TOWARD INTEGRATED POLICIES FOR WATER-RESOURCES MANAGEMENT
SYSTEMS APPROACHES TO INDUSTRIAL PROBLEMS
Rolfe Tomlinson
Chairman of the Management and Technology Area
This paper is concerned with the relation between IIASA and industry,and illustrates this theme with examples of the work we are currently undertaking in the Management and Technology Area. This discussion will provide some understanding of the work and approach of the Area, as well as show both the potential advantages and difficulties in developing closer coordination between IIASA and industry.
Before saying anything further I would, however, like t o introduce a quotation from part of the discussion at a recent workshop held at IIASA on the problems of scale. This workshop attracted a number of industry representatives, one of whom was Mr. J.D.van Dalen from the Basic Chemicals Manufacturing Division of Shell International. In the course of the discussion Mr. van Dalen said:
. . .
for whom is IIASA's research intended - is it intended for industry or is it intended for other bodies who have some control or some bearing on the way our society develops, for example, trade unions or governmental institu- tions, who have to deal with economic parameters and who want t o have at their disposal some general ideas and formulate how t o respond t o economic changes within private industry? I get the feeling that IlASA is mostly direct- ing its efforts t o these institutions rather than t o industrial companies them- selves.One purpose of this quotation is to show that industry representatives d o visit IIASA, that they d o contribute t o the discussion, and that they are listened to. More importantly, however, Mr. van Dalen has raised a question that is central t o our present discussion. Indeed, I think it is necessary to start this discussion with t w o critical ques- tions. They are:
1. Is IIASA genuinely interested in industry qua industry, or is it only interested in industry in so far as it is a factor affecting government policies?
2. Why should industry be interested in IIASA?
The best answer t o such questions lies in practice, and much of what follows will point t o the answer. But let me start by giving some personal answers. I believe that industry is worth studying in its own right. This is hardly surprising, since I came t o IIASA from industry and I would not have come if I thought otherwise. But, even if it
were agreed that IIASA was primarily concerned with common issues of national policy, it would still be essential for IIASA to pay particular attention to industry. If you are considering economic policy, it is absurd t o do this without considering the source of wealth that makes it possible to plan economic development. It is clearly absurd to con- sider technological policy without considering the part of national life where technologi- cal change primarily takes place. And it is equally absurd to consider social policy without paying some attention to what happens in the place where half the population spends half of its waking life. Moreover it must be emphasized that, when I say "IIASA must take industry into account," I do not believe that this can be done by inserting another statistical equation into some overall model. An activity as complex as industry, so sensitive to economic, social, and technological change, cannot be reduced to a single index or equation. Yes, IIASA must be interested in industry, and in depth.
My answer to the second question, relating to industry's interest in IIASA, is based on the fact that in our modern society industry faces entirely new problems arising from the increased complexity and the increased rate of change in our modern world. The com- plexity is largely induced by developments in communications, the world-wide connect- edness of trade, and the supply of resources and energy. The current rate of change of technology and international negotiation is such that most of the traditional managerial learning devices are no longer appropriate. By the time one has acquired enough experi- ence to improve one's practice in a given situation, the external situation has changed.
These are fields where systems analysis is particularly applicable, but is still in the infancy of its usefulness. IIASA has a major role to play in providing a focus where ideas can be exchanged and developed on an international basis. Such a focus is seriously needed -
indeed one of the noticeable features of our workshops has been the way that they have helped to produce new communities of people concerned with similar problems.
In the following sections, 1 shall discuss some research projects being undertaken in the Management and Technology Area that are specifically directed toward industry:
1. Problems of scale 2. Innovation
3 . The management/computer interface 4. Decision making under high risk 5. Gaming
6. Industry studies: issues for the eighties
Before doing this, however, it is worth making three points with regard to the work of the Area as a whole:
Only one of the projects described has been in progress for more than 15 months;
most of the work started more recently than that. Many working papers are now avail- able and two conference proceedings are in the press. Other formal publications will, however, not appear until 198 1, and full interaction with interested parties will then start to appear. The cycle "conception-to-use" is at least five years long! Nevertheless, it must problems is, as I have said, a major justification for IIASA.
Systems Approaches ro Indusrrial Problems 1 3 7 The fact that these projects are oriented toward the problems of the manager and decision maker has led us to an emphasis in our methods and analyses different from that of many IIASA tasks. Our prime problem is often simply to understand and structure the situation. We make much less use, particularly in the early stages of the research, of large formal models; more emphasis is placed on conceptual understanding and less on mathematical manipulation. This is a difference in emphasis rather than a conflict of ideals; we work in close collaboration, for example, with the System and Decision Sciences Area and many of our staff could be interchanged. Nevertheless, there is a difference and it should be noted.
SOME PRACTICAL STUDIES RobIems of Scale
The problems of scale in our modern society are many. So far as industry is con- cerned, they are often contained in such questions as "How big should we build the next plant?"; "How does one scale up the present operation to obtain increased output?";
and "How can one cope with the con~plexity created by the amalgamation of several
O p t i m u m size
kilowatt available
Capital cost/kilowatt capacity
Actual outage rate '"%
I
S ~ z e in megawatts
FIGURE 1 Factors determining the sizes of electricity-generating units.
previously separate organizations?". Many mistakes have been made in the past (particu- larly in building too large); n o standard reference books exist that tackle these questions comprehensively, and little serious research appears to be going on or directed toward developing a general methodology.
As we studied the problem, we developed a feeling that, at a certain stage in the development of a technology, the economies of scale that had previously been well established are overtaken by a variety of factors that had previously been thought of as secondary. A startling example of this was given in a workshop in July 1979. One of the largest manufacturers of electricity-generating plants in the USA reported on a study indi- cating that, in terms of minimizing overall operating costs, they were already building generators twice as large as the optimum. Part of the reason for this can be seen in Figure 1 , which we have prepared from his data, and which shows how outage rate and capital
costs/kilowatt vary with generator size for a modern generator. Although the capital cost per kilowatt capacity reduced with size, the total cost curve in terms of kilowatts gen- erated has a minimum well below current building sizes. (This was not an obvious result;
it was the result of extensive regression analysis.) However, the real picture is much more complicated than that shown in Figure 1 , for a number of reasons. One reason is the capacity factor, which is generally larger for smaller generators; a second is the ques- tion of learning; and a third relates to the fact that the decision to build a larger generator requires a decision about increased demand further ahead than the decision about a small generator, and consequently there is a much greater chance of a serious error in the demand forecasts. However, the question of learning is illuminated by Figure 2, which shows the reduction in construction costs in the building of four identical
Unit
Man-hours per kilowatt capacity
Unit Unit
Unit
\ 4
a
FIGURE 2 The effects of learning o n the cost o f constructing electricitygenerating units
units on the same site by the same contractor during the period 1971-1974. Although the first unit was considerably more expensive per kilowatt capacity than a unit four times the size built at the same time. the fourth unit was considerably cheaper. The size decision is a complex one.
When we started this work, we hoped to produce a handbook on the question of problems of scale, but we do not now consider this to be practicable at the present stage of knowledge. We are producing a book* based on the workshop that will identify the state of the art and explore, with some thoroughness, the main issues involved. We have also undertaken research on two topics: the question of learning and the question of management decisions in view of an uncertain future.
In addition, we have identified four major factors that must be borne in mind when taking decisions about plant scale. The first of these is the question of flexibility - will the larger plant be sufficiently flexible to meet an uncertain future? The second is the
.- ~-
*J.A. Buzacott, Mark F. C a n t l e ~ , Vladimir N. Glagolev, and Rolfe C. Tomlinson, editors, Scale in Pro- duction Systems, Pergamon Press, Oxford, UK, 1981, in press.
Systems Approaches t o Industrial Problems 139 question of systems effectiveness - although the larger plant may be more effective as a single unit, does it reduce the overall effectiveness of the system of which that unit is a part? The third is the question of complexity. Increased size almost invariably leads to increased complexity - does this generate increased costs in terms of organization, lack of control, etc.? Finally, the possible lower performance of individuals in very large organizations needs to be considered.
Innovation
Innovation, the process of putting into practical use the basic research ideas pro- duced in the laboratory, remains one of the headaches of modern society - in the devel- oped and the developing worlds, in East and West, in large and small countries. It is now generally realized that traditional sources of econonuc strength in industry may not be
Production innovation
Process
Cumulative o u t ~ u t
FIGURE 3 A view of the effects of process innovation and production innovation as cumulative output increases.
the ones that will provide an organization or a country with a stable economic future.
The questions are: How can a country or an industry change its technoIogica1 base? How does it decide where to go? What means can it use to change more rapidly in the right direction?
The first step in trying to answer these questions is to understand the process of innovation more thoroughly, and we have been looking at this from several points of view. We have tried to understand the apparent fluctuations in the number of innovations emerging in successive years. We have tried to understand the difference between basic and improvement innovation. Above all, we are trying to understand the relative impor- tance of different kinds of innovation. Many people have pointed out, for instance, that it is necessary to distinguish between production innovation, which improves the product, and process innovation, which reduces the cost of production (see Figure 3).
Professor Heinz-Dieter Haustein, a member of the MMT team, has shown what this can mean, as a result of his research into the lighting industry. Figure 4 shows the annual increase in the amount of light produced by a single lamp; the main product improve- ments can be seen clearly. Figure 5 shows the main process innovations together with the annual increase in productivity, i.e., the number of lamps per unit cost. When you
Annual lo Beginning decline Fluorescent Halogen halarc
of gas lighting lamp lamp bulb
Year
FIGURE 4 Production innovation in incandescent lamps: the annual increase in the technical (light- giving) level of the product.
FIGURE 5 Process innovation in incandescent lamps: the annual increase in productivity (lamps per unit cost).
Jennifer Robinson has built this understanding into a systems dynamics model that helps us to follow the overall innovation process more clearly than in the past. We now Beginning decline Fluorescent Halogen halarc
of gar lighting lamp lamp bulb
Systems Approaches to h~dustrial Problems 141
FIGURE 6 A two-by-two classification of innovations.
Large product improvement Small product improvement
of our work. We have looked at such questions as the way in which governments decide on the kinds of innovation policies they want, and the effectiveness of the various instru- ments they may use to further these policies, and we are just about to undertake detailed studies within industries of the barriers and incentives to innovation. This study isexpected to continue for some years, always being closely related to management.
The Management/Computer Interface
The traditional centralized computer information system may give managers less (or more) information but it has had surprisingly little effect on the way they actually do their jobs. On the other hand, there are strong indications that, once a manager has a flexible interactive system that he can address, using his own data and asking his own (often not very clearly structured) questions, his pattern of behavior alters. This has major implications for the future of information systems, for management training, and for organizational structure. We need to know what these implications are. One step in finding this out is a task force meeting to be held in June 1980* at which an international group of experts will review the state of the art in decision support systems.
There are, traditionally, two classes of criteria used when considering the design of a computerized information and decision support system. There are the type A criteria concerned with cost: the cost of purchase, of installation, and of the operation of the computer service. Then there are type B criteria, concerned with impact, the behavior and effectiveness of the system in relation to the individual, the group, or the organiza- tion. Because of their cheapness and their accessibility, the introduction of small (mini- micro) computers operating within networks is now making radical alterations in the
*Editor's note: The proceedings of this meeting have now been published: G. Fick and R.H. Sprague, editors, Decision Support Systems: Issues and Challenges, Pergamon Press, Oxford, UK, 1980.
computing on the small computer operating within a network can be as cheap as comput- ing on the big central computer, so that type B criteria now become primary.
One of the critical elements that has t o be looked at when studying small com- puters within the network system is the software constraint. Software, if it is t o be reasonably cheap and accessible in places where there is relatively little skilled program- ming support, must. in fact, be mass produced. If such mass-produced software is to be widely used, then there must be a nonprocedural interface between the user and the procedural program. Our research has so far concentrated on looking at the relation between the user and the nonprocedural interface, and a report on this work is available.*
We are now looking at the relation between the nonprocedural interface and the proce- dural program.
Decision Making Under High Risk
The next question is that of management under high risk, and it is particularly concerned with the situation where the risk is the potential for large human and material damages. We first looked at this question in relation to the oil blowout at the Bravo platform in the North Sea, and as a result we were able to make some recommendations that have been adopted by the Norwegian government.
We are currently undertaking a major study comparing the siting decision process for liquid energy gas plants in six, or perhaps seven, countries. However, as we were preparing for this work, the Three Mile Island nuclear accident occurred, and it quickly became clear that there were a surprising number of similarities with the North Sea acci- dent. We have recently had a successful workshop on problems of reactor safety inanage- ment in which David Fischer, who had been responsible for the work on the North Sea, compared the two accidents. He looked at questions such as the location, the timing, the indirect cause, the initiating events, the reaction and behavior of the supervisors, their accident management, the maintenance program, etc. The results he obtained are given in Table 1 ; a comparison of the two accidents shows a surprising number of virtu- ally identical features. In both cases, it was a sticking valve that initiated the accident chain, and the maintenance program was deficient. In fact, 17 out of the 29 colnparisons made were labeled "same." There are common principles involved in quite different technologies, and the lessons to be learnt are applicable t o many different technologies.
Another interesting finding was related to contingency plans for accident manage- ment. Table 2 shows the relations of certain elements in the plans prepared before the accident to the situation that actually evolved. For instance, the accident plan states:
"Measure the radiation to determine when the dose reaches a certain level." When the accident occurred, the radiation monitors detected such wide fluctuations that the orderly projection of doses assumed by the accident plan was impossible. According
*B. Melichar, Nonprocedural Comrmrnication between a User and Application Software, IIASA Research Report, 1981, to be published.
S y s r e n ~ s Approaches ro Indusrrial Probletns 143 TABLE 1 A comparison between the Bravo blowout and the Three Mile Island accident.
Items Bravo TM I
1 Location Norwegian sector of N ~ r t h Sea Middletown, Pennsylvania, USA 2 Technology Offshore oil production platform Nuclear power plant
3 Accident Oil blowout Core overheat
4 Timing and Late evening, 8 days Early morning, 6 days
extent
5 Indirect cause Maintenance program Same
6 Early warning Fluid leaking from valve (mud) Same (water)
7 Initiating Valve stuck open (downhole safety valve) Same (pilot-operated relief valve) event
8 Contributing Not ready to install backup valve, and Did not realize valve was stuck open,
events installed it upside down and shut down cooling pump
9 Onduty crew Could not act on warnings Same
Could not share information between Same shifts
No formal engineering education Lacked experience with events 10 Supervisors Lacked theoretical knowledge
Lacked experience with events I I Investigation Royal Commission of Inquiry on Bravo 12 Basic cause Weak organization/adminisfrative systems 1 3 Prevention Preventabb
14 Safety program Existed but no details, inspections No plans for stopping uncontrolled well 15 Accident Hindered by design and responses
Same
16 Maintenance Nut detailed or appruved Same
16 Maintenance Nut detailed or appruved Same