked about his project, which was developing a new service they could "sell" to the marketing unit, which would generate over $250,000 in new revenue for Shared Services. The class again politely applauded.

I asked, "What's wrong with these stories?"

Blank stares (I'm the idiot!)

I tried to give them a hint: "How does the company benefit from these projects?"

A tentative hand, then (in a tone that indicates that surely, I AM the idiot), "Well, the company saves half a million dollars! Why wouldn't THAT be a benefit?"

I asked, "How is the company saving a half-million dollars?"

Again, incredulous stares..."You're the stats guy...maybe you should have taken accounting instead...250,000 plus 250,000...isn't that half a million?"

I pointed out that marketing was "saving" a quarter of a million by not "renting" a quarter of a million's worth of servers from Shared Services, but that Shared Services was "making" a quarter million by "selling" a quarter-million's worth of new services to marketing. So they just dipped a bucket into one end of the lake and dumped it into the other end...and some evaporated while they were transporting it, because of the cost of the project.

Eventually, we did work out that there were benefits...increased server capacity, benefits from the new service, etc.. Most of these numbers (the actual benefits) were "unknown and unknowable" numbers. None of those benefits had been discussed originally, because the "knowable" numbers were easily calculated (and wrong)...

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