bs l02 strategic thinking (ii)

8/9/2019 BS L02 Strategic Thinking (II)

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STRATEGIC THINKING II)

Prof.Dr.Dr.Dr.H.C. Constantin Bratianu

Facul ty of Bus iness Adm inis t rat ion

Academy of Econom ic Studies

Bucharest , Romania


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LINEAR THINKING

representationThe

Input (X) Process

constant (K)Output (Y)

Y = kX

Where K is a process constant.

The output is proportional with the input.


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LINEAR THINKING (I)

Outputs are proportional with inputs Processes are described by linear equations

Linear thinking is the most frequently used approximationin our daily life

In linear thinking one sequence of any activity starts onlywhen the previous sequence ends

Complex problems can be decomposed into simplerproblems. Each simple problem can be solved and got a

solution. By assembling all of these simple solutions weget the solution of the initial complex problem.

In linear thinking we can sum up objects or events and getthe final result


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LINEAR THINKING (II)

Measuring systems are based on linear thinking

E.g. 5 kg apples x 2 $/kg = $ 10

2 kg + 7 kg = 9 kg

Budgetary salaries are based on linear thinking

E.g. 40 hours x 5 $/hour = $ 200

Democracy is based on linear thinking

Language is based on linear thinking

In Europe, getting university Diplomasis based onlinear thinking


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LINEAR APPROXIMATION

Graphical representation


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NONLINEAR THINKING (I)

Life processes, natural processes, social processes arenot linear

For instance, biology demonstrates that people donthave qualities whose values to be proportional withtheir age. Just think of the situation in which thetallness of a person would be such a quality

Outputs are related to inputs by nonlinear equations, ofdifferent forms

E.g. Y = a + bx + cx + dx

Y = log x Scientific discoveries, Engineering innovations,

A scientific discovery cannot be proportional with anyother entity


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NONLINEAR THINKING (II)

Intellectual work, artistic performance and knowledgeprocessing are strongly nonlinear processes

For nonlinear processes summation is not valid

Complex problems cannot be decomposed into simplerproblems since problems will change their nature

For nonlinear processes integration is the mostimportant characteristic (e.g. Big Mac and a chickensoup)

Friendship, love, happiness, excellence, performance,quality etc. are strongly nonlinear


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If a butterfly is producing a perturbation of the air inNew York, we may have a tsunami in Tokyo.

The butterfly effect


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Peter Senge: If you cut an elephant, you dont

get 2 smaller elephants!


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DETERMINISTIC THINKING (I)

Deterministic thinking is based on idea that eventsare certain, and well defined. There is no uncertaintyabout them.

Certainty give us a feeling of security and makes thedecision process very easy because everything isclearly defined and there is no ambiguity orincomplete information about events.

The model of deterministic thinking are the laws of

physics. For instance, the second law of Newton:

F = ma (F and a are vectors)


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DETERMINISTIC THINKING (II)

The entropy law: In a closed system the entropy willincrease in any natural process.

The train tables or plane time tables are models

of deterministic thinking.

The time table of your classes is also such a

model

Traffic regulation and organizational internalregulations are based on deterministic thinking

Legislation is only partially deterministic since itleaves the possibility of interpretation


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RANDOM/PROBABILISTIC THINKING (I)

Events in nature, society, and our life events are notcertain. Also, we rarely have events well defined andwith a complete information description.

Events are mostly uncertain, and our information

about them is incomplete and fuzzy. We have alimited cognitive capacity to understand manyevents in our work or life and we must makedecisions in these conditions.

Herbert Simon introduced the concept of limitedrationality to underline the incompleteness of our

knowledge state in making economic decisions.


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RANDOM/PROBABILITIC THINKING (II)

Events can be characterized by their probability ofappearance:

Probability = (No. of favourable chances)/ (No. of totalchances of being produced)

Probability values: 0< p< 1.0 When p = 0, the event does not produced

p = 1.0, the event will produce for certain

That means that certainty is only a limited case of

uncertainty. In decision making uncertainty brings in the risk.

Because of the risks we are adverse to uncertainty,and the role of management is to reduce it.


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RANDOM/PROBABILITIC THINKING (III)

Dealing with uncertainty is influenced by our cultureand education.

In Japan, uncertainty is part of life and peopledeveloped a different approach with respect to it.

The Japanese language is fuzzy by its nature, and itgets clarity from the context. For instance verbs donot have future. They get the meaning of the futurefrom the context.

In any conversation one person leaves the messagefuzzy and invites the other person in contributing tothe clarification.


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SOLVING PROBLEMS

In schools we solved hundreds of problems that:

- were defined by other people (e.g. professors)

- were well defined, with complete information

- had 1 or 2 solutions, for which we had formulas

- solving these problems is based on deterministic thinking

In management we deals with problems that:

- are defined by our top managers, or we have to identify anddefine them

- these problems do not have complete information- there are no generic formulas to solve them

- solving such problems is based on probabilistic thinking


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INTELLIGENT THINKING

A complex model of thinking able to optimize and tooffer the best solutions to any problem

A model based on capacity of combining a lot of knowndata and knowledge, in a very short time

All the data and knowledge needed are known. Thereare no new elements

Intelligent thinking is strongly nonlinearand dynamic

Intelligent thinking is able to process tacit knowledge


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CREATIVE THINKING

A complex model of thinking able to generate always anew piece of knowledge

Knowledge creation, conversion, transmission and useare based on this model of thinking

Creative thinking is highly nonlinearand random

Scientific discoveries and Engineering innovations are

based on creative thinking

In real life there is a strong connexion betweenintelligent thinking and creative thinking


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POSITIVE vs. NEGATIVE THINKING

Positive thinking is looking for positive facts and results

It is based on an optimistic approach

It stimulates creativity and innovation

It helps in dealing with uncertainty

Negative thinking is looking for negative facts and results

It is based on a pessimistic approach

It blocks creativity and innovation

It increases adversity for uncertainty and risks

It makes rather difficult any decision making inconditions of fuzziness, ambiguity and uncertainty


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STRATEGIC THINKING

Strategic thinking is the most advanced and the most

powerful model for Science, Engineering and Business

Strategic thinking is based mostly on the following:

- entropic thinking

- nonlinear thinking- random thinking

- intelligent thinking

- creative thinking

- positive thinking

Strategic thinking is the most adequate way of thinkingfor the future


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STRATEGIC THINKING

Graphical representation

L NL

Complexity

D

R

S

D

Generation

of events

Time

Simple thinking model

Strategicthinking model

bs l02 strategic thinking (ii)

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