(and Out of Control)
by Pat Craig
from the Fall 2000 issue
of the Complexity Management Chronicles
"We wrote a paper for the Journal of the British Interplanetary
Society on using very small robots to explore planetary surfaces. The title we came
up with was Fast, Cheap, & Out of Control, A Robot Invasion of the Solar System.
Instead of sending one 1,000 kg. robot to explore Mars, our idea was to send a whole bunch
of one kilogram robots, maybe a 100 of them. If we had about 100 little robots, you might
be willing to try a higher risk thing with one of the robots. If you fail and you lose
that robot, it’s not the end of the mission."
From a videotaped interview with Rodney Brooks, the robotics scientist
and Director of the Artificial Intelligence Lab at MIT.
The point? Seeking out cheaper alternatives to solve problems can lower
the risk and sometimes offer unexpected opportunities. Upper management might take more
risks if the financial impact of each individual decision was less. The quotation from
Professor Brooks serves to introduce our newsletter on diversification (and pooling).
This represents our final newsletter in the risk management series. We
have followed the risk management framework developed by Donald Lessard, MIT Sloan School
of Management, and Roger Miller, Universite Quebec a Montreal. They propose a six step
framework 1) Identify / understand risks, 2) Shape risk, 3) Create options / Build in
flexibility, 4) Take risks strategically, 5) Transfer or hedge risk, and 6) Diversify the
risk or pool it. This newsletter discusses step 6.
Why diversify? Why pool? To minimize your firm’s overall risk and
maximize its investment.
Spreadsheet usage has proliferated in business. Like Rodney’s
robots, spreadsheets in Excel or Lotus are fast to build, they are cheap, and sometimes
appear out of control. One of our banking clients had over 1,000 spreadsheet
"systems". The most critical spreadsheets evolved upwards into more robust
Access database systems. Crucial Access databases evolved upwards into more powerful
customized software. This client lowered their risk by allowing diverse systems to be
built on diverse technical platforms with little central control.
"More Companies Cut Risk by Collaborating With Their Enemies"
was the headline in a page one article of the 1/31/00 edition of the Wall Street Journal.
The article provides good examples of pooling. It discussed a venture capital firm
specializing in the Internet, similar to CMGI, that persuades the start-ups it invests in
to cooperate with each other. These Internet start-ups add value to the whole by including
web links to each other’s web sites and by adding or dropping functionality to
complement the aggregate organization. The article also discussed the partnership
(pooling) of AOL and Microsoft in Roadrunner, a high speed cable Internet business. Buying
software packages, something many of us are familiar with, also represents pooling with
We trust these brief examples will provide ideas on how diversification
or pooling can help mitigate your software development risks. You can view our entire risk
series on this site http://world.std.com/~pcraig.
©2000 by Complexity Management
Somerville, Massachusetts, in Metropolitan Boston
Complexity Management Chronicles, a newsletter for software quality assurance
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