A Systems Approach to Strategy and Execution in National Security Enterprises more

PhD THESIS A Systems Approach to Strategy and Execution in National Security Enterprises Defence and Systems Institute University of South Australia Submitted by: Richard Hodge, BA, GradDip (Strategic Studies) 31 January 2010 ________________________________ Submitted for Examination 22 March 2009 Revised Edition Addressing Examiners’ Comments 31 January 2010 ________________________________ © Richard Hodge, 2009 and 2010 For Vicki your approach to raising our family was my first lesson in systems thinking … only I didn’t realise it, at first. And now, we see enduring results from all generations. A Systems Approach to Strategy and Execution in National Security Enterprises – i – A Systems Approach to Strategy and Execution in National Security Enterprises – ii – Table of Contents 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Introduction ................................................................................................. 1 Personal Motivation ................................................................................................ 1 Genesis .................................................................................................................. 3 Research Question ................................................................................................. 4 The Research Domain............................................................................................ 5 Methodology ........................................................................................................... 6 The Thesis – In Outline .......................................................................................... 8 The Thesis – In Summary ...................................................................................... 9 The Contribution to Knowledge ............................................................................ 16 2 Initial Context of the Research Problem in the Australian Defence Planning Environment .............................................................................. 19 2.1 Early Statements of a Strategic Planning Problem ............................................... 19 2.1.1 The Defence Response ............................................................................ 20 2.2 Environmental Constraints and Challenges .......................................................... 22 2.2.1 Size of the Organisation ............................................................................ 22 2.2.2 Complexity of the Organisation ................................................................. 22 2.2.3 A Revolution in Military Affairs................................................................... 25 2.2.4 Culture ...................................................................................................... 28 2.2.5 Time Creates a ‗Fog of Peace‘ .................................................................. 29 2.2.6 Australia‘s Own ‗Fog of Peace‘ – No Structural Change since WWII ......... 30 2.2.7 Problem Definition in Defence ................................................................... 31 2.2.8 Increasing Cost Drives Lower Margins for Error in Strategic Decisions ..... 33 2.2.9 Changes Needed to the Basic Calculus for Defence Planning .................. 34 2.2.10 Final Challenge: Coping with Rapid Changes in Strategic Leadership ...... 37 2.3 Strategy Making Theory and Practice beyond Australia........................................ 37 2.3.1 Closing Remarks....................................................................................... 40 3 3.1 3.2 Literature Review 1: Towards an Integrated Strategy Framework ....... 43 Modes of Strategy Making .................................................................................... 44 First Principles Approach...................................................................................... 46 A Systems Approach to Strategy and Execution in National Security Enterprises – iii – 3.2.1 Analysis and Synthesis as Drivers for High Performance .......................... 48 3.2.2 Design for Greater Accountability in the New Economy ............................ 52 3.3 Managing Complexity with Multiple Strategy Modes ............................................. 54 3.3.1 Complexity Laws Applicable in Organisations ........................................... 56 3.3.2 From the Limitations of Working Memory to Organisational Learning ........ 60 3.3.3 Designing a Trichotomy into the Strategy Process – The Rational, Evolutionary and Processual Schools (Van der Heijden, 1996) ................. 65 3.3.4 Designing a Trichotomy into the Strategy Process – The Linear, Adaptive and Interpretive Models of Strategy (Chaffee, 1985) ................................. 68 3.4 A New Model for Integrated Strategy Processes .................................................. 70 3.4.1 Influence of Cognitive Systems Engineering on the New Model ................ 72 3.4.2 The Implications of Heuristics for Speed in Decision Making..................... 76 3.4.3 Finding the ‗Sweet Spot‘ in the Strategy and Execution Approach ............ 78 3.4.4 Decision Making among Interfaces of Mutual Constraint ........................... 80 3.4.5 Summary of Progress towards an Integrated Strategy Framework ............ 81 3.4.6 Issues for Implementing the Concept Design ............................................ 82 4 4.1 4.2 Literature Review 2 – A Systems Approach to Strategy & Execution.. 85 Introduction .......................................................................................................... 85 Theoretical Foundations from Systems Thinking .................................................. 86 4.2.1 The Importance of Time ............................................................................ 87 4.2.2 Constraints on Process Design for an Integrated Multi-Method Approach . 89 4.2.3 General Systems Principles Influencing Methodology Design ................... 92 4.2.4 From Design Principles to Structural Form ................................................ 96 4.3 Preliminary Design – Construction from Systems Theory ..................................... 99 4.3.1 General Assessment of the State of Systems Theory ............................... 99 4.3.2 Measures for Achieving Best Performance ............................................. 103 4.3.3 Cognitive Approach for Great Results Amid Complexity .......................... 106 4.3.4 Typology of Management Problems to Guide Systems Approaches ....... 106 4.3.5 Available Systems Methodologies to Address Complex Problems .......... 110 4.3.6 Mapping Systems Approaches to Management Problems ...................... 118 4.3.7 Available Strategy Methods to Address Complex Problems .................... 119 A Systems Approach to Strategy and Execution in National Security Enterprises – iv – 4.3.8 Critical Systems Thinking, the Paradigm Problem and How it is Addressed .. ........................................................................................................... 122 4.3.9 An Integrative Approach to Deliver Results ............................................. 127 4.3.10 Integrated Strategy Framework built on Systems Theory ........................ 129 4.4 Preliminary Design – Construction for Systems Practice .................................... 130 4.4.1 General Assessment of Systems Practice............................................... 130 4.4.2 Practical Construct for a Dashboard of Measures ................................... 134 4.4.3 Practical Construct for Managing Cognitive Complexity .......................... 137 4.4.4 Practical Construct for Problem Definition ............................................... 140 4.4.5 Practical Construct for How the Parts Connect........................................ 147 4.4.6 Systems Engineering as an Integrative Methodology .............................. 147 4.4.7 Systems Engineering and Strategy Schools ............................................ 150 4.4.8 The Recursive Nature of Systems Engineering ....................................... 151 4.4.9 Relationships Among the Elements of the Conceptual Model ................. 152 4.4.10 Test and Validation – The Value of Seminar Gaming .............................. 154 4.4.11 A Note on Total Systems Integration (TSI) .............................................. 155 4.5 Conclusion ......................................................................................................... 159 5 5.1 5.2 5.3 Case Study One – Defence Capability Planning in Australia .............. 163 Introduction ........................................................................................................ 164 Approach ............................................................................................................ 166 Appreciate the Cognitive Complexity of the Problem and the Principal ProblemSolving Components .......................................................................................... 167 5.4 Managing the Cognitive Complexity ................................................................... 170 5.4.1 The Problem Expressed.......................................................................... 171 5.4.2 Root Definitions and Conceptual Models for Strategic Planning .............. 175 5.4.3 Comparison of the Model with the Real World ........................................ 179 5.4.4 Action to Improve the Problem Situation ................................................. 181 5.4.5 Summary ................................................................................................ 182 5.5 Design / Implement an Approach to Manage the Situational Complexity ............ 182 5.5.1 Configuring a Mix of Rational, Adaptive and Interpretive Approaches ..... 183 5.5.2 Developing the Scenario Planning Base (Expression of the ‗Why‘) ......... 186 A Systems Approach to Strategy and Execution in National Security Enterprises – v – 5.5.3 Developing the Force Structure Options (Expression of the ‗How‘) ......... 187 5.5.4 Developing the Testing Methodology (Expression of the ‗So What‘) ........ 188 5.5.5 Tools for Data Capture and Knowledge Elicitation .................................. 192 5.5.6 Managing the Data for Analysis .............................................................. 197 5.5.7 Reviewing Progress against the Conceptual Model ................................ 201 5.6 5.7 5.8 General Approach to Synthesising Defence Capability Priorities ........................ 203 Defining Government Needs .............................................................................. 205 Defining Defence Functions................................................................................ 207 5.8.1 Defining Defence Functions – Operational Distribution / Deployment ...... 208 5.8.2 Defining Defence Functions – Mission profiles ........................................ 209 5.8.3 Defining Defence Functions – Performance Parameters (Generic) ......... 211 5.8.4 Defining Defence Functions – Performance Parameters (Specific) ......... 212 5.8.5 From Requirements to Design – Review of Progress .............................. 217 5.9 Designing Solutions ............................................................................................ 219 5.9.1 Designing Force Structure Options ......................................................... 219 5.9.2 Balancing Capabilities ............................................................................. 222 5.9.3 Summary Design Issues ......................................................................... 229 5.10 Product Development for Strategic Planning ...................................................... 231 5.10.1 Capabilities Priorities Statement (CPS) ................................................... 231 5.11 Summary Assessment of Case Study 1 ............................................................. 232 5.11.1 A View on the Comprehensiveness of the Strategy Formation ................ 232 5.11.2 A View on the Application of SSM to a Strategy Process ........................ 237 5.11.3 A View on the Application of Systems Engineering to a Strategy Process..... ........................................................................................................... 243 5.11.4 The Value of the Systems Approach to Strategic Planning ..................... 246 6 Case Study Two – Assessment of a National Health System‟s Capability to Respond to Serious Emergencies .................................. 249 6.1 6.2 Introduction ........................................................................................................ 249 Introduction to the Problem................................................................................. 250 6.2.1 Summary of the Objectives of the Study ................................................. 251 6.3 Assess & Manage the Cognitive Complexity ...................................................... 252 6.3.1 Appreciate the Cognitive Complexity of the Problem Space .................... 254 A Systems Approach to Strategy and Execution in National Security Enterprises – vi – 6.3.2 Define the Scope of the Problem Space using Research Questions ....... 256 6.3.3 Create an Information Architecture.......................................................... 258 6.3.4 Appreciate the Available Interpretive, Adaptive and Rational Methodologies ........................................................................................................... 259 6.3.5 Synthesise a Methodology ...................................................................... 262 6.3.6 Define Performance Criteria and to Guide Control Action ....................... 262 6.4 Systems Engineering Approach to Manage the Situational Complexity .............. 263 6.4.1 Implementation ....................................................................................... 266 6.4.2 Testing the Methodology Design in a Pilot Study .................................... 267 6.4.3 Maintaining Methodological Control in a Dynamic Situation .................... 268 6.4.4 Validating the Research Questions ......................................................... 270 6.4.5 Validating the Ability to Scale Modes of Intervention to a National Study 271 6.4.6 Value of Integrating Risk ......................................................................... 274 6.5 Synthesis and Analysis of Options for Government ............................................ 275 6.5.1 Synthesis of Options for Government ...................................................... 275 6.5.2 Cost, Benefit and Risk Analysis of the Option Sets ................................. 277 6.5.3 Outcome of the Study ............................................................................. 278 6.6 Summary Assessment of the Systems Methodologies in Case Study 2 ............. 278 6.6.1 A view on the dominant systems methodologies ..................................... 278 6.6.2 A view on the comprehensiveness of the strategy formation ................... 280 7 7.1 7.2 7.3 A New Systems Engineering Model for Strategy and Execution........ 285 Introduction ........................................................................................................ 285 Assessment of Checkland‘s Soft Systems Methodology (SSM) .......................... 286 Assessment of Two Systems of Systems Interventions ...................................... 289 7.3.1 Mintzberg Revisited – Part 1 ................................................................... 292 7.4 Assessment of Two Applications of a Standard Systems Engineering Model at an Enterprise Level ................................................................................................. 294 7.4.1 Validation and Repeatability of the Systems Approach to Strategy and Execution ................................................................................................ 299 7.5 A New Enterprise Systems Engineering Model as a Pattern for Organising Strategic Management Processes ...................................................................... 299 7.6 Identifying the Core Strategic Management Capabilities ..................................... 307 A Systems Approach to Strategy and Execution in National Security Enterprises – vii – 7.7 Testing the Wider Exploitability of the Generic New Systems Engineering Model for Strategy and Execution ...................................................................................... 310 7.7.1 Case Study 3: Terrorism-related Enterprise-level Review for a Private Sector Owner / Operator of Critical Infrastructure.................................... 310 7.7.2 Case Study 4: Redesign of a Strategy and Execution System for a State Department of Health .............................................................................. 314 7.7.3 Case Study 5: Designing a Development Program for Young Executives 316 7.8 In Review ........................................................................................................... 318 7.8.1 Mintzberg Revisited – Part 2 ................................................................... 318 8 8.1 8.2 8.3 In Conclusion (after T.S. Eliot)............................................................... 321 ―Between the Conception and the Creation‖ ....................................................... 321 ―Between the Emotion and the Response‖ ......................................................... 325 ―Falls the ‗Shadow‘ – Life is Very Long‖ .............................................................. 326 Appendix 1 – Game Book for Force Structure Options ................................. 331 Appendix 2 – Risk Assessment Model for Case Study 2 ............................... 351 References ......................................................................................................... 357 Endnotes ............................................................................................................ 375 A Systems Approach to Strategy and Execution in National Security Enterprises – viii – List of Figures Figure 1-1: The research domain and key thought-leaders ..................................... 5 Figure 2-1: Conceptual model for strategic planning ............................................. 35 Figure 3-1: Architectural view of the inter-relationships between the schools ....... 66 Figure 3-2: A future concept for ‗nesting‘ three models (after Chaffee, 1985) ....... 69 Figure 3-3: Primary elements for synthesising strategy processes ....................... 70 Figure 3-4: Secondary elements for synthesising strategy processes .................. 71 Figure 3-5: The decision ladder (Rasmussen, 1994 p.65)..................................... 73 Figure 3-6: Cognitive control mechanisms ............................................................ 74 Figure 3-7: Nominal overlay of decision ladder with integrated strategy model..... 76 Figure 3-8: The 'Sweet Spot' (Reason, 2001) ....................................................... 79 Figure 3-9: Strategy ‗sweet spot‘ ........................................................................... 80 Figure 3-10: Simplified conceptual design............................................................. 82 Figure 4-1: Four areas of concern and four problem-solving attitudes (Mitroff, 1985) ....................................................................................................................... 90 Figure 4-2: Simplified concept for a multi-method approach to move among different views .............................................................................................. 102 Figure 4-3: Abstraction hierarchy of measures for high performance .................. 104 Figure 4-4: Integrated mapping of three problem typologies (after Jackson & Keys, 1994) ............................................................................................................ 108 Figure 4-5: Conceptual presentation of diversity of approaches ......................... 111 Figure 4-6: Conceptual representation of inter-relationships among systems approaches .................................................................................................. 113 Figure 4-7: Mapping of systems approaches to problem-contexts ...................... 118 Figure 4-8: Strategy based approaches .............................................................. 120 Figure 4-9: Theoretical construct for addressing complex problems by mixing methods ....................................................................................................... 128 Figure 4-10: Theoretical foundations for an integrated approach to strategy & execution...................................................................................................... 129 Figure 4-11: Summary of main choices for an integrated strategy framework .... 134 Figure 4-12: Towards a hierarchy of measures ................................................... 136 Figure 4-13: Checkland's SSM in two modes ...................................................... 138 A Systems Approach to Strategy and Execution in National Security Enterprises – ix – Figure 4-14: General hierarchy of systems (Adapted by Hodge after Boulding, 1956) ............................................................................................................ 142 Figure 4-15: Systems engineering as an approach to integrating /methodologies methods ....................................................................................................... 148 Figure 4-16: Systems engineering for strategy & execution ................................ 149 Figure 4-17: Interpretation of strategy schools with systems engineering methodology ................................................................................................ 151 Figure 4-18: Systems engineering as a recursive methodology .......................... 152 Figure 4-19: Concept relationship between structural and synoptic views .......... 153 Figure 4-20: The benefits of seminar gaming in policy settings ........................... 155 Figure 5-1: Concept outline of the strategic and capability planning processes .. 168 Figure 5-2: Checkland‘s Soft Systems Methodology (1981)................................ 170 Figure 5-3: The ‗gap in explanation‘ .................................................................... 173 Figure 5-4: The problem expressed .................................................................... 175 Figure 5-5: Conceptual model for adapting systems engineering to Defence strategic planning ......................................................................................... 178 Figure 5-6: Conceptual model appears to address the gap in explanation.......... 180 Figure 5-7: Integrating current and future thinking .............................................. 184 Figure 5-8: Summary of test methodology and measures ................................... 188 Figure 5-9: Seminar gaming tools for force structure analysis ............................ 193 Figure 5-10: Main screens of primary database .................................................. 194 Figure 5-11: Scales for First Order Judgements ................................................. 195 Figure 5-12: Visualisation of the decision tree ..................................................... 196 Figure 5-13: Electronic decision support tools..................................................... 197 Figure 5-14: Managing the 'iceberg' of evidence ................................................. 198 Figure 5-15: Structured analysis of qualitative data ............................................ 199 Figure 5-16: Review of progress against the conceptual model .......................... 202 Figure 5-17: Adaptation of the systems engineering process.............................. 204 Figure 5-18: Relate operational deployments, mission profiles and abilities ....... 213 Figure 5-19: Relating operational deployment to mission profile and abilities ..... 213 Figure 5-20: Minimum & desirable parameters to guide design .......................... 217 Figure 5-21: Progress in moving from requirements to design ............................ 218 Figure 5-22: Capability-based enterprise design ................................................. 227 A Systems Approach to Strategy and Execution in National Security Enterprises – x – Figure 5-23: Interpretive viewpoint of Defence strategic planning c. 1999 .......... 234 Figure 5-24: Perspectives on developing a 'sweet spot' in Case Study No. 1 ..... 235 Figure 5-25: Rich picture of the Defence strategy and execution process in 19992000 ............................................................................................................. 238 Figure 5-26: Root definitions ‗nested‘ to deepen and enrich the outcome ........... 239 Figure 5-27: Conceptual model for the development and continuous improvement of a strategy process .................................................................................... 240 Figure 5-28: Interoperability of SSM and SE for Defence strategy and execution ..................................................................................................................... 241 Figure 5-29: Application of systems engineering to Defence strategic planning . 243 Figure 5-30: Systems engineering closing the 'gap' in explanation ..................... 245 Figure 6-1: Proposed six work packages ............................................................ 252 Figure 6-2: SSM 1 – To manage cognitive complexity of the methodology ......... 253 Figure 6-3: Indicative layers of complexity (after Hitchins 2003) ......................... 256 Figure 6-4: Information Architecture .................................................................... 258 Figure 6-5: Hitchins' 5-layer model guides methodology design ......................... 261 Figure 6-6: Spiral development path for the designed methodology ................... 263 Figure 6-7: 'Building blocks' of an integrated process and a rational product ...... 264 Figure 6-8: Linear overview of the methodology ................................................. 267 Figure 6-9: SSM2 – Managing the situational complexity of dynamically changing the mix of methodologies ............................................................................. 269 Figure 6-10: Close interaction of theory and practice .......................................... 269 Figure 6-11: Relationship between key questions and focal areas for analysis .. 271 Figure 6-12: SSM as a methodology to manage cognitive and situational complexities ................................................................................................. 279 Figure 6-13: Perspectives on developing a ‗sweet spot‘ in Case Study No. 2 ..... 282 Figure 7-1: SSM as a methodology to manage complexity (Reprise of Figure 6-12) ..................................................................................................................... 288 Figure 7-2: Interoperability of SSM with systems engineering (Reprise of Figure 5-28)............................................................................................................. 288 Figure 7-3: Comparison of the mix of strategy modes used in Case Studies 1 & 2 ..................................................................................................................... 289 Figure 7-4: Design goal – to optimise ‗sweet spot‘ .............................................. 291 Figure 7-5: Relating the modes of systems intervention to Mintzberg‘s ten schools ..................................................................................................................... 293 A Systems Approach to Strategy and Execution in National Security Enterprises – xi – Figure 7-6: Comparison of systems engineering application ............................... 294 Figure 7-7: Revised systems engineering model for strategy formation .............. 300 Figure 7-8: Representative model for operational capability management.......... 301 Figure 7-9: Revised models in conventional pose of strategy followed by execution ..................................................................................................................... 302 Figure 7-10: New systems engineering model for strategy-to-action .................. 303 Figure 7-11: Starting ‗top-down‘ .......................................................................... 304 Figure 7-12: Starting ‗bottom-up‘ ......................................................................... 305 Figure 7-13: Starting ‗middle-out‘ ........................................................................ 305 Figure 7-14: Principal capability elements needed to implement new systems model ........................................................................................................... 307 Figure 7-15: Initial application in case study 3 (2005-06) .................................... 311 Figure 7-16: Follow-on application in case study 3 (2006-07) ............................. 313 Figure 7-17: Relationship between integrated and linear models ........................ 315 Figure 7-18: Systems components embedded in ‗linear‘ model .......................... 316 Figure 7-19: Mapping course content to new systems engineering model .......... 317 A Systems Approach to Strategy and Execution in National Security Enterprises – xii – List of Tables Table 2-1: Hierarchy of complexity in defence force capabilities ........................... 24 Table 3-1: Schools of strategy making (after Mintzberg et al 1998) ..................... 44 Table 3-2: Analysis and synthesis (after Ackoff 1999) .......................................... 47 Table 3-3: An integrative framework for strategy-making processes (Hart, 1992). 54 Table 3-4: Strategy-making mode and the organisational ―levers‖ of top management .................................................................................................. 55 Table 3-5: Two laws of complexity applicable to design processes in organisations (based on Warfield, 1999) .............................................................................. 57 Table 3-6: Three models of strategy (Chaffee, 1985) ............................................ 68 Table 3-7: Application of the decision ladder to process control and strategy formation ........................................................................................................ 75 Table 4-1: Jackson‘s extended grid of problem contexts .................................... 107 Table 4-2: Jackson‘s (2000) preliminary classification of systems approaches ... 110 Table 4-3: Comparison of trichotomies formed in the problem contexts and approaches .................................................................................................. 121 Table 4-4: Summary assessment of selected systems approaches / methodologies ..................................................................................................................... 131 Table 4-5: A defence hierarchy of systems complexity (after Boulding, 1956) .... 141 Table 4-6: Boulding‘s hierarchy (1956) with mapping of methods, disciplines and tools ............................................................................................................. 145 Table 4-7: Comparison of the SE construct with TSI (after Jackson, 2000) ........ 156 Table 5-1: Adaptation of user requirements process (after Blanchard & Fabrycky, 1998). ........................................................................................................... 205 Table 5-2: First-order assessment of Government needs. .................................. 206 Table 5-3: Adaptation of the Defence ‗system‘ requirements process. ............... 207 Table 5-4: Mapping of Mission profiles against Strategic functions. .................... 210 Table 5-5: Generic performance parameters among Defence functional relationships ................................................................................................. 212 Table 5-6: Reducing complexity to address one operational deployment at a time. ..................................................................................................................... 214 Table 5-7: Developing summary design criteria for Peacekeeping. .................... 215 Table 5-8: Strategic functional architecture for Defence...................................... 216 Table 5-9: Matrix of key mission components / function interactions. ................. 219 A Systems Approach to Strategy and Execution in National Security Enterprises – xiii – Table 5-10: Options design based on functional requirements and ‗gap‘ analysis ..................................................................................................................... 220 Table 5-11: Worked example of options design. ................................................. 221 Table 5-12: Illustrative matrix of interdependent capabilities. .............................. 223 Table 5-13: Cross-functional analysis for developing and employing the force. .. 225 Table 5-14: Scorecard of case study 1 (after Mintzberg et al, 1998). .................. 233 Table 6-1: Research questions – Setting boundaries & targeting the health system. ..................................................................................................................... 257 Table 6-2: Modes of investigation ....................................................................... 261 Table 6-3: Assessment of modes of intervention in pilot study............................ 272 Table 6-4: Scorecard of case study 2 (after Mintzberg et al, 1998) ..................... 280 Table 7-1: Schools of strategy making (after Mintzberg et al 1998) ................... 292 A Systems Approach to Strategy and Execution in National Security Enterprises – xiv – Summary This thesis was conducted part time over nine years while the author was engaged in full time employment at an executive level. This thesis presents a contribution to the field of strategy and execution for large, complex organisations in the national security sector. Enterprises in this sector may be public and/or private. They are characterised by the critical functions they deliver to deal with serious and unusual emergencies or provide critical national infrastructure. For example, Defence, emergency services, transport security, health care, banking and finance, customs and border protection – they all prepare for serious and unusual activities although this is not the activity that occupies the majority of their time. They help to define our national character here and abroad. A consequence of national security enterprises (NSEs) needing to plan for substantial, unlikely events is that the evaluation and feedback on the strategy and its implementation is neither immediate nor easy to achieve. It has long been recognised that strategy formation for NSEs is both challenging and often felt to be poorly executed in acquisition programs and poorly connected to daily operations. This thesis draws on knowledge of strategy practice in Defence and other NSEs, business strategic planning and systems approaches to management. It synthesises a conceptual model for an integrated strategy framework and an associated methodology that directs practice. This is validated by two case studies that illustrate the utility of the methodology in different areas of concern: defence and health. These studies inform the refinement of the methodology, which is then tested in a further three minor case studies. The thesis concludes with an analysis of what has been learned through the research program and how the work significantly contributes to the field through the presentation of an integrated strategy framework and how it can be used to inform strategy practice not only in national security enterprises but in all substantial businesses, where survival and growth are important. A Systems Approach to Strategy and Execution in National Security Enterprises – xv – A Systems Approach to Strategy and Execution in National Security Enterprises – xvi – Declaration I declare that this thesis does not incorporate without acknowledgment any material previously submitted for a degree or diploma in any university; and that to the best of my knowledge it does not contain any materials previously published or written by another person except where due reference is made in the text. Richard Hodge 31 January 2010 A Systems Approach to Strategy and Execution in National Security Enterprises – xvii – A Systems Approach to Strategy and Execution in National Security Enterprises – xviii – Acknowledgements The primary research associated with study was conducted with the support of the Australian Department of Defence, with Booz Allen Hamilton and CAE (Australia) in association with the Defence and Systems Institute at the University of South Australia (UniSA). I owe an enormous debt of gratitude to two people. To my lovely wife Vicki, for the love and support you give me every day and the sacrifices you have made over nine long years of work on weekends and nights. Thank you. To my principal supervisor, Professor Stephen Cook of the University of South Australia: you encouraged me to extend my first tentative steps into systems thinking and it has changed my worldview – on science, on strategy formation and on life. It led to a change in profession and the opportunity to engage national security leaders in several countries. Thank you Stephen for your constant support and for challenging me to live the words of Winston Churchill: ‗Never give up. Never give up. Never give up‘. Dr Kym Schmid, thank you for your critical thinking, your keen questioning and your enduring support through many sessions of seminar gaming and on many difficult problems that we faced together in Defence and at Booz Allen Hamilton. Vicki and I value your continued friendship most of all. To the rest of the team in Defence, I acknowledge your deep contributions to the parts of the early work that you took responsibility for. Particular recognition goes to Martin Dunn (scenario master and legatee of the methodology), Lieutenant Colonels Cameron Hooke and Tony Casey and then Wing Commander Paul Hickerton who followed in their footsteps (as force structure masters), Ros MacKenzie (capability planning) and Rene Konrad (information systems support). I make two special mentions. To Geoff Walpole, thank you for your belief in the value of a systems approach to strategic planning, and for the risks you took in advancing your belief to the senior hierarchy of the Australian Department of A Systems Approach to Strategy and Execution in National Security Enterprises – xix – Defence: which repaid you in the only way it knew how. Likewise to Alan Behm who, as head of strategic policy and planning, took a new systems approach to the Ministerial level and gave it impact it never had before. You are both champions to the cause of systems thinking and Defence is the richer for the advancements you made. I remain ever grateful for your support then and your ongoing advice and friendship now. To Les Haines, a colleague and friend at Booz Allen Hamilton (now Booz & Co.), thank you for inviting me onto your team in the New Zealand Health Study and in other health studies we conducted together. I appreciate the freedom you gave me to apply systems engineering principles in the strategy domains that you know so well. It was a great combination then and remains so. To Pat Helm and Lance Beath in New Zealand, both operations analysts by training and senior advisers to Government, thank you for your critical advice on advancing new methodological approaches into bureaucratic domains. Without which, it would have been more difficult to achieve the degree of cultural fit for our methods and solutions. Pat, delivering your advice on risk analysis during the health study by rolling up your sleeves around the whiteboard showed a depth of commitment and passion in the topic that was infectious to me and Les. I also acknowledge the support of Associate Professors Joseph Kasser (UniSA) and Martin Burke (UniSA and DSTO) and Dr David Wood, Senior Principal Research Scientist of DSTO all of whom provided valuable guidance. A final note of acknowledgement to the many participants in the research and consulting projects: you accepted that a systems approach to strategy and execution was more demanding than traditional approaches. I thank you all for stretching your patience with commitment to the experiment and acknowledge that without your consent to participate, your willingness to be involved and your thoughtful contributions, none of this would have been possible. Sincerely, Richard Hodge A Systems Approach to Strategy and Execution in National Security Enterprises – xx – Chapter 1: Introduction 1 Introduction This study contributes a framework of ideas and methodologies to advance the practice of strategy and execution for Defence and other organisations that are part of a national security enterprise. In today‟s interconnected world, national security covers a multiplex of issues. The traditional areas of foreign affairs, trade, defence, politics and law are now inextricably woven with border control, transport, telecommunications and information infrastructure, identity management, banking and finance, health and food, justice, law enforcement and human rights. In view of the web of inter-relationships between these areas of concern and the overall goals of achieving levels of national security that fit the cultural norms for our society, the framework of ideas and the methodologies that embody them must address the inherent complexities. This thesis aims to make a contribution in each of these domains across several areas of concern to national security. 1.1 Personal Motivation I became motivated to undertake this study at a personal, professional and ideological level, based on a belief that many people were not enjoying their working life as fully as they wanted to due to inadequate guidance that could enable them to decide which activities were more important for their organisation than others. I had developed this perspective throughout the 1980s and 1990s from personal experience and anecdotal evidence. In that time, from various positions in the Department of Defence, I had witnessed the passing mantras of „doing more with less‟ and „working smarter not harder‟, and had seen how the influx of information technology into the workplace brought expectations for productivity increases that appeared to be met primarily at the expense of an experienced workforce. As strategic directions were endorsed and seemingly ignored over time, cynicism appeared to hang over conversations like a wintry fog in London. A Systems Approach to Strategy and Execution in National Security Enterprises – 1 – Chapter 1: Introduction Few people appeared happy. Many were overworked meeting short-term demands and appeared progressively less clear about their future, not knowing what was important for them and their organisation or their business beyond the short term. It seemed to me a reality that traditional methods of setting and following directions were failing to help people sort „wants‟ from „needs‟. Consequently, people worked harder at meeting organisational targets from their group‟s perspective with the effect that cross-group relationships more frequently became competitive rather than collaborative. Raised expectations for organisational learning and growth appeared to have grown quicker than new processes that help people to „see‟ their way ahead. More appeared to have been said about the uncertainty and ambiguity of the future than had been offered in ways to deal with it. However, I also believed that many people wanted help to learn what is important for the organisation in general and for their group in particular. So that, armed with a better understanding, they might then reduce the amount of nugatory work in their lives and contribute more effectively to the security of the nation through personal growth and achievement in their organisation. If that were to happen in a systemic manner, I could then hope to see cynicism, „followership‟ and fear replaced with more widespread optimism, leadership and understanding. Holding such a belief system and a professional desire to improve systems thinking, these two motivating forces acted in a complementary way, bringing together an individual perspective on the one part and an organisational perspective on the other. With these forces motivating me to seek some solution, so began a journey of part time study over nine years. The journey started in Defence and then explored the application of systems engineering to strategy and execution to other areas of concern in health, transport security and executive education in the national security sector. The thesis is as much a journal of the discovery and personal growth over nine years while the author was engaged in full time employment as a senior A Systems Approach to Strategy and Execution in National Security Enterprises – 2 – Chapter 1: Introduction analyst with DSTO, a consulting analyst with Booz Allen Hamilton (20012007) and now as Director CAE Professional Services in Australia (2007present). 1.2 Genesis When The Living Company was published (de Geus 1997), I was at once attracted to de Geus‟ two main hypotheses that “the company is a living being … [and] the decisions for action made by this living being result from a learning process.” In de Geus‟ (1997) view, the only clarity to be found in a firm‟s progress is in looking back where, as he states, “you see a clear path that brought you here. But, you created that path… Ahead, there is only unchartered wilderness.” For de Geus, those companies which succeed in charting a course through the wilderness are those which see strategy as something a company does, not something a company has. Planning as learning becomes the way of guiding the next steps (de Geus, 1988). At the time of de Geus‟s writing, incidents of catastrophic terrorism were also entering strategic discourse and being considered “more likely than not [to occur] in the coming years” (Carter and Perry, 1999). The notion that ahead, people faced an “unchartered wilderness” (after de Geus, 1997) for future national security policy became apt in Australia and in other nations across the globe and then catastrophic terrorism became real on 11 September 2001. However, at the genesis of this work in late 1999, there were multiple views on the strategic futures that Defence might have to operate within and multiple views on the force structure required. Consequently, it was attractive to extend de Geus‟s concept of „planning as learning‟ to Defence, noting that what was needed most was a means of addressing the simple questions of: what capabilities are required? How much of each is enough? And, why? In view of the time pressures in the Department to develop advice on force structure priorities within an initial three-month window, an experimental approach was adopted. The essence of the experiment was to develop a range of scenarios representative of the different A Systems Approach to Strategy and Execution in National Security Enterprises – 3 – Chapter 1: Introduction views of the future; construct a range of force structure options representative of a range of funding profiles (-30% to +100% of 1999 funding levels); and test the different force structures in the range of scenarios. The focus of the analysis was to identify what „abilities‟ in a force structure were commonly required in each scenario and which were critical. The author designed an initial „trial horse‟ wrapped around a simple concept that systems thinking and systems engineering principles could be applied. In particular, the goal was to harness the test and evaluation and systems analysis processes of a traditional systems engineering approach and explore the extent to which they supported the integration of „planning as learning‟ in strategy formation at the enterprise level. Building on earlier work (Hodge, 1998a,b), it soon became evident that the application of Checkland‟s (1981) Soft Systems Methodology (SSM) and a generic systems engineering model (DSMC, 1999) in combination also enabled other modes of intervention to be combined with the learning method of seminar gaming. For example, interpretive modes were incorporated to refine contextual understandings and define needs; and, rational modes to integrate forecasting and other analytical methods. A new synthesis emerged from this work in the integration of three modes of strategy intervention, where „planning as learning‟ needed to be balanced with interpretive modes (planning with judgement) and rational modes (planning as calculation). SSM appeared to be helpful in methodology design and systems engineering appeared to be a useful structure for framing the intervention and integrating different component methods. 1.3 Research Question The initial work in the last three months of 1999 showed some promise in helping a new Strategic Policy and Planning Division in Defence to connect strategy with capability development and operational preparedness. More needed to be done to consider seminar gaming, and further, military power in A Systems Approach to Strategy and Execution in National Security Enterprises – 4 – Chapter 1: Introduction the wider context of other elements of national power. Therefore, the general research question arising from the initial work is: To what extent can systems thinking and systems engineering principles and methodologies enable integrated strategy and execution processes in national security enterprises? 1.4 The Research Domain The research domains of this thesis are the human activity systems for strategy formation and execution. The research domains are multidisciplinary. A range of research areas relevant to the primary of study is presented synoptically in Figure 1-1, representing the research domain in three spaces: the problem, the objective and the solution spaces. Research Areas & Key Thinkers The Problem Space Focus on the ‘WHY’ A systemic understanding of the context in which strategy & execution problems exist (Nominal List – See References for Full Listing) War / Peace Strategy Theory Planning Theory Systems / Multidisciplinary Thinking Systems Engineering & Architecting Cognitive Theory & Engineering Organisation of the Living Risk and Cultural Theory Knowledge Systems Learning Leadership Organizational Behaviour and Management Howard (’73, ’01) Hamel (’94, ’00) Mintzberg (’94, ’98) Hart (’94) Kline (’95) Checkland (’80, ’91) Blanchard & Fabrycky (’98) Flood & Jackson (’91) Hitchins (’92, ’00) Rasmussen (’94) Maturana & Varela (’72) Capra (’96) Adams (’95) Argyris (’93) Senge (’90, 94, 99) Sveiby (’99) Collins & Porras (’98) Rechtin (’91, ’00) The Objective Space Focus on the ‘WHAT’ A system for separating and explaining the more important from the less, appropriate to the context The Solution Space Focus on the ‘HOW’ Methodologies for resolving problems with systemic and cultural fit, balance & compromise Figure 1-1: The research domain and key thought-leaders These research areas are not mutually exclusive and those listed are not exhaustive of the disciplines that impact on strategy and execution. While all A Systems Approach to Strategy and Execution in National Security Enterprises – 5 – Chapter 1: Introduction are important, however, this thesis concentrates on systems thinking and on systems engineering as they apply to strategy and execution. The thesis enters the other research areas only where they are judged to impact significantly on the central study, exploring them no deeper than is adequate for the central purpose of the thesis. Where other questions arise in these areas, they are referred for further research. 1.5 Methodology The initial work in this thesis and the investigation of future combat systems for soldiers that preceded it (Hodge, 1998a) illustrated that it was unfeasible for the author as researcher to separate himself from the subjects under investigation. In both cases, research occurred within a community of participants, where the author led a conversation with the participants about the definition of the problem and the construction of a methodology before conducting the intervention and evaluating the results – once again, as an „orchestrated debate‟ (after Checkland, 1981). These characteristics of the research enabled acceptance of the experimental objectives; then, ensured the approach was culturally feasible and the results accepted within the community of interest. These characteristics are indicative of the experimental „learn by doing‟ approach advocated by the Australian Department of Defence (Defence, 2009) to the research question having some alignment with a constructivist methodology (Mir and Watson, 2000) and to constructionism (Wikipedia, 2008). Time did not permit use being made of the work of constructivist philosophers and sociologists, so I do not claim to have adopted a constructivist approach. However, I note that the characteristics of the adopted experimental approach rank amongst some „beliefs‟ held by some constructivists (Mir and Watson, 2000):  knowledge is driven by theory but “as long as researchers are transparent about their a priori theoretical position, the process of research is not impeded” (p.943), A Systems Approach to Strategy and Execution in National Security Enterprises – 6 – Chapter 1: Introduction  just as it is unfeasible to separate the researcher (as subject) from the object of his research, so too, it is unfeasible to separate theory and practice (p.943) and,  “researchers are never „objective‟ or value-neutral … as research occurs within a community of scholarship where mutually held assumptions are deployed to create conversations. ” (p.943). These constructivist „beliefs‟ underpin the general experimental approach to „learning by doing‟ while concurrently keeping the practice and the theory closely coupled (after Checkland, 1981): not only did the outcome have to be systemically desirable in the improvements it made to strategy and execution (McIntosh et al, 1997), it also had to be culturally feasible (after Checkland, 1981) if it were to bring together the “warring tribes” (McIntosh et al, 1997). The Helsinki University of Technology has outlined its view of a constructive research method (TKK, 2008) requiring: ―… 1. 2. building an artefact that solves a problem domain in order to create knowledge about how a problem can be solved and, if previous solutions exist, how the solution is new or better than previous ones.‖ Furthermore, ―… The artefact should solve a domain problem… a failed attempt is not a result… [and] the correctness of a solution should be properly validated. The artefact can have practical relevance… [but] the artefact is not a scientific result. The research should solve some related knowledge problems… [where] the types of knowledge advances … [include] Feasibility: how a previously unsolved problem can be solved; Novelty: how a previously solved problem can be solved with a new (and promising) technique; [and] Improvement: how a previously solved problem can be solved in a better way than before.‖ (TKK, 2008) In applying these aspects of the TKK (2008) approach, the thesis set out to build as its „artefact‟ an methodology, which turned out to be a revised systems engineering model. Through experimentation and critical analysis, the thesis aims to “create knowledge about how a problem can be solved”. Thus, in the Defence case study, once it became clear that the strategy literature offered no immediate solution that would deliver an integrated A Systems Approach to Strategy and Execution in National Security Enterprises – 7 – Chapter 1: Introduction strategy and execution framework (Mintzberg, 1998), the artefact of the research aimed to close a “gap in explanation” (Baker, 2000) in the strategy content and in the strategy process. The approach outlined in this thesis, also sought to solve some related knowledge problems. The following outline of the thesis embeds the main elements of TKK (2008) approach where, a theoretical basis is constructed from the available literature and declared at the outset. Theory and practice are not separated. They build on one another. As theory is tested, new knowledge is created and the theory is extended. The author as researcher was deeply engaged in the interventions, yet as his involvement was at times challenged, explanation persuaded the continuation of the research. Persuasion was only ever achieved when based on the theoretical foundations for the methodological design and the improvements it suggested over the status quo. The combination of the two demands – for systemic improvement and cultural fit – the TKK (2008) views of a constructivist methodology support the experimental path taken, without compromising the validity of the research methodi. 1.6 The Thesis – In Outline At the outset, there was no intention of exploring the concept of the organisation as a „living‟ entity; however, the journey had begun. In the following nine years, the research progressively constructed a framework of ideas and methodologies based largely on experiential learning from five case studiesii, to advance a thesis for developing a systems approach to strategy and execution as an organisational capability in a number of areas of concern to national security. The main elements in the evolution of this work, which frame this thesis, are:  a discussion in chapter 2, to identify the nature of the problem first faced within Defence and the main contextual issues, A Systems Approach to Strategy and Execution in National Security Enterprises – 8 – Chapter 1: Introduction  in chapter 3, an overview of the strategy literature which leads to a first principles approach to developing a concept for an integrated strategy framework constructed on the literature from the fields of strategy, complexity science, systems theory and cognitive systems engineering,  in chapter 4, a review of the systems literature to explore the dimensions of the conceptual model for strategy and execution and how an adaptation of systems theory and practice might enable the implementation of an integrated strategy framework,  in chapter 5, a first major case study based on methodological research conducted within the Australian Department of Defence,  in chapter 6, a second major case study on methodological developments for a consultancy task undertaken with the New Zealand Ministry of Health,  in chapter 7, a review of the methodological findings from the Defence and health case studies from which a revised systems engineering model is proposed and tested in three mini case studies,  in chapter 8, concluding remarks on the contribution made to bodies of knowledge for systems thinking and strategy and suggestions for further research. The case study in chapter 5 focuses on methodology development and, in order to keep the thesis unclassified, only illustrative data is used. Likewise in chapter 6, the focus is on methodology and does not divulge any of the recommendations or strategic outcomes for the health system due to the sensitivities involved and the need to maintain client confidentiality. 1.7 The Thesis – In Summary Each chapter is now presented in a short overview to complete the introduction. A Systems Approach to Strategy and Execution in National Security Enterprises – 9 – Chapter 1: Introduction Chapter 2 examines the early statements of a strategic planning problem within the Australian Department of Defence as it was in 2000 and the Defence response to the Government driven reviews of the late 1990s. In essence, strategic planning has lacked the coherence required to connect strategic policy with force structure outcomes (McIntosh et al, 1997). The problem is considered in relation to contextual and historical issues in the Australian Department of Defence and, where relevant, defence organisations generally. A sense of the complexity of the organisation is developed as it contains diverse sub-cultures that have a „natural‟ bias for the status quo (Howard, 1973) – basically, the problem has been around since Tange integrated four separate Departments into one in 1976 (Edwards, 2006). Interestingly, the 2009 Defence White Paper (Defence, 2009a) and the subsequent Strategic Reform Program (Defence, 2009b) have also identified a need for further advances in connecting strategy and execution in the five years from 2009 to 2014 when the next White Paper is due. In noting some of the inherent difficulties in military planning, technology is driving a quiet revolution not only in the capability of the military but also in the definition of its role in society (Builder 1996, Warner 1996). The concept of a „fog of peace‟ is considered inherently more complex (Howard, 2001) than the „fog of war‟ (after von Clausewitz, 1832/1984) as new spaces born of strategic competition and political adaptivity arise, in addition to the impact of technology, social and other drivers (Hamel and Prahalad, 1994). As a result, Defence organisations have higher demand for flexibility to meet uncertain strategic requirements, yet they face a lower margin for error in their early strategic decision-making. The need to change a basis calculus for defence planning is emphasised together with the importance of eliminating rapid changes in strategic leadership to gain further improvements in strategy and execution capabilities. From this contextual setting, the discussion in chapter 3 then turns to the strategy literature to assess the value of business strategic planning practices A Systems Approach to Strategy and Execution in National Security Enterprises – 10 – Chapter 1: Introduction for the Defence context. Chapter 3 builds a concept for an integrated strategy framework upon foundations laid in the management literature. Firstly, a short review of a sample of strategy and execution processes in overseas defence organisations shows all nations being on a similar learning path and needing skills in designing and implementing methodologies that would deliver more rigorous thinking about operational requirements (Howard 1973, Roske 2000). A short review of the non-defence strategy and management literature finds the need for an integrative framework is well documented, yet a solution remains elusive (Mintzberg, 1998). Some relevant advances towards an integrative framework are noted (Chaffee 1985, Hart 1992, van der Heijden 1996) – notably drawn from literature on highperforming firms and from the findings from an ongoing study into CEO tenure (Lucier et al, 2002). These suggest further keys to success lie in managing the complexity involved in driving longer term strategy direction early in the tenure of a new CEO (Lucier et al, 2002), while maintaining earnings per share. Elements of Warfield‟s (1994) work on complexity are discussed to gain the insight that if the cognitive complexity is not managed first, then attempts to manage the situational complexity are likely to fail. Three further insights for strategy making are also drawn from Warfield (1994): 1) a component of the process should be designed to analyse and control the whole process and its products in order to manage complexity in both; 2) strategy making by exclusive groups or committees in an un-orchestrated debate is likely to produce bad outcomes; and, 3) designing the strategy process with tension among three domains of strategy making will engender more flexible thought and action. At least two authors have presented the strategy field in frameworks of three domains (Chaffee 1985, Van der Heijden 1996). From their work, an approach to design a concept for an integrated strategy framework is constructed with a view to addressing the insights from the complexity literature. The conceptual design is then considered against insights from the cognitive systems engineering literature to support an A Systems Approach to Strategy and Execution in National Security Enterprises – 11 – Chapter 1: Introduction assertion that the conceptual design enables cognitive control to be exercised during the design, execution and evolution of an integrated strategy framework. As strategy and execution is a constantly moving domain in a social system, chapter 3 closes with a summary of the outstanding conceptual design issues. These form the basis for further review of the literature on systems science and engineering, organisational learning and change, and knowledge management in chapter 4 – the aim of which is to close-out the conceptual design of an integrated strategy framework and set the foundation for the case studies that then follow. The systems literature indicates there are no simple prescriptive solutions to implement an integrated strategy framework. Multiple methodologies and methods are organised into at least four schools of endeavour (Jackson, 2000). Even so, the structure of the body of literature may overburden most people in managing the cognitive complexity of mixing methods from more than three systems approaches (Warfield, 1994). Hence, the cognitive complexity involved in applying the systems literature to the design of an appropriate integrated framework for strategy and execution is also difficult to manage. And so, by mildly re-shaping elements from Jackson and Keys (1984), Flood and Jackson (1991) and Jackson (2000), a theoretical basis is constructed based on trichotomies in:  how problem contexts are defined, the available systems and strategy approaches to address them, and in how they combine to form and integrated framework for strategy and execution.   Consistent with Kline‟s (1995) foundations for multi-disciplinary thinking, the methodological viewpoints maintain a synoptic overview, a piecewise view of problems and methodologies, and a structural overview/ framework that is A Systems Approach to Strategy and Execution in National Security Enterprises – 12 – Chapter 1: Introduction consistent with the characteristics of the problems and the available methodologies. Theory is translated to practice through a review of selected methodologies to fit the theoretical foundation. SSM and systems engineering are selected as the dominant methodologies, respectively to manage the cognitive complexity of the strategy and execution process and provide the framework for integrating multiple methods. The recursive nature of systems engineering (Hall, 1998) is shown to add further value by forming a strong interdependency between the integration of the „pieces‟ (multiple methods) and the measures of enterprise performance to sustain a fluid process (after Demos et al, 2001). Theoretically, then, it is asserted that the design and management of ongoing systems interventions can approach the level of complexity of dynamic problems themselves (after Boulding 1956, and Chaffee 1985) and enable the operation of a strategy and execution process dynamically to drive high performance. Chapter 5 presents the first of two major case studies. At the outset, the study focussed primarily on integrating an adaptive, learning-based approach into existing capability planning processes as a means to improving connections between strategy and capability development. SSM is shown to be helpful in managing the cognitive complexity of developing and adapting a strategic planning approach dynamically to ensure the process is systemically desirable and culturally feasible – that is, the resulting dynamic process is inclusive of the „right‟ people, it uses the most appropriate tools and techniques (bearing in mind cost, time and availability of people, data and systems support) and it delivers defensible advice through a transparent process. Systems engineering is shown to be helpful in managing the situational complexities involved in analysing and making decisions on the design of a force structure for a given cost while ensuring the result is „fit-for-purpose‟ in meeting the Government needs of Defence. This process and the tools A Systems Approach to Strategy and Execution in National Security Enterprises – 13 – Chapter 1: Introduction developed to support it are described, together with „control actions‟ taken at regular intervals in order to scope and scale a viable enterprise level approach. Chapter 5 also describes the adaptation of the systems engineering processes to determine functional capability requirements at the enterprise level. The resulting strategic functional architecture or „agility matrix‟ is described, indicating the progressive increases in the functional and performance characteristics required of a set of Defence capabilities across a range of contingencies representative of possible Government needs of Defence. The use of adaptive approaches in translating the functional requirements of the „agility matrix‟ into force structure designs is described. While, in practice, the approach was hampered by the timing of the formal development of the 2000 Defence White Paper, the case study is able to assess the extent to which the different rational, interpretive and adaptive methodologies developed an effective „sweet spot‟ for Defence planning. The result suggests the methodological application of systems engineering concepts at the Defence enterprise level of systems complexity may have application as a framework of ideas to the wider national security and industry domains, which are areas of concern with similar issues faced by Defence capability planners. The response to the work within Defence has been positive. The author received a DSTO Achievement Award for “Best contribution / Advice to Defence in the area of Force Options Testing and Analysis” and, more significantly, the work continues as a formal part of the Defence capability development process in its more evolved state, used most recently as part of the analysis process supporting the development of the 2009 Defence White Paper. In chapter 6, the second case study is drawn from the contribution of the author to a study (conducted from January 2004 to March 2005) of the capability of a national health system to respond to serious and unusual emergencies. The intended outcomes of the study were required to have a whole of government benefit for health emergency management A Systems Approach to Strategy and Execution in National Security Enterprises – 14 – Chapter 1: Introduction preparedness and have benefit for day-to-day health services delivery. Consideration of the focal health problems at a business, enterprise and industry level was necessarily nested within the national government‟s broader security agenda. While the results of the study remain confidential, the design and implementation of the systems methodology is presented. An approach to designing and developing an integrated set of rational, interpretive and adaptive interventions is described, framed on Checkland‟s (1990) Soft Systems Methodology. Systems engineering is also adapted as a methodology for synthesising multiple methods into one continuous and dynamic intervention. A pilot study was used to test the system of interventions at a regional level, the results of which guided the „control‟ actions required to adapt the methodologies so they could scale to a national level study. Most interventions were able to scale with little or no modification. The modification to the risk analysis, however, was extensive and became a central integrating „force‟ in the study. The case study concludes with a summary assessment of the extent to which the different rational, interpretive and adaptive methodologies developed an effective „sweet spot‟. Once again, the case study reinforces the methodological application of systems engineering concepts at the business, enterprise, industry and national levels of systems complexity. It also demonstrates the portability of this framework of ideas, and its adaptability, to different areas of concern. The response to the study at the higher levels of Government – notably the Department of Prime Minister and Cabinet and the Treasury – report a “good outcome”. A high-level comparison of the major elements of the two Case Studies is made in chapter 7. Two variations of Checkland‟s Soft Systems Methodology (SSM) – the earlier 1981 model for the novice user and the later 1990 model for the experienced user (after Checkland and Holwell, 1998) are compared for their usefulness as methodologies to help manage the cognitive complexity and dynamically to adapt the different multiple methods used in each case. A Systems Approach to Strategy and Execution in National Security Enterprises – 15 – Chapter 1: Introduction While the 1981 version proved adequate in Case Study 1, the 1990 version of SSM is considered a better framework for monitoring and controlling the development and dynamic adaptation of multiple methods into one complex systems intervention at the enterprise and/or whole-of-nation level. A high level comparison is also made of the different combinations of rational, adaptive and interpretive modes of systems interventions used in each of the case studies. While each has its strengths and weaknesses, the tight integration of risk into Case Study 2 enhanced the effect of the other modes of intervention by acting as an integrating control factor across the different modes. The utility of the systems engineering models in each case study, which are based on DSMC (1999), are compared. Noting the importance of the role of risk analysis and performance management as part of the system analysis and control functions, a revised systems-engineering model is designed for strategy and execution. This is then reviewed in three mini case studies. In toto, a new synthesis for strategy and execution is established across three dimensions involving: 1) using Soft Systems Methodology to manage the cognitive complexity of sustaining good strategy and execution outcomes; 2) designing a new systems engineering model that establishes a pattern of process elements and a configuration of relationships among them to define the essential characteristics of a system of strategy and execution processes; and, 3) structuring any systems intervention in a way that achieves an appropriate balance between interpretive, rational and adaptive modes. Chapter 8 summarises the author‟s contribution made to bodies of knowledge for systems thinking and strategy and suggestions for further research. 1.8 The Contribution to Knowledge The author has explored to some extent how systems thinking and systems engineering principles enable integrated strategy and execution processes in national security enterprises. By using systems methodologies as a composite A Systems Approach to Strategy and Execution in National Security Enterprises – 16 – Chapter 1: Introduction platform for the design of systems interventions in two major case studies, the author has synthesised a revised systems engineering model for strategy and execution. He has tested the utility of the revised model in three different areas of concern. In doing this, he has taken steps to deliver the strategy and systems communities with a new, codified synthesis for an integrated strategy and execution framework. The author‟s contribution shows how complex socio-technical organisations can develop their own systems approach to strategy and execution in a way that ensures it will gain from it a reasonably good understanding of how the organisation might adapt its enterprise (in its operations and its strategic direction) to adjust to influences of its complex environment; and, with that understanding, drive action that ensure the organisation will survive and grow in ways meaningful to itself. In a way, then, the author has illustrated how various organisations in the national security enterprise can apply systems thinking and practice to „emancipate‟ themselves (Jackson, 2000) from the oppression of singularly mechanistic approaches to strategy and execution (Demos et al, 2001) and „find‟ its own strategic direction and means of getting there (after Hamel & Prahalad 1994, Hamel 2000). In keeping with de Geus‟ (1988) concept of “planning as learning”, this thesis has achieved its syntheses from learning through experimentation. Just as each step became a way of guiding the next steps, it has taken nine years of part-time work to reach the end point in this thesis. The presentation of this thesis takes the reader on that journey one step at a time but, one hopes, in a much shorter timeframe. Such are the benefits of learning from others. I trust you, the reader, will enjoy the journey and contribute to the ongoing construction or re-construction of the systems thinking offered here. That much is critical. A Systems Approach to Strategy and Execution in National Security Enterprises – 17 – Chapter 1: Introduction A Systems Approach to Strategy and Execution in National Security Enterprises – 18 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment 2 Abstract: Initial Context of the Research Problem in the Australian Defence Planning Environment Chapter 2 is contextual to the beginning of the study within the Australian Department of Defence. It examines the Defence strategic planning problem as it was in the late 1990s and the Defence response to the Government driven reviews. The problem is considered in relation to contextual and historical issues in the Australian Department of Defence and, where relevant, defence organisations generally. From the end of World War II to the close of the century, Australia‟s broader national security framework had not changed (Oatley, 2000). A sense of the complexity of the organisation is developed, which contains diverse sub-cultures that have a „natural‟ bias for the status quo (Howard, 1973). This is contrasted with the impact of technology and how that is driving a quiet revolution not only in the capability of the military but also in the definition of its role in society. The concept of a „fog of peace‟ (Howard, 2001) is considered and how, as a result, Defence organisations have higher demand for flexibility to meet uncertain strategic requirements, yet they face a lower margin for error in their early strategic decisionmaking. The need to change a basis calculus for defence planning is emphasised together with the importance of eliminating rapid changes in strategic leadership to gain further improvements in strategy and execution capabilities. A short review of a sample of strategy and execution processes in overseas defence organisations shows all nations being on a similar learning path and needing skills in designing and implementing methodologies that would deliver more rigorous thinking about operational requirements. The discussion in chapter 3 then turns to the strategy literature to assess the value of business strategic planning practices for the Defence context. And, then, in chapter 4 examines the systems literature with a view to developing an integrated strategy and execution framework appropriate to national security organisations operating in a complex and dynamic strategic environment. 2.1 Early Statements of a Strategic Planning Problem In 1974, Sir Arthur Tange (Secretary of Defence, 1970-1979) brought together four Defence departments into one. Beyond seeking the obvious administrative efficiencies, he sought to improve the level of integration in strategic policy, which until then was hampered by inter-Service rivalry and stereotyped thinking A Systems Approach to Strategy and Execution in National Security Enterprises – 19 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment (Edwards, 2006). Nearly a generation later, the Defence Efficiency Review of 1996-97 reported publicly to the Minister for Defence, noting the „warring‟ nature of the tribes of Defence (McIntosh et al. 1997). The effect of this tribalism on Defence strategic planning was made clear in the Secretariat Papers to the Defence Efficiency Review (DER). ‗In the absence of a sufficiently articulated strategic direction, there remains considerable scope to dispute guidance on parochial grounds or to continue to dispute decisions once taken. … There are too many organisations competing in establishing capability priorities. … In attempting to set capability priorities, the focus has tended to be more on the platforms required than the holistic consideration of capabilities, being not only the platform, but also the manner in which that platform will be employed, supported and staffed. The end result is that it is difficult to agree priorities for force capability development, with those priorities which have been established in the Five Year Development Program (FYDP) having been constructed largely on the basis of resources available in the capital investment program (although it is inevitable that resources will ultimately set the limit for the priorities).‘ (McIntosh et al, 1997) Up to this point in 1997, Defence „strategic‟ planning has operated in a strategyfree environment supportive only of a combative „force-on-force‟ engagement between the Services as they competed in committee meetings for project funding. The Secretariat Papers are again more telling in suggesting Defence‟s needs for better strategic planning. ‗Defence needs a more authoritative and integrated approach to strategic policy formulation to provide a coherent and rigorous strategic basis for planning for the defence of Australia and its interests, for determining preparedness objectives and for setting capability priorities.‘ (McIntosh et al, 1997) 2.1.1 The Defence Response In response, Defence established a Strategic Policy and Planning Division in 199798 by integrating four branches covering Strategic Policy, Military Strategy, Capability Planning and Capability Analysis together with a small advisory element from the Defence Science and Technology Organisation (Defence, 1998)1. Work progressed with the design and development of new planning processes and products being introduced in futures planning, quarterly and annual strategic reviews, an Australian Military Strategy, and capability studies into select areas of Defence capability (e.g. undersea warfare, air defence). 1 The author as Scientific Adviser, Strategic Policy & Planning inaugurated the science team in March 1998. A Systems Approach to Strategy and Execution in National Security Enterprises – 20 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment In the first eighteen months in SPP Division, the author worked progressively with the different Branches in a waterfall approach:  assisting Strategic Policy (SP) Branch by coordinating a review of technology futures to assess the implications of technological developments for Australia‟s strategic analysis, and supporting the conduct of a major USAustralia strategic wargame on regional and coalition policy approaches. A major goal of SP Branch was to analyse a range of possible choices for Government in how it might employ military power with other elements of national power and define the policy parameters for such employment.  assisting Military Strategy Branch (MSB) with the development of the Krait series of technology wargames, designed to help planners learn how better to insert technology into the battlefield and/or change the concepts for warfighting in the ADF at a strategic level. A primary goal of MS Branch was to analyse a range of possible military strategic objectives for the ADF within the policy context established by SP Branch and to define, in Defence terms, the boundaries of the military response options available to Government.  assisting the Capability Policy and Planning Branch2 transition from an executive body dealing with State Governments on broader mobilisation and sustainment issues to a planning body focussing on capability planning and prioritisation at a force structure level. The primary goal of the [retitled] Force Structure Priorities Branch was to derive a set of options for structuring the ADF that could be put to decision makers with an analysis of priorities for capability development relative to the Military Strategic Objectives set by MS Branch, and the strategic policy context set by SP Branch. The author spent relatively little time with Capability Analysis Branch, per se. While it studied important topics such as Air Defence or Maritime Surface Warfare, which contributed to force structure prioritisation, it did not then extend Later retitled as Force Structure Priorities Branch and headed by Commodore Geoff Walpole, RAN, with whom the author developed a strong working relationship in leading the development of new planning concepts and processes for developing force structure priorities. 2 A Systems Approach to Strategy and Execution in National Security Enterprises – 21 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment to the development and analysis of options for force structuring as a whole-offorce problemiii. 2.2 Environmental Constraints and Challenges This section of chapter 2 characterises constraints and challenges in the Defence environment at the time this work began. The discussion initially considers the size and complexity of the Defence planning environment and identifies a number of key external and internal pressures acting in combination. The discussion then covers the so-called „Revolution in Military Affairs‟ (RMA), Defence culture, time to acquire capability and cost of capability. The „bottomline‟ is that Defence3 faces a high demand for flexibility in how it defines and develops capability to meet uncertain strategic requirements with constraints that drive a lower margin for error in its early strategic planning and decisionmaking. 2.2.1 Size of the Organisation The Australian Department of Defence is a large organisation. As reported publicly (Defence, 2004a), it comprises a permanent force of about 52,000 women and men in uniform, a reserve force of about 20,000 and a civilian workforce of 18,000 staff. Defence‟s annual resourcing for 2002-03 is $22.8B in accrual terms, of which $18.3B is revenue from Government for outputs. Its asset base is valued at about $50B in 2002-03 dollars. Defence owns about 70% of the Commonwealth‟s non-recurrent assets and has a ten-year investment program worth about $50B. In total then, it comprises one of the largest organisations in the Southern Hemisphere (Defence, 2004a). 2.2.2 Complexity of the Organisation Defence has two Chief Executive Officers reporting to the Minister of State for Defence (Defence, 2004b). A military chief, the Chief of the Defence Force, is the senior adviser to Government on military matters. He commands the Defence It is interesting to see in the course of this study how these pressures are common in so many enterprises operating in the 21st Century. 3 A Systems Approach to Strategy and Execution in National Security Enterprises – 22 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment Force and carries responsibility for its development and preparedness. On the civilian side, the Secretary of Defence is responsible for financial administration, strategic policy, security and intelligence, information, defence materiel, science and technology support functions. This diarchy distributes its executive power through an interdependent network of committees and branches led by 210 starrank and senior executive officers4 (ASPI, 2007). This is the tip of a complex organisation of command and control functionaries. In its simplest representation, Defence is an enterprise that is structured to contribute to national power through the synergistic output of two „products‟: influence and combat power (Hodge, 1998b after Hitchins, 1992). Influence: Defence forces provide nations first and foremost with the ability to exert their will and influence over other state and non-state actors just by their presence and the effects of any influences by a nation state and counter-influences upon it will change as the strategic environment changes (von Clausewitz, 1832/ 1983). In Australia‟s case, a stable state been rarely been perceived (if ever), much less achieved. Consequently, the spectra of influences and counter-influences are potentially very broad in scope and comprehensive in their effects. The balance of power issues involved become a complex equation to comprehend yet they remain an important component in the exercise of national power. Combat Power: Defence‟s number-two „product‟ is combat power, which is not an end in itself but supports the application of deterrence as one set of the national capability to influence other actors. As many in defence have experienced, the development of a combat capability that is adaptable to an uncertain future is a highly complex, expensive and time-consuming task (Howard, 1973). Not surprisingly, the terms „complexity‟ and „uncertainty‟ feature strongly in the business and planning vocabulary of Defence decision makers. The expenditure decisions they make today will influence the military capabilities of the future. Unfortunately, though, it is difficult to know whether today‟s decisions will prove advantageous in the longer term or, indeed, whether 4 Average funded strength in 1998/99, which had grown to 291 by 2007/08 (ASPI, 2007) A Systems Approach to Strategy and Execution in National Security Enterprises – 23 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment time will show that today‟s decision only added to the complexity and uncertainty faced by the next generation of decision makers. (Observers could glibly wonder how much easier it would be if only they could position themselves 20 years out and look upon the decision with the benefit of hindsight.) The heart of many studies involves the analyst determining how to measure, assess and report military capability. The degree of complexity involved in such studies is illustrated in Table 2-1, which has been constructed by abstracting Hitchins‟ five-layer model to the defence context (Hitchins 2000, 2003). Table 2-1: Hierarchy of complexity in defence force capabilities Fundamental Inputs to Capability (E.g., equipment, people, training, infrastructure, logistics support …etc.)   The basic ‗building blocks‘ that can be acquired and/or developed as inputs that must be integrated to develop a defence capability These elements can usually be quantified and costed directly Capability (E.g., the ability to conduct air combat, maritime surveillance, counter-terrorism, etc.)    Functional expression of Defence operational outputs The actual capability is more than the sum of the physical elements; all fundamental inputs to capability need to be considered. The actual value of the capability cannot be directly costed; judgement is required on doctrine, tactics, morale, leadership, command intent etc. Capability domain (E.g., the ability to achieve control of the air, control of the sea, special operations, etc., including key enablers)   Functional ability comprising a group of capabilities (e.g., control of the air comprises offensive counterair, air defence, with key enablers command and control, intelligence, logistics, etc.) Produces operational level outcomes Component Force (Air Force, Land Force, or Maritime Force)    Functional expressions of the enterprise‘s ability to deliver armed force for a range of desired effects in one or more of the individual operational environments Includes raise, train and sustain functions Delivers strategic level outputs. National Defence Force    Functional expressions of the national ability to deliver military strategic outcomes supporting Australia‘s national interests in concert with the nation‘s political and economic objectives Integrates strategic support functions of strategic and capability planning, development and acquisition, science and technology, national industry support and corporate governance functions Defence is costed as a Government line item. A Systems Approach to Strategy and Execution in National Security Enterprises – 24 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment At its most basic level, defence capability is presented in terms of its physical component elements (equipment and people and other fundamental inputs) which can be costed. At the other extreme, Defence is represented qualitatively in terms of the strategic outcomes delivered by a defence force in joint or coalition operations. The gulf in the complexity between the two ends is vast. Yet, only at these two extremes are dollars attached to the hierarchy. This compromises one‟s ability to provide a high degree of fidelity in the tracking and distribution of effort and resources to the various layers because the interdependencies at each layer between the function and form, and therefore cost, are not clearly understood. 2.2.3 A Revolution in Military Affairs Planning in the strategic security environment in Australia is characterised by uncertainty in the events that might arise and complexity borne of high global interdependencies (Baker, 2000; Defence, 2000c). Defence must engage in new spaces born of strategic competition and political adaptivity as they arise, in addition to the impact of technology, social and other drivers (Hamel and Prahalad, 1994). Military forces in the world aim to create advantage over their potential adversaries by establishing asymmetry in combat capability, or in timing (Betts, 1982)iv. This is no different to planning and timing in highly complex corporations (Mason & Mitroff 1981, Hamel 2000). Military forces of the 20th Century saw technology, in particular, as a key advantage. Builder (1996) speaks of a military technical revolution noting how, for example, the range of naval weaponry went through three such technical revolutions in just over 50 years – each time producing an order of magnitude increase in the range of the weapons. Smokeless powder increased the range from 2 to 20 miles. Naval aircraft increased the range at which fleets could engage from 20 to 200 miles. And, ballistic missiles provided a further increase in engagement ranges from 200 to 2000 miles. However, as Builder (1996) writes, these enormous technology improvements did not revolutionise military operations: A Systems Approach to Strategy and Execution in National Security Enterprises – 25 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment ―… until other changes took place within militaries – in their concept of operations, doctrines, equipment, training and organisation. Navies had to change all those things in order to exploit the technologies of smokeless powder, aircraft and ballistic missiles.‖ (Builder 1996, p.7, underline added for emphasis) The subject of a „Revolution in Military Affairs‟ (RMA) has been discussed at length in defence circles during the 1990s. Futurists Alvin and Heidi Toffler contributed their view of a military revolution occurring (Toffler, 1993, p.32): ―… in the fullest sense, only when a new civilization arises to challenge the old, when an entire society transforms itself, forcing its armed services to change at every level simultaneously – from technology to culture to organisation, strategy, tactics, training, doctrine, and logistics. When this happens, the relationship of the military to the economy and society is transformed… ‖ (Emphasis added.) Using the Tofflers‟ definition, let us briefly examine if a military revolution emerging from the complexity of the strategic and technological environments is evidenced by a change in the balance of relationship between the two. From the technological viewpoint, the (then) Australian Chief Defence Scientist, (Brabin-Smith 1996, pp.173-174) writes about a change in the military relationship with the civil community: ―… in the key technologies of communications and computing, the rate of advance is being set in the civil sphere, driven by intense commercial competition. The challenge to Defence is not just to ensure the spin-in of developments from those civil opportunities but also to keep up with the speed of advance. … Many defence organisations have recognised this as a problem … the question is what to do about it. Something of a cultural change is required to make the acquisition process in high-technology areas less ponderous and more imaginative.‖ Where the military once led the development of communications and computing technologies, the relationship has changed over the past two or three decades. For example, the Global Positioning Satellite System was developed as a military navigation system. Yet, its importance to society now generally places the military in a „special‟ customer and provider relationship with the system and with society. Another example arises in the application of technology to Information Warfare which has changed the military relationship with the security environment – this time taking on a far more strategic perspective (Warner, 1996). An important aspect of Information Warfare is how computerbased information network systems are used to project influence and how we protect our own national systems (Warner, 1996, p.109). Brabin-Smith (1996) A Systems Approach to Strategy and Execution in National Security Enterprises – 26 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment noted the high interdependency between military and civil communications developments and infrastructures, so that planning to protect the military communications capability becomes more problematic. The boundaries are less well defined. Coming from a US policy perspective, Warnerv notes (p.109): ―It is also obvious that other countries – to perhaps not as great an extent – but to a substantial extent, already depend on computer-based control systems for not only their military activity but for their economic, industrial and other activities. So developing a capability to be able to attack, to disrupt, perhaps corrupt the information process of the enemy is equally important. The techniques of doing particularly the computer attack dimension of information warfare are considered so sensitive that they just aren‘t available for public discussion.‖ The traditional organisational and structural boundaries on warfare – like those of the systems one hopes to protect – are now less clear. Knowing thy enemy as Sun Tzu proclaimed (McNeilly, 1996) can now be easier if one has a superior information capability. But this also creates the potential for greater vulnerability (Warner, 1996). It can be inferred that if one‟s own information is corrupted and that corruption is not detected – the perceived „ground truth‟ of the working information could lead to precisely the wrong decisions being made. As Builder (1996) notes, “the techniques of doing particularly the computer attack dimension are considered so sensitive that they just aren‟t available for public discussion.” Therefore, the capability for Information Warfare has the potential to change fundamentally the traditional relationship of the military to the economic and societal foundations (Builder 1996, Warner 1996) – if it has not already done so. These external drivers also have significant implications for the internal organisational planning processes. In the course of conducting this research program, the computer attack dimension of Information Warfare remained so sensitive that the details were restricted to a very close cadre of people with a strict „need-to-know‟ within the defence community and this was extended to a small subset of the planning team involved in the Defence case study presented in chapter 5. This enables the systemic implications of the effects that can be delivered with an Information Warfare capability to be understood by an inner core, yet it disadvantages the goals of extending the strategy debate to the wider defence organisation and the development of whole-of-defence concepts across A Systems Approach to Strategy and Execution in National Security Enterprises – 27 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment all capability areas. Assumptions have to be made in the process and judgements checked with subject matter experts on the integration of these capabilities. A revolution appeared to be quietly underway at the end of the 20th Century, in terms of the relationship of the military to the economy and society. “A strong and unavoidable message is that the Defence Force is facing major change.” (Babbage 2000). The world then changed at the beginning of the 21st Century. The importance of technology was not displaced. Rather the innovative use of commercially available technology was shown to serve political and ideological ends with devasting effect. After 11 September 2001, it is clear that the operating boundaries of the Australian defence organisation have changed significantly (Behm, 2006). After 11 September 2001, policy re-ascended to drive wider range of contingencies requiring more flexible and adaptable capability in Defence and national security (Behm, 2006). 2.2.4 Culture As an enterprise, Defence is a multi-cultural, pluralistic organisation embodying at least four cultures with distinct esprits de corps in the Army, Navy, Air Force and civilian components (Brenchley, 2002). Within each area, micro-cultures have developed (Hodge, 1998b). One‟s formative experience within Defence is invariably conditioned by the micro-culture in which individuals personally develop (Howard, 1973). Such conditioning has often led many studies of Defence down a reductionist path where perspectives of whole-of-Defence are more difficult to comprehend (Hodge, 1998b). Secondly, there is the difficulty for the military to “absorb, encourage, and nurture outstanding original thinkers in their midst” (Howard, 1973). The military, like other professions that are bureaucracies, “accommodate themselves only with great difficulty to outstanding original thinkers” and in this respect, Howard sees the military as “no worse than other bureaucracies” (p.4). However, he also notes that the military hierarchy is: A Systems Approach to Strategy and Execution in National Security Enterprises – 28 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment ―… exceptionally rigid, where subordination is exceptionally strict; and one where promotion depends on a great many factors other than intellectual insights and originality of concepts. Therefore the problem of encouraging and rewarding those outstanding original thinkers … presents genuine problems of a kind which laymen tend to underrate (pp. 4-5).‖ In the US, for example, Builder (1989) has explored Service culture and suggests that Service identities and behaviours are driven as much by self interest as by the national interest. And, strategy then serves to explain the resultant force structure decisions. The rich cultural dimension adds to the complexity of the organisation, to how strategy is formed and what strategy contains. 2.2.5 Time Creates a „Fog of Peace‟ Time adds further complexity to military planning. One of the leading contributors to the RMA debate, Andrew Marshall, once Director of the Office of Net Assessments and now part of a Washington „think-tank‟ – the Center for Strategic and Budgetary Assessments – notes how military revolutions are generally understood (Marshall, 1997): ―… to be changes in military technology, concepts of operation, and military organisations which, over the course of perhaps two or three decades, transform the conduct of war and make possible order-of-magnitude gains in military effectiveness. In periods of this sort, it usually is the case that not all military organisations make the same innovations and changes. Those who make the right choices, achieve a very distinct advantage over opposing forces. A look at history, in particular at the changes in warfare that took place during the course of the 20s and 30s and were then demonstrated in the early days of WWII, generally illustrates this phenomenon.‖ Marshall‟s observation goes to the heart of the problem defence strategic planners have in making the right choices in developing a military force. The effects of those decisions may not be demonstrated in operations, in some cases, for over 10 years? This is quite different to managing complexity in the non-military world where choices can be tested on the marketplace before significant investment decisions are made (Hamel, 2000). Howard (1973) speaks of the Defence functioning professionally... ―… in a sort of void. You cannot verify your calculations. You do not get as military scientists any ‗feedback‘ for your ideas about how wars should be fought and how weapons should be used; the kind of ‗feedback‘ that a natural scientist gets when he can verify his hypotheses by experiments or a businessman when he examines his annual balance sheets. … The greater the distance from the last war, the greater become the chances of error in this extrapolation. … The problems of transferring the experience of (previous) conflicts … to the kind of conflicts for which you are now A Systems Approach to Strategy and Execution in National Security Enterprises – 29 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment preparing is a very complex one indeed. For the most part you have to sail on in a fog of peace until at the last moment.‖ While von Clausewitz (1832/1984) wrote extensively about ambiguity and complexity creating a fog of war, Michael Howard appears to be the first to have spoken of a „fog of peace‟. In considering the nature of war and peace, nearly thirty years later, Howard (2001) writes: ―War, it has rightly been said, starts in the minds of men, but so does peace. For some people – perhaps for most – any order is acceptable so long as their expectations are met, and for most of human history these expectations are very basic. This majority will be little concerned about injustices to others, if indeed they ever hear about it. For them peace is what they have got and they want to preserve it. … Throughout human history mankind has been divided between those who believe that peace must be preserved and those who believe that it must be attained.‖ Howard (2001) concludes, “peace may or may not be „a modern invention‟ but it is certainly a far more complex affair than war.” So, where should one focus consideration of key issues? 2.2.6 Australia‟s Own „Fog of Peace‟ – No Structural Change since WWII Oatley (2000) opened his review of Australia‟s national security framework with the startling fact that “since World War Two, Australia has relied on the same high-level structures for its national security decision making.” At the highest level, three official bodies dominate proceedings – the National Security Committee of Cabinet, and two interdepartmental committees – the Secretaries‟ Committee on National Security and the Security Policy Coordination Group . The issue is less is that “the structure is designed principally to advise an executive embodied principally in Cabinet” (Oatley, 2000). Rather, the problem arises when ―… the main departments involved – Foreign Affairs and Trade and Defence have tended to dominate the issues related to global, regional and military affairs. Australia did not develop as did the USA in 1947, a focal body such as the National Security Advisor and the National Security Council.‖ (Oatley, 2000) While Australia made significant changes in its national security interests after 11 September 2001, prior to that time, Defence policy and Defence force structure focussed on its defence of Australia tasks. As Ablong (1997) noted: A Systems Approach to Strategy and Execution in National Security Enterprises – 30 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment While defence policy has, in the past, acknowledged the necessity for consideration of the national interest, it has not progressed this assessment beyond the strictly military defence of Australian territory, and the Regional Engagement philosophy of the 1987 Defence White Paper. Peacekeeping activities, national sovereignty protection, and other-than-war operations should now force a re-assessment of this narrow Defence interpretation of the national interest. Australia did not establish the office of National Security Advisor and make its first appointment until 2009. 2.2.7 Problem Definition in Defence With the dialogue in military development focussing on its military tasks, the nature of that dialogue is a triangulation of three elements: operational requirement, technological feasibility and financial capability (Howard, 1973). Howard (1973) sees financial limitations as “a matter of politics” (as it is in Australia where Defence funding is approved by the National Security Committee of Cabinet) and technological limitations as “questions of scientific expertise” and the flexibility of these two elements “cannot be controlled by the military” (p.5). Howard (1973) focuses squarely on the third element of the triangle – operational requirements, where the “real conceptual difficulties of military science occur… If there is not rigorous thinking at this level, neither technology nor money can help.” (Emphasis added) ―With inadequate thinking about operational requirements, the best technology and the biggest budget in the world will only produce vast quantities of obsolete equipment; bigger and better resources for the wrong war. …Ample resources can be positively bad for the military because this enables them to shelve the really vital question: what do we really need, and why? The fundamental problem may not be, how can we provide more of X; how can we stretch our resources to provide additional quantities or develop a bigger and better X with longer range and better protection or greater speed. The basic question is, why do we need X anyway? What is its function? Is that function essential? Can it be performed more cheaply and more effectively by other means? This is not the normal cast of mind of the military profession. The disciplined acceptance of traditional values and of traditional solutions is the natural product of a military environment, and the problem of combining this attitude with the scientist‘s scepticism and agnosticism lies at the root of military education and of military training at every level.‖ (Howard 1973, bold type added for emphasis) Howard (1973 p.6) best summarises the problem for planning and creating adaptive change in a military context: A Systems Approach to Strategy and Execution in National Security Enterprises – 31 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment ―… it becomes increasingly difficult as warfare becomes more complex, as the bureaucracy becomes more dense, as the problems become harder, for anybody credibly to emerge and impose his will on the debate in this basically irrational manner. Thus as military science develops, innovation tends to be more difficult rather than less.‖ Howard‟s later insights (2001) about war and peace confirm the viewpoint that preservation of the status quo would be – for the majority of men and women involved in Defence – a natural standpoint: for example, fast-jet pilots expect to fly fast jets, fleet commanders and principal warfare officers expect to command and operate surface combatants; and, today‟s cavalry expect to operate mechanised and armoured forces. This „premise of preservation‟ (Howard, 2001) impacts not only how problems are approached, but also how they are defined in the first place (Argyris 1991; Hodge, Walpole 1999). The issue comes to a head however, when ideas for change meet extant policy strictures. Unless there is a basis for considering operational requirements at a whole of force structure level, good thinking at a lower level can stall, as illustrated in the following summary of the author‟s perspectives from his experience in an Army study. 2.2.7.1 The Author‟s Perspectives on a 1998 Project The progress of the Future Soldier Combat System (Project LAND 125) slowed for the year of 1998, right after a field trial supporting the utility of several technological enhancements. The problem was not in the Project, per se, nor the experimentation supporting it. The field trial had been well planned: several workshops brought together the sponsors, the principal investigators, the planners, and the soldiers. The experimental subjects were among the best soldiers available: they had been the on-line battalion just two months previously. Through the direct engagement of the Commander 3 Brigade, they understood the importance of the work at hand and responded with full professional commitment. The soldiers‟ combat effectiveness was investigated over two weeks, enduring many experiments in the hot-dry and hot-wet environments of Far North Queensland (Defence 1998). Operations research techniques, physiological investigations and psychological profiles built a picture of the effectiveness of A Systems Approach to Strategy and Execution in National Security Enterprises – 32 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment potential technological enhancements. A novel supplementary set of four „integrated‟ experiments examined two land operations‟ activities from five different research domains concurrently and the principal co-ordinator integrated the results by employing Checkland‟s (1981) Soft Systems Methodology, appropriately adapted for the purpose (Hodge et al. 1998). The sponsors were pleased with the results and planned follow-on trials, yet the progress of the project stagnated almost immediately after such a successful trial. The source of the problem lay in the planning and programming environment external to this project and many others (McIntosh et al. 1997). Project LAND 125 was building for itself a sound basis for competing with other projects for the funds it needed. However, the strategic and capability planners had no consistent basis for determining the priority they should accord Project LAND 125 relative to other projects (McIntosh et al, 1997). The Defence Capability Plan derived as part of Defence 2000 White Paper has since become the baseline for reviewing what should be in, and what should be replaced in the plan. The problem with this baseline is that it keeps the debate about costs and solutions which instils a “piecemeal cycle of investment” (ASPI, 2007). Calls for an iterative debate to focus on the interaction between policy objectives and capabilities (Baker 2000) and operational requirements (Howard, 1973) where each iteratively shapes the other, have been long outstanding. 2.2.8 Increasing Cost Drives Lower Margins for Error in Strategic Decisions At one level, a focus on the cost of Defence capabilities is understandable because new, high-technology capabilities are increasingly expensive. Combine the trend for lower numbers of higher technology platforms manned by fewer people at higher cost per capability unit and Defence faces not only a higher demand for flexibility in how it applies the capability to meet uncertain strategic requirements, it also faces a lower margin for error in its early strategic decision-making about current and future capability. A Systems Approach to Strategy and Execution in National Security Enterprises – 33 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment Unfortunately, traditional military mindsets, necessary for command and control in warfare, have a „natural‟ bias towards preserving the status quo (Howard, 1973). Yet, “some long held capabilities can no longer be justified.” (Babbage 2000). Baker‟s (2000) prescription for capability planners is that they… ―…need to direct their attention to future possibilities, to situations beyond current warning indicators. This raises three issues, particularly for small forces. a. There is a need to avoid the temptation to have a little bit of everything, comforting to those seeking to preserve sectional interests, but risking the attainment of effective levels of deployable operational capability. b. Both short-and long-term exigencies need consideration. Short-term requirements naturally attract attention, but longer-term needs should not be neglected. Difficult choices involving both likelihood and consequences of particular contingencies are involved. c. Finally, in a highly competitive resource environment, how are resource levels beyond those required to meet evident existing commitments actually justified? Yet investment in future requirements and an appropriate internal allocation of defence resources are essential for long-term security.‖ (Baker 2000, p.15) To enable Defence to close the “gap in explanation” (Baker 2000) between strategic policy and capability decision-making, it must address these challenges head on. The content of Defence‟s strategic decision making needs to demonstrate explicitly a greater depth of understanding of the relationships between political, social, economic and environmental factors as well as technological drivers for capabilities that are able to adapt to changes. In so doing, strategists will be better able to explain the inherent flexibility of each option relative to their capacity to meet political needs not yet imagined. And, the decision-making process must adequately address the concerns raised with the „natural‟ culture of the military mind for the status quo while adapting to the emergent properties of time and their impact on the acquisition of defence capability. 2.2.9 Changes Needed to the Basic Calculus for Defence Planning Following the Defence Efficiency Review in 1996 and the Defence Reform Program (McIntosh et al, 1997) the [then newly formed] Strategic Policy and Planning Division evolved to create a strategic planning framework which, as it operated in 1998, is summarisedvi in Figure 2-1. A Systems Approach to Strategy and Execution in National Security Enterprises – 34 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment Strategic Assessment 99 Strategic Assessment 98 Australia‟s Strategic Policy 97 Conceptual Model for Strategic Planning (v3.1) Conceptual Model for Strategic Planning (v3.1) Alternate Futures Non-linear iterative processes Non-linear iterative processes Military Strategies & Strategic Doctrine Strategic Military Objectives Future Warfare Concepts Capability Delivery (CPD, Concepts, Doctrine etc) Capability Definition & Development Resources Assessment Report Resource Outlook Capability Planning Preparedness Force Structure (Analysis of Balance-of-Capability Balance- ofExpressed in DFDP) Current Force Programmed Force Future Force Options Capability Assessment Reports 0-1 years 3-7 years 15-20+ years Figure 2-1: Conceptual model for strategic planning A futures‟ framework was developed in 1998, incorporating a program of future technology studies. However, the Division‟s greatest challenge remained: how to improve the futures‟ thinking, and then make that thinking impact on decisions that shape the programmed force and the preparedness of the current force. Content and process are both just as important to formalised decision making in public sector organisations (Bryson 1988) as they are in business (van der Heijden 1996, Mintzberg 1998). The Department of Defence internal process of strategic decision-making is also highly formalised, as suggested by how it is charted in Figure 2-1. Defence considers and manages capability in two planning domains: (1) in terms of what investments are needed in future capability, and (2) in what level of preparedness is required of the current capability (in terms of its readiness and sustainability) for it to respond to crises and events as they arise. Whole of Defence capability is then presented as a linear additive function where capability „equals‟ force structure plus preparedness (ANAO 1996). Defence A Systems Approach to Strategy and Execution in National Security Enterprises – 35 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment organises and manages itself to plan, develop and deliver current and future capabilities along these two, largely separate, strands of planning and enquiry. The principal point at which these two strands intersect in the bureaucracy is at the Defence Capability Committee. The simplicity of this doctrine and its parallel organisation (as it was in 2000) belies the complexity of raising, training, sustaining and operating the current force and developing the future force. A decision about either force impacts the shape of the other. Clearly, with finite public resources allocated to Defence, the trade-offs in the decision-making process have to understand implications for the current and the future force. However, the separation of current and future issues into different organisational structures and processes make it difficult to provide the integrated analysis needed to support whole-of-Defence decisionmaking. In 1999, Defence needed a new calculus that would integrate decision making about current and future capabilities within a whole-of-Defence enterprise. Implicit in this is a need for a process that better supports strategic decision-making that considers the implications for the current and future force structures operating in a dynamic strategic environment. Recognising that practice will not necessarily follow process as a formalised process gives way to “ignorance-based” or “one-reason” methods and other heuristic methods (Gigerenzer and Todd , 1999). However, with an integrated framework in place that allows for – or even, depends on heuristics - Defence will avert creating “a gap in explanation” (Baker, 2000) between strategic policy assessments and force structure decisions. Closing the “gap in explanation” (Baker 2000) is the essence of the problem facing Defence strategic decision making and is the initial driver for this thesis. The fundamental problem appears not one of comparative or competitive capabilities. The real question for Defence is whether a capability is required at all (after Howard, 1973). Answers to this question will contribute to closing the gap between strategic policy assessments and capability decision-making. The final challenge is the strategic leadership in Defence to drive the change. A Systems Approach to Strategy and Execution in National Security Enterprises – 36 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment 2.2.10 Final Challenge: Coping with Rapid Changes in Strategic Leadership Hamel and Prahalad make a keen observation (Hamel 1994) from their business research that has parallels within the Australian Defence Organisation: ―… What most often prompts a change in strategy in a large company is not a new competitor, new technology, or regulatory upheaval. What most often prompts change is a new executive in a corner office. It is all too easy for a succession of short-tenure executives to jerk the corporate tiller one way and then the other, confusing employees about corporate direction and slowing forward progress. We know of no company that has achieved a ten- or fifteen-year strategic intent with a succession of two-year executives in key jobs. … A revolving door in the executive suite frustrates the steady accumulation of insights about just where the future lies.‖ Defence operates with two and three year posting cycles for its senior military officers, and three or five year contracts for its civilian equivalents. The author posits that there is a stronger need in Defence for retention of senior executives in key planning positions5. If it does not attend to this matter is a serious way, Defence will not steadily accumulate the insights it needs to define its future and to continually improve its strategy and execution processes. It can ill afford to increase the inherent risk brought on by leadership changes where there is already a reduced margin for error and an increased need for flexibility in strategic decision making. 2.3 Strategy Making Theory and Practice beyond Australia As part of the research process, the author travelled overseas in October and November 2000 to investigate how a select number of Defence Departments, global commercial firms and academics were addressing strategic planning and decision-making. Early research, design and development of a proposed new approach to strategic planning had been developed and opportunities were taken during the visit to discuss this approach with senior executives and obtain their feedback. In summary, the author found no evidence of other Defence organisations taking a similar approach or indeed any other organisations in our sample of industry and academia. The UK Ministry of Defence (MOD) appeared closest to the During his four-year attachment as Scientific Adviser, Strategic Policy and Planning the author reported to five different executives heading the strategic policy and planning organisation (3 two-star officers and 2 civilian). 5 A Systems Approach to Strategy and Execution in National Security Enterprises – 37 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment thinking developed in this thesis. At the time, they were beginning to apply a systems engineering approach at a level of complexity addressing capability domains, by each their Directors of Equipment Capability (one Director for each of the fifteen capability domains). At the strategic level, they – like Sweden and Canada – were in a process of change to “take small steps more frequently, rather than monolithic change occasionally” (Hodge 2000). The UK MOD had engaged one of the top-five global strategy consulting firms to assist them, however, they had brought the consultancy to a halt due to the difficulties being encountered by the firm in adjusting their methods and understanding to the Defence context. The UKMOD recognised the need for a high-level „Balance of Investment‟ analysis process and, at the time, were still to design their approachvii. Integrated approaches to strategic planning were also of interest to Shell‟s global headquarters in London. At the time, they referenced the Executive Inquiry by the Corporate Strategy Board (1999) on forging a direct link between scenario planning and strategic decision making, suggesting the benchmark was then set by Daimler Chrysler Aerospace. This work of the Corporate Strategy Board sufficiently indicated the Australian Department of Defence was developing the necessary components of an integrated system for strategy and execution however, it offered no insight into how the essential planning components could integrate into a coherent strategic planning and operational system. In the US, the first Quadrennial Defense Review (QDR) had taken place in 1997 and preparations were underway for the second QDR in 2001. The QDR had been mandated by Congress to “address the perceived mismatch between the stated defense strategy and resources that were being made available to implement it” (Zakheim, 2004). In 2001, Secretary Rumsfeld used the QDR as “a vehicle of outlining his vision for transforming how Defense would conduct operations.” (Zakheim, 2004). To support the QDR process, much analysis for force structure studies was done quantitatively involving large models of up to A Systems Approach to Strategy and Execution in National Security Enterprises – 38 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment 10,000 inputs. Anecdotal claims suggested this approach had given rise to Defense IADD – Institutional Attention Deficit Disorder (Roske, 2000). Senior researchers at Science Applications International Corporation (SAIC) and the National Defence University in Washington D.C. were showing great interest in the application of systems thinking to the problem. They perceived increasing benefits to organisational learning through improving knowledge elicitation and collection, knowledge management, and analysis and synthesis to aid strategic decision-making. They suggested that the value of the research would be enhanced if the Australian Department of Defence were to advance the use of web-based technology and share its store of strategic knowledge as it grows. As evidenced at SAIC (where their knowledge management system included a “yellow pages” to connect people) technology can provide a significant aid to improve collaborative strategy development and capability prioritisation. At the London Business School, the author collected an autographed copy of Leading the Revolution (Hamel, 2000). This provided hope and encouragement that the inclusive processes and intended outputs might be appropriate to improve strategic decision making in complex and dynamic defence environments. Above all else, Hamel‟s message is clear: each organisation needs to develop its own view of the future. The content has to belong to the organisation (Hamel 2000), and the process has to be compatible with the prevailing culture (Checkland 1981). The member nations of the Technical Cooperation Program (Australia, Canada, New Zealand, UK and US) have since established a cooperative program on capability-based planning. Meeting in Australia in November 2002, the panel recognised there are substantial challenges in capability planning and the nations exchanged views on planning processes, tools and techniques (Cook 2003). In summary, the problems faced by Australia in developing an integrated planning framework were common. In response, best practices involve scenario planning and learning approaches supported by systems for information sharing. Systems based approaches are now being explored by different defence, A Systems Approach to Strategy and Execution in National Security Enterprises – 39 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment academic and commercial organisations following the failure of approaches that were heavy with calculation or adaptations of the prevailing strategy practices of global consulting firms. After considering the evaluation of the information gathered during this valuable study trip, the search for an integrated planning framework returned to the literature for further clues on the way forward. 2.3.1 Closing Remarks The leadership in Defence faces an evolving set of strategic challenges in marrying strategy content and strategy process. Babbage (2000) reinforced Howard‟s (1973) viewpoint about the need to focus on operational requirements, putting the issue more specifically in the Australian context: ―Defence needs to become much more practiced at analysing and comparing total defence systems, not just elements of capability, and it needs to strengthen the skills and methodologies required.‖ (Babbage, 2000) Allison and Cook (1998) considered issues impacting Defence planning and, with a view to driving changes in military capability development, they propose a comprehensive systems methodology is needed to cover the range of systems activities to be undertaken by Defence. The most crucial of these is a framework for strategic planning that can be coupled to capability development that is designed to cost (Cook and Allison, 1998). Their initial work stimulated the author to consider integrating a systems approach to the strategy framework in the evolution of Defence strategy and execution processes. In developing a thesis for improving strategy and execution, the issues addressed in chapter 2 remain important in their context and prospective impact, where Defence enterprises generally:  comprise large complex organisations with diverse sub-cultures that have a „natural‟ bias for the status quo (Howard, 1973).  undergoing a quiet revolution in the definition of their role in society, and have higher demand for flexibility to meet uncertain strategic requirements, yet they face a lower margin for error in their early strategic decision-making.  A Systems Approach to Strategy and Execution in National Security Enterprises – 40 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment The discussion in chapter 3 now turns to the strategy literature to assess the value of business practices for the Defence context. And, then, chapter 4 examines the systems literature with a view to developing an integrated strategy and execution framework appropriate to national security organisations operating in a complex and dynamic strategic environment. A Systems Approach to Strategy and Execution in National Security Enterprises – 41 – Chapter 2: Initial Context of the Research Problem – The Australian Defence Planning Environment A Systems Approach to Strategy and Execution in National Security Enterprises – 42 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework 3 Literature Review 1: Towards an Integrated Strategy Framework Abstract: Where chapter 2 illustrates the remarkable challenges for strategy and execution in a defence environment, this chapter builds a concept for an integrated strategy framework upon foundations laid in the management literature. The non-defence strategy and management literature finds the need for an integrative framework is well documented, yet a solution remains elusive. Some relevant advances towards an integrative framework are drawn from literature on highperforming firms and from the findings from an ongoing study into CEO tenure. These suggest further keys to success lie in managing the complexity involved in driving longer term strategy direction early in the tenure of a new CEO (Lucier et al, 2002) while maintaining earnings per share. Elements of the complexity literature are discussed to draw three insights for strategy making: 1) a component of the strategy and execution processes should be designed to analyse and control the whole process and its products in order to manage complexity in both; 2) strategy making by exclusive groups or committees in an un-orchestrated debate is likely to produce bad outcomes; and, 3) designing the strategy process with tension among three domains of strategy making will engender more flexible thought and action. Drawing on the works of two authors who have presented the strategy field in terms of frameworks of three domains (Chaffee 1985, Van der Heijden 1996), an approach to the design an integrated strategy framework is then constructed with a view to addressing the insights from the complexity literature. This conceptual design is then considered against insights from the cognitive systems engineering literature to support a the conceptual design that enables cognitive control to be exercised during the design, execution and evolution of an integrated strategy framework. As strategy and execution is a constantly moving domain in a social system, chapter 3 closes with a summary of the outstanding conceptual design issues. These form the basis for further review of the literature on systems science and engineering, organisational learning and change, and knowledge management in chapter 4 – the aim of which is to close-out the conceptual design of an integrated strategy framework and set the foundation for the case studies that then follow. A Systems Approach to Strategy and Execution in National Security Enterprises – 43 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework 3.1 Modes of Strategy Making From Sun Tzu to the present day, strategy making has addressed many contexts from warfare to personal well-being. Many reviews of the tools, processes and techniques abound in the literature, which are not repeated here because it is to no avail in the search for an integrative framework for strategy making. It is clear that many are searching and yet few answers can be found. Mintzberg, Ahlstrand and Lampel (1998) present their analysis of the strategy field (based on over 2,000 items they have reviewed between them) through categorising approaches into ten schools of thought. Mintzberg et al structured their book Strategy Safari (1998) as a deliberate juxtaposition of viewpoints, to illustrate one of the “greatest failings of strategic management” that occurs when managers take one point of view too seriously; often changing with the fashion from planning to calculation, to learning (1998:368). The ten schools are summarised in Table 3-1. Table 3-1: Schools of strategy making (after Mintzberg et al 1998) Strategy Group / Schools Prescriptive Group Design Planning Positioning Descriptive Group Entrepreneurial Cognitive Learning Power Cultural Environmental Configuration Configuration Focus Prescribing how strategies should be formulated Strategy making as process of conception Strategy making as a formal process Strategy making as an analytical process Describing how strategies are made Strategy making as a visionary process Strategy making as a mental process Strategy making as an emergent process Strategy making as a process of negotiation Strategy making as a collective process Strategy making as a reactive process Integrating other schools of thought: process and content, organisational structures and contexts Strategy making as a process of transformation A Systems Approach to Strategy and Execution in National Security Enterprises – 44 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework More than an historical record of the field, Mintzberg et al offer the book ”as a whole” for readers to pick, choose and combine the works of many eminent strategists as “building blocks, or, better still … the ingredients of a stew.” The choice of metaphors is interesting. “Building blocks” connote the strategist as an architect; while, “the ingredients of a stew” connote the strategist as a chef. Each metaphor works to the point that both of these professions operates with an understanding of the systemic interactions of the elements of their stock in trade and they frequently experiment to synthesise new products. In the case of strategy making, Mintzberg et al conclude that ―Every strategy process has to combine various aspects of different schools. Can anyone possibly imagine strategy making in any serious organization without the mental and social aspects, without the demands of the environment, the energy of leadership, and the forces of organization, without trade-offs between the incremental and the revolutionary? And can any strategy process be realistically pursued as purely deliberate or purely emergent? To deny learning is as silly as to deny control.‖ (Mintzberg et al, 1998: 367) The comprehensibility of the thinking presented within the ten schools is, therefore, quickly confounded in the practice of combining elements from across the different approaches. The strategy „elephant‟ that Mintzberg et al describe through the lenses of their ten schools, becomes a mammoth – a „hairy‟ menu of combinations of the ten schools for the strategy maker to consider. To return to Mintzberg‟s metaphor, architects and chefs might argue a comparable array of complexity given the choice of elements and ingredients available to them. But the metaphor breaks down at this point because both of these professions have codified certain laws, processes and heuristics in a deep literature to guide their practitioners towards achieving a desired synthesis. The schools of strategy are yet to take that step. While they appear extremely rich in techniques for analysis, the strategy schools do not appear to be so rich in helping their practitioners achieve synthesis by codifying the methods and the results of past syntheses for other strategists to learn by. In an earlier work, Mintzberg (1987) likens strategy making to a crafting process that evokes A Systems Approach to Strategy and Execution in National Security Enterprises – 45 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework ―not so much thinking and reason as involvement, a feeling of intimacy and harmony with the materials at hand, developed through long experience and commitment. Formulation and implementation merge into a fluid process of learning through which creative strategies evolve.‖ (p66) In Strategy Safari, Mintzberg et al (1998) demonstrate their intimacy and mastery of understanding of the materials at hand in strategy making. Strategy Safari is an analysis and critique of a vast field of strategic management literature that ultimately leaves the synthesis to the reader. The „fluid process‟ of merging strategy formulation and implementation harkened to eleven years earlier – detecting discontinuity, knowing the business, managing patterns, and reconciling change and continuity – is enlightened only in the strategy approaches that support the development of the parts, not the crafting of a comprehensive whole. In view of the range of possible combinations and the complexity of choices facing strategy makers, Mintzberg et al (1998) have, perhaps understandably, taken a rational position in providing a useful classification of different approaches. The strategy practitioner is left more enlightened for understanding their analysis of the field, while also being left to continue the search for practical guidance on how to design (i.e. synthesise) and integrate strategy and management processes appropriate for their problem and context. In the remaining sections of this chapter, the review of the literature constructs a framework of ideas as a theory to support the experimentation and practice described in chapter 5, and being undertaken as a parallel research task. 3.2 First Principles Approach At the outset, it is prudent to note an important distinction in the use of the term synthesis, as opposed to analysis, that is not always made clear. The distinction is critical to ensuring its full and proper use in strategy formation. For example, the Australian Oxford Dictionary (Oxford 1999) defines analysis as “a detailed examination of the elements or structure of a substance etc. … [and]… the act or process of breaking something down into its constituent parts.” Synthesis, on the other hand, is defined as “the process or result of building up separate elements, A Systems Approach to Strategy and Execution in National Security Enterprises – 46 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework esp. ideas, into a connected whole, esp. into a theory or a system” (Oxford 1999). In this case, analysis and synthesis appear as direct opposites as one (analysis) disconnects the parts of a whole and the other (synthesis) reconnects them. Similar threads of meanings also appear in Webster‟s Dictionary (1989). Based on these words alone, an entirely mechanistic view of synthesis could reasonably be taken: if you understand how to break things down, you will learn how to put them back together. This would be incorrect, as Mintzberg (1994) criticised the planning school (with its emphasis on formal process and rationality) for its “implicit assumption … that analysis will produce synthesis”. Ackoff (1999:11) offers a useful comparison of analysis and synthesis in an organisational context as processes of three steps, summarised in Table 3-2. Table 3-2: Analysis and synthesis (after Ackoff 1999) Analysis Step 1 Step 2 Step 3 The entity to be understood is taken apart Understand the behaviour of each part of the entity taken separately Aggregate the knowledge of the parts of the system in an effort to explain the behaviour or properties of the whole. Knowledge of entity structure, how it works and delivers its outputs Analysis provides knowledge to make an entity work efficiently and to repair elements of it as they stop working Synthesis Identify one or more larger systems of which the entity of interest is a part Understand the function of the larger system(s) of which the entity is a part. Disaggregate the larger containing system to identify and understand the role or function of the entity and the nature of its interfaces with the larger system Design of entity behaviour and outcomes in the larger system(s) it is part of Synthesis provides systemic understanding of the entity behaviour for it to work effectively as a whole in a greater system. Focus Benefit The distinction that Ackoff makes between analysis and synthesis is insightful when considered in the context of strategy formation. The separation of viewpoints between analysis and synthesis align like the two hemispheres of a human brain – the left for analysis, the right for creation. And, there is an implicit connection of the two cognitive processes to a „cognitive whole‟ where analysis, Ackoff (1999: 12) suggests, produces knowledge and know-how to make a system A Systems Approach to Strategy and Execution in National Security Enterprises – 47 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework perform efficiently but, to understand the behaviour of an organisation, one needs to understand its role within a larger system that it is a part of and design its functions and behaviours appropriately. Synthesis is therefore about design for effectiveness (Blanchard & Fabrycky, 1998) based on an understanding of the relationships among the various elements of the larger system (Ackoff, 1999). Hart (1992) argues: “over the past three decades, authors have developed scores of different strategy making typologies… [that have] covered such a wide range of considerations that little cumulative knowledge has resulted. A conceptualization that is capable of providing a framework for ongoing research is lacking.” (p327). With little changing in the following decade, a deep fibrous and fluid connection (Mintzberg 1998, Demos 2001) between the two cognitive functions of analysis and synthesis is yet to be defined in the strategy literature. By extension of Ackoff‟s metaphor, then, the strategy field lacks an equivalent of a „corpus callosum‟ connecting the two hemispheres of the brain. The art and science of the strategy field continues to evolve, while the expertise needed to connect them appears missing from the literature. 3.2.1 Analysis and Synthesis as Drivers for High Performance The lack of an integrated framework for strategy process may have a deeper cause, presenting difficult challenges for all public and private organisations. A joint research project by the World Economic Forum (WEF) and Booz Allen Hamilton into how senior leaders of successful companies develop a culture of leadership deep in their organizations indicates alignment and adaptability are required to deliver high performance (WEF 2000). Yet these forces act orthogonally as the research shows (WEF 2000):  Alignment in individual and organizational behaviour ensues when “there is a high degree of consistency and coherence among an organization‟s strategy, systems, processes, communications, and other key cultural attributes.” A Systems Approach to Strategy and Execution in National Security Enterprises – 48 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework  Adaptability comprises the ability to “detect and cope successfully with changes in the external environment, especially when such changes are difficult to anticipate.”  Alignment without adaptability yields a bureaucratic organization that “can‟t get out of its way” and adaptability without alignment results in chaos and “resources wasted on duplicate and conflicting efforts.”  To achieve alignment and adaptability at the same time, enabling systems must encourage managers to question underlying assumptions, experiment, and actively manage risk rather than avoid it.  Alignment and adaptability are “difficult to achieve simultaneously, but are not mutually exclusive … [and adaptability] seems to be harder to develop than alignment. Creating the capacity to change is important, but creating the capacity to change quickly is critical in today’s business environment”.  One way to combine these two organisational attributes is by aligning around adaptability. This is an important finding from WEF (2000) that will be brought into more practical perspective in the review of systems literature in chapter 4, and again in the case study in chapter 5. The need for greater flexibility has been recognised for over twenty years: ―we need flexible organizations with flexible production systems that are able to adapt quickly to new and highly changing markets … the problem is we‘re trying to produce hi-tech products with lo-tech organizations designed, managed and run by lo-tech minds‖ (Mitroff, 1985) And the reason for apparently little change in the state of the art and science between Mitroff‟s work and the World Economic Forum study is forecast in Mitroff‟s paper in quoting Reich (1983): ―Collaborative and innovative problem-solving skills simply can not easily be learned in a routine and tightly controlled environment. People cannot be trained to participate in flexible system enterprises when their daily lives are dominated by high-volume, standardized institutions.‖ (as quoted in Mitroff, 1985) A Systems Approach to Strategy and Execution in National Security Enterprises – 49 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework Not surprisingly, with the fall of the Berlin Wall in 1989 the West and its capitalist ways had achieved its objective in breaking a totalitarian state and the growth of a new economy was well underway, yet: ―… many of those who gloated over the collapse failed to notice that in one significant respect, Soviet behavior not only had survived but was alive and well in their own backyard. The point is that, managerially, much of the West runs its corporations like the Soviets ran their economy. … The United States and other Western economies continue to provide a safe haven for the command-and-control approach that marked Soviet economic management, not at the macroeconomic level but in their management style.‖ (Davis and Meyer 1998:113) There appear at least two reasons for the dominance of alignment and analysis over adaptability and synthesis that occurs both in the literature and in practice – the 300 year legacy of reductionist thinking; and, the relationship between shareholder value and CEO tenure which drives leadership behaviour. Descartes‟ legacy of reductionism has taken root in science and western society such that analysis is deeply embedded in its education, its mechanistic modes of thinking and its institutions (Checkland, 1981). Our education system delivers people skilled more in analysis than synthesis: the field of strategic management is not the least of them, as we have witnessed in Strategy Safari (1998). Western societies have built their institutions and social structures based on reductionist learning. Interestingly, a key question is raised in the middle of the analysis of the Cognitive School: “have we focussed too much of our research and technique of strategic management on the wrong side of the brain?” (Mintzberg et al, 1998). While the implicit answer is „yes‟ (supported also by Mintzberg‟s 1987 treatise Crafting Strategy), unfortunately, the ever-practical authors of Strategy Safari choose to leave that question for others to answer, preferring instead to conclude: ―Overall, we have a long way to go in understanding the critical mental processes of strategy making as concept attainment. Hence we must conclude that the cognitive school, while potentially the most important of the ten, practically now may well be the least.‖ (Mintzberg et al, 1998: 164) (Italics and underline added) The second factor that reinforces a primacy of analysis over synthesis is that business analysts and journalists love clarity, particularly creating clarity (or the perception of it) in the issues and numbers that drive shareholder value (Manning 2003). Consequently, if CEOs are to retain their jobs, they must A Systems Approach to Strategy and Execution in National Security Enterprises – 50 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework provide an acceptable shareholder return and the analytical clarity that success entails (Lucier et al, 2002). Lucier‟s study (2002) of the top 2,500 publicly-traded corporations (as at 1 January 2001) concludes: ―…[There has been a] transformation in the CEO‘s world [that] has profound consequences for everyone in and around business… The long-term trend towards greater accountability and higher CEO turnover will continue… CEO turnover is the bridge linking behaviour of the management team, the actions of employees and returns to shareholders‖. Thus, clarity in analysis will continue to be a cornerstone of strategy making in practical terms. But importantly, Lucier‟s findings (2002) also give cause for more work on synthesis: ―…[The study] suggest[s] several behavioural shifts that can help CEOs survive – for example, by focussing less on extraordinary gains in shareholder value during their first two years in office and more on organizational and strategic reforms that aim at growth that is both strong and steady.‖ (Italics and underline added) These findings suggest a focus on synthesis must deliver growth outcomes in a timely manner for them to be effective within the first two years of a CEO‟s tenure. This message is consistent with Hamel & Prahalad‟s (1994) claim that, “We‟ve reached the limits of incrementalism” and while promoting attention of senior management to improving the numerator over denominator management, they concluded: ―The capacity for resource leverage is the ultimate selection mechanism, sorting out the victors from the victims in prolonged battles for industry leadership. It‘s not enough to get to the future first, one must also get there for less.‖ (Hamel, 1994:174) As CEOs of public and private organisations focus on greater strategic effectiveness and organisational efficiencies, they will need to apply equal attention to both analysis and synthesis (using Ackoff‟s 1999 definitions) in their reforms. And so the challenge mounts in the search to guide the design of a strategy making process that is a fluid process, linking strategy formulation with implementation, and combining clear analysis (for survival) with novel syntheses (for steady and strong growth), and a process that is practical and timely. CEO survival depends on it (Lucier et al, 2001). As a consequence, CEO survival is also dependent on an ability to manage complexity in the strategy formation and implementation processes that drive organisational behaviours and actions. A Systems Approach to Strategy and Execution in National Security Enterprises – 51 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework To make an organisation more effective, as a whole within a greater system (e.g. an industry), strategists need a point of view about where opportunities lie within that industry (Hamel & Prahalad, 1994). Achieving these improvements in effectiveness is harder than making an organisation more efficient (Hamel & Prahalad, 1994). 3.2.2 Design for Greater Accountability in the New Economy In less than two decades, information technology has transcended socio-economic boundaries as the poor gain equal access to mobile communications and the internet in all but the most regulated places on earth. Consequently, all organisations have the potential for global reach and need to understand, and adapt their approach to, three driving forces in the new economy: Speed, the growth of Intangible value and Connectivity (Davis and Meyer 1998). The strategic responses an organisation makes in the face of these combined forces will be dominated by how it creates new knowledge – that ability will be the principal underlying determinant of whether or not an organisation continues to grow or survive (Drucker, 1995)viii. A complex organisation “runs a mini-economy with thousands of continually changing variables. It needs to be every bit as adaptable as the economy in which it participates.” (Davis, 1998:114) As thousands of variables change, new knowledge is constantly generated, some of which may be captured in enabling systems. The risk is that new knowledge is not evaluated and aggregated to mitigate the business risks. Effective risk management systems are a key explainer of adaptability (WEF 2000): ―…with a robust system of risk management corporate executives in highly decentralized organizations can assess the aggregate impact that a broad constellation of independent decisions (made outside the corporate center) are likely to have on the company‘s overall performance.‖ Should organisations allow a traditional „command and control‟ approach to dominate their planning and management they will establish alignment yet will risk failure in achieving the adaptability needed to survive (WEF 2000). Successful mitigation of this risk appears to align with increased accountabilities A Systems Approach to Strategy and Execution in National Security Enterprises – 52 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework for strategy formation and execution. In traditional, well-aligned organisations, CEOs are accountable over time for setting the strategic priorities for their organisations and then executing initiatives to achieve their strategy and profit projections. In the new economy, the factors of speed, intangible value and connectivity suggest that CEOs must also be accountable at any point in time for stating with a measure of certainty what their strategic priorities are and why. This calls for new knowledge to be dynamically formed. Using a mathematical analogy, the strategy and execution processes must be capable of giving CEOs knowledge of the first derivative of strategy (the maximum return over time) and the second derivative to guide decision making at any point in time on whether their many initiatives are excelling (local maxima) or providing diminishing returns (local minima) to the organisation as a whole. This places high demands on the strategy and execution capabilities to change the way they support CEOs, owners, boards or Government with information about priorities that establish the momentum of change in the organisation (Ijiri, 1989, as quoted in Davis and Meyer 1998, p.188). Creating and managing knowledge, per se, may not be enough to do this. As Rechtin points out, knowledge is very difficult to contain or own indefinitely (even when it is the most secret and secured) and, unless refreshed and updated, it loses its value relatively quickly (Rechtin, 2000, p.34). Consequently, Rechtin suggests (p.34) modifying Drucker‟s conclusion to say: ―… wealth is no longer best defined as ownership of land, goods, capital or labor. It is new knowledge and knowing how to use it‖ [emphasis added]. An integrated strategy framework must therefore develop and maintain new processes for creating and managing new knowledge on a sustainable basis. By advancing and improving such concepts, complex organisations will learn to think in real time and be recognised by their owners and customers for it. The challenge for the designer of the strategy processes is to integrate analysis and synthesis consistently and coherently. There is high cognitive complexity to be A Systems Approach to Strategy and Execution in National Security Enterprises – 53 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework managed in designing the strategy process and then in applying and adapting the process to address a high level of situational complexity facing their organisation. 3.3 Managing Complexity with Multiple Strategy Modes Recognising the complexity of strategy making, Mintzberg et al (1998) conclude that the field of strategic management needs “good practice, not neat theory”, …[and] more importantly, we have to get beyond the narrowness of each school: we need to know how the beast called strategy formation, which combines all of these schools and more, really lives its life. We need to ask better questions and generate fewer hypotheses – to allow ourselves to be pulled by the concerns out there rather than the being pushed by the concepts in here. And we need to be more comprehensive – to concern ourselves with process and content, statics and dynamics, constraint and inspiration, the cognitive and the collective, the planned and the learned, the economic and the political. In other words, in addition to probing its parts, we must give more attention to the whole beast of strategy formation. We shall never find it, never really see it all. But we can certainly see it better.‖ (Mintzberg et al, 1998: 373) With this call to arms, it is surprising that the works of Hart (1992) and then Hart and Banbury (1994) were excluded from reference in Strategy Safari. These contributions advanced the thinking across the complicated strategy field by introducing an integrative framework based on five modes of strategy-making processes: command, symbolic, rationale, transactive and generative (Hart, 1992). The theory is far from esoteric. Each descriptor directly relates the five modes of strategy making with an understanding of the roles of top managers and organisational members operating in each mode, suggesting the practical levers available to top managers, as summarised in Table 3-3 and Table 3-4. Table 3-3: An integrative framework for strategy-making processes (Hart, 1992) Descriptors Style Command (Imperial) Strategy driven by leader or small group Symbolic (Cultural) Strategy driven by mission and a vision of the future (Coach) Motivate and inspire (Player) Respond to challenge Rational (Analytical) Strategy driven by formal structure and planning systems (Boss) Evaluate and control (Subordinate) Follow the system Transactive (Procedural) Strategy driven by internal process and mutual adjustment (Facilitator) Empower and enable (Participant) Learn and improve Generative (Organic) Strategy driven by initiative of organisational actors (Sponsor) Endorse and support (Entrepreneur) Experiment and take risks Role of Top Management (Commander) Provide direction (Soldier) Obey orders Role of Organisational Members A Systems Approach to Strategy and Execution in National Security Enterprises – 54 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework Table 3-4: Strategy-making mode and the organisational “levers” of top management Levers Mission Vision Goals Strategy Structure Systems Processes People Command Symbolic Rational Transactive Generative * * * * * * * * * * * ** ** ** * * * ** ** * * * ** ** * * * Primary focus ** Secondary focus The relationship between Hart‟s theory and business practice was shown to be substantive when Hart and Banbury‟s research (1994) yielded two key insights into the value of this integrative framework. First, the more firms developed capability in multiple modes of strategy making, the higher their performance – the best-performing firms held capability in all five modes of strategy-making processes. Secondly, a high level of capability in strategy-making processes was found to be robust, facilitating “superior [firm] performance in a wide variety of settings and situations” (p265), which “appears to make the most difference for larger firms operating in turbulent environments” (p266). When Hart and Banbury (1994) report that “these firms were simultaneously planful and incremental, directive and participative, controlling and empowering, visionary and detailed” (p265), it suggests that there are firms who are giving more attention to “the whole beast of strategy formation” and, while we don‟t know if they „see it all‟, the evidence suggests they certainly „see it better‟ relative to firms with lesser capability maturity in strategy making processes. The wraps around Mintzberg‟s claim that “we shall never find it ” (the whole best of strategy formation) appear to have been loosened somewhat: the cognitive complexity of integrating multiple strategy modes appears to be managed by some firms to the extent that they are addressing situational complexity across A Systems Approach to Strategy and Execution in National Security Enterprises – 55 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework their enterprises and delivering higher levels of performance. Therefore the question arises, what is the key to managing the cognitive complexity in developing a process of strategy making appropriate to the situational complexity and performance challenges facing an enterprise? 3.3.1 Complexity Laws Applicable in Organisations Whereas Hart addressed five practical modes of strategy making, combinations of the five modes would stress the conceptual limits of the human mind to process information adequately (Miller 1956, Simon 1974). Worse still if one were endeavouring to examine combinations of approaches from the ten schools of Mintzberg et al. The cognitive ability to manage complexity in either framework is therefore compromised (Warfield, 1999). There are at least three popular schools of thought on how to model and manage complexity: systems dynamics associated with Jay Forrester and his colleagues at the Massachusetts Institute of Technology and later in application to the practice of learning organisations (Senge, 1990), chaos theory that enables distinctions to be made between random behaviour, „noise‟ and chaotic behaviour that is deterministic and patterned (Gleick 1987, Capra 1996), and complex adaptive systems theory emanating from the Santa Fe Instituteix. Warfield is critical that these schools “view complexity as an aspect of the systems which they explore” and that they “actively promote models that essentially shut out the human being as an active component of the system”. He subsequently developed the Structure-based school (Warfield, 1999)x, which “proceeds from the assumption that it is the organization of complexity that must be the foundational way to start to resolve it” (p6) (emphasis added). That is to say, deal first with the cognitive complexity of the problem that arises from the limited information processing capacity of people; then, begin to address the situational complexity of the problem being addressed (Jackson, 2000). Warfield developed 20 Laws of Complexity, a Taxonomy of the Laws of Complexity, and five Indexes of Complexity (the „LTI‟ set) as a foundational A Systems Approach to Strategy and Execution in National Security Enterprises – 56 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework element of the Structure-based school aimed at resolving complexity in organisations (Warfield, 1999). For the purposes of this discussion on the management of cognitive complexity in the synthesis of strategy making processes, two Laws from the LTI set are considered: the Law of Triadic Compatibility and the Law of Requisite Parsimony – summarised in Table 3-5, below. Table 3-5: Two laws of complexity applicable to design processes in organisations (based on Warfield, 1999) Title Law of Triadic Compatibility Statement of Law The human mind is compatible with the demand to explore interactions among a set of three elements, because it can recall and operate with seven concepts, these being the three elements and their four combinations; but compatibility cannot be presumed for a set that both has four members and for which those members interact. Positive construction IF the individual can manage to keep the numbers down, success in reasoning is a likely outcome. Negative construction Attempts to work simultaneously with more than the specified number of elements and their interactions are very likely to fail. Thus avoid exceeding the threshold of mental effectiveness IF the individual can operate within the prescriptions of the Law, the flow of information to the designer(s) will have been regulated in the design process and will enable them to interpret information in terms of the interactions and help to ensure the information is remembered. Attempts to allow the flow of information to the designer to exceed processing capacity the resultant design will embody outcomes that are beyond the control of the designer. IF the Law of Requisite Parsimony were unknowingly violated, one would expect the impact to be revealed in the failure of large system designs. Law of Requisite Parsimony (Based on the dynamics of interpreting the Law of Triadic Compatibility) Every individual‘s short-term brain activity lends itself to dealing simultaneously with approximately seven items. Attempts to go beyond this scope of reasoning are met with physiological and psychological Limits that preclude sound reasoning. For a given designer, there is some number Kd that is characteristic of that designer which is typically chosen from the set [5, 6, 7, 8, 9] that represents the Limit of that designer‘s shortterm idea-processing capability. If a design methodology requires a designer to cope intellectually at any one time with some number Kc, then (1) if Kc < Kd, the designer is underburdened, being influenced by the Law of Requisite Parsimony, through regulation of the rate of flow of information to the designer as the designer engages in the design process. (2) if Kc = Kd, the designer is operating at the limit of reasoning capability (3) if Kc > Kd, the designer is overburdened and no reliance can be placed on the designer‘s decisions By constructing the Laws with positive and negative interpretations, Warfield clarifies the potential benefits of the Laws and the potential impact of not controlling the conditions under which the Law can operate. Consequently, those observing the Laws will better understand where failure to manage cognitive A Systems Approach to Strategy and Execution in National Security Enterprises – 57 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework complexity in their constructed intervention is likely (Warfield, 1999). By deduction therefore, failure to manage cognitive complexity will make attempts to manage situational complexity in strategy formation more likely to fail. This realisation challenges Mintzberg‟s assertion that the cognitive school of strategy is “potentially the most important … [yet] practically now may well be the least” (Mintzberg et al, 1998: 164). In fact, the science of cognition and its application to manage cognitive complexity becomes the sina qua non in strategy theory when designing practical strategy processes. Failure to manage cognitive complexity in the design of strategy processes will make the resultant designs more likely to fail. Three points around Warfield‟s interpretation of these Laws are insightful when considered in the context of strategy making: Interpretation of the Law (Warfield, 1999): ―The limitation [of the human mind] should also persuade individuals that intuitive decision making, carried out without careful analysis, is likely to produce bad decisions and bad outcomes when complexity is present.‖ Insight for Strategy Making: There is benefit in designing a component of the strategy making process to focus on analysing and controlling the strategy process and on developing effective products of the process. Likely benefits include improved management of complexity in the strategy products and processes and improved understanding of the potential risk of bad decisions or outcomes arising. Interpretation of the Law (Warfield, 1999): ―The limitation to interactions among three items suggests a very serious limitation on creative ability as might be reflected in the design of complex systems. …Many situations in life have been approached as though there were a dichotomy involved. Instead of allowing our thinking to be limited to dichotomies, we should be encouraged to move to trichotomies in a way of becoming more flexible in thought and action, wherever appropriate.‖ Insight for Strategy Making: Designing the strategy process (i.e. organising the management of the cognitive complexity) with tension among three A Systems Approach to Strategy and Execution in National Security Enterprises – 58 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework domains of strategy making processes will engender greater flexibility in the thought and actions within the designed process. Implicitly, one could expect the resultant strategy to better reflect and manage the situational complexity that the designed strategy process is contending with. Designing a trichotomy into the strategy making process is consistent with a tenet of multidisciplinary thinking, that a solution to a complex problem requires a minimum of three different perspectives of that problem to be taken (Kline, 1995). Interpretation of the Law (Warfield, 1999): ―Ad hoc designs, arrived at in ordinary conversational modes (as for example, in government bodies or committees) might be looked upon as unlikely to be of high quality, and likely to produce bad outcomes.‖ Insight for Strategy Making: Strategy making by an appointed (or self-appointed) „inner circle‟ invoking interpretive strategy models in an unorchestrated, dichotomous debate is likely to produce bad outcomes. Strategy-making processes that are innovative and designed to be inclusive of other strategy models (and therefore more demanding in orchestrating analysis and synthesis) are a hallmark in high performing organisations (Hart 1992, Hamel 2000). There is a paradox embedded within these insights. On the one hand, strategy and execution are conducted daily with the recognised limitation humans have in the capacity of the working memory of human minds to deal with three or four things (Miller, 1956). On the other hand, the world we are seeking to manage is exceedingly complex and we need mental models that can go at least some way to matching it. A prime question then arises – how might a strategy and execution framework of processes be designed to operate within the limitations of working memory while scaling in application to manage the situational complexity of the real world? Warfield suggests that moving to thinking in sets of three in a structured analytical mode (after Warfield, 1999) instead of working ad hoc from one dichotomy to another is likely to improve success in reasoning and reduce bad outcomes. This suggestion is intriguing, yet by Warfield‟s own admission, “the A Systems Approach to Strategy and Execution in National Security Enterprises – 59 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework limitation to interactions among three items suggests a very serious limitation on creative ability as might be reflected in the design of complex systems” (1999). Further Jackson (2009) has stated that “models should enhance human cognitive capacity in the face of complexity not just try to fit with it”. Both of these statements reinforce the paradox discussed above. So, it raises a question that must be addressed first – how valid is the limitation of three to human cognitive activity? This preliminary question is addressed in section 3.3.2. The primary question is then addressed in section 3.3.3 and section 3.3.4 by examining past approaches to strategy operating in three complementary domains. 3.3.2 From the Limitations of Working Memory to Organisational Learning The discussion traces a hierarchy from organisational learning and strategy through to human cognitive capacity and then back again. It illustrates how pivotal short-term working memory is in the day-to-day actions of individuals from which individual and organisational learning arises. Strategy and execution are intimately bound with organisational learning, because learning is a fundamental requirement for growth and sustained existence (Kim, 1993). Organisational learning is advanced by individual learning and memory (Kim 1993, Argyris and Schon 1978). And, then individual learning and memory are elements within a framework for problem solving behaviour (Simon 1976, Argyris 1991, 1993). A distinction between learning and memory is made in psychological research (Postman, 1976). ―Learning has more to do with acquisition, whereas memory has more to do with retention of whatever is acquired. In reality, however, separating the two processes is difficult because they are tightly interconnected – what we have in our memory affects what we learn and what we learn affects our memory. …[Further] we need to differentiate between stored memory and active structures that affect our thinking processes and the actions we take.‖ (Kim, 1993) The elementary processes involved in the active processing of information are executed in tens or hundreds of milliseconds (Simon, 1976). “The inputs and outputs of these processes are held in short term memory with a capacity of only a few (between four and seven) familiar symbols or chunks“ (Simon, 1976). Yet, the time taken to store a new „chunk‟ into long-term memory is in the order of A Systems Approach to Strategy and Execution in National Security Enterprises – 60 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework seconds or tens of seconds (Simon, 1976). A consequence of the low but rapid capacity of short-term memory and the slow but limitless capacity of long term memory is that the human information-processing system operates “apart from its sensory organs… almost entirely serially, one process at a time, rather than in parallel fashion” (Simon, 1976). At the most fundamental level then, humans solve problems (including strategy and execution problems), by frequently alternating between an understanding process and a solving process (Simon, 1976). To begin a problem solving „journey‟, humans construct a problem representation “determined sensitively by the precise way in which the problem is stated” (Simon, 1976). It appears we do not first search for the most efficient representation of a problem which would make problem solving easiest, but, instead “adopt the representation that derives in the most direct and straightforward way from the language of the problem instructions.” (Simon, 1976). So, armed with a representation of an often ill-defined problem and a limited short term memory and serial processing capacity, humans not only alternate between understanding and solving processes, we also ”focus almost exclusively on proceeding from the current situation, whatever that might be” (Simon, 1976). We do not often backtrack because this “would require [us] to keep in mind nodes previously visited” and the limits of short-term memory preclude this (Simon, 1976). Hence, we see how pivotal the limitations of short term memory are in resolution of problems. The long-standing evidence for a three- to four-item limit in working memory remains robust (Feigenson and Halberda, 2008). Their more recent evidence shows that ―…without instruction, and in the absence of robust language, a fundamental memory computation [of tracking three objects at once] is available throughout the lifespan, years before the development of explicit metamemorial strategies‖ (Feigenson and Halberda, 2008). In four experiments, Feigenson and Halberda (2008) demonstrated that 14-month, pre-verbal infants can surpass this limit “when given perceptual, conceptual, A Systems Approach to Strategy and Execution in National Security Enterprises – 61 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework linguistic or spatial cues to parse larger arrays into smaller units that are more efficiently stored in memory.” This experiment demonstrated that „chunking‟ is a learned strategy using conceptual knowledge to increase working memory capacity from a fundamental limit of three objects at once. But it is only with some conceptual knowledge or cues operating, that short-term memory increases its capacity to only a few (between four and seven) „chunks‟ or familiar symbols (Simon, 1976). With visual cues, “there appear to be different codes for the boundary and surface features of objects, and [short-term] memory operates on boundary features more efficiently that it operates on surface features” (Alvarez, 2008). This combination of long-standing and recent research in psychology offers evidence supportive of applying Warfield‟s Law of Triadic Compatibility. At a base level, with no conceptual or linguistic cues, humans can address only three objects in short-term working memory (Miller 1956, Simon 1976, Feigenson and Halberda 2008). This is important to understand when involving new people in developing and communicating strategy. To assume a cognitive capacity to address more issues at an early stage of their engagement in a new strategy process risks loss of comprehension of the strategy processes and products and promotes ad hoc approaches. Once relevant conceptual and linguistic cues are accumulated, short-term memory can be extended to parse larger arrays into smaller (four to seven) „chunks‟. And, by inference from Alvarez (2008) they will likely attend to the „boundary‟ conditions of strategy domains more efficiently than the finer surface features of each domain. As an individual journeys between understanding a problem domain and problem solving, individual learning occurs as „chunks‟ and familiar symbols are stored in long term memory. Individual learning then shapes the mental models each of us holds as images of how the world works (Senge 1990, Kim 1993). ―[Mental models] represent more than a collection of [stored] ideas, memories and experiences – they are like the source code of a computer‘s operating system, the manager and arbiter of acquiring, retaining, using, and deleting new information. But they are much more than that because they are also like the programmer of that source code with the know-how to design a different source code as well as the know-why to choose one over the other. A Systems Approach to Strategy and Execution in National Security Enterprises – 62 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework Mental models not only make sense of the world we see, they also restrict our understanding to that which makes sense within the mental model‖ (Kim, 1993). Kim (1993) defines two levels of learning within mental models – operational and conceptual. ―Operational learning represents learning at the procedural level, where one learns the steps in order to complete a particular task. … Conceptual learning has to do with the thinking about why things are done in the first place, sometimes challenging the very nature or existence of prevailing conditions, procedures, or conceptions and leading to new frameworks in the mental model. The new frameworks, in turn, can open up opportunities for discontinuous steps of improvement by reframing a problem in radically different ways.‖ (Kim, 1993) How a problem is reframed is then a new point of departure for human information-processing systems to restart its journey of serial steps of problem solving within the limits of short term memory (Simon, 1976). As an organisation grows in size, organisational learning begins to distinguish itself from individual learning through the emergence of a system for capturing the learning of its individual members (Kim, 1993). The transfer mechanisms are shared mental models, which embed individual frameworks in the organisation‟s weltanschauung – a shared „world view‟ of an organisation‟s image, culture, deep rooted assumptions, operating procedures and other artefacts and overt code of behaviour (Kim, 1993). Concepts for „double-loop learning‟ help to explain how these governing values can evolve (Argyris and Schon 1978, Argyris 1991). By socialising with other individuals, externalising or sharing individual mental models of how they see the world, people are able to work in groups to combine their shared knowledge to develop new knowledge. And, by internalising the new knowledge, individuals are able to reframe their own mental models ready to begin the cycle again (Nonaka and Konno, 1998). Mental models therefore become the change agent through which the transfer of learning occurs from individuals to organisations (Kim, 1993). The concept of organisational growth through shared mental models thus hinges on the organic information-processing system in each and every individual human being. While it is important to recognise the fundamental limitations of A Systems Approach to Strategy and Execution in National Security Enterprises – 63 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework the human short-term memory capacity and how it works serially in rapid succession, it is also important to recognise: ―The information processing system is an adaptive system, capable of moulding its behaviour, within wide limits, to the requirements of the task and capability of modifying its behaviour substantially over time by learning. Therefore, the basic psychological characteristics of human information-processing system set broad bounds on possible behaviour but do not determine the behaviour in detail.‖ (Simon, 1976) The complexity of the mental models can grow over time with the benefit of individual learning to match better the complexity of the world they inhabit. So the apparent paradox between the limitations of short term memory and the capacity to build mental models that closer fit the complexity of the world has been addressed – to a point. The application of this knowledge is confounded by many organisations having a propensity to move executives quickly through positions in two or less years, which severely reduces the capacity for high performance because they do not spend long enough building and reframing a shared mental model of the future (Hamel and Prahalad, 1994). Where this high turnover continues to be the case (as it is in the Australian Department of Defence), executives may well arrive in post with little or no conceptual framework for strategy and/or the specifics of execution in a particular field for which they are responsible. In the infancy of their tenure, executives will be working serially to build the mental concepts they need (after Simon, 1976). To assume a capacity of the working memory to address more than three objects at once in a new field risks the individual losing comprehension of the relevant processes and products (after Simon, 1976) and is likely to promote ad hoc approaches (Warfield, 1999). Only when relevant conceptual and linguistic cues are accumulated from the new field can short-term memory can be extended to parse larger arrays into smaller (four to seven) „chunks‟ (Simon, 1976). What executives need is an organic foundation that will mitigate the risk of new strategy executives making their biggest mistakes on day one (Rechtin, 2000). A Systems Approach to Strategy and Execution in National Security Enterprises – 64 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework As a result, this thesis uses Warfield‟s Law of Triadic Compatibility as a guide to structuring how problems are defined and how systems and strategy methods / methodologies are organised so that at a high level of abstraction they are manageable within the limits of working memory. Perhaps then, executives might better see the „whole beast‟ of strategy and execution. There has been some development towards a more organic view of strategy formation (Mintzberg 1987, Hart 1992, de Geus 1997) where strategy “must live inside the fiber of the enterprise” (Demos et al, 2001). However, organic ideas have not gone far enough to provide an alternative to traditional mechanistic approaches (Farjoun, 2002). The research towards an integrative framework has considered five domains (Hart 1992) and at least two authors (Chaffee 1985, Van der Heijden 1996) have represented the entire strategy field in frameworks of three domains. Each of these is now considered for insights into our primary question – how might a strategy and execution framework of processes be designed to operate within the limitations of working memory while scaling in application to manage the situational complexity of the real world? Or more simply, to what extent does designing a trichotomy into the strategy making process help us to manage complexity better by design? 3.3.3 Designing a Trichotomy into the Strategy Process – The Rational, Evolutionary and Processual Schools (Van der Heijden, 1996) Van der Heijden (1996) presented three schools in competition in the field of strategy, namely:  The rationalist school, which codifies first the strategy then the implementation; its methods and tools form the largest part of the strategy literature (Van der Heijden 1996, Mintzberg 1998)  The evolutionary school, which emphasises the complexity and emergent properties of organisational behaviour that cannot be explained directly by the rational paradigm (Van der Heijden 1996, Checkland 1981) A Systems Approach to Strategy and Execution in National Security Enterprises – 65 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework  The processual school, which views an organisation as a complex adaptive system and emphasises entering into a continual process of experiential learning to model and drive purposeful behaviours (Van der Heijden 1996, Kolb 1981, 1984). The rational and evolutionary schools are complementary yet mutually exclusive as one is goal seeking (Mintzberg 1998, Porter 1996) and the other „ills‟ avoiding (Lindblom 1959 as relayed by Van der Heijden, 1996). Consistent with De Geus (1988), Van der Heijden‟s (1996) thesis that effective strategy develops within learning approaches is central to the processual school. The learning process evolves towards an organismic view of strategy formation (De Geus, 1997). As illustrated in Figure 3-1, the processual school „bridges‟ the other two schools, focussing on the concrete experiences, observations and reflections on organisational evolution. The experiential methods of the school follow the Kolb learning cycle (Kolb, 1981, 1984) to generate a theory that emerges from observed data rather than a pre-conceived hypothesis, operating therefore in grounded theory (Glaser & Strauss 1967, Glaser 1998). PROCESSUAL SCHOOL Strategy that triggers entry to a continual „Learning Loop‟ RATIONAL SCHOOL Goal seeking „One right answer…‟ Concrete experiences Testing implications of theory in new situations EVOLUTIONARY SCHOOL „ills‟ avoiding Strategy emerges … Observation and reflection Formation of abstract concepts and theories Kolb‟s integrative learning model Figure 3-1: Architectural view of the inter-relationships between the schools A Systems Approach to Strategy and Execution in National Security Enterprises – 66 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework The composite architecture of the three schools provides five elements through which cognitive complexity is managed: the three schools and the interaction of the processual school with each of the other two. The mutual exclusivity of the rational and evolutionary schools in Van der Heijden‟s framing of three strategy modes is consistent with Kolb‟s observation that “the modes of active experimentation and reflection, like abstraction and concreteness, stand in opposition to one another” (1981, p.237). Kolb‟s four dimensions stand as axes of individual learning styles important in strategy formation, yet as parameters to guide designers of a strategy making process, they limit the flexibility available to the designer to mix methodologies to suit problems that could be seen to lie at the intersection of the rational and evolutionary schools: for example, the formation and implementation of an information systems strategy. Such a strategy needs to be simultaneously purposeful in its implementation (as user requirements flow to systems functional requirements to a technical architecture) and have the ”polycentric” emergence to match the changing needs of the business processes and the user community. Yet, in this tripartite model the only mechanism available to connect the evolutionary and rational modes of strategy making is to trigger a learning cycle. While appropriate in maintaining system performance and business continuity, a learning-centric model offers no guidance for ab initio design of strategy processes – pre-supposing that it matters less where you start and more that you start somewhere and then learn a better way forward towards designing a most skilful process. The dominance of a learning-centric model also suggests a dominant leadership role of the facilitator (Hart, 1992) that empowers and enables organisational members to improve the system. Other leadership roles of commander, coach, boss and sponsor that accompany other forms of strategy formation (Hart, 1992) may become less favoured in such a model, potentially reducing organisational performance (Hart, 1992). A Systems Approach to Strategy and Execution in National Security Enterprises – 67 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework 3.3.4 Designing a Trichotomy into the Strategy Process – The Linear, Adaptive and Interpretive Models of Strategy (Chaffee, 1985) Chaffee‟s (1985) three models of strategy present a more multifaceted perspective than Van der Heijden. Chaffee describes the strategy field using three modes of strategy: linear, adaptive and interpretive, as summarised in Table 3-6. Table 3-6: Three models of strategy (Chaffee, 1985) Linear Model Primary Focus Methodical, directed sequential action in planning Adaptive Model Development of a viable match between external and internal conditions Monitoring environment and making changes are simultaneous and continuous functions Interpretive Model ―Orienting metaphors or frames of reference‖ allowing organisation and its environment to be understood Strategy is socially constructed and multifaceted ―relying on individuals to cooperate in mutually beneficial exchange‖ Shape the attitudes of participants towards the organisation and its outputs; they do not make physical changes in the outputs. Open, emphasizing attitudinal and cognitive complexity Organisation and the environment constitute an open system ―Organisational representatives convey meanings [intended] to motivate stakeholders in ways that favour the organisation‖. Strategy construct Integrated decisions, actions, plans, goals and means of achieving them Top Managers Hold considerable capacity to change the organisation Attend to means / process, where goals are driven by the ―coalignment of the organisation and the environment‖ Open to the environment and structurally focussed ― a complex organisational life support system‖ Organismic view of strategy able to change organisational parts to handle greater complexity and more variables than linear model Organisation Composed of tightly coupled parts ―a necessary ‗nuisance‘ composed mainly of competitors‖ Interest waned in mid1970s as strategic problem seen as more complex Environment Summary remarks Chaffee‟s review of the literature at the time led her to the conclusion that “interpretive strategy ignores linear and adaptive strategy” (p.95) and foresaw that “the full value of strategy cannot be realized in practical terms until theorists expand the construct to reflect the real complexities of organizations” (p.96). Yet, in the midst of her thesis, Chaffee has added considerable value to the theoretical A Systems Approach to Strategy and Execution in National Security Enterprises – 68 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework construct by correlating the three models of strategy with Boulding‟s hierarchy of systems complexity, to illustrate how strategy has “evolved to a level of complexity almost matching that of the organisations themselves” (p.89). In particular, in setting the three models in a hierarchy, Chaffee observes: ―It is important to integrate each lower level model with models that represent more complex systems because organizations exhibit properties of all levels of system complexity. Adaptive and interpretive strategies that ignore less complex strategy models ignore the foundations on which they must be built if they are to reflect organizational reality. Furthermore, a comprehensive interpretive strategy probably requires some planning as would fit with a linear strategy and some organizational change as would fit with an adaptive strategy; and a viable adaptive strategy may well require some linear planning.‖ (p.96) Chaffee also noted that the models specify “three diverse ways of viewing the organizational problem and three classes of potential solutions” and raised questions over different concepts for future development of the strategy construct, including deepening the interpretive and adaptive models in the hierarchy to include the levels lower to each. ―Ultimately the construct may emerge as a hierarchy of three models: a mechanistic linear model; a biological adaptive model incorporating linear strategy; and a cultural interpretive model, incorporating both linear and adaptive strategy.‖ (p.96) That concept would see the three strategy models „nesting‟ one inside the other, as indicated in Figure 3-2. INTERPRETIVE PROCESSES ADAPTIVE PROCESSES LINEAR PROCESSES Figure 3-2: A future concept for „nesting‟ three models (after Chaffee, 1985) As a system of strategy and execution approaches, the deepening of one model to include lower level processes would raise questions around the boundary conditions of whether, for example, a linear approach alone could be adopted for A Systems Approach to Strategy and Execution in National Security Enterprises – 69 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework a certain class of problem. Chaffee perhaps foresaw the problem and left the way open for ―theoreticians …[to] find value in still greater model differentiation. Perhaps this can be done by specifying a hierarchy that contains a model of strategy for each of Boulding‘s nine levels of systems complexity. Whatever the end products may be – and whether or not they relate to Boulding‘s hierarchy – it is time for theoreticians and researchers to begin putting the pieces together.‖ (p.96) 3.4 A New Model for Integrated Strategy Processes An alternative to Chaffee‟s „nesting‟ concept is to view the three domains as complementary and necessary elements of designing effective strategy processes for socio-technical systems. The model, illustrated in Figure 3-3, incorporates:  Interpretive processes, where the currency is judgement, to address the social and cultural dimensions of organisations, to imagine the future and set directions and courses of action while applying understanding of the value, costs and risks,  Adaptive processes, where the currency is the expertise of individuals, applying explicit and tacit knowledge about what is known to work in order to learn what could work in the future,  Rational6 processes, where the currency is calculation in linear and non-linear forms, applying explicit knowledge about what is and what was in order to calculate new knowledge. INTERPRETIVE PROCESSES Judgement RATIONAL PROCESSES Calculation ADAPTIVE PROCESSES Expertise Figure 3-3: Primary elements for synthesising strategy processes Preference given to van der Heijden‟s label, „rational‟ over Chaffee label, „linear‟ for this category of processes because the focus is on calculation and a rational output that may involve linear and non-linear algorithms 6 A Systems Approach to Strategy and Execution in National Security Enterprises – 70 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework As a model for an integrated strategy framework, the focus remains on the whole – not simply the central area of overlap among the three elements. The four combinations of the elements, illustrated in Figure 3-4, highlight the role of:  Forecasting, where judgement is applied to calculation to explore what we don‟t know about plausible future situations based on what we do know at multiple elemental levels and from which we can extrapolate,  Backcasting, where judgement is applied to expertise gained from exploring plausible future situations (using interpretive and/or experiential methods) to identify desirable behaviours, concepts and technologies we currently don‟t have and so extend our expertise base beyond what we currently know works for the enterprise system as a whole. The concept of going „back to the future‟ becomes instantiated in the enterprise as a useful exercise.  Lessons learned, where calculation & expertise apply to capture what is known about current performance and what is learned by backcasting about prospective performance,  Cognitive control and decision making, where cognitive control of the processes is aimed at ensuring the mix of interpretive, adaptive and rational methodologies in the process design meet key criteria of efficacy, effectiveness and efficiency (Checkland, 1981). INTERPRETIVE Forecasting Cognitive Control and Decision Making RATIONAL Lessons Learned ADAPTIVE Backcasting Figure 3-4: Secondary elements for synthesising strategy processes A Systems Approach to Strategy and Execution in National Security Enterprises – 71 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework The control functions also aim to ensure resultant substantive decision making on strategy content is supported by an integration of the judgements, expertise and calculations arising from the application of the mix of methodologies. The ultimate goal is to improve the enterprise performance based on improvements in strategy process and strategy content. 3.4.1 Influence of Cognitive Systems Engineering on the New Model The central placement of cognitive control of the process design, execution and evolution is based on an adaptation of Rasmussen‟s (1987, 1992, 1994) skill-ruleknowledge (SRK) framework in the cognitive systems engineering literature. SRK is a component of Reason‟s theoretical paradigm that has been central to conventional human error research (Byrne, 2003). Rasmussen (1994) accounts for cognitive control of complex ecological systems interfaces using the following skill-rule-knowledge taxonomy, where:  at the skill-based level, human performance depends on a dynamic world model which “has a perceptual basis …activated by patterns of sensory data, acting as signs, and synchronized to spatio-temporal signals” (Rasmussen et al, 1994). Within the context of the space in which a person acts, they exert cognitive control relative to their immediate needs and goals on stored patterns of objects and their behaviour that have been updated by experiences over time (Rasmussen, 1994). In short, as experience in different situations improves skills, it shapes, expands and updates a person‟s mental models by which cognitive control is exercised. Errors at this level “are related to the intrinsic variability of force, space and time” (Reason, 1990), the different combinations of which add to the situational complexity a person faces when dynamically referencing mental models relevant to the situation arising.  at the rule-based level, cognitive control draws on descriptive labels (for scenarios, contexts, events) that assign attributes to categories which may be a rational basis for “updating the focus for intuitive judgments and for establishing the proper „background‟ for action and communication” (Rasmussen et al, 1994). A Systems Approach to Strategy and Execution in National Security Enterprises – 72 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework  at the knowledge-based level, cognitive control invokes the development of mental models and decision making processes in real time based on the “causal environment and the work content” (Rasmussen et al, 1994). Reason (1990) acknowledges Rasmussen‟s contribution here: ―…in charting the short cuts that human decision makers take in real-life situations. Instead of a straight line sequence of stages, Rasmussen‘s model [shown in Figure 3-5] is analogous to a step ladder, with the skill-based activation and execution stages at the bases on either side, and the knowledge-based interpretation and evaluation stages on top. Intermediate on either side are the rule-based stages (observation, identification, goal selection, and procedure selection). Shortcuts may be taken between these various stages, usually in the form of highly efficient but situation-specific stereotypical reactions, where the observation of the system state leads automatically to the selection of remedial procedures without the slow and laborious intervention of knowledge-based processing. The ‗step-ladder‘ model also allows for associative leaps between any of the decision stages. Errors at this level arise ―from resource limitations and incomplete or incorrect knowledge. With increasing expertise, the primary focus of control moves from the knowledge-based towards the skill-based levels; but, all three levels can co-exist at any one time.‖ (Reason, 1990 pp. 43-44) GOALS Evaluate Options OPTIONS GOAL CHOSEN Predict Consequences STATE TARGET Identification Choice of Task INFORMATION TASK Observation Heuristics, Shortcuts Planning ALERT PROCEDURE Activation Execution Figure 3-5: The decision ladder (Rasmussen, 1994 p.65) While the SRK framework was developed to support technical system design, it also supports ecological interface design (EID) which requires the designer to rely A Systems Approach to Strategy and Execution in National Security Enterprises – 73 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework on their perceptual skills in managing multiple dimensions, well beyond the capability of modern computing to assist (Rasmussen, 1994). The concept of an ecological interface design between cognitive control and the strategy process design/execution/evolution is relevant in view of the need to manage the strategy process and content in real time with the dynamics of change in the ecosystem that is our strategic environment. Vicente & Rasmussen (1992) established a basic goal for an EID: it had to support the three levels (SRK) without driving the processing demands (in this case for cognitive control) to be any higher than the task itself requires (in this case of strategy making or strategy execution). Thus, an EID for cognitive control “should not contribute to the difficulty of the task, …[yet] at the same time it should support the entire range of activities the [strategy process] operators will be faced with” (Vicente & Rasmussen, 1992). An EID for strategy process design remains an outstanding issue which will be explored in chapter 4. With these cognitive systems concepts and principles in mind, cognitive control over process design for strategy making and execution appears achievable conceptually as shown in Figure 3-6. The cognitive control dimensions of the model exist to correct errors in process design targeted at improving the performance of the strategy processes for the benefit of the organisation. JUDGEMENT Knowledge-based control Error Correction & Performance Management RATIONAL Rule-based control EXPERTISE Skill-based control Figure 3-6: Cognitive control mechanisms A Systems Approach to Strategy and Execution in National Security Enterprises – 74 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework In effect, a process design, which develops a coherent cognitive control process, will maximise the efficacy, effectiveness and efficiency of its interpretive, adaptive and rational strategy process into an integrated strategy process that is tunable by an enterprise to drive high performance. Consider the comparison of the application of the decision ladder to the processes for cognitive control of a strategy process and for making substantive choices for strategy formation and execution. Their distinctive features and general alignment is outlined in Table 3-7. Table 3-7: Application of the decision ladder to process control and strategy formation Mode Rational Decision making for Cognitive Control of Strategy Process Rule-based control Use descriptive labels to assign attributes to categories, forming a rational basis for control Adaptive Skill-based control Apply experience in different situations to shape, expand or adapt and update the mental models by which cognitive control is exercised Interpretive Knowledge-based control Develop mental models and decision making processes in real time to exercise control based on the context and the content. Decision making for Strategy Formation Currency: Calculation Use known methods and empirical data to forecast trends and derive options for consideration and decision making Currency: Expertise Apply learning-based methods that extract value of tacit knowledge and to create new actionable concepts, processes and strategy Currency: Judgement Imagine the future and set directions and courses of action that address the social and cultural dimensions of organisations with an understanding of the value, costs and risks involved. The general alignment between the two applications of the decision ladder is notionally overlaid on the integrated strategy framework7 as shown in Figure 3-7. The boundaries of which are dotted to indicate the intersections of the two models are not absolute, for example procedures will be rational yet here it can be interpreted as a link between two experiential actions. 7 A Systems Approach to Strategy and Execution in National Security Enterprises – 75 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework INTERPRETIVE PROCESSES for Strategy Formation  Judgement KNOWLEDGE-BASED CONTROL of Strategy Process GOALS Evaluate Options OPTIONS GOAL CHOSEN Predict Consequences Forecasting STATE TARGET Backcasting Identification Choice of Task RATIONAL PROCESSES for Strategy  Calculation RULE BASED CONTROL of Strategy Process INFORMATION TASK ADAPTIVE PROCESSES for Strategy  Expertise SKILL-BASED CONTROL of Strategy Process Planning Observation Heuristics, Shortcuts ALERT Lessons Learned PROCEDURE Activation Execution Figure 3-7: Nominal overlay of decision ladder with integrated strategy model For Rasmussen, the application of the decision ladder to “cognitive control as opposed to [naturalistic] decision making is ambiguous and basically a question of context” (Rasmussen, 1994 p.112). Clearly, the interpretation of the context into goals is critical for speed in decision making – without these in place, the application of rule-based control of a process or rational outputs into strategy are delayed until the context and goals are clear and other steps in the decision ladder are taken. With the drive for speed (Davis and Meyer, 1998) comes the risk of applying heuristics and shortcuts inappropriately. 3.4.2 The Implications of Heuristics for Speed in Decision Making If the strategic context and goals for the design of the strategy are not present or remain unclear, the ability to apply heuristics and shortcuts to the process design will be problematic. Time will need to be spent clarifying these. If not, the capacity of the organisation to move from one approach to another or to integrate new methods may be diminished as it is either stuck in its traditional ways or worse producing unintended outcomes, if it applies new methods without the appropriate consideration of context and goals. In this case, ad hoc application of A Systems Approach to Strategy and Execution in National Security Enterprises – 76 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework heuristics and shortcuts may drive the process in a counter-productive manner and reduce the agility of the organisation. Similar considerations apply to substantive decision making for strategy formation and management, where a lack of goals appropriate to the strategic context result in decisions which leave an organisation with poor strategic positioning and competitiveness. With the same „decision ladder‟ in play, the variability in its application will be driven mostly by a person‟s store of heuristics in control mode and in decision mode and in their aptitude to switch dynamically between control decisions on strategy process and substantive decisions on strategy content, appropriate to the context and goals that have been set. Speed in decision making in both cognitive control of the process and in substantive decision making is attained by having a high store of heuristics and shortcuts. These stores are only created and updated by a high level of integration of adaptive processes with the (traditional) rational and interpretive processes. Simple heuristics constructed experientially can provide highly accurate shortcuts (Reiskamp and Hoffrage, 1999). The process of selecting them and using them appropriately often requires a search for information beyond the cues given in the available context (Gigerenzer and Todd, 1999). Gigerenzer and Todd emphasise the importance of recognising that ―much information search is external … [including] in the socially distributed memory spanning friends and experts and in the human artefacts such as libraries and the Internet [read world wide web]. …In reasonable models, search must be limited because real decision makers have only a finite amount of time, knowledge, attention, or money to spend on a particular decision‖ (p.10). Further, they promote the view that ―satisficing [as a]… form of bounded rationality as the way that real people make the majority of their inferences and decisions (p.15).‖ Heuristics form an experiential part of the decision making processes that control process design and substantive strategy decisions. When applied to „big‟ national security questions, the multi-disciplinary nature of the problems mean that many people will need to search externally for information (Gigerenzer and Todd, A Systems Approach to Strategy and Execution in National Security Enterprises – 77 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework 1999). The inference being that few people will have the capability in a complex environment to switch decision making dynamically between process and content with sufficient speed from a single store of heuristics. Furthermore, as national security agendas expand to include global security and climate control within their ambit, “the issue [of climate control] is so multi-disciplinary, there are few true experts in the field, and even fewer who can articulate what the problem might mean to the general public and what we should do about it” (Flannery, 2005). It is perhaps reasonable, then, to deduce the national and global capacities to find people able to switch dynamically between control decisions on strategy process and substantive decisions on strategy content are extremely limited when large security issues are at play. Consequently, as strategy task forces are raised to address complex security issues, it is incumbent on leaders to identify people who can lead strategy process as well as those who can contribute to strategy content. It is then incumbent on those process and content leaders to operate symbiotically with neither process nor content dominating. 3.4.3 Finding the „Sweet Spot‟ in the Strategy and Execution Approach The concept of a „sweet spot‟ is often used in sports such as tennis, cricket and baseball among others to indicate that confluence of smooth action with the striking of a ball on the racquet or bat on its „sweet spot‟ to deliver a winning shot, a boundary or a „home run‟. The confluence of these factors delivers high performance with seemingly effortless action – a mark of a true „professional‟. Reason (2001, in Roberts 2003) described “the sweet spot” as a balance point “where most individuals function best and feel most comfortable” – a point that sits between two extremes. At one end, people work at the “edge of chaos” tolerating uncertainty, randomness and ambiguity; and, at the other end, people work within rigid, rule-based activities requiring tight constraints (illustrated in Figure 3-8). A Systems Approach to Strategy and Execution in National Security Enterprises – 78 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework Edge of Chaos Requisite Variety Increasing chaos randomness Increasing rigidity constraint order The fitness landscape of system control uncertainty Figure 3-8: The 'Sweet Spot' (Reason, 2001) Interestingly, the „sweet spot‟ widens under the influence of the „requisite variety‟ brought on by building teams to respond to the pressure of complex environments… ―When… the ‗going gets tough‘, high performing individuals seem to resort to the more ordered end of the spectrum approach, which seems to reflect their sense that ‗any rule is better than no rule at all‘ during a crisis. In response to the question, ―What is the effect of working in a team during high stress periods?‖ Reason said well-functioning teams widen the ―sweet spot‖ where individuals comfortably function.‖ (Roberts 2003, incorporating Reason 2001) In the context of developing and implementing a systems-based approach to strategy and execution in a complex enterprise, this is directly relevant. Systems approaches of the kind proposed in this thesis seek to provide „requisite variety‟ by being more inclusive of different people, methods and tools with a goal of providing a framework through which they can develop their most skilful process (after van der Heijden, 1996). Inclusive approaches and good teamwork delivers requisite variety in people, methods and tools. The cognitive „heart‟ of the decision making model which controls the decisions on what is included in the strategy and execution process (and what is not) can therefore be envisaged as the driver of a strategy „sweet spot‟ (Figure 3-9). When functioning well, it can be expected to deliver speed, new knowledge and connectivity between the environment and the organisational actions (after Davis and Meyer, 1998). A Systems Approach to Strategy and Execution in National Security Enterprises – 79 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework INTERPRETIVE Forecasting STRATEGY SWEET SPOT Backcasting RATIONAL Lessons Learned ADAPTIVE Figure 3-9: Strategy „sweet spot‟ 8 The importance of good team work in this context is captured by Roberts (2003): ―Working as a team allows a great deal more capacity for dealing with complexity of system function because the members bring requisite variety in terms of many views of the same process. It also widens the ―sweet spot‖ between excess order and chaos in unstable situations (Reason, 2001). One of the main threats to this is ―team think‖ and collective lack of situational awareness (Cook and Woods, 1994). Lacking variety they miss important information, their diagnosis is incomplete and their remedies are short-sighted and can magnify rather than reduce a problem‖ (Roberts, 2003) An inference here is that inclusive approaches to strategy and execution, while widening the “sweet spot” will also have a direct and positive impact on the organisational culture. Likewise, if the team does not actively avoid “group think” the strategy process can have an adverse impact. 3.4.4 Decision Making among Interfaces of Mutual Constraint The issue of decision making becomes most interesting when two opposing views are held on the optimal decision. Typically, these arise when a „clash of cultures‟ occurs between those with a dominant interpretive view meets those with a dominant reductionist view. Whether the cognitive control issue is one of directing the strategy process or in forming a substantive strategy conclusion, levels of misunderstanding have occurred by different disciplines extending their claims beyond interfaces with other disciplines. Kline has labelled these Interfaces of Mutual Constraint based on the work of Polyani (1968), noting: The author first came upon the concept of a „sweet spot‟ in Roberts (2003), referencing a presentation by Professor James Reason yet the literature research on this topic has not uncovered any further material. It remains a topic of great interest as the factors underlying the concept might uncover keys to higher performance. 8 A Systems Approach to Strategy and Execution in National Security Enterprises – 80 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework ―As systems become larger and contain more types of components, new behaviours and characteristics often emerge and therefore require new rules. When we ignore these differences, attempting to derive one level from another without looking for new variables and parameters and behaviours, we are very apt to confuse ourselves. We have done so, many times in the past. We have been able to erect a reliable overall theory for some particular classes of problems. These usually lie at one level in the hierarchy … [and] it does not follow that these principles extend to all systems in all levels of the hierarchy, since the variables, parameters, characteristics and principles in some levels differ from those in others. We have also found a few principles that apply to many levels but do not give complete information about most of the levels, only some constraints. … We cannot expect to derive everything from any one view or set of principles. We must instead strive for consistency of results from different sources on a given problem.‖ (Kline, 1995, p.279 – underline added for emphasis) Kline‟s work will be addressed again in the introduction to chapter 4 to guide the development of a multi-disciplinary approach. For now, it is sufficient to note that we cannot expect to achieve cognitive control of strategy processes for complex socio-technical systems by allowing one set of processes to dominate – whether interpretive, adaptive or rational. We should be guided by Kline and strive for consistency in results from different sources for any given problem. 3.4.5 Summary of Progress towards an Integrated Strategy Framework Some further progress has been made towards an integrated strategy framework. In relation to the insights from the literature review so far, the theoretical model supports the full range of strategy process activities consistent with Boulding‟s (1956) hierarchy of systems complexity. The „structure‟ of the system of strategy and execution processes is open, enabling the system of strategy and execution processes to operate within a continuous flow of people, information, tools and methods. It also maintains tension among three domains of strategy making. As a whole, this model remains consistent with the Law of Triadic Compatibility with its three elements and their four combinations. Consequently, the model attains the median value (seven) for the Law of Requisite Parsimony, suggesting a majority of strategy process designers may not become overburdened in applying it. Finally, the model centralizes cognitive control of the strategy process and decision making on strategy content without adding to the methodological difficulty since control employs „natural‟ decision making processes. This directly enables the strategy process designer to manage the A Systems Approach to Strategy and Execution in National Security Enterprises – 81 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework cognitive complexity before addressing the situational complexity regardless of whether the process begins from an interpretive, adaptive or rational mode of intervention. 3.4.6 Issues for Implementing the Concept Design To progress from an abstract theoretical concept to a practical, operational process, these key principles are embodied in a simplified construct where the integrated processes are guided by five questions: A. Is the organisation achieving its best possible performance? B. What is the problem? Is it the real problem? C. What methodologies, methods and tools do we have available to address the problem(s)? D. What approach will bring together the right combination of people, processes and tools to deliver a great result? E. How do I actually deliver a great result (in process and content) amid complexity? While first question focuses on achieving a desired outcome amid the situational complexity of the real world, other questions first need to be addressed in the cognitive domain, as illustrated in Figure 3-10. Strategy Content and Execution Seeking High Performance Performance Process Execution A Decision (Content) Problem Definition B Decision Making Process Considered Problematic? Process Design E Cognitive Control Process D Integrated Strategy & Execution Process Control (Process) Methodologies / Methods C Options: Strategy / Systems Processes 2 Managing Situational Complexity 1 Managing Cognitive Complexity Figure 3-10: Simplified conceptual design A Systems Approach to Strategy and Execution in National Security Enterprises – 82 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework The challenge remains to manage the cognitive complexity before addressing the situational complexity. Some key measures guiding cognitive control decisions will include the extent to which: 1) multiple modes of intervention are used (Midgley 2000, Jackson 2000, Kline 1995); 2) the methods are appropriate to the level of complexity being studied (Boulding, 1956); 3) methods of „lower levels‟ of complexity are used to inform the study (Boulding 1956, Chaffee 1985); and 4) the extent to which the combination of methods suits the context and cultural environment (Checkland 1981, Jackson 2000). Further conceptual design issues are now to be addressed in chapter 4:  defining an EID for cognitive control – that is, a methodology for managing cognitive complexity in the design, execution and evolution of strategy in enterprises.  defining a methodology for managing the situational complexity of integrating multiple modes of strategy intervention effectively.  designing a mechanism to mitigate the risk of strategy making being conducted by „committee‟ or an inner circle.  assisting the strategy process designer to identify important indicators of diminishing returns from the process. It is expected that other design issues will arise as progress is made with our constructive research methodology. Others may be left aside. For example, in maintaining cognitive control the “…taxonomic frameworks provided by conventional human error research [and that are drawn on in this thesis] lack predictive powers to allow researchers to make predictions of error behaviour” (Byrne, 2003). In the strategy process, it may be difficult to predict error behaviour even though it may be easy to see defensive behaviours arising A Systems Approach to Strategy and Execution in National Security Enterprises – 83 – Chapter 3: Literature Review 1 – Towards an Integrated Strategy Framework (Argyris 1991, 1994). This is a good research question in the strategy field, however, it is left for cognitive scientists to explore; and, the author encourages more cognitive scientists to lift their areas of concern beyond the human-machine interface to help address the cognitive control issues relevant to design and implementation of policy and strategy. The benefits of which are enormous: for example, while working in the health field in Case Study Two (chapter 6), the author worked with an intensive care specialist who found that “…bad policy was more dangerous to his patients than the flesh-eating bug” (Roberts, 2003). Other „big‟ pressing issues of global security also need your assistance. Concept alone is not enough, we need a fluid/ adaptable process (Demos et al 2001, Lucier et al 2002) that is practical (Mintzberg et al, 1998) and timely to support organisational decision making and deliver strategy and implementation outcomes for CEOs in a short period of time (Lucier et al, 2002). Potential answers to these questions are found in the systems literature, which frames the discussion in chapter 4 and aims to strengthen the field of ideas, the methodologies and areas of concern for strategy and execution; and improve coherence of the discipline. A Systems Approach to Strategy and Execution in National Security Enterprises – 84 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 4 Literature Review 2 – A Systems Approach to Strategy & Execution Abstract The systems literature indicates there are no simple prescriptive solutions to implementing an integrated strategy framework. The cognitive complexity involved in designing an appropriate integrated, multi-method approach for strategy and execution is difficult to manage. By mildly re-shaping elements from Jackson and Keys (1984), Flood and Jackson (1991) and Jackson (2000), a theoretical basis is constructed from trichotomies in how problem contexts are defined and in the available systems approaches to address them. An integrated approach is constructed to maintain cognitive control of a dynamic process designed to adapt change in the complex environment. A common theoretical basis is derived for a structural overview/framework that is consistent with the characteristics of the problems and the available methodologies. The systems theory indicates that an integrated strategy framework is feasible. Theory is translated to practice through a review of selected methodologies to fit the theoretical foundation. SSM and systems engineering are selected as the dominant methodologies. The recursive nature of systems engineering (Hall, 1998) is shown to add further value by forming a strong interdependency between the structural view (integrating the piecewise methodologies / methods) and the synoptic overviews. Theoretically, then, it is asserted that the design and management of ongoing systems interventions can approach the level of complexity of dynamic problems themselves (after Boulding 1956, and Chaffee 1985) and enable the operation of a strategy and execution process dynamically to drive high performance. 4.1 Introduction In this, the second part of the literature review, the aim is to turn the theoretical conceptual design into a preliminary, yet practical framework of multiple methodologies that can be tested in later case studies. With no codification available in the strategy and management literature on how to implement an integrated strategy framework (Chaffee 1985, Hart 1992, Mintzberg 1998, Farjoun 2002), it is only in the systems literature that the author has found ideas and guidance on designing multiple methodologies to address a complex area of concern. In starting this journey, the author was significantly influenced by Jackson (2000) and Midgley (2000), who … A Systems Approach to Strategy and Execution in National Security Enterprises – 85 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution ―…argued for pluralism at the methodological level, in the sense of respecting the fact that others may have useful insights that we may learn from in constructing our own methodological ideas. [Midgley] also argued for pluralism at the level of methods, meaning that we can draw upon methods originally produced within other methodologies and reinterpret them through our own methodology. This means that, if we are using a systems methodology, even methods developed outside the systems paradigms can be used as part of systemic intervention.‖ (p.215) Midgley‟s advice supports the application of a constructive research methodology (TKK 2008). That is, it is reasonable to construct a systems methodology for a given purpose (for example, strategy and execution for complex national security enterprises) by drawing insights from others including those methods outside the systems paradigm to build a novel approach and create new knowledge (as in this case, to implement an integrated strategy framework). Strategy and execution for complex national security enterprises must adapt its content and process to, at times, rapid changes in the strategic environment. As new knowledge enters the system, the range of people involved may also change quickly. Therefore, the design and configuration of the strategy process to deliver new strategy content must also adapt quickly to ensure the methods employed are appropriate to the people involved and the context they are considering. In the remainder of this chapter, the thesis draws predominantly on the body of knowledge on systems methodology to translate a conceptual design for an integrated strategy framework into a pluralist, multi-method approach for strategy and execution in a complex socio-technical system (such as the Australian Department of Defence) operating within its strategic environment. 4.2 Theoretical Foundations from Systems Thinking The discussion in chapter 3 (Section 3.4) indicates that a methodology will operate to support decision making as a means of process control and as a means of determining strategy content and execution. While the new economy drives a demand for speed (Davis & Meyer, 1998) and timing to get to „the future‟ first (Hamel, 2000), the broader issue of time is discussed first for the complexity it A Systems Approach to Strategy and Execution in National Security Enterprises – 86 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution adds in the context of an organisation‟s ability to survive shocks to the environment and to grow. Consideration is given to other constraints important to designing a systems methodology. This section then concludes with a summary of general systems principles influencing methodology design as a prelude to further sections of this chapter that discuss enabling methodology selection and the preliminary design of a multi-method approach. 4.2.1 The Importance of Time Time is important in at least two ways to the design of a multi-method approach. The multi-method approach must operate continually over time (Demos et al 2001) and it must act within time boundaries as they vary and drive decision making (Lucier, 2002). To operate continually over time to support the concurrent operation of strategy and execution (Mintzberg et al, 1998), the multi-method approach needs to support the ideal of strategy „living‟ within the enterprise (Demos et al 2001, Farjoun 2002, Lucier 2002). To achieve this, it is inferred that the multi-method approach must act organically to adjust its selection and operation of methodologies to suit changing internal and external contexts and the arrival of new knowledge, people, tools and methods – and to keep doing this until time itself (or the enterprise) stops. Concepts of survival and growth are bound within the organic metaphor. An organisation must first survive, which in commercial firms (whether or not they are part of the national security enterprise) means generating profits to fuel their capacity to conduct business in their areas of concern. These profits may then fuel the capacity to grow – enabling an organisation either to increase its current capacity or to develop emerging business lines for new capacity or to fund the exploration of new ideas that may „change the game‟ (Baghai et al 2000, Hamel 2000). Growth in all three horizons is important; yet more important methodologically is that growth has to be managed over the three horizons A Systems Approach to Strategy and Execution in National Security Enterprises – 87 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution concurrently (Baghai et al, 2000). The concepts of three horizons may also apply to not-for-profit and government organisations. For example, in the case of the Australian Department of Defence, the strategic planning process refers to the current force (near term), concept-led capability development (medium term view) and a long-term view of force after next (Defence, 2006b). This leads to the second main reason that time is important: the time available to make decisions in the real world is limited, whether in public or private organisations. In forming any proposition for change, it may be desirable to apply a „theory of rationality‟ (Habermas, 1976) to understand a proposition from a view of „three worlds‟ – an objective view based on our external natural world, a normative view from our social world and a subjective view from our individual internal worlds9. Yet, however desirable the task of engaging in “communicative action” (Midgley 2000 quoting Habermas, 1984 a,b) to achieve participatory engagement and consensus, instinctively it would appear to be constrained by consuming more time than is frequently perceived to be available; or, be bounded by some control decision of who is invited or given permission to participate (Checkland 1981, Sparrow 2000). Decision making is time sensitive and a multi-method approach needs to be able to adapt to the demand for speed (Davis & Meyer, 1998) in the business world. In the national security space, time sensitivity often comes with a need for decision superiority, which is achieved by making decisions inside the decision cycle (or OODA10 loop) of the adversary (Boyd, 1987). In later research, the OODA loop has been linked with a cybernetic approach in which delays in decision making are modelled to help understand information flows and design more effective command and control processes (Brehmer, 2005). The three horizons of survival and growth (Baghai et al, 2000) will drive a variety of time boundaries for decision making on strategy, operations and decision making, with which a multi-method approach will have to cope. In view of the 9 10 See Midgley 2000, which references Habermas‟ work extensively. The acronym OODA: Observe-Orient-Decide-Act originated in the work of Boyd (1987) A Systems Approach to Strategy and Execution in National Security Enterprises – 88 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution complexity of socio-technical systems operating in its strategic environment, the available social knowledge “will always be subjective, partial and tentative” (Hofstede, 1996). The deduction drawn from this is that a system of systems methodologies for the strategy and execution of socio-technical enterprises cannot always predict the demands arising on decision makers yet the multimethod approach needs to be able to respond and adapt in a time sensitive manner in all three horizons – and it must keep doing so. The operation of the multi-method approach to deliver an integrated strategy framework is a continual process. 4.2.2 Constraints on Process Design for an Integrated Multi-Method Approach At the highest level of abstraction, the strategic landscape for all organisations on Earth is the same as we first ensure life on Earth survives and, in doing so, we have choices to make. Differences arise as a zoom lens is applied from a universal, global standpoint to examine the regional landscapes and then the local conditions. For example:  at a global level, climate change is the „big‟ security problem (Flannery, 2005) at a regional level, rapid urbanization of people in India and China increases the need for energy, and changes employment and social conditions (Andrieu, 1999). Entry of global firms into these markets brings with it considerations to ensure corporate social responsibility, socio-economic growth for those employed and growth in shareholder earnings (USCBC, 2008).   at the local level, growth in demand for non-farm jobs, strengthening the rule of law, and fighting communicable disease are some areas of concern (UNDP, 2009). A variety of perspectives can therefore be taken of what constitutes a strategic context. Likewise, the differences in contexts will influence the methodologies and methods chosen to guide the survival and growth of an individual or the enterprise they are a part of. Yet among the multiplicity of global, regional and local areas of concern, Mitroff (1985) identified four generic areas of concern for A Systems Approach to Strategy and Execution in National Security Enterprises – 89 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution business and four attitudes to problem solving. He builds his thesis around two dimensions: the first is “a content pole” (p.9) where business and management issues range from technical/economic to people/social; and the second is scope, indicating whether a narrow/micro perspective is taken or a broad/macro view. The concerns represented in each quadrant and the problem solving attitudes are shown in Figure 4-1. FOUR GENERIC CONCERNS OF BUSINESS TECHNICAL / ECONOMIC I. MICRO-ECONOMIC How do I maximize the performance of my current business(es), product(s), Return On Investment (ROI)? NARROW II. MACRO-ECONOMIC How do I anticipate/develop new businesses, ideas, markets and products? BROAD IV. MICRO-SOCIAL How do I increase/improve my personal quality of life and that of my fellow employees? III. MACRO-SOCIAL How do I and my company contribute to improve the quality of life of my environment/community? (Mitroff 1985) PEOPLE / SOCIAL PROBLEM SOLVING ATTITUDES TECHNICAL / ECONOMIC I. Every scientific/technical problem has one best way to formulate it and one right answer to it. Every complex problem can be broken down into a series of simpler problems NARROW II. There is no one best way to formulate complex scientific/technical problems. It is important to look at as many different formulations of a complex problem as possible in order to avoid solving the wrong problem precisely BROAD IV. Every problem ultimately reduces itself to its effect on a single unique individual. As a result, there are no general solutions which are good or best for all individuals. Every solution to every problem has to be tailored to fit the unique needs of unique individuals. PEOPLE / SOCIAL III. Important political and social problems or issues never have a single formulation or a single best answer that is accessible to all members of a community. Complex human problems must be viewed from many perspectives to avoid doing harm to people. (Mitroff 1985) Figure 4-1: Four areas of concern and four problem-solving attitudes (Mitroff, 1985) Mitroff‟s main point is that “it is not possible to initiate or to sustain any business strategy or policy that does not take explicitly into account the concerns of all four cells” (p.9). The problem as he saw it in 1985 is that “while the world has shifted from a relatively stable environment to one that is increasingly turbulent, the structure of our organizations and our problem-solving methods have not kept pace.” While this appears now as common sense among systems thinkers, the problem now (in 2009) is that scholars and practitioners have continued to recognise this as a problem that needs resolution (Hart 1992, Davis and Meyer 1998, Lucier et al A Systems Approach to Strategy and Execution in National Security Enterprises – 90 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 2002, Flannery 2005). There are many systems thinkers, yet perhaps not enough to influence the curricula and products of the education system with systems thinking as a counter-balance to the institutional effects of the dominant reductionist thinking (Checkland, 1981). Leaning back over twenty years again, the designer of an integrated, multimethod approach for strategy and execution should also note Mitroff‟s (1985) observation that ―…something like 90 percent of the behaviour that goes on in all organizations and institutions can be explained in terms of the interplay between the four [quadrants]. Thus, if given a free hand, each would design a completely different kind of organization … where [some] prefer an organization with as much high structure and control as possible… [another] prefers almost no structure and control at all‖ (p.12). Consequently, it is reasonable to infer that past and present designs of strategy and execution processes have taken multiple forms, aligning with those quadrants where the process designer is most concerned and/or where the approach to problem solving best fits with their attitude. It follows that, in determining an integrated, multi-method approach for strategy and execution, the inherent risk is that a balanced, integrated approach will be lacking due to the preferences of those influencing the organisational systems for strategy and execution in how they perceive and approach the concerns of business. It would therefore be wise for a process designer to be cognisant of Checkland‟s (1981) criteria for change not only to be systemically desirable, it must also be culturally feasible. Overtones of Machiavelli (1532/2004) remain. Mitroff‟s argument (1985) for an holistic approach across all four quadrants is consistent with Boulding‟s thesis (1956) on dealing with systems complexity and with Chaffee‟s three models for strategy (1985). This drive for pluralism in how issues are conceived and problems addressed in complex socio-technical systems / enterprises is part of the evolution of socio-technical systems thinking, a brief history of which is given in Midgley (2000). The two core ideas of socio-technical systems thinking presented by Midgley (p.188) are: A Systems Approach to Strategy and Execution in National Security Enterprises – 91 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution  work is most effectively done in groups, where the members collectively take responsibility for completing the tasks. This is also seen as most satisfying way of organising work; and,  social and technical components of the work need to be addressed holistically ―…separating the technical from the social is a recipe for disaster, because it could lead to two sets of solutions that do not fit together. Rather, organisations should be viewed as systems in which the social and the technical interact: if both are dealt with simultaneously then, while it may at first appear that sub-optimal solutions are being devised for each of the social and technical aspects, the outcome will be optimal for the organisation as a whole – which is what really counts in terms of improving worker satisfaction and hence performance (p.188, italics added).‖ The „recipe for disaster‟ is exactly what had been occurring in the Australian Department of Defence since amalgamation of the Services into one Department in 1976. The connection between strategy formation at the „social‟ end of Boulding‟s scale of systems complexity was disconnected from the capability planning and remained so for over 20 years (McIntosh et al, 1997); and, technical analyses were being undertaken elsewhere in the Department using rational systems analysis methodologies more attuned to the lower levels of Boulding‟s hierarchy without fully integrating into the „social‟ activities of strategic planning for future warfighting (Hodge, 1998a). Midgley‟s (2000) concept of developing sub-optimal solutions for each of the social and technical aspects would be seen by both „camps‟ as being counterintuitive to developing an optimal solution for Defence as a whole, which as Midgley (2000) states “is what really countsxi”. 4.2.3 General Systems Principles Influencing Methodology Design What then counts in designing an integrated, multi-method approach for strategy and execution as an ongoing systemic intervention? From the systems literature, we can identify certain systems characteristics which are interpreted here as applicable principles for a systems approach: 1. One must first define the system of interest (Kline 1995), 2. Boundaries are to be defined (Kline 1995, Midgley 2000) A Systems Approach to Strategy and Execution in National Security Enterprises – 92 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 3. Learning is enabled in both the systems process and in the strategy content that drives action (Argyris 1993, Mintzberg et al 1998), 4. Boundaries can be varied and several can exist concurrently (Ulrich, 1983), 5. New knowledge, people and processes may enter the intervention (Ulrich 1983, Midgley 2000). Each of these principles is briefly outlined in the context of the defined system of interest 1. Define the System of Interest The system of interest, in this case, is a multi-method approach to perform integrated strategy formation and execution functions of a socio-technical organisation operating as part of Australia‟s national security enterprise. Hereafter, a short title for the system of interest will be an „integrated multimethod approach for strategy and execution‟. 2. Define the Boundaries The integrated multi-method approach for strategy and execution should enable definition of:  the boundaries of the enterprise you wish to intervene, its purpose (if such exists), and its interfaces with the environment (Kline, 1995) which are dynamic and change as the environment or the enterprise itself changes. 3. Learning is Enabled   A multi-method approach should enable learning in terms of the content of a strategy (the direction and actions) arising from change(s) in the environment or in the enterprise (Checkland, 1891). It should also enable learning in terms of the process (Checkland 1981, Mintzberg 1998) and the people contained within a process activity (Habermas 1976, Kelly 1955xii). This demands the multi-method A Systems Approach to Strategy and Execution in National Security Enterprises – 93 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution approach enable inward reflection of individual behaviours and actions (Argyris 1991, 1994, Nonaka & Konno, 1998). This is critical because:  the way problems are defined can be a problem in itself, impairing learning (Argyris, 1991) and driving leaders to demonstrate defensive behaviours where the theories they espouse vary from the theories they practise (Schön 1983, Argyris 1991), and  learning is geared by the individual‟s capacity to develop perceptual, conceptual and linguistic cues that enable them to parse large streams of data into a few (four to seven) chunks in working memory and store these chunks in long term memory which takes significantly more time (Simon, 1974). 4. Boundaries Can Be Varied A multi-method approach should enable a boundary critique (Ulrich, 1983). Relevant to the previous two points, this design criterion is linked to improving the systemic intervention in the social system of interest. It may be that boundary definitions change as the debate goes along to address, for example, microeconomic concerns at a quantitative level and then brings the results for synthesis into a whole of enterprise dialogue. This is consistent with Boulding (1956), Mitroff (1985) and Chaffee (1985). For example, as the national security „system‟ and debate in Australia extend to include climate change, they also consider legal, economic, political, and military and technology dimensions. Hence a boundary critique may enable a number of component issues and boundaries for intervention to be varied concurrently with changes in the environment and dynamically with the level at which the problem is being addressed and prioritised for action (Midgley, 2000). Ulrich (1983) argues that boundary critique is inseparable from values, which later studies have shown drive behaviours and learning (Argyris, 1977, 1991, 1993, 1994). In managing a systemic intervention for strategy and execution, control decisions made to extend or reduce the boundaries not only define the interfaces with the environment but also identify the people that have permission to act (Sparrow, 2000) within boundaries specified by subject matter and time. A Systems Approach to Strategy and Execution in National Security Enterprises – 94 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Boundary critique within a multi-method approach is vital: it enables concurrent actions on multiple levels, including concurrent management of activities addressing, for example, the three horizons of growth or a deep technical issue using quantitative methods while concurrently addressing other issues with different modes of intervention. 5. New knowledge, people and processes By virtue of dynamic shifts in boundaries, a multi-method approach should enable new knowledge to enter (including new methods) and allow new participants to enter and leave the debate (Ulrich, 1983). Midgley‟s critique of the first wave of systems thinking that the „hard‟ systems methodologies relied on being driven by „experts‟ (Midgley 2000, pp. 191-193) is pertinent. A suitable design for a multi-method approach will be able to manage a process where there are no „experts‟ as such for the whole framework of strategy process and strategy content. Of interest to a multi-method approach is how it is able to draw in expertise from a „crowd‟ as required (Midgley, 2000, Surowiecki, 2004) to resolve through orchestrated debate the iterative definition of a problem space and to guide action (Checkland, 1981). The pressure of time and resources will also mean that some limits to entry of new knowledge, people and methods will be managed. For example, in working down from whole national security debate to define government‟s needs of Defence and how Defence will meet those needs is a complex hierarchy. For that to be effective at the enterprise level in the Defence and other complex problem spaces, control must be exercised in the process to ensure participants look beyond the narrow boundaries of their local stakeholder groups (Ulrich 1983, in Midgley 2000). In which case, intervention by „process advisers‟ with experience in applying systems approaches to complex enterprises problem spaces may be unavoidable and in the best interests of achieving timely and defensible outcomes. These five characteristics have been selected as foundational to the design of an integrated, multi-method approach for strategy and execution in a complex A Systems Approach to Strategy and Execution in National Security Enterprises – 95 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Defence enterprise. In the design process, other characteristics may arise from the systems literature, which is replete with characteristics of systems concepts and their relevance to management – see for example: Checkland (1981), Checkland & Scholes (1990), Flood & Jackson (1991), Ackoff (1999), Rechtin (1991, 2000), Jackson (2000), Maier and Rechtin (2002), Hitchins (2003) and Jackson (2003). 4.2.4 From Design Principles to Structural Form The proposed new model for an integrated strategy framework devised in Section 3.4, views the three domains of interpretive, adaptive and rational methodologies as complementary and necessary elements of an effective strategy process design for socio-technical systems. In order to manage the cognitive complexity involved in transitioning from a conceptual design to an integrated, multi-method approach for strategy and execution (before managing the situational complexity (after Warfield, 1999)) it is useful to review some of the theoretical foundations in managing cognitive complexity. In particular, Kline‟s (1995) formulation of what he called Polyani‟s Principle, which in two parts states: Part A. In many hierarchically structured systems, adjacent levels mutually constrain, but do not determine each other (p.115). Part B. In hierarchically structured systems, the levels of control (usually upper levels) ―harness‖ the lower levels and cause them to carry out behaviours that the lower levels, left to themselves, would not do (p.119). In the context of achieving cognitive control in the design of an integrated, multimethod approach for strategy and execution, Polyani‟s Principle is interpreted to mean:  whereas the many methods of strategy intervention are hierarchically structured consistent with Boulding‟s hierarchy of systems complexity (Chaffee, 1985), the disciplines related to each level and their methodologies may maintain interfaces of mutual constraint and one discipline or methodology does not determine the other and each might contain A Systems Approach to Strategy and Execution in National Security Enterprises – 96 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution information of value for the overall system of strategy and management (Kline, 1995).  the levels of control in the multi-method approach (which will be driven by the people in control who are themselves level 7 systems in Boulding‟s hierarchy), will cause lower level systems to behave differently than if not „under control‟. For example, interpretive processes designed to assess future roles and capabilities of an organisation may give rise to adaptive processes that can generate learning about how to test and evaluate the judgements made. Similarly, rational processes may be formed to examine the extent to which available empirical data also validate or challenge the results gained from the interpretive processes. These adaptive and rational processes and their results may not have been otherwise explored had not the new areas of concern been raised by a higher-level interpretive process. Furthermore, the rational and adaptive processes will mutually constrain each other as the available rational data are unlikely to be sufficient to provide a reliable forecast or provide principles or rules that guide behaviour in a learning process about future strategic conditions. Similarly, the adaptive process will deliver data that, having arisen from new experiential learning, may not be considered credible until it is validated over repeated experimental runs. Until then, the newly formed data constrains the ability to incorporate it in rational processes in anything but a hypothetical situation. Interpretive processes are not more important than adaptive or rational processes (Chaffee, 1985). While they are more suited to addressing social issues at a higher level of system complexity (Chaffee 1985), other views are also required to gain a comprehensive insight of the complex socio-technical system they support (Midgley 2000, Kline 1995). Kline (1995) argues that an adequate process to understand complex systems that are “hierarchically structured systems with interfaces of mutual constraint” will have at least three views (p.134): A Systems Approach to Strategy and Execution in National Security Enterprises – 97 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 1. a synoptic overview which provides a „top-down‟ view, helping to define the boundaries of the system, its purpose (if such exists) and its interfaces with the environment; 2. a piecewise, „bottom-up‟ view of the relevant parts that make up the system; and, 3. a structural view of how the parts connect with each other in the whole system. Kline suggests there is no theoretical reason for not taking all three views of the system into account simultaneously – the only limit is the capacity of the human mind (p.136): ―We can‘t hold enough information in our working memory to look at the bits, the structure, and the whole of the complex system simultaneously. As a result, we must move back and forth between the …[different] views in order to form a complete understanding of complex systems. In many cases, we may need to examine the results at many levels, one by one, in the hierarchy of constitution of the system of concern.‖ (Kline, 1995 – Italics and bold added for emphasis) This is an important foundation in how an integrated, multi-method approach for strategy and execution is to operate – back and forth between different methodologies that deliver views of the complex socio-technical system and its strategic future in synoptic overview, in piecewise views and in structural view connecting the pieces. This approach is consistent with the normal approach taken by humans of frequently alternating between an understanding process and a solving process (Simon, 1976) Concurrently, each viewpoint enables analysis of results from that view so that over time a complete understanding can be formed. Consistent with these tenets of multi-disciplinary thinking, a concept for an integrated strategy framework will be implemented by an integrated, multimethod approach for strategy and execution that is designed as a hierarchicallystructured system of methodologies that, having interfaces of mutual constraint (Kline, 1995), deliver a synoptic overview of the boundaries and goals, a A Systems Approach to Strategy and Execution in National Security Enterprises – 98 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution piecewise view of the parts and a structural view of how the parts connect with each other in order to create the whole system of strategy and execution. The discussion now moves to construct a preliminary design from the theory. This is presented in Section 4.3 with the aim of adequately addressing the derived systems foundations and constraints discussed in Section 4.2. The theoretical construction is then translated into a preliminary design and presented in overview in Section 4.4. Each of the selected methodologies is then examined in some detail in Sections 4.3.1 to 4.4.5 of this chapter as a model or starting hypothesis for experimentation in case studies. 4.3 Preliminary Design – Construction from Systems Theory First the general state of the systems literature is briefly considered. The discussion then draws on available elements of the literature to develop a theoretical design to address the five main elements of the conceptual model (previously presented in Figure 3-10) for problem solving in a strategy and execution context. The discussion then turns theory into practice, rebuilding the simplified design for an integrated, multi-method approach (Error! Reference source not found.) into a theoretical whole. This „whole‟ is then briefly examined to ensure the theoretical design addresses the principles and constraints previously discussed. 4.3.1 General Assessment of the State of Systems Theory It is sobering to read Jackson‟s (2000) view that “systems thinking overall enters the third millennium in a less secure position than it occupied thirty years ago” (p.4). Describing systems thinking as “splintering … into warring factions championing soft systems thinking against hard systems thinking and critical systems thinking against soft systems thinking” Jackson comments that this may “provide amusement to academics but is alienating practitioners” (p.4). He observes that while practitioners may “buy into aspects of systems thinking presented as the latest management fad (as the “learning organisation” or chaos A Systems Approach to Strategy and Execution in National Security Enterprises – 99 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution or complexity theory), [they] continue to see the approach as too theoretical to be helpful with their everyday concerns” (p.4). It may be that at the time of Jackson‟s writing (2000) systems thinkers had generally regressed to a mean (i.e. average) set of behaviours ingrained in the reductionist education systems they were initially trained in. It appears the dominance of early conditioning has pressed even systems thinkers to search for one best way. In reality, interfaces of mutual constraint among different systems approaches were arising in the evolution of systems science, where each has something to contribute yet none has the complete understanding (Kline, 1995). In Systems Approaches to Management, Jackson (2000) does for systems thinking what Mintzberg et al (1998) do for strategy: he creates order around the many and varied approaches to his discipline. Jackson (2000) orders the systems literature into four groups: functionalist, interpretive, emancipatory, and postmodern approaches. His aim is to “reconstitute systems thinking [within the social and management sciences] as a coherent approach to inquiry and problem management so that it can again occupy a role at the leading edge of development in the applied disciplines” (p.4). Jackson‟s (2000) presentation reduces the complexity of dealing otherwise with multiple methodologies by aggregating them into four categories with generalised characteristics. This aids in determining the applicability of the generalised approach within each category to different problems or sets of problems. The work of Jackson (2000) provides a framework to the body of systems literature that makes it more accessible than before. Yet, the main issue is that by using four categorisations, with interplay among them, the framework risks overburdening a novice systems process developer (Warfield, 1999) when designing a multi-method approach operating, as they will, in short term working memory (Simon 1976, Feigenson and Halberda 2008). Once relevant cues are learned from the systems approaches (after Simon 1976, Feigenson and Halberda 2008), designers of strategy and execution processes are better able to A Systems Approach to Strategy and Execution in National Security Enterprises – 100 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution develop a multi-method approach to address a hierarchy of problems and produce a holistic outcome. For those uninitiated in systems theory, however, it is possible they will be limited to working with three objects in short term memory (Simon 1974, Feigenson and Halberda 2008). Jackson has reached a similar outcome to Mintzberg et al (1998). In both cases, they have improved the coherence and understanding of the literature yet their shared desire to find an holistic framework for their respective disciplines that is operable generally, eludes them. At the risk of achieving a similar outcome, the discussion in this thesis aims to improve the ability of a designer to manage the complexity in the systems theory and between the systems and strategy literatures. Both literatures build on social theory, management theory, learning and organisational theories, and both have taken steps towards a framework of ideas in search of a consistent integration of many methodologies that will adequately address multiple areas of concern to drive strategy and execution in a complex enterprise. To that extent, it is not surprising that many enterprises fail to deliver holistic outcomes in practice when the strategy and systems theory has not yet fully constructed adequate frameworks to support their best endeavours. The preliminary design is initiated by the simplified concept of the principal functions of an integrated, multi-method approach (previously illustrated in Figure 3-10). In this case, the simplified concept is redrawn in Figure 4-2Error! Reference source not found., wherein the driving questions presented in Section 3.4 are related directly to the main elements of the concept: 1) Is the organisation achieving its best possible performance? 2) How do I (as process designer) achieve a great result amid complexity? 3) What is the problem? And, is it the real problem? 4) What methodologies, methods and tools do I have available to deal with the problem? And, A Systems Approach to Strategy and Execution in National Security Enterprises – 101 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 5) What approach will bring together the right combination of people, processes and tools to deliver a great result? Is the organisation achieving its best possible performance? How do I deliver a great result amid complexity? What is the problem? Is it the real problem? Strategy Content and Execution Seeking High Performance Performance Process Execution Decision (Content) Problem Definition Decision Making Process Considered Problematic? Cognitive Control Process Process Design Integrated Strategy & Execution Process Control (Process) Methodologies / Methods Options: Strategy / Systems Processes 2 Managing Situational Complexity 1 Managing Cognitive Complexity What methodologies, methods and tools do we have available to address the problem(s)? What approach will bring together the right combination of people, processes and tools to deliver a great result? Figure 4-2: Simplified concept for a multi-method approach to move among different views Embedded into that concept is the requirement for the multi-method approach to to move „back and forth‟ between the perspectives of each question (Kline, 1995) as the problem solver alternates between understanding and problem solving (Simon, 1976). The structural view brings together the multiple pieces (after Kline, 1995) noting that: “Pluralism needs, as an approach to managing complex problems, to employ a meta-methodology to take maximum advantage of the benefits to be gained from using methodologies premised on alternative paradigms together, and also encourages the use of diverse methods, models, tools and techniques, in a theoretically and methodologically informed way, to ensure maximum flexibility in an intervention.” (Jackson, 2000, p387). The discussion now constructs the theoretical mechanisms for the five elements in the conceptual model, examining the opportunity to embed a trichotomy (after Warfield, 1999) to help the designer alternate between understanding and problem solving within the fundamental limits of working memory (Simon 1974, Feigenson and Halberda, 2008). A Systems Approach to Strategy and Execution in National Security Enterprises – 102 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution To deliver a synoptic overview of the strategy content and process, two components are required. Error! Reference source not found. One relates directly to a system of measures that reach into the organisation to understand how well it is performing in the real world; another, relates to a cognitive framework for decision making on strategy content and controlling the process design and execution. 4.3.2 Measures for Achieving Best Performance To consider the question of whether or not the organisation is achieving its best possible performance, a system of measures helps a CEO to reach into her organisation to understand how well it and its parts are performing in the real world (Hauser & Katz, 1998). How does a CEO keep her head in the „cockpit‟ while the rest of her is in different elements of the workplace, whether that be government policy, strategy development, materiel acquisition or operations? How can she be certain that her espoused theories and theories in action are delivering the desired organisational behaviours and performance? Measures are the key: every metric will affect actions and decisions (Hauser & Katz, 1998). The issue with measures is the same for strategy and systems literature – there is an extensive menu from which to choose. If a CEO can devise a set of critical measures without breaking the laws on triadic compatibility or requisite parsimony (after Warfield, 1999), she has the capacity to ask the right questions from any level in the organisation that drive the desired behaviours and actions across the main human activities of the enterprise, but not limit their actions (Hauser & Katz, 1998): ―Metrics empower managers and employees to make decisions and take the actions that they believe are the best decisions and actions to … enable the firm to maximise its long-term profit [read: performance].‖ (Hauser & Katz 1998, p.526) The question is how to structure the crucial measures to achieve this outcome? Most socio-technical organisations will have a hierarchy of primary inter-related functions. In the case of national security enterprises there are distinct functional groups addressing strategic policy defining the Government‟s needs of Defence and its other components of national security (the „why‟ for national security); A Systems Approach to Strategy and Execution in National Security Enterprises – 103 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution capability strategy for each structural component deliver on the Government‟s needs (the „what‟); and execution / operations, delivering the physical capabilities (people, processes and technologies) they are operating or building to provide the functionality required in the strategy as a contribution to Government‟s response options for national security (the „how‟). Each group has its defined purpose (the „why‟ they are needed), its defined abilities to contribute (the „what‟ they are able to do) and their physical instantiation (their „how‟ they do it). This enables a Measure of Success (MoS) to be related to each „why‟ to know if the desired outcome is being achieved. A Measure of Effectiveness (MoE) is related to each „what‟ to know if the functionality they deliver is effective; and, a Measure of Performance (MoP) is related to each „how‟ to understand whether the actions day-to-day are delivering the functionality in national security enterprises that the Government needs are dependent upon. Adapting an abstraction hierarchy (Rasmussen, 1998) serves to combine these functional groups, as shown in Figure 4-3, indicating the inter-relationships between the „why‟, „what‟ and „how‟ is indicated. The key issue for a CEO of a national security agency and for Government is to be able to gauge the performance of their policy by understanding the effectiveness of the strategy and the success of how it is executed. Measures of Success Measures of Strategic POLICY Capability EXECUTION STRATEGY Top Down Effectiveness Relevance Measures of Performance WHY WHAT WHY Performance of Policy Initiatives are dependent on Effectiveness of the Strategy AND Success of the Execution Coherence and Consistency HOW WHAT WHY Measures of Success Measures of Effectiveness HOW Bottom-up Accuracy Adapted from Rasmussen, 1998 WHAT HOW Measures of Performance Figure 4-3: Abstraction hierarchy of measures for high performance A Systems Approach to Strategy and Execution in National Security Enterprises – 104 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Once constructed with a set of measures of success, effectiveness and performance, the hierarchy delivers a top-down view that is relevant and a bottom-up view that is accurate. It serves to identify at a macro level the boundaries of acceptable operation, and by virtue of its measures it shapes the desired behaviours within those boundaries (Hauser & Katz, 1998). In this sense, then, a structured hierarchy of measures is an ecological interface across the real world operations of the enterprise enabling alignment and adaptability. The importance of this is illustrated in an interview with a CEO reported in Hamel (2000): ―I used to spend most of my time worrying about the how – how we did things, how we operated, how efficient we were. Now I spend much of my time worrying about the what – what opportunities to pursue, what partnerships to form, what technologies to back, what experiments to start‖ (Hamel, 2000 p.12) Hamel‟s assessment is clear: ―The point is simple. By the time an organisation has wrung the last 5 percent efficiency out of the how, someone else will have invented a new what. Inventing new whats – that‘s the key to thriving in the age of revolution.‖ (Hamel, 2000 p.13) Traceability of actions to strategic policy objectives is critical: it enables strategy and action to align top down and adapt bottom up as actions play out against changes in the strategic environment. To achieve this, the choice of measures will drive policy makers to be more inclusive and even though the processes will become more demanding (Hamel, 2000), the outcome of achieving better balance between alignment and adaptability will be high performance for the enterprise (WEF, 2000). The importance of this is captured in a short and graphic statement of value from an examination of the health system in New Zealand as a complex adaptive system where it was found that, “Bad health policy was more dangerous to [the] patients than the „flesh-eating bug‟ ” (Roberts, 2003). Health is not alone. Similar statements have been made across national security enterprises where policy has been found wanting in the face of counter-terrorism and extensive measures since have been taken in many countries to improve unity of command, collaboration and communication as crucial elements to success. A Systems Approach to Strategy and Execution in National Security Enterprises – 105 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Through this adaptation of Rasmussen‟s (1998) work, a synoptic overview (after Kline, 1995) can be delivered via a hierarchy of measures for a complex sociotechnical enterprise: it helps a CEO address the question, Is the organisation achieving its best possible performance? 4.3.3 Cognitive Approach for Great Results Amid Complexity A cognitive framework for decision making on strategy content and for controlling the process design and execution has already been explored by considering the influence of cognitive systems engineering on strategy theory in chapter 3, Section 3.4. That discussion concluded with the illustration in Figure 3-7, which overlaid a decision ladder (Rasmussen, 1994) onto a model that integrated strategy processes (after Chaffee, 1985) with skill-rule-knowledge based approaches for cognitive control (Rasmussen 1987, Rasmussen et al, 1994). This combination of strategy, systems thinking and cognitive theory details the main functions required in a synoptic overview of an integrated decision making and control process. Theoretically, then, it is possible to incorporate into a methodology a means of providing a synoptic overview addressing the question: how do I as a process designer deliver (and keep delivering) a great result amid complexity? 4.3.4 Typology of Management Problems to Guide Systems Approaches We have previously seen that how problems are defined can itself be a problem (Argyris 1991, 1993) and drives how humans activate their information processing system to solve it (Simon, 1976). In turn, this frequently promotes defensive behaviours in senior executives in a way which blocks learning (Argyris, 1994). The questions what is the problem? and, is it the real problem? are important to gaining a systemically desirable and culturally feasible outcome (Checkland, 1981). The work of Jackson and Keys (1984) in defining the problem space offers a trichotomy of problem typologies. In this most familiar approach, the Jackson and Keys (1984) system of systems methodologies (SOSM) created a classification A Systems Approach to Strategy and Execution in National Security Enterprises – 106 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution system for the nature of the problem context(s) and the available methodologies. They defined the problem context on a grid of two axes: one considering the participant on a scale of increasing divergence in their values / interests; and, the other considering whether the problem was simple or scaled increasingly to complex. The SOSM methodology was later extended by Jackson (1990) to develop a grid of problem contexts which is repeated in Table 4-1. Table 4-1: Jackson‟s extended grid of problem contexts Systems Unitary Simple Complex Simple Unitary Complex Unitary Participants Pluralist Simple Pluralist Complex Pluralist Coercive Simple Coercive Complex Coercive Flood and Jackson (1991) built their Total Systems Intervention (TSI) framework around the extended grid of problem contexts. Yet, while it received much criticism (Jackson 2000) as he forecast it might (Flood and Jackson, 1991), there is inherent value remaining in Jackson‟s extended grid of Jackson and Keys (1984) problem contexts which will be leveraged here. The value of the grid of problem contexts lies in the ability to map and track organisational and management problems as they scale in their systems complexity and in their social difficulty as people diverge in their values / interests. The difficulty of presenting this information in a grid is that boundaries are drawn as problems are categorised. This leads to a loss in the sense of a continuum that existed in Jackson and Keys (1994) concept and leads people to follow their early conditioning and look for the one best solution that fits the problem (when in fact one might not exist). While retaining the original intent, this presentation issue can be redressed by representing the problem domain as three overlapping circles, where the participants‟ views of unitary, pluralist and coercive are represented by one of the circles. Scaling in the diversity of participants‟ views occurs by travel in a clockwise direction from the unitary circle, where the circle boundaries are permeable. The scaling of the degree of complexity occurs from the outer A Systems Approach to Strategy and Execution in National Security Enterprises – 107 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution boundary towards the centre in increasing complexity. Both dimensions are illustrated in Figure 4-4. Simple PLURALIST Complex UNITARY Simple COERCIVE Simple Figure 4-4: Integrated mapping of three problem typologies (after Jackson & Keys, 1994) When the system you are intervening in is a complex enterprise like a national security agency, complex problems at the enterprise level will comprise all three problem typologies. And so, this redrawing of the Jackson and Keys problem typologies indicates that complex problems at an enterprise level will likely require an approach that mixes multiple methodologies, including at least one method from each class of problem typology. Furthermore, problem definitions will move. As Rechtin‟s (1991) heuristic makes clear: ―Don‘t assume the original statement of the problem is necessarily the best, or even the right, one.‖ (p.54) For example, a problem might first be encountered as a unitary problem with well defined boundaries and deteriorate, scaling in both directions concurrently – potentially to a point where a problem spans the organisation. At that point, a problem will have expanded in complexity and in the level of disagreement to cover the whole map of problem contexts while comprising elements which fit one or more of the original categorisations. Some pay disputes fit this description where a disaffected employee finds others equally disaffected. If compounded by poor handling and management of the problem, industrial action ensues (sometimes scaling across multiple employee groups within an organisation or A Systems Approach to Strategy and Execution in National Security Enterprises – 108 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution across organisations where people are sympathetic to the cause). Settlement requires trade-offs between pay, employment conditions, management practices and business processes. For the CEO, all dimensions of the problem must be addressed, requiring an integrated approach. Each salient dimension of the problem space could invoke a particular methodology that is best suited to provide insight. This example has some philosophical underpinning as Jackson (1985) records his understanding of Habermas (1972), ―Disagreement among different [individuals or] groups can be just as much a threat to the reproduction of the socio-cultural form of life as a failure to predict and control natural and social affairs. While work and interaction have for Habermas… pre-eminent anthropological status, the analysis of power and the way it is exercised is equally essential, Habermas argues, for the understanding of all past and present social arrangements. The exercise of power in the social process can prevent the open and free discussion necessary for the success of interaction. Human beings therefore have an ‗emancipatory‘ interest in freeing themselves from constraints imposed by power relations and in learning, through a process of genuine participatory democracy, involving discursive will-formation, to control their own destiny‖ (Jackson 1985, in Midgley 2000, pp.223-224) The issue of power is particularly important in strategy formation. If not managed it can halt progress for many years as witnessed in the Australian Department of Defence (Edwards, 2006). From the author‟s own experience, the exercise power at a strategy level can be easily abused and have a completely destructive influence on those involved. Yet, managed well, the process designer has an opportunity to get people to act as if they are „owners‟ and maintain the best interests of the enterprise. The representation of the problem-context in a Venn diagram attempts to include the issue of power by intersecting the coercive domain with the other two. It also establishes a previous non-existent boundary between „coercive‟ and „unitary‟ problem contexts. The suggestion is that, just as people can disrupt a process by disagreement (moving from unitary to coercive), they can also smooth a process by reaching agreement or compromise and so move the problem context from coercive to unitary. As such, this representation offers a more complete canvas for mapping the Jackson and Keys (1984) problem contexts while retaining compliance with the Warfield‟s (1999) laws of triadic compatibility and requisite A Systems Approach to Strategy and Execution in National Security Enterprises – 109 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution parsimony. Using this framework to exploration the validity of an initial problem definition helps the process designer to address the questions what is the problem? and is it the right problem? 4.3.5 Available Systems Methodologies to Address Complex Problems In shifting the mapping of problem contexts from a grid to a Venn diagram, intuitively it appears sensible to do the same when mapping the systems methodologies available to address them. Jackson (2000) presents his preliminary classification of systems approaches in a grid as shown in Table 4-2. Table 4-2: Jackson‟s (2000) preliminary classification of systems approaches Systems Unitary Hard Systems Approaches Participants Pluralist Soft Systems Thinking Coercive Emancipatory Systems Thinking Simple Organisations as systems Complex Organisational cybernetics Soft Systems Thinking Emancipatory Systems Thinking The same issues with a grid presentation arise as in the consideration of systems approaches, where the temptation is to „lock on‟ to the nominated approach and be bounded by that. In constructing a trichotomy of approaches in Figure 4-5, the author has sought to align three systems approaches with the problem contexts: a rational approach with unitary concerns; an interpretive approach with pluralist concerns; and, a critical systems approach with coercive concerns. At the core, methodological pluralism leads to a diversity of new approaches (Midgley, 2000). A Systems Approach to Strategy and Execution in National Security Enterprises – 110 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution INTERPRETIVE APPROACHES DIVERSITY of APPROACHES Systems Sweet Spot RATIONAL APPROACHES CRITICAL APPROACHES Figure 4-5: Conceptual presentation of diversity of approaches Midgley (2000) argues that ―…it is impossible for any approach to methodological pluralism to be metaparadigmatic given that it must inevitably make assumptions that are alien to, and incommensurate with, assumptions made by the proponents of the various paradigms that methods are drawn from. Far from being meta-paradigmatic, [Midgley] suggest[s] that those engaging in methodological pluralism are trying to establish the foundations for a new paradigm‖ (Midgley 2000, p.248, bold type added) Midgley (2000) relates Brocklesby‟s (1997) presentation of the defining feature of this approach which ―…is that it can dissolve the competing objective-subjective duality of the original paradigms by incorporating these perspectives within a broader ontological framework. … [P]utting various methodologies to work in support of this new paradigm is desirable because it provides a way of avoiding having to choose between… the… existing paradigms, or having to constantly adjust one‘s assumptions as one moves between them. This option… provides the authority to throw away the old rule books and play by new rules. The new rules circumvent the need to be constantly adjusting one‘s philosophical position depending on which methodology or technique is being used at any moment in time, which, as we have seen, can create difficulties.‖ (Brocklesby 1997, p.211 bold type added) In essence then, the intervener(s) are designing their own pluralist approach to dealing with the complex problems of their complex enterprise. To prevent new paradigms falling to chaotic free-for-all, the challenge is to keep the theory and practice close together (Checkland, 1981). As cognitive human beings, we create the codes by which we live (Beer 1980, Maturana & Varela 1980) and, different individual codes often become a source for coercive problem contexts arising. Creating the foundations of new thinking for a complex systemic intervention is therefore likely to drive differences of perspectives on strategy process. A Systems Approach to Strategy and Execution in National Security Enterprises – 111 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution As individual differences arise, it is possible for them to be reflected up the sociological scale to the point where nationality influences organisation theory (Hofstede, 1996). A pathway to success involves participatory engagement (Taket & White, 2000), particularly where multiple agencies are working together – for example, in national security causes. The goal is adaptation to achieve fit, balance and compromise (Rechtin 1991, 2000) – to understand skills, rules and knowledge and the mental models that each works from (Rasmussen 1987, 1994) and, through participatory engagement (Taket & White, 2000), create new knowledge (Drucker, 1995) and use it in new mental models (Rasmussen 1994, Rechtin 2000). Jackson (2000) observes the real value of critical approaches is to make us aware of the difficult questions, ―there was a time when systems thinking sought unlimited knowledge but that time has passed. Critical systems thinking is about constantly reflecting on the limitations and partiality of our understanding … [I]t recognises that an understanding of any …measures of improvement can only come about through a theoretical awareness of the ―paradigms‖ from which they emerge and within which they make sense. And, of course, these paradigms, and so the measures of improvement, can offer contradictory guidance. When should effectiveness be sacrificed for empowerment? Critical systems thinking makes us aware of such difficult questions.‖ (p.424). So, what becomes of the functionalist, interpretive, emancipatory and postmodern approaches presented in Jackson (2000)? As labels for groups of approaches, they may remain; however, the author has incorporated them under a different nomenclature. The hard systems approaches that typify the functionalist approaches (Jackson, 2000) are classified as rational approaches. The category of interpretive approaches assumes the same term. The category critical has been used to combine emancipatory and post-modern approaches. Within the critical paradigm, where learning-by-doing characterises the available approaches, the roles and styles of facilitators (Taket and White 2000) will influence the outcome as they are a crucial part of the system and the system intervention (Midgley 2000). The concern of TSI is that it “leads to the privileging of methods which are verbally based and that this can hinder the participation of some groups” (Jackson, 2000). A Systems Approach to Strategy and Execution in National Security Enterprises – 112 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Once again, this suggests evidence of a tendency even among critical systems thinkers to apply a preferred approach within their preferred operating paradigm (after Mitroff, 1985), yielding further problems from which people wish to be emancipated. It is illustrative of the difficulty in achieving paradigm diversity. At a macro level, the systems approaches map onto the rational, interpretive and critical paradigms as shown in Figure 4-6. INTERPRETIVE Soft Approaches Cybernetic Approach DIVERSITY of APPROACHES Fit + Balance + Compromise ? Emancipatory Approach RATIONAL Hard Approaches CRITICAL Heuristic Approaches Knowledge Systems Diagnostics Figure 4-6: Conceptual representation of inter-relationships among systems approaches The evolution in the diversity of systems approaches is consistent with the travel in a clockwise direction from the rational, hard approaches. The evolution is described well in Midgley (2000) as three waves of systems thinking that map similarly in this direction. Hard systems: using a functionalist approach, systems are viewed as objects akin to complex technical systems and the tools of complex technical systems analysis, operations research and systems engineering feature. These approaches have their place in supporting even „softer‟ social issues. For example, one can decide how to develop an optimal system of aged care but as soon as the constraint of a fixed monetary value is applied by Government, hard decisions have to be made with the support of hard systems approaches. For all the insight that hard systems approaches provide into the detailed complexities of technical and ecological systems, they ―…fell into the trap of making recommendations for change without properly involving those who would be affected by, or would have to implement, that change‖ (Midgley 2000, p.191) A Systems Approach to Strategy and Execution in National Security Enterprises – 113 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Cybernetic: cybernetic approaches explore the ability of the enterprise to selforganise (Beer, 1966) where ―…the totality of the organisation ought to be made up of building-blocks that will be called quasi-independent domains. This is the compromise notion lying between actually independent domains (decentralisation) and no domains at all (centralisation). These domains have a certain local autonomy and may (in their own language) claim to be altogether autonomous. But they are not autonomous in the metalanguage of the whole system, which monitors their activity according to the laws of cybernetics‖ (Beer, 1966). This existence of a macro level of control and a „freedom of manoeuvre‟ within constructed boundaries separates cybernetic approaches as a hybrid of both rational and interpretive approaches. Cybernetic approaches such as Viable System Modelling (Beer, 1981) offer useful diagnostic and forecasting tools for organisational systems and the operation of their component systems relative to the whole and are also capable of proposing ways to improve the system. Interpretive: interpretive approaches expanded the available systems methodologies by addressing the fact that people develop their own goal-seeking behaviours, acting individually which may differ from the behaviours needed to attain organisational goals (Midgley, 2000). Interactive planning (Ackoff, 1981), Strategic Assumption Surfacing and Testing (Mason & Mitroff, 1981), and Soft Systems Methodology (Checkland 1981, Checkland & Scholes 1990) are some of the approaches which have demonstrated significant success in interpreting the real world, making sense of it, especially with a view to managing relationships with those participating in or affected by a systemic intervention (Checkland & Holwell, 1998). Emancipatory: all emancipatory approaches “are suspicious of the current social order and seek to radically reform it… [seeing] society, as presently constituted, as benefiting some groups at the expense of other groups which are suffering domination or discrimination” (Jackson, 2000). Emancipatory approaches to address this and are adaptive within an intervention to “account sufficiently for power relationships within interventions, and/or conflicts built into the structure of society” (Midgley, 2000). In that sense they offer an evolutionary adjunct to A Systems Approach to Strategy and Execution in National Security Enterprises – 114 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution soft approaches and a „lens‟ through which new perspectives can be obtained on the utility of interpretive or adaptive approaches. Critical: post-modern systems approaches consider life as “a complex of continuously changing patterns made up of the incidents of life… characterised by change, novelty, order and disorder” (Jackson, 2000) and these form the core of the domain of „critical‟ approaches. The concept behind post-modern approaches is one of critically questioning “received opinion and accepted ways of doing things … [with a view to] disrupting real-world problem situations” (Jackson, 2000). Interventions are conducted in a heuristic manner to “reveal who is marginalised by existing power/knowledge structures … [and ensure] conflict is reclaimed and diversity and creativity are encouraged” (Jackson, 2000). Critical approaches that capture individual and group perspectives on the sharing of power, authority and knowledge help the intervener to understand how the performance of an enterprise is influenced by these factors. In the context of improving execution, the goal of dissolving problems (everyone „wins‟) rather than solving them (everyone compromises) is a concept for not only improving higher performance but sustaining it because the issue, once dissolved, is less likely to rise again. The use of a narrative as a form of analysis is one method enabling participants to take a similar exploratory path and enable reflection and critique of their experience (Taket and White, 2000). Similar approaches have been taken in the strategy literature where, for example, 3M has used „strategic stories‟ as a means of creating and conveying strategy (Shaw et al, 1998). In the context of strategy formation a capability for post-modern approaches for contesting the status quo is critical for the survival and growth of an enterprise in its management of growth over three horizons concurrently (Baghai et al, 2000). The important outcomes are for an organisation to create its own future (Hamel and Prahalad, 1994) and so, too, the individuals within it (Beer 1980, Maturana & Varela 1980). A Systems Approach to Strategy and Execution in National Security Enterprises – 115 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Knowledge Systems Diagnostics11: to complete the circle in the evolution of systems thinking that is illustrated in Figure 4-6 (but by no means the final element in the evolution of systems thinking) is the intersection formed between the critical systems approaches and the rational approaches. Perhaps due to the way the systems literature has been presented, this domain appears not to have been explored, yet it would appear important as one seeks to identify and secure the learning achieved along the evolutionary path in order to improve the order, regulation and body of knowledge that is associated with rational approaches. The concept of “knowledge systems diagnostics” seeks out new methods for updating the body of knowledge an organisation uses to define their concepts for current and future operations, their belief systems and the „way things are done around here‟: ―Instead of focussing exclusively on the a priori concepts and systems ideas of individuals, one needs to understand the formative elements that make it possible for them to say and think new things within specific business contexts. How is the new knowledge created or adopted by an organization? What are the sources of the generation and regulation of knowledge? What rules underlie such generative or regulative processes? Why are some concepts and systems ideas adopted and circulated for conversation, while others are discounted and never established as guides for action?‖ (Topp 1999, in Jackson 2000, underline added) The value it places on the contestability of the status quo, the questions guiding the intervention and its desire for the results of the intervention to be new knowledge recorded as regulation, rules and guides for action situate the knowledge systems diagnostics clearly in the intersection of the critical and rational systems approaches. To gain sufficient understanding in the organisation for new knowledge to become established as a guide for action demands a process of organisational learning (Argyris, 1993). He argues that learning occurs “when we detect and correct error, [that is]... a mismatch between intentions and results,” and “when we produce a match between intentions and results for the first time” (p3) and: ―… discovery of a mismatch is only a first step in learning. Additional steps occur when the error is corrected in such a way that the correction perseveres. Furthermore, there are at least two ways to correct errors. One is to change behaviour (for example, reduce back-biting and bad-mouthing among individuals). 11 The name adopted from Topp (1999) who led early phases of research in this domain. A Systems Approach to Strategy and Execution in National Security Enterprises – 116 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution This kind of correction requires only single loop learning. The second way to correct errors is to change the underlying program, or master program, that leads individuals to bad-mouth others even when they say they do not intend to do so. This is doubleloop learning. If actions are changed without changing the master programs individuals use to produce the actions, then correction will either fail immediately or will not persevere‖ (Argyris 1993, p.50) Argyris‟s concept of an “underlying program, or master program,” aligns with systems at level-5 complexity in the Boulding hierarchy. Key characteristics include the blueprinted growth from the plant metaphor, which roughly translated, accounts for „indoctrination‟ and training for ingraining, within individuals, „innate‟ or early-conditioned, autonomic behaviour patterns that, for example, define a collective Service (or Defence agency) and maintain group dignity and esprit de corps. In Defence, as in many organisations, much attention is given to capturing „lessons learned‟. These are invariably recorded. And, they invariably become lessons to be learned again. These are inherently difficult systemic matters to change and lend support to Argyris‟s (1993) claim that taking corrective actions without changing the “master programs” (presumably with the support of critical systems methods) will lead to the correction failing. The challenge for the class of systems approaches referred to here is to ensure the lessons learned from experiments, exercises and operations have the effect of changing the current doctrine and training. In effect, the feedback loop needs to shift from a static record to a dynamic interaction with the current rules and procedures. It is this challenge to operationalise the feedback loop that is most pressing (Manton, 2009). In which case, the current nomenclature of Knowledge Systems Diagnostics may not be most appropriate for describing the field of theory and practice covered in the overlap between the rational and critical approaches addressing unitary and coercive problems. The author leaves this for the next researcher in the field to suggest a better alternative to Knowledge Systems Diagnostics. Diversity of Approaches: consistent with the unifying “adaptive whole system” metaphor of the organisation as a living system, greatest diversity in any multimethod approach is to be found in the whole construct of the Venn diagram in Figure 4-6. And that, when dealing with whole of enterprise issues, it is likely A Systems Approach to Strategy and Execution in National Security Enterprises – 117 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution that elements of all of the three primary categories of approaches will be required in different measures according to the intervention being guided by how the perceived problem is first defined and then refined throughout the intervention. 4.3.6 Mapping Systems Approaches to Management Problems In building a replacement presentation to Jackson‟s (1990) expanded grid of problem contexts, Figure 4-6 is overlaid with the mapping of the problem contexts in Figure 4-4 to form a new representation of systems problem-contexts and systems approaches, which is illustrated in Figure 4-7. INTERPRETIVE Soft Approaches Simple PLURALIST Cybernetic Approaches Emancipatory Approaches Complex UNITARY RATIONAL Hard Approaches Simple COERCIVE Simple CRITICAL Heuristic Approaches Knowledge Systems Diagnostics Figure 4-7: Mapping of systems approaches to problem-contexts The evolution of the systems approaches over the last 50 years has contributed to an organic whole, where the cycle of development has arisen in search of answers to perceived problems with the previous waves of systems thinking (after Midgley, 2000). True to Descartian form, the evolution of western processes for systems-thinking was dominated by the „science‟ of the rationalist approaches, then advanced by the „art‟ forms of the soft interpretive approaches. The dichotomy of art versus science is deeply entrenched in management discussion and approaches. And, the fit, balance and compromise between them are only achieved with the evolution of systems approaches to address the coercive problem contexts that arise. A Systems Approach to Strategy and Execution in National Security Enterprises – 118 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution The number of methods available from the earlier generations of systems approaches well exceeds the number of systems methodologies available from the later generations, particularly the post-modern approaches that identify and explore coercive problem contexts. While this domain is still relatively young, offering more methods than methodologies, systems interveners ignore the issues of power, authority and knowledge sharing at their peril because ―…as groups become more committed to their own goals and norms, they are likely to become competitive with one another and seek to undermine their rivals‘ activities, thereby becoming a liability to the organisation as a whole. The overall problem, then, is to establish collaborative intergroup relations in those situations where task interdependence or the need for unity make collaboration a necessary prerequisite for organisational effectiveness.” (Schein 1980, in French et al 1994) Midgley (2000) has argued for methodological pluralism, drawing on ―…methods from other methodologies and reinterpreting them through our own methodology. This means that, if we are using a systems methodology, even methods developed outside systems paradigms can be used as part of a systemic intervention‖ (Midgley 2000, p.215). The challenge now is to draw on methods from other methodologies and reinterpret them through a systems framework. 4.3.7 Available Strategy Methods to Address Complex Problems When discussing the systems approaches in section 4.3.5, occasional reflections have been made to points of interest from the strategy literature. In view of the progress made in chapter 3 towards developing an integrated strategy framework (after Chaffee 1985), it is worth pausing for a moment to reflect again on the new construct as shown in Figure 4-8. A Systems Approach to Strategy and Execution in National Security Enterprises – 119 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution INTERPRETIVE PROCESSES Judgement Forecasting Cognitive Control and Decision Making RATIONAL PROCESSES Calculation Backcasting Lessons Learned ADAPTIVE PROCESSES Expertise Figure 4-8: Strategy based approaches In particular,  rational processes apply explicit knowledge about what „is‟ and what „was‟ to calculate new knowledge,  interpretive processes enable participants to imagine a future and apply judgement based on an accrued understanding of the value, costs and risks arising to determine strategic direction and courses of action, and  adaptive approaches apply explicit and tacit knowledge about what is known to work to learn what could work better in future. The use of the same Venn diagram in defining an integrated strategy framework, problem contexts, systems paradigms and systems approaches has been a deliberate attempt to provide a shared framework of trichotomies that enables cross referencing. As yet the alignment among these has been at least inferred if not formally made. Comparison is made in Table 4-3 of the alignment between the seven elements of each of the trichotomies established for problem contexts, systems approaches, strategy approaches and decision making/control. A Systems Approach to Strategy and Execution in National Security Enterprises – 120 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Table 4-3: Comparison of trichotomies formed in the problem contexts and approaches Problem Context Unitary Unitary/ Pluralist Systems Approach Rational Cybernetic Strategy Approach Rational Forecasting Decision / Control Rule based N/A Remarks Generally aligned: Normative, closed system approaches to suit formed goals Generally aligned: Applying judgement to calculation to explore what we don‘t know of a problem context based on what we do know at multiple elemental levels Generally aligned: Applying soft approaches drawing on judgement of individuals dynamically operating mental models to suit the context Generally aligned: Applying the expertise of individuals to influence pluralist judgement and effect changes to the status quo Generally aligned: Transactional approaches to draw out tacit knowledge in a participatory manner to build a store of critical heuristics for skill-based control in decision making, with a view to dissolving coercive problems and building a shared future Generally aligned: Codifying and capturing new knowledge (particularly cultural knowledge) to create new concepts of operations, rules and guides for action Generally aligned: Common challenge to find the fit, balance and compromise across approaches to resolve complex problem contexts in a time sensitive manner Pluralist Interpretive Interpretive Knowledge based Pluralist/ Coercive Coercive Emancipatory Backcasting N/A Critical systems Adaptive / transactional Skill based Coercive/ Unitary Knowledge Systems Diagnostics Paradigm diversity Lessons learned N/A Unitary/ Pluralist/ Coercive Cognitive control and decision making Shortcuts from formative rules and heuristics On the face of this high-level comparative assessment, there appears sufficient alignment exists across the board to enable the completion of a theoretical construct that brings these various pieces together into an integrated whole. A deeper consideration is first required, however, particularly exploring the degree to which the perceived alignment between the strategy and systems approaches to is valid, particularly in coercive problem contexts. And then, there is the issue of the „paradigm problem‟ (Midgley, 2000). As these operate from different paradigms with different assumptions, it raises the philosophical problem that if methodologies with different philosophical and theoretical assumptions are to be mixed or brought together in a framework, that action has to be justified at the level of philosophy (Midgely, 2000). These two issues are addressed in the next section before then considering an integrative approach to deliver results. A Systems Approach to Strategy and Execution in National Security Enterprises – 121 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution 4.3.8 Critical Systems Thinking, the Paradigm Problem and How it is Addressed The introduction to this chapter opened with Midgley‟s (2000) argument for “pluralism at the methodological level…[and] at the level of methods, meaning that we can draw on methods originally produced within other methodologies and reinterpret them through our own methodology” (p.215). This influenced the author to draw into a systems-methodology methods developed outside systems paradigms (after Midgley, 2000). In doing so, the degree of alignment between the problem domains and the strategy and systems literatures has been explored. Both literatures have identified rational and interpretive approaches for addressing unitary and pluralist problem domains respectively. The assumptions in these approaches do not transcend a psychological barrier to moving between the strategy and systems literatures. A „hard‟ approach in the strategy literature has similar assumptions to „hard‟ approaches in the systems literature – problem domains are well defined as if an organisation were a set of „mechanical parts‟ that are goal seeking and could be modelled mathematically. Management science and operations research communities grew closer over time and in the mid-1990s the two professional societies representing them merged into one larger unit having recognised that “both communities have very similar, if not identical, interests” (Midgley, 2000). The management and systems communities both use the same „interpretive‟ term to describe the category of „soft‟ approaches that address the pluralist problem domain. And again, the assumptions in the strategy and systems approaches to this problem domain do not transcend a psychological barrier to moving between the strategy and systems literatures. Both build a set of approaches on the assumptions that not everything can be counted. Social issues require insights from qualitative approaches to gain subjective understanding of human needs of individual and collective levels, where “individuals with their own goals …may or may not harmonise with wider organisational priorities” (Checkland 1981, Midgley 2000). Approaches commonly use metaphors and symbols for the A Systems Approach to Strategy and Execution in National Security Enterprises – 122 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution purpose of “conceptualizing and guiding individual attitudes of organizational participants” (Chaffee, 1985). In their approaches to the rational and pluralist problem domains, the major differences between the strategy and systems literature is that the strategy literature offers a collection of methods, while the systems literature offers a deeper philosophy with a collection of methodologies and supportive methods. The systems scientist has developed greater rigour in building a philosophy and theoretical framework of ideas behind their methodologies that appears largely absent in the strategy literature. The management literature on the other hand has focussed on practical methods to address practical problems, and yet they remain in search of an integrated framework to deliver the systemic reach for their methods to provide deeper insights into managing complex enterprises. In seeking to construct an integrated framework around systems methodologies, this thesis aims to make best use of the available methods in both literatures. In the rational and pluralist problem domains, the author claims sufficient alignment between the literatures to continue. Thus, we come to the coercive problem domain. In this domain, the two literatures use different names for their approaches. The strategy literature uses the terms such as „adaptive‟ (Chaffee, 1985), „transactive‟ (Hart, 1992) and „learning-based‟ (Argyris 1991, van der Heijden 1996) to describe the group of approaches that aim to resolve problems that have deep cultural and/or political and/or power dimensions. Multiple methods have been developed and codified in the strategy literature to help practitioners develop their own approaches to strategy and execution. These have been categorised by Mintzberg et al (1998) into the learning, power and cultural schools. “The learning school introduced power and politics into the discussion whereas the first four schools12 ignored it." The power school however “takes the gloves off”. Recognising that “power relations surround organizations… [and that] they can also infuse them”, strategy can be enacted as The first four schools discussed in Mintzberg et al (1998) are: the design school, planning school, positioning school and the entrepreneurial school. The authors also present the cognitive school before their discussion on learning, however, the cognitive school was as a supplier of theory instead of practical learning for management. 12 A Systems Approach to Strategy and Execution in National Security Enterprises – 123 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution “an overt process of influence, emphasising the use of power and politics to negotiate strategies favourable to particular interests“ (Mintzberg et al, 1998). ―Hold power up to a mirror and the reverse image you see is culture. Power takes the entity called organization and fragments it; culture knits a collection of individuals into an integrated entity called organization. In effect, one focuses primarily on selfinterest, the other on common interest. So, too, the literature of what we are calling the cultural school – strategy formation as a process rooted in the social force of culture – mirrors the power school. While one deals with the influence of internal politics in promoting strategic change, the other concerns itself largely with the influence of culture in maintaining strategic stability, indeed sometimes in actively resisting strategic change.‖ (Mintzberg et al, 1998, p.264) Whether these schools are considered in the micro sense (with individuals or small groups inside an organization) or in the macro sense (by the organisation), the focus of the strategy literature is on power and coercion applied in a transactional, learn-by-doing manner to shape the environment or respond to changes within it. In the systems literature, Critical Systems Thinking (CST) evolved to give focus on the issues of power and coercion, which the previous „waves‟ of systems thinking had not adequately addressed (Jackson 2000, Midgely 2000). CST also embraces the concept of methodological pluralism and how better use could be make of “the great methods in a pluralist intervention practice” (Midgely, 2000). This appears on the face of it a major differentiating factor in the systems literature. The critical systems theorists have set themselves two goals within the one paradigm as they seek to address complex problems where power and coercion are at play. They also seek a way of combining in use paradigms providing potentially incompatible versions of the nature of reality. Each goal is complex in its own right. Perhaps because of this extraordinary challenge, their struggle has generated “a paucity of systems methods in the face of coercion” (Midgely, 2000). It is this duality of purpose which, on the face of it, sets up a psychological barrier to aligning the goals and principles of critical systems thinking with those of the strategy community. The strategy literature does not have a direct equivalent to critical systems thinking. Rather it spreads the burden of the two goals of critical systems thinking across several schools – the learning, power and cultural schools to A Systems Approach to Strategy and Execution in National Security Enterprises – 124 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution address power and coercion, and the configuration school to attempt the mixing and integration of methods into a consolidated and meaningful whole. Having previously addressed the strategy approaches to power and coercion, the next stage of the discussion focuses on the configuration school. ―There are two main sides to this school… one describes states – of the organization and its surrounding context – as configurations. The other describes the strategy process – as transformation. These are really two sides of the same coin: if an organization adopts states of being, then strategy making becomes a process of leaping from one state to another. In other words, transformation is an inevitable consequence of configuration. There is a time for coherence and a time for change… [making strategy] not about change at all, but about continuity – whether as a deliberate plan to establish patterns of behaviour or as emergent pattern by which such patterns get established‖ (Mintzberg et al, 1998). While this school has generated more in its research agenda than any other school in the strategy and management literature, “in the 1990s, the field became more eclectic, with all other schools gaining in importance” (Mintzberg et al, 1998). As Mintzberg et al (1998) admit, they wrote Strategy Safari as a review of a field and presented their work in ten categories because it not only makes it easier to read, it also represents the „lumpiness‟ of the field since the 1970s. The field has been driven heavily by the influence of academic writers and consultants who “chop up reality for their convenience, in some cases using one part…while ignoring the rest…[and so] the nuances get lost” (Mintzberg et al, 1998). This led the authors to ask and answer a critical question of their endeavour: ―Why then write this book (other than for the historical record)? Why not leave the field to the splitters, who weave together all the nuances? Because they do not seem to have the necessary impact, at least on practice. It is not that managers do not appreciate nuance – these people live nuance every day. Rather, like the rest of us, they seem to understand the world more easily in terms of categories, at least initially. Categories strike us all more sharply. The nuances can follow. The trick, of course, is to make use of this simplicity while distrusting it …We all have to appreciate the categories and we have to get beyond them.‖ (Mintzberg et al, 1998, bold type added for emphasis) 13 So the strategy and systems literatures have a way to go to resolve the critical systems thinking challenge. We have found in the strategy literature, those who would integrate methods in a nuanced manner are having little impact on 13 Whitehead (1920). A Systems Approach to Strategy and Execution in National Security Enterprises – 125 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution shaping practice. And then, in the systems literature that “critical systems thinkers are battling, in a way that the strategy writers are not, with the notion of combining in use paradigms providing potentially incompatible versions of the nature of social reality” (Jackson, 2009). Strategy practitioners might argue they are battling in a way that critical systems thinkers are not by doing what they can with what they have available, given the pressures of businesses to succeed and sustain themselves in a complex world. In a way, they are „trying their luck‟ in an experimental, learn-by-doing manner addressing unitary, pluralist and coercive problem contexts using rational, interpretive and adaptive methods. Risky as this might be in attracting criticism of being “theoretically contradictory eclecticism” (Midgely, 2000), strategy practitioners must continue work from their roots in practice while, concurrently, the critical systems thinking community builds theory and practice seeking to have greater impact on strategy and execution. As a leader of a systems intervention for strategy and execution, I have chosen to get beyond the paradigm problem in a pragmatic manner, seeking to enhance the application of systems methodologies to strategy and execution in this thesis rather than take up the deeper philosophical endeavour facing the critical systems thinking community. In doing so, I have adopted Midgley‟s (2000) pragmatic approach to the paradigm problem that advances the theory and practice of systemic intervention: ―Far from being meta-paradigmatic, I suggest that those engaging in methodological pluralism are trying to establish the foundations for a new paradigm. Of course, pluralists can still learn from other paradigms (Gregory, 1992), but this learning is always geared to the enhancement of one‘s own paradigmatic position – there is no pretence that other people‘s methodological ideas are used in exactly the manner that their creators intended. It is because I do not believe the paradigmatic thinking can be transcended that I stress the mixing of methods, not methodologies… We can learn from other methodologies to aid the on-going construction of our own, and we can detach methods from their original methodological principles in order to use them in new ways (seen through the eyes of our own methodology). This is now a widely accepted way of thinking about methodological pluralism in both the CST and operational research communities. Clearly, this argument addresses the paradigm problem: there is no need to claim that we are operating across paradigms – we just have to acknowledge that we are setting up a new position which encourages learning about ideas from other paradigms, but re-interpreted in our own terms‖ (Midgely, 2000, p.248). A Systems Approach to Strategy and Execution in National Security Enterprises – 126 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution As an individual cannot give birth to a paradigm, it can only become so when the individual‟s ideas have become widely accepted (Tsoukas 1993 in Midgely 2000): ―Individual agents can establish virtual paradigms…which might be temporary (like a working hypothesis or model) or be developed over the longer term‖ (Midgely, 2000)‖ In now setting up a working model as a virtual paradigm, the aim – as with Midgely (2000) – is to establish a model of learning to gain further insights into the field of ideas for a systems approach to strategy and execution, the utility of the methodologies and their application to different areas of concern. I must then leave it to others in the strategy and systems communities to consider whether this model for a systems approach to strategy and execution accrues wider consensus. 4.3.9 An Integrative Approach to Deliver Results Having considered theoretical definition of the problem contexts and constructs for systems and strategy methods, the question remaining is: what approach will bring together the right combination of people, processes and tools to deliver a great result? In bringing the pieces together into a theoretical form for a structural view in Figure 4-9, the author has preferred instead to use the language of the strategy and management community where it is broadly applicable, with a view to achieving a fit of the systems literature with the strategy literature, a balance between the two, and some compromise in terms of the language. A Systems Approach to Strategy and Execution in National Security Enterprises – 127 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution INTERPRETIVE Soft Approaches Simple PLURALIST Cybernetic Approaches Complex Problem Emancipatory Approaches  Methodology Mixing methods UNITARY RATIONAL Hard Approaches Simple ? COERCIVE Simple ADAPTIVE Heuristic / Learning Approaches Knowledge Systems Diagnostics Figure 4-9: Theoretical construct for addressing complex problems by mixing methods My consulting experiences with many senior executives have drilled into me the importance of framing ideas within their language set so as not to overburden them when bringing new ideas to bear on old problems. So, too, it seems that the services of the systems literature to the strategy and management community will be better received if it developed and used a library of common terms. To that end, the terminology of the strategy community (as the user of systems approaches) has been used where sufficient alignment exists as shown in Table 4-3. The main difference lies in the use of the term adaptive in exchange for the term critical to describe the set of approaches commonly known among systems theorists as critical systems thinking. Preference for the term adaptive is twofold. First, it is a term in the strategy literature aligned with the transactional use of learning / skill-based approaches to draw out tacit knowledge in a participatory manner (after Chaffee 1985, Hart 1992), building a store of critical heuristics for skill-based control in decision making (after Rasmussen, 1994), with a view to dissolving coercive problems and building a shared future. Secondly, as a systems term, it references a major emergent property of the critical systems paradigm. Namely, that learning occurs through a process of critical enquiry where the organisation adapts its framework of decision rights and authority, and its responsibilities and knowledge-sharing to improve the fit and balance A Systems Approach to Strategy and Execution in National Security Enterprises – 128 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution between the elements of its system of strategy, organisation, execution and control. Through compromise with extant holders of power and influence, an organisation adapts to improve the whole system. The term critical systems thinking may be better applied to the whole framework currently under construction because all systems thinking across all approaches is critical (using both senses of the word – crucial/urgent and challenging) especially of the status quo, if mankind is to address the magnitude and complexity of the management and social problems facing us and achieve some acceptable measure of success. 4.3.10 Integrated Strategy Framework built on Systems Theory A theoretical basis for an integrated strategy framework can now be constructed by combining the theoretical systems components discussed in Sections 4.3.2 to Error! Reference source not found.. Combining the theoretical components within a simplified construct (previously illustrated in Figure 3-10 and Error! Reference source not found.) can now be shown as a whole in Figure 4-10. The connections become visible between different theoretical constructs for how a system of measures drives performance, how problem contexts are considered and defined, and how available systems and strategy methods might be combined into a systems approach. Strategy Content and Execution Simple Adaptability Alignment PLURALIST Decision (Content) High Performance Real World Outcome INTERPRETIVE PROCESSES for Strategy Formation  Judgement KNOWLEDGE-BASED CONTROL of Strategy Process GOALS Complex UNITARY Simple COERCIVE Simple Evaluate Options OPTIONS GOAL CHOSEN Predict Consequences Forecasting STATE TARGET Backcasting Process Execution Considered Problematic? Process Design Identification Choice of Task RATIONAL PROCESSES for Strategy  Calculation RULE BASED CONTROL of Strategy Process INFORMATION TASK Cognitive Control Process ADAPTIVE PROCESSES for Strategy  Expertise SKILL-BASED CONTROL of Strategy Process PROCEDURE Problem Definition Observation Heuristics, Shortcuts Planning ALERT Lessons Learned Integrated Strategy / Execution Process Systems World INTERPRETIVE Soft Approaches Options: Methodologies / Methods Activation Execution Simple PLURALIST Cybernetic Approaches Complex Problem Emancipatory Approaches Strategy Processes Decision (Control Process) INTERPRETIVE PROCESSES Judgement Forecasting Backcasting Cognitive Control and Decision Making Lessons Learned Systems Approaches INTERPRETIVE Soft Approaches Cybernetic Approach PARADIGM DIVERSITY Fit + Balance + Compromise ? Emancipatory Approach  MetaMethodology UNITARY RATIONAL Hard Approaches Simple ? COERCIVE Simple ADAPTIVE Heuristic / Learning Approaches RATIONAL PROCESSES Calculation ADAPTIVE PROCESSES Expertise RATIONAL Hard Approaches CRITICAL Heuristic Approaches Knowledge Systems Diagnostics Knowledge Systems Diagnostics Figure 4-10: Theoretical foundations for an integrated approach to strategy & execution A Systems Approach to Strategy and Execution in National Security Enterprises – 129 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Starting with a premise that strategy and execution is about design and action for achieving high performance, a common theoretical basis is shown to exist for mapping problems and methodologies and mixing them in a structural framework that is consistent with the characteristics of the problems and the available methodologies. The issue to be addressed now in section 4.4 is how to translate this theoretical construct into practice. 4.4 Preliminary Design – Construction for Systems Practice This section begins with a general assessment of systems practice and then selects appropriates methodologies/methods to deliver an integrated framework. 4.4.1 General Assessment of Systems Practice A summary assessment of selected systems approaches is summarised in Table 4-4. Jackson (2000) and Midgley (2000) have been used as major references in the construction of the account. A Systems Approach to Strategy and Execution in National Security Enterprises – 130 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Table 4-4: Summary assessment of selected systems approaches / methodologies Systems Approach Ackoff‘s social systems sciences / interactive planning Action research Dominant Approach Interpretive Remarks On the science: objectivity can only be approached by groups of individuals with diverse values. On the practice: Facilitates involvement of all stakeholders to generate creativity and consensus. A systemic intervention based on testing theories in action, enabling emphasis to be placed either on theory or action. In an interpretive setting, it introduces a means to conduct research even though the interventionist is influencing the situation being investigated. A theory of living processes providing useful insights into concepts of unity and co-production when designing processes but not it is not a methodology or meta-methodology per se. A foundation principle to be observed in the design of a methodology and a critical systems practice in implementing interventions in enterprises which are complex socio-technical systems, enabling problems within problems to be defined and managed concurrently with different methods/methodologies. Based on a paradigm of learning focused on design using mental models of the participant observers to construct conceptual models test-able in the real world. Appears relevant to the design and control of a methodology if such is defined as the system of interest. Based on the development of world views through dialogue, it introduces concept of weltanschauung as a definitive primary element of social systems interventions, later integrated into Checkland‘s SSM. Established by Habermas (1984) as an approach to achieve rational debate of an issue from a wider context of three worlds: the external natural world, the social and internal worlds. Cybernetic concepts applied to engineering, knowledge and social systems offer useful insights to management of that class of systems where control is exercised within a closed loop, which may exist as a productive component of a larger system. Meta-methodological theory and practice which improves the research method as well as the real-world problem. As it embraces rational, interpretive and critical systems approaches it is the view of the author, a term better applied to the whole integrated framework currently under construction. As it currently stands in the literature, critical systems thinking embodies the intent of integration for a holistic approach to ‗wicked‘ problems yet offers a limited synthesis for how this might generally be considered or designed – see also TSI below. An approach linked to the concept of boundary critique used to explore and justify boundaries (and if and how they might be varied). Through debate in two modes of what ‗is‟ and what ‗ought to be‘ boundary critique is linked to values (Ulrich, 1983). Helpful complement to CATWOE in SSM. Boulding‘s hierarchy of systems complexity is a particularly useful framework to assist with location of a selected problem context within the hierarchy and indicate the appropriate paradigms / disciplines. Multiple methodologies and methods are available. Most are helpful in closed loop analysis. Those from this paradigm which have shown capabilities to operate in other paradigms are separately considered. A consensus method to design, planning and communication devised to apply to the management of complexity, supported in the workshop phase with a computer assisted learning process. Aspects of the theory – i.e. the laws of triadic compatibility and requisite parsimony – are foundational to an integrated systems approach. Multi-method Autopoiesis Multi-method Boundary critique Multi-method Checkland‘s Soft Systems Methodology (SSM) Churchman‘s social systems design Communicative action Interpretive Interpretive Multi-method Control engineering and cybernetics Rational Critical systems thinking & practice Multi-method Critical systems heuristics (CSH) Critical / Adaptive General systems theory Multi-method ‗Hard‘ systems thinking Rational Interactive management (IM) Interpretive A Systems Approach to Strategy and Execution in National Security Enterprises – 131 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Systems Approach Living systems theory Dominant Approach Interpretive / Critical Remarks A descriptive approach to adding value, replacing assets, error correction and adjusting to environmental changes to maintain equilibrium, with particular attention to how an organisation manages information as an indicator of effectiveness (Miller & Miller 1995 in Jackson 2000). Offers little guidance on methodology design. Instructive approach to improving the definition and structure of ‗wicked‘ problems by taking opposing views of by ill-structured problems before making judgements about the ‗real‘ problem. Integrates five ‗disciplines‘ of ‗systems dynamics‘ (hard systems thinking) with ‗personal mastery‘, ‗mental models‘, ‗building shared vision‘ and ‗team learning‘ (soft systems thinking) as a basis for organizational learning. Seen by Jackson (2000) as ―severely limited‖ (p.272). Significant influence, particularly in how management theorists have adapted into organisational theory an organismic view of society as a system of interconnected parts. Sociological methods however are only recently changing to an open systems approach (Scott, 2004). Focus on improving performance and increased worker satisfaction by taking a holistic approach to social and technical aspects – the theory of which lies behind systems analysis, system dynamics, and systems engineering methodologies. Adapts a selection of hard OR methods to support pluralist approaches and build consensus through open dialogue. An integrated methodology for assessing cost, operational effectiveness, and investment analysis in multiple scenarios (COEIA) adopted in US and adapted by UK with human systems integration for complex procurements. Originating from Forrester‘s work at MIT, many systems dynamics simulation tools are now available to model ‗stocks‘, ‗flows‘ and feedback processes, helpful in understanding dynamic behaviour through modelling causal structures where they are known to exist. Supports design and construction of complex systems in contexts where requirements evolve and contexts change. SE has proven its capacity to integrate different methods and methodologies for requirements analysis, design, test and evaluation and systems analysis and control functions. SE is also shown to be fractal (Hall, 1998) and can be adapted to different levels of complexity. SE is therefore an important candidate for consideration as an integrative methodology. The systems architecting paradigm distinguishes itself from SE by generally defining SE as a deductive process dealing with measurables and Sarch as an inductive process dealing largely with unmeasurables (Maier & Rechtin, 2002). This suggests tenancy in common in the one domain, but wicked problems make SE & Sarch equitable joint tenants. For the purposes of this exercise, SE will be taken to include Sarch: Design (from politics to components) require fit, balance and compromise common in both schools of thought. SE is more complete. Shown in Section 4.3.4 to be reconstructed in a Venn diagram to leverage the trichotomy that defines problems that scale in complexity and in the level of disagreement between participants. However, the use of different methodologies in the one intervention is not considered. Received favourable and unfavourable criticisms. The simplified construct for strategy and execution, can be seen as a TSI framework based on 1) problem definition (creativity); 2) selection of appropriate methodologies (choice); and, 3) implementation of the chosen ‗pieces‘. At that point TSI is an iterative process to integrate systems methodologies as contexts change yet Jackson (2000) ―believes a more fundamental recasting is necessary‖. A useful diagnostic methodology based on theory of cybernetics for identifying potential causes for organisational dysfunction. Helpful therefore in organisational design to test for fitness and balance and identify possible compromises between systems demands / functions. Mason & Mitroff‘s Strategic Assumption Surfacing & Testing (SAST) Senge‘s (1990, 1994) soft systems thinking / practice Social theory / sociology Interpretive Multi-method Interpretive / Critical Socio-technical systems thinking Interpretive / Critical Soft operational research Systems analysis (SA) Interpretive Rational System dynamics Rational Systems engineering (SE) Multi-method Systems architecting (Sarch) Multi-method System of systems methodologies (SOSM) Critical Total Systems Intervention (TSI) Critical Viable systems theory / modelling (VSM) Rational / Interpretive A Systems Approach to Strategy and Execution in National Security Enterprises – 132 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution The most promising works from this quick assessment of 26 systems theories, methodologies and/or methods are:  A dashboard of measures, built on cognitive systems engineering foundations, to provide an indication of performance across the hierarchy of critical functions.  Checkland‟s Soft Systems Methodology (SSM) as it appears relevant to design and control of a multi-method approach where that is defined as the system of interest for assuring great strategy and execution. Of all the second wave (interpretive) approaches, it is suggested SSM has been applied most widely (Midgley, 2000) and is available in two modes suited for the novice and the experienced user (Checkland and Holwell, 1998).  SOSM as adapted in section 4.3.4 and illustrated in Figure 4-4, to locate a particular problem context within a framework that is flexible and scales as the problem definition evolves. This averts the concern of “pigeon-holing … methodologies” (Taket and White 2000, in Jackson 2000) by guiding the selection of a methodology or identification of the need for an approach to building a new paradigm (after Midgley, 2000);  Boulding‟s hierarchy of systems complexity locates a selected problem context within a hierarchy to provide a first order guide to the combination of approaches / disciplines appropriate to the problem.  the integrated strategy framework, as adapted from Chaffee (1985) in section 3.4 and illustrated in Figure 3-9, to align strategy processes with the problem context and so extend the choice of methods that can be integrated into the design of a systems approach (after Midgley, 2000); and,  Systems Engineering – in particular, by adapting the simplified construct, colloquially known as the „egg diagram‟ presented in DSMC (1999, 2001). Systems engineering has been broadly classified by its origins within the rational paradigm in Jackson (2000) and Midgley (2000), yet both overlook its fractal nature (Hall, 1998) and therefore the capability it derives to serve at A Systems Approach to Strategy and Execution in National Security Enterprises – 133 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution different levels of systems complexity, including as a meta-methodology (Cook and Ferris, 2007). Cook and Ferris (2007) have re-evaluated the epistemology of systems engineering to establish its capability as a framework for tackling systems issues. These choices are mapped against the simplified construct for strategy and execution in Figure 4-11 to illustrate how they will combine in practice to manage the cognitive complexity before addressing the situational complexity (after Warfield, 1994). FORWARD TRACEABILITY Measures of Success Measures of Effectiveness Strategic POLICY Capability Materiel STRATEGY EXECUTION Soft Systems Methodology 1. Strategy, execution or processes considered problematic 7. Action to improve the problem situation 6. Changes: Systemically desirable, Culturally feasible WHY Defence in the national interest Problem Map Measures of Performance WHAT WHY 2. Problem expressed Military Response Influence & Options Combat Power Simple PLURALIST Coherence and Consistency HOW Balanced, agile force structure WHAT Capability Portfolio WHY Fit For Purpose Capability Real World 5. Comparison of models and real world Complex BACKWARDS AUDITABILITY HOW WHAT Capability Projects Systems World UNITARY Simple COERCIVE Simple Dashboard of Measures Adapted from Rasmussen, 1998 Capability Programs Integrated Capability Systems HOW 3. Root definitions of relevant purposeful activity systems 4. Conceptual models of systems (holons) named in the root definitions Strategy Content and Execution Seeking High Performance Performance Process Execution • Political (incl. Power) • Political (incl. Power) • Environment • Environment • Social • Social • Technology • Technology • Economic • Economic Choose methodologies to Decision (Content) Problem Definition Decision Making Process Considered Problematic? Cognitive Control Process Process Design Choose methodologies to understand dynamic inputs Choose methodologies to understand dynamic inputs Choose methodologies to conduct critical control functions • Risk Management • Performance Management • Trade-Off Studies • Configuration Management, etc understand the „WHY‟ • Intent, Purpose, Mission Goals? Enable Iterative Requirements Definition Integrated Strategy & Execution Process Control (Process) Methodologies / Methods Options: Strategy / Systems Processes Choose methodologies to understand the „WHAT‟ • What abilities do we need? • Define “Fitness for Purpose” Enable Iterative Organisational Design 2 Choose Choose methodologies methodologies to deliver to deliver critical outputs critical outputs delivering delivering guidance for guidance for Strategy & Strategy & Action Action Managing Situational Complexity 1 Managing Cognitive Complexity Choose methodologies to test & validate alternative solutions against Choose methodologies to understand the „HOW‟ • Design Capability Options • Develop Alternative Solutions Systems Engineering Methodology Mapping of Methodologies / Methods to 1) Boulding‟s Hierarchy of Systems Complexity 2) Integrated Strategy Framework Figure 4-11: Summary of main choices for an integrated strategy framework Each of the selected methodologies / methods is now discussed in the remaining sections of chapter 4, before this integrated framework is „exercised‟ in two case studies in chapters 5 (in a defence context) and chapter 6 (in a health context). 4.4.2 Practical Construct for a Dashboard of Measures Most socio-technical organisations are hierarchically organised around primary inter-related functions, which in the case of national security enterprises typically involve: A Systems Approach to Strategy and Execution in National Security Enterprises – 134 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution  Forming strategic policy: defining the identity and purpose of the enterprise (the „why‟), the Government‟s capability goals and response options (the „what‟) and major investments in structural components (e.g. foreign affairs, intelligence, customs, defence, legal entity, social entities etc. – the „how‟)  Developing the capability strategy, usually developed by each structural component outlining the influence and power it contributes to national security (their „why‟), the portfolio of capabilities they offer Government to build response options (their „what‟), and the capability programs they are investing in (their „how‟)  Executing the Capability Strategy, i.e. operations, usually detailing the capability set that is fit for purpose in design (their „why‟), the capability projects they have underway to maintain and enhance their performance (their „what‟), and the capabilities they are operating or building to execute the strategy as a contribution to Government‟s response options for national security (their „how‟) Different groups of people span these functions. In the Australian Department of Defence, this exceeds 90,000 military and civilian personnel. While this organisation has found it difficult to put in place high level measures for the enterprise to drive the performance of these principal functions, many subordinate measures exist for force structure, preparedness and acquisition. How these are formed and executed could be better guided by a hierarchy of measures at a level of abstraction appropriate to the CEOs of such enterprises xiii. Such an abstraction has been developed theoretically in Figure 4-3 and this may now be populated with the author‟s perspective of the Australian Government‟s needs of Defence as a start point for developing appropriate measures (Sproles, 1998). This hierarchy provides a synoptic overview from a Government‟s viewpoint as owner and customer of Defence as one element of national power. A Systems Approach to Strategy and Execution in National Security Enterprises – 135 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution FORWARD TRACEABILITY Measures of Success Measures of Effectiveness Strategic POLICY Capability EXECUTION STRATEGY WHY Defence in the national interest Measures of Performance WHAT WHY Performance of Policy Initiatives are dependent on Effectiveness of the Strategy AND Success of the Execution Military Response Influence & Options Combat Power Coherence and Consistency HOW Balanced, agile force structure WHAT Capability Portfolio WHY Fit For Purpose Force Top Down Relevance HOW Capability Programs WHAT Integrated Capability Systems BACKWARDS BACKWARDS AUDITABILITY AUDITABILITY HOW Build & Operate Adaptable Capabilities Adapted from Rasmussen, 1998 Bottom-up Accuracy Figure 4-12: Towards a hierarchy of measures A methodology to deliver a hierarchy of measures will enable a socio-technical system (like Australia‟s Department of Defence, for example) to survey its strategic and operating environments, define its boundaries and its goals (Kline, 1995) and its system of beliefs or governing values (Argyris, 1993, 1994). From this overview an observer and/or participant member of the enterprise gains a sense of identity, and direction and general codes of behaviour (Kline 1995, Argyris 1977, 1991). However, the author has deliberately not gone further at this stage to determine measures from this summary of „needs‟: the high level statements of needs shown in Figure 4-12 are only inferred from public statements made in the White Paper (Defence, 2000c): it is not culturally feasible to develop an agreed set of measures in the Department (Hawke, 2000). The difficulty is the „cry‟ for objectivity where rational measures are preferred (Manton, 2009) over qualitative measures, and the issue then focuses on establishing the „right‟ rational measure. Hauser and Katz (1998) offer practical guidance on establishing useful measures using a „House of Quality Metrics Matrix‟ to capture the voice of the customer and relate their needs in outcome terms to performance metrics, priorities, A Systems Approach to Strategy and Execution in National Security Enterprises – 136 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution benchmarks and targets. Two pieces of advice stand-out from several in their treatise: ―The lesson: measure what is truly important, not just what is easy to measure. Vaguely right is better than precisely wrong! … [and,] Pitfall 7: Thinking Narrowly … sits squarely on the shoulders of top management. Do not be paradigm bound.‖ (Hauser and Katz, 1998) One is immediately reminded of a sign hanging in Einstein‟s office in Princeton: ―Not everything that counts can be counted, and not everything that can be counted counts.‖ The importance of establishing a good synoptic overview of measures of the performance of the enterprise cannot be over-stated: “you are what you measure” (Hauser & Katz, 1998) and if you measure nothing, the ability to consider whether performance of an enterprise is problematic (Checkland, 1981) is itself problematic and so is the purpose and direction of any intervention that follows. 4.4.3 Practical Construct for Managing Cognitive Complexity In the author‟s consulting experience, the situation of having poor measures at the enterprise level of public organisations is not uncommon. Therefore, to mitigate the risk that arises, a methodology for managing the cognitive complexity of strategy and execution process is to be inclusive of multiple worldviews (Checkland 1981) to ensure it delivers an understanding of the interconnectedness and inter-dependency of the concerns of business and the means to address them (after Mitroff 1985, Capra 1996, Hammond 2002). It must then enable a common view of the boundaries, goals and of the system of strategy and execution that is to be maintained (Kline, 1995) and have operable criteria to vary the mix of methodologies in the strategy and execution processes as appropriate to address changes in the strategic environment. Checkland‟s SSM offers a methodology meeting these criteria. It invites multiple world-views and implements the definitional steps embedded in the mnemonic CATWOE (Customer, Actors, Transformation, Weltanshauung, Owner, Environmental constraints) to each world view. CATWOE adds value by pinning down the right context, the mental models that people hold and how those A Systems Approach to Strategy and Execution in National Security Enterprises – 137 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution models relate to their problem-solving attitudes. In the absence of a dashboard of measures, CATWOE can derive indicative information on the why, what, how – and the who, where, and when. From the multiple world views of a strategy and execution process, SSM would then aim to construct conceptual models that are test-able in the real world. SSM‟s operating paradigms are pluralist as it seeks out multiple viewpoints. And, by leveraging learning in its application (Jackson, 2000) actions are defined to improve the mix of methods being applied appropriate to changing contexts, including delivering skill-based control actions over the mix of methods as might be required for its successful operation in coercive problem contexts. The methodology has appeared in two forms shown in Figure 4-13, which have been suggested by Checkland and Howell (1998) to offer applications for the novice in using the seven step methodology and for the experienced practitioner in using the later adaptive version. 1. Strategy, execution or processes considered problematic 7. Action to improve the problem situation 6. Changes: Systemically desirable, Culturally feasible 1. Appreciate the cognitive complexity of the problem 3. Build an information architecture (IA) 4. Appreciate the available interpretive, adaptive & rational methodologies 2. Define the scope of the problem using questions 2. Problem expressed Real World Systems World 5. Comparison of models and real world 5. Design integrated methodology 3. Root definitions of relevant purposeful activity systems 4. Conceptual models of systems (holons) named in the root definitions 6. Appreciate situational complexity (incl. cultural aspects) Review 1-5 7. Define measures of performance (MOP)* Systemically desirable + Culturally feasible ++ Take control action NOVICE + Fit to suit scope of problem efficiently and effectively ++ Balance of interpretive, adaptive, rational methodologies to suit the culture of the organisation EXPERIENCED PRACTITIONER Figure 4-13: Checkland's SSM in two modes Jackson (2000) points to three requirements from pluralism that would be addressed by SSM in this nominated role:  pluralism must “encourage flexibility in the widest possible variety of methods, models, tools and techniques in any intervention” (Jackson, 2000) and care is needed to avoid relapse into pragmatism by ensuring theoretical A Systems Approach to Strategy and Execution in National Security Enterprises – 138 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution control. By using SSM for choosing methodological action and directing implementation action SSM requires two control criteria to be satisfied. Chosen methodologies must be systemically desirable in their application (thus invoking no boundaries on variety of methods employed) and culturally feasible in their implementation (which may avert relapse to pragmatism depending on those involved, although SSM cannot guarantee it).  “methodologies owing allegiance to different paradigms should be employed in the same intervention unless good reasons are given for temporary relapse into imperialism… [and] at all stages in the same intervention” (Jackson, 2000). The risk is creating an illusion of pluralism by employing different methodologies from the same paradigms and assumptions (Jackson, 2000). SSM is wholly from the interpretive paradigm. Yet, where a strategy process is viewed as problematic, SSM enables different root definitions from multiple world-views to be generated. Against which, different methods from different systems approaches can be modeled and integrated into a new mode of systems intervention through which action can be taken to address the problematic process. Thus, the risk of creating simply “an illusion of pluralism” (Jackson, 2000) remains valid if all the modeled methods have their origins from the same paradigm. In view of the complexity of strategic planning and execution problems at an enterprise level (where this thesis is focused), the mix of issues to be addressed will drive a mix of methods across the rational, interpretive and critical systems approaches.  “Pluralists must learn to live with and manage a degree of paradigm incompatibility” (Jackson, 2000). SSM allows different models to co-exist in the „systems world‟ and be tested in the real world. In both modes in which it operates, SSM appears relevant to driving action to develop an integrated, multi-method approach for strategy and execution, which is defined as the system of interest. The intent therefore is to proceed with SSM, noting that SSM will enable us to change process evolving form the mix of methods if, in combination, they are not delivering intended outcomes. In that A Systems Approach to Strategy and Execution in National Security Enterprises – 139 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution sense then, SSM may operate as an Ecological Interface Design (EID) for cognitive control, that is, a methodology for managing cognitive complexity in the development, execution and evolution of strategy and execution in enterprises. In operating such a critical element of the integrated framework, the facilitator of SSM is akin to the systems architect defined by Rechtin (1991) by drawing on Spinrad‟s (1988) perception of architecting as: ―1. Top-level design – functional, physical, and operational, the partitioning of which can be very important (the ―what‖) 2. Creative, obsessive, juggling of requirements, constraints, technology, costs, and standards (the ―how‖) Creating an enduring base for growth and change (the ―why‖).‖ 3. Rechtin (1991) supports Spinrad‟s (1988) view that “the greatest architectures are the product of a single mind, or at least of a very small, carefully structured team.” (Rechtin, 1991). This heuristic has been taken as wise counsel in applying SSM in later case studies14,15. 4.4.4 Practical Construct for Problem Definition In view of the many methodologies, methods, the question arises as to which pieces (methods) are appropriate? For the study of the social world, Hofstede (1996) suggests that Boulding‟s (1956) hierarchy is the social scientist‟s equivalent of the First Law of Thermodynamics. This law states the equivalence of heat and work and reaffirms the principle of conservation of energy. Thus, for an analyst of social systems, Boulding‟s hierarchy reaffirms the importance of all levels of complexity in reaching an understanding of the real world and that complexity is conserved: the real world cannot be understood by reducing its expression at a lower level of complexity than that being observed (Boulding 1956, Einstein 1946). It is useful therefore to begin with an appreciation of the range of systems complexity that comprises a social activity, using Boulding‟s framework as shown in Table 4-5 which is populated using as an example, the “social” activity of warfighting. In the defence case study, the author held the principal role as architect supported by the advice of a small team from Force Structures Priorities Branch. 15 In the health case study, the author shared the role in process design with Mr Les Haines, who led the study. 14 A Systems Approach to Strategy and Execution in National Security Enterprises – 140 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Table 4-5: A defence hierarchy of systems complexity (after Boulding, 1956) Level 1. General Characteristics of Systems at this Level Label/Metaphor: ―Frameworks‖ – Static structures, requiring accuracy in their description. 2. Label/Metaphor: ―Clockwork‖ – Simple dynamic systems, predetermined, necessary motion (may exhibit equilibrium) 3. Label/Metaphor: ―Control/Cybernetics‖ – Closed loop control systems. Defence “Systems” Examples xiv MGI (spatial & temporal information), anatomy of the Defence organisation, … Typology of Methodologies Rational Calculation Generators, simple mechanical systems, chemical reactions (HX, CW agents)… Rational Calculation Much of Defence‘s capital equipment e.g. surveillance radars, GPS constellation, major platforms, missiles and on-board (closed loop) information processing, ESM, etc. … Also facilities and installations (thermostatic control, air purification systems, security monitoring) ... Rational Calculation 4. Label/Metaphor: ―Cell‖ – Self-maintaining systems in the midst of throughput; selfreproduction. Biological agents, information processing in open systems, ―Intelligent‖ self-healing networks, … Artificial intelligence, neural networks, imagery processing. Environmental threats, bureaucratic systems such as administrative process, defence acquisition procedures etc ... (bureaucracy defines formal power and ―grows‖ as people ―become‖ their jobs and hence the need for regular inspection and organisational ―pruning‖ where required). Service-specific systems awareness of change in the environment and learned behaviours in response to the environment. Systems of ―indoctrination‖ and training for ingraining, within individuals, ―innate‖ or early-conditioned, autonomic behaviour patterns that define a collective service and maintain group dignity and esprit de corps. Also drives informal power seeking behaviours for group control – influencing the acquisition of knowledge. The people of Defence as individuals, each with their own view of values & mission, training systems for building individual competencies ...etc. Also, the acquisition of knowledge by individuals to guide individual behaviour leading, thus, to ―single-user‖ intelligence systems, … Adaptive Learning / Knowledge Adaptive / Coercive Learning / Knowledge 5. Label/Metaphor: ―Plant‖ – Systems of differentiated and mutually dependent parts with ―blueprinted‖ growth. Label/Metaphor: ―Animal‖ – Systems displaying selfawareness, neurological control, teleological system behaviour is based on image of environment as a whole (more than the sum of the parts). The unit metaphor is animal. Label/Metaphor: ―Human‖ – Systems that display selfconsciousness (knows that it knows), system behaviour based on more complex images with abstract dimensions. The systems‘ unit is the person. 6. Adaptive / Coercive Learning / Expertise 7. Interpretive Judgement 8. Label/Metaphor: ―Social‖ – Systems built upon collective shared identification with roles / symbols, set of roles tied together with communication, displaying interpersonal accommodation. The unit for considering social systems is the role, not the person. Australia‘s system of warfare, Defence organisational groups/ task-forces/ programs/ units/ squadrons (...etc) with their own system of Defence values and measures, training systems for building unit, service, joint and coalition capabilities. Also the acquisition and sharing of knowledge by units/groups for Defence-wide benefit, collective training systems and the development of ―systems of systems‖ comprising all fundamental inputs to capability. Defence systems of strategic and futures planning, Intelligence system of strategic assessments of intent, motive and capabilities, indicators and warnings systems to guide the acquisition and sharing of knowledge, risk assessments of strategic and operational nature. Interpretive Judgement 9. Label/Metaphor: ―Transcendental‖ – Systems of unknowns and unknowables. Interpretive Judgement A Systems Approach to Strategy and Execution in National Security Enterprises – 141 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution By adapting Boulding‟s hierarchy of systems complexity to Defence planning, our multi-disciplinary understanding of available methodologies can be orchestrated across nine systems levels where the labels used are metaphors of the levels of systems complexity. This adaptation of Boulding‟s work to a Defence hierarchy of systems complexity has been developed by considering how systems at each level utilise and depend upon data, information and knowledge. The systems‟ capacity to handle data, information and knowledge is suggested as the key discriminator. This view differs from that presented by Cook and Allison (Cook, 1998), particularly in their assessment of levels 5 to 9, where they base their assessment on organisational complexity, differentiating the levels of complexity largely by the size and capacity of an organisational unit. To achieve differentiation on organisational complexity, the author considers Hitchins‟ five levels of complexity (Hitchins 2000, 2003) to be a more appropriate and useful measure16. To help maintain a “mind-map” of the General Hierarchy of Systems, Table 4-5 can be summarised and illustrated as seen in Figure 4-14, using a Defence example. This mapping helps to maintain in Defence interventions a focus for warfighting on level 8 and for Defence planning on level 9. Far from Agreement 9 8 Strategy Development Warfare Training 7 Roles & Authorities Competence & Self Awareness 6 Situational Awareness 5 4 Business Processes Equipment 3 1 2 & Technology Far from Certainty Figure 4-14: General hierarchy of systems (Adapted by Hodge after Boulding, 1956) Illustrated in Chapter 6 - Case Study Two – Assessment of a National Health System‟s Capability to Respond to Serious Emergencies 16 A Systems Approach to Strategy and Execution in National Security Enterprises – 142 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution Boulding‟s seminal work offers most value for planners in preventing us “from accepting as final, a level of theoretical analysis which is below the level of the empirical world which we are investigating” (Boulding, 1956). Any tendency to focus the planning debate solely onto capital equipment (of level-3 systems complexity) grossly misses the point. Einstein (1946) observed, “Solutions to the problems we face today require a higher level of thinking to that we were at when we created them”.xv Where most of Defence‟s problems have occurred by maintaining a systems focus at level 3, Boulding‟s hierarchy helps us maintain a higher-level focus for Defence systems thinking at the complexity of level 8, in addition to all levels below! Hofstede (1996) observes that the social world of level eight is the only level where the social scientists (systems at level seven) are themselves less complex than is the object of their study and he draws the implication that “social knowledge will always be subjective, partial and tentative”. What then for strategic planners (who are also complex level-7 systems), but the object of their study is two levels of complexity higher than that of the planners? At the very least, their knowledge like social knowledge “will also be subjective, partial and tentative” (Hofstede, 1996 emphasis added). Table 4-6 illustrates this point by mapping Boulding‟s hierarchy to the systems and strategy approaches, and the dominant basis for decisions / control with disciplines, methods and tools available for the analyst. It also helps analysts to map the gaps in our present knowledge base and define methods to address them. By way of epilogue to this sub-section, in marketing a proposed new system of long-term planning around Defence (as presented in chapter 5), the author often heard statements that Australia‟s Order of Battle is not so large that decisions about its future warrant the complexity of “rocket science”. The paradox is that decisions about Australia‟s future defence needs – the focus of the case study – still reside in the domain of highest complexity with vast uncertainty and great scope for disagreement. Designing and developing the methodology and the filters through which the architect „orchestrates the debate‟ (Checkland 1981)xvi and attains the minimum information necessary for strategy making and strategic A Systems Approach to Strategy and Execution in National Security Enterprises – 143 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy & Execution planning is not rocket science – to be credible, it must indeed be designed and developed as a system that copes with far higher complexity. A Systems Approach to Strategy and Execution in National Security Enterprises – 144 – Chapter 4: Literature Review 2 – A Systems Approach to strategy and execution Table 4-6: Boulding‟s hierarchy (1956) with mapping of methods, disciplines and tools Level Metaphor Open/ Closed Dominant Intervention Organisational Focus Strategy Mode Systems Approach Dominant Basis for Decisions / Control Measurement Calculation / Rule based Disciplines and Tools 1 2 3 Frameworks Clockwork Cybernetic Closed Closed Closed Analysis Analysis Analysis Tangible / Measurable (Assets and Resources) Linear / Rational Rational / Hard Mathematics, physical sciences, engineering, spreadsheets, models and simulation, business analysis tools, hard systems approaches, operations research, cybernetic approaches Partial (in sense of not complete) Biological sciences, systems dynamics and simulation, operations analysis, organisational development, observation of autonomic behaviour, knowledge systems diagnostics, critical systems thinking (esp. addressing power and coercion) Tentative (largely tacit knowledge) Cognitive sciences and behaviour, social and political sciences, seminars, table-top exercises, strategic simulations and gaming, scenario based planning, soft systems approaches. Subjective (individually held knowledge) Outcome: 4 5 6 Cell Plant Animal Open Open Open Analysis/ Synthesis Analysis/ Synthesis Synthesis Intangible Structural Capital (Operations and business processes) Outcome: 7 8 9 Human Social Transcendental Open Open Open Synthesis Synthesis Synthesis Intangible (Goodwill and future options) Interpretive Interpretive / Soft Judgement based on trust & inner circle of influence / Knowledge based Outcome: Adaptive / Learning Critical / Heuristic Approximation, Subject Matter Expertise / Skill based A Systems Approach to Strategy and Execution in National Security Enterprises – 145 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management In this sub-section, Boulding‟s hierarchy of systems complexity has been used as a useful guide to map selected „pieces‟ of a strategic intervention to assist in mitigating the risks incurred in over-extending any one paradigm or methodology. In the next sub-section, the discussion considers the value of systems engineering as a methodology for integrating the piecewise methodologies / methods for strategy intervention effectively. 4.4.5 Practical Construct for How the Parts Connect We have established a broad approach to strategy and execution that in theory is acceptable both at an enterprise scale and adaptable to deliver a tailored fit for the unique needs of individuals. It is also shown to be theoretically suitable and for both business process design and for strategy content. Successful conversion of the theory to practice suggests a need to find a methodology that is recursive in its nature and, by definition, maintains the same structure in its parts. This criterion is a key differentiator drawing the author to consider systems engineering as a methodology suitable for the purpose. This issue of recursion will be addressed again a later subsection. 4.4.6 Systems Engineering as an Integrative Methodology Systems engineering has not been considered at length by either Jackson (2000) or Midgley (2000) in their reviews of the systems literature. While it is recognised for its capacity to support the design of whole organisational systems (Midgley, 2000) both reviewers align it with the rationalist, hard systems approaches for its use of quantitative methods to optimise system outcomes. This is true for development of „hard‟ systems where the discipline has its origins but not necessarily the case when considering its application to the complexity of whole organisations, where other techniques may apply to achieve an appropriate fit, balance and compromise (after Rechtin 1991, 2000). Properly abstracted, the elements of systems engineering support the integration of methodologies for analysis and synthesis (design) in contexts where requirements evolve and A Systems Approach to Strategy and Execution in National Security Enterprises – 147 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management contexts change. This is an important feature when considering its application to the analysis, design, implementation and control of strategy and execution processes. Equally important is that systems engineering is shown to be fractal (Hall, 1998), suggesting it can be adapted to different levels of organisational complexity. Systems engineering is therefore an important candidate for consideration as an integrative methodology. The systems engineering process illustrated in Figure 1-3 of DSMC (2001) has been abstracted into Figure 4-15, which retains all seven main features of the original. 1 Choose methodologies to understand dynamic inputs Choose methodologies to understand dynamic inputs • Political (incl. Power) • Political (incl. Power) • Environment • Environment • Social • Social • Technology • Technology • Economic 2 • Economic Choose methodologies to 6 Choose methodologies to conduct critical control functions • Risk Management • Performance Management • Trade-Off Studies • Configuration Management, etc understand the „WHY‟ • Intent, Purpose, Mission Goals? Enable Iterative Requirements Definition 3 Choose methodologies to understand the „WHAT‟ • What abilities do we need? • Define “Fitness for Purpose” Enable Iterative Design 7 5 Choose methodologies to test & validate alternative solutions against 4 Choose methodologies to understand the „HOW‟ • Design Capability Options • Develop Alternative Solutions Choose Choose methodologies methodologies to deliver to deliver critical outputs critical outputs delivering delivering guidance for guidance for Strategy & Strategy & Action Action Figure 4-15: Systems engineering as an approach to integrating /methodologies methods Process inputs for strategy and execution include all of the expected political, environmental, social, technological and economic (PESTE) inputs to futures analysis or environmental scanning (element 1). This provides the context for analysing the role, purpose and mission of an enterprise (element 2) which in turn provides the rationale (the why) for assessing the functionality required across the enterprise to fulfil its mission (element 3). Function translates to form A Systems Approach to Strategy and Execution in National Security Enterprises – 148 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management through iterative design and the selection of methodologies to conduct multiple designs integrating people, process and technology (element 4). Applied at the policy level, for example, these designs may be purely conceptual, so methods to test and validate them (element 5) will not necessarily involve rational, quantitative methods: seminar wargaming involving judgement of subject matter experts might be considered more appropriate. Overall balance is maintained in the configuration of the mix of strategy and execution processes through methodologies that deliver risk and performance management (element 6). The output (element 7) requires methodologies that ensure appropriate communication of the strategy content beyond those involved in its development and in capturing and operationalising the lessons learned in the implementation of the process. This generic illustration of systems engineering as an integrated, multi-method approach for strategy and execution is now considered in the context of lessons learned from strategy making literature. Consider the two „roads‟ illustrated in Figure 4-16. SCENARIO PLANNING X X Taking the HIGH ROAD X X     Demanding Experiential learning opportunities Inclusive & focussed on function and form Adaptability and alignment for performance  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. X X X Analyse Analyse X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟ Adaptability Performance  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ Alignment Taking the LOW ROAD     Reactive & easy Hostage to history-less events Exclusive & focussed on structure Alignment without adaptability: Sclerosis Figure 4-16: Systems engineering for strategy & execution The „low road‟ indicates the case where plausible futures are considered using scenario-based planning and a direct relationship is made to change the structure. Aligning costed solutions (to address the interpreted gaps in current capabilities) A Systems Approach to Strategy and Execution in National Security Enterprises – 149 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management directly to crises and/or events arising in a range of plausible futures is reactive and „easy‟ path. The „low road‟ drives the organisation to being held “hostage to history-less events” (Hamel 2000). It also drives greater alignment without necessarily creating better adaptability (after WEF, 2000). While being a more demanding route to high performance, a systems engineering approach enables the design of solutions to be based on an architecture of activities (or functions) that the enterprise is to be capable of; and, enables designs to be tested against defined purpose(s) in multiple scenarios. By achieving alignment around the functional requirements which improve its adaptability to different futures, an organisation is able to drive higher performance (WEF, 2000). Theoretically, then, systems engineering appears to be a critical enabling process in strategy and execution. 4.4.7 Systems Engineering and Strategy Schools Briefly, the strategy schools of Mintzberg et al (1998) offer methodologies and methods from outside the systems literature that are available and can be drawn into a systems methodology (after Midgley, 2000). These schools have been overlaid onto the systems engineering model in Figure 4-17 to illustrate which, in the author‟s subjective view, are the most likely schools to contribute to the methodological approaches in the major elements of the systems engineering methodology for strategy and execution. A Systems Approach to Strategy and Execution in National Security Enterprises – 150 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management Illustrative Application of Mintzberg‟s Strategy Making Schools to the Major Systems Engineering Process Elements* X X X X  Prescriptive: Design, Planning, Positioning  Descriptive: Entrepreneurial, Cognitive, Learning, Power, Cultural, Environmental  Configuration: Configuration (Mintzberg et al, 1998) X X X X – Potential Crises & Events Scenario Planning  Cognitive  Environmental  Entrepreneurial / Power  Cognitive // Power  Cognitive Power  Cultural  Cultural  Design  Design Understand the „Why‟ Understand the „Why‟  Cognitive  Cognitive  Cultural  Cultural  Configuration  Configuration  Positioning // Power  Positioning Power Analysis & Control Analysis & Control  Learning // Environmental  Learning Environmental  Cognitive  Cognitive  Planning  Planning Develop the „What‟ Develop the „What‟ Adaptability Performance  Positioning  Positioning  Learning  Learning  Configuration  Configuration Validate the Solutions Validate the Solutions  Design  Design  Learning  Learning  Entrepreneurial // Power  Entrepreneurial Power Design the „How‟ Design the „How‟ Alignment * Note: The strategy making processes of any Group/School could potentially be applied to any of the major SE process elements. The allocations made here are the author‘s interpretation of which schools of strategy processes might best deliver the intended outcomes of each of the major process elements as a contribution to the overall performance of SE as a meta-methodology for an enterprise. Figure 4-17: Interpretation of strategy schools with systems engineering methodology The variety of methods available to the systems architect in designing and adapting a mix of methodologies dynamically to suit changes in the operating environment is enormous. Importantly, among these, is the availability of methods from the strategy literature to address power, in addition to the systems methodologies for addressing coercive problems. 4.4.8 The Recursive Nature of Systems Engineering “Fractal geometry and chaos theory can convey a new level of understanding to Systems Engineering and make it more effective” (Hall, 1998). This suggests systems engineering can be applied recursively at multiple levels, to enable multiple threads of enquiry to occur concurrently in, for example, policy development, capability strategy and execution – as illustrated in Figure 4-18. Managed within an enterprise-level methodology, the different lines of enquiry (as illustrated) deliver depth in the intervention while maintaining traceability to the primary enterprise functions of policy, strategy and execution/operations. A Systems Approach to Strategy and Execution in National Security Enterprises – 151 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management E.g. 3 Would projected force structures be able to deliver those strategic outputs? SCENARIO PLANNING X X X X X X X  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ E.g. 2 What set of military strategic outputs is optimal in 5-7 years? SCENARIO PLANNING X X X X X X X  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟ E.g. 1 What are Government‟s needs of Defence? SCENARIO PLANNING X X X X  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ X X X  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ E.g. What is the optimal solution for offensive counter air? X X X X – Potential Crises & Events  Discover future purpose  Discover future purpose 3 SCENARIO PLANNING X X X X Understand the „Why‟ Understand the „Why‟  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ Strategic Inputs Strategic Purpose & Directions Capability Requirements Budget (Systems Analysis, Risk, Configuration etc) E.g. 2 What is the optimal capability mix for Air Defence? X X X X X X X SCENARIO PLANNING Analysis & Control X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟  Against specified  Against specified purpose purpose Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ Successful Policy Capability Strategy Project Design SCENARIO PLANNING X X X X X X X  Performance  Performance  Costs  Costs  Risks… etc.  Risks… etc. Analyse Analyse X – Potential Crises & Events  Discover future purpose  Discover future purpose Understand the „Why‟ Understand the „Why‟ Effective Strategy (Not Illustrated) Verification Operations/ Execution In Service Capability  Against specified  Against specified purpose purpose  Develop abilities //  Develop abilities requirements requirements Develop the „What‟ Develop the „What‟ Validate the Solutions Validate the Solutions  Design cost-effective  Design cost-effective solutions solutions Design the „How‟ Design the „How‟ High Performing Capability E.g. 1 What is the optimal portfolio of Defence programs? Figure 4-18: Systems engineering as a recursive methodology 4.4.9 Relationships Among the Elements of the Conceptual Model Traceability of multiple methodologies to policy, strategy and execution also enables the resultant actions to be traceable to the high level measures of success, effectiveness and performance. In each of the primary functions of an enterprise that are shown in Figure 4-19, a relationship exists among the „why‟, „what‟ and „how‟ in keeping with the systems engineering model shown in Figure 4-15. By adding in the validation and analysis elements, the relationship between the measures and the systems engineering methodology can be established. A Systems Approach to Strategy and Execution in National Security Enterprises – 152 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management Consistency and coherence in systems analysis & control Cognitive control by SSM Problem Definition Options: Methodologies Analysis & control Strategic POLICY Needs Analysis & control Capability STRATEGY Analysis & control EXECUTION WHY Requirements Needs WHAT Design WHY Requirements Needs HOW WHAT Design WHY Requirements Validate HOW Validate WHAT Design HOW Validate Consistency and coherence in test and evaluation linking strategy to action Figure 4-19: Concept relationship between structural and synoptic views The recursive nature of systems engineering is again apparent. Two aspects of this presentation indicate further value added by systems engineering. First, by seeking consistency and coherence in performing the „analysis and control‟ functions of the systems engineering methodology, a relationship is established with the decision making and control functions of SSM. This forms, in practice, a strong interdependency between systems engineering and the other elements of the conceptual model in a covalent bond. In that sense, then, systems engineering is likely to become the dominant methodology in practice. Yet, in the initial design, SSM will dominate to manage the cognitive complexity before managing the situational complexity. It will also be important to revisit SSM at intervals to ensure the methodologies in action do not overlook or exclude vital ingredients and a change methodology is taken if emancipatory or coercive approaches are desirable. Second, by seeking similar levels of consistency and coherence in the „test and validation‟ element of the system engineering methodology, knowledge of lessons learned in earlier iterations can be transferred and operationalised. A Systems Approach to Strategy and Execution in National Security Enterprises – 153 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management 4.4.10 Test and Validation – The Value of Seminar Gaming My final note on the theory behind this „systems‟ approach pertains to the benefits of seminar gaming as a technique to test or validate ideas about defence organizational design. It is useful at policy levels to include seminar gaming (Roske, 2000). It is particularly supportive of the goals of emancipatory and critical systems thinking as it opens the debate to a wider range of participants; and, it enables an interplay among tacit, implicit and explicit knowledgexvii (after Polyani 1968 and Sveiby 1999) to synthesise new knowledge and develop new mental models. New knowledge is synthesised in seminar gaming through a spiralling exchange between explicit and implicit knowledge. This exchange has been conceptualised by Nonaka and Konno (1998) in a pattern of four conversions, illustrated in Figure 4-20, which help to explain the benefits of seminar gaming in strategy formation:  The first step in seminar gaming brings people together in one place to socialize and build enough comfort for them to share their subject matter expertise and “know-how” with others, around a common objective.  Using a well-structured agenda, participants externalize/share their expertise on how to achieve a common (group) objective, making their implicit knowledge explicit as a judgement or assessment that can be reviewed or accepted by the group.  And, by combining their knowledge with other explicit knowledge from across the organisation, an enriched knowledge base is created and recorded. This is a key benefit of seminar gaming: the individual is able to provide decision makers with more useful, auditable information about the systemic relationships of the components of a problem and its potential solution.  The power of the conversion process is magnified when individuals internalize this new knowledge and change their own view of the world. They might not be able to express the dimension of the change adequately, A Systems Approach to Strategy and Execution in National Security Enterprises – 154 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management but their tacit “know how”, their internal mental models, are forever altered. After participating in a well-structured seminar game, people can return to lead their own operations with a better “radar” for spotting opportunities for growth through joint operations and a better understanding for how to exploit them. This is far less visible and potentially more powerful outcome. IMPLICIT KNOWLEDGE IMPLICIT KNOWLEDGE IMPLICIT KNOWLEDGE EXPLICIT KNOWLEDGE Socialization Externalization i i g i i i i i i IMPLICIT KNOWLEDGE EXPLICIT KNOWLEDGE o g g i Internalization EXPLICIT KNOWLEDGE g o g Combination EXPLICIT KNOWLEDGE g KEY i: individual g: group o: organisation Diagram ADAPTED from Nonaka, I & Konno, “The Concept of „Ba‟: Building a Foundation for Knowledge Creation” California Management Review Vol 40 No.3 Spring 1998 page 43. Figure 4-20: The benefits of seminar gaming in policy settings 4.4.11 A Note on Total Systems Integration (TSI) TSI was a first attempt to codify a meta-methodology to deliver on the long held ideal of the critical systems community and establish an holistic approach to systemic intervention of a complex enterprise through the application systems thinking and systems practice across multiple paradigms. In his re-evaluation of TSI, Jackson (2000) noted: ―The breakthrough achieved by TSI, noted by Mingers and Brocklesby (1996), is to postulate a meta-methodology for using methodologies adhering to different paradigms in the same intervention on the same problem situation. As a metamethodology, TSI seeks to ensure that pluralism extends beyond the use of different methods and techniques guided by one methodology premised on one set of theoretical assumptions. It seeks to find a way of managing, in a coherent way, very different methodologies premised upon alternative theoretical assumptions. It would be nice to use such different methodologies alongside one another in highly complex problem situations but if this proves to be practically impossible, TSI suggests, then that the best way to handle methodological pluralism is to clearly state that one A Systems Approach to Strategy and Execution in National Security Enterprises – 155 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management methodology is being taken as ―dominant‖ (and others ―dependent‖) for some period of time, being always willing to alter the relationship between dominant and dependent methodologies as the situation changes. One methodology, encapsulating the pre-suppositions of a particular status is granted ―imperialistic‖ status – but only temporarily; its dominance is kept under continual review. The other strength of TSI, as we have already suggested, was to bring together pluralism in the creativity phase (looking at the problem through different Ws) with pluralism in terms of management of different methodologies in combination (in the choice and implementation phases.‖ (Jackson, 2000 p.371) In the light of this, the methodological construct for strategy and execution postulated in this thesis seeks to manage „very different methodologies‟ concurrently in the same intervention. With the theoretical basis for this being reconstructed around trichotomies in all major theoretical elements shown in Figure 4-11, it is worth exploring whether a practical implementation of TSI can be interpolated here – at least in the fundamental elements (– „interpolated‟ in the sense of interjected in the discussion to note the apparent similarities and differences in objective and construct17). An overview of the major elements is given in Table 4-7. Table 4-7: Comparison of the SE construct with TSI (after Jackson, 2000) Consideration Phase Task Tools Creativity To highlight concerns issues and problems Systems metaphors TSI Hodge Strategy & Execution Construct Understanding To understand the problem and available methodologies Inter-related mapping of problem(s), systems methodologies and strategy processes using sets of trichotomies holding consistent alignment of ‗rational‘, ‗interpretive‘ and ‗adaptive‘ domains. Coherent relationships between problem and methodologies support rapid re-evaluation of a problem and re-structuring of the mix of methodologies involved an intervention Outcome Dominant and dependent concerns, issues and problems The author also admits to being pre-dispositioned against TSI because of the deconstruction of the problem contexts into an over-simplified grid of 6 cells (previously discussed) and for its apparent „pigeon-holing‟ of methodologies that follows the problem grid – the same concern raised by Taket & White (2000) in Jackson (2000). 17 A Systems Approach to Strategy and Execution in National Security Enterprises – 156 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management Consideration Phase Task Choice TSI Hodge Strategy & Execution Construct Choice (Decision / Control) To choose an appropriate intervention methodology (or methodologies) and adapt the selection of methods in real time to fit and balance with any changes in the problem definition as the intervention unfolds Cognitive systems engineering decision ladder operating in a skill-based, rule-based, and knowledge-based control process enabling time sensitive decision making on strategy content and process design change Agile process using dominant methodologies of SSM (for cognitive control) and Seng (for structural integration of methodologies) Strategy & Execution To implement strategy and execution processes relevant to internal and external changes in the operating environment Systems and other methodologies employed according to the logic of systems engineering (incorporating systems architecting) operating in a multi-methodological domain. High performance by improving adaptability and alignment of the organisation Iterative process and logic to manage cognitive complexity of understanding and addressing dynamic problem domains and deliver an integrated framework to manage the situational complexity of mixing multiple methods from systems, strategy and execution domains and enabling methods to operate concurrently To choose an appropriate system-based intervention methodology (or methodologies) Tools The ―system of system methodologies‖ and knowledge of the strengths and weaknesses of different methodologies Outcome Dominant and dependent methodologies chosen for use Implementation To arrive at and implement specific change proposals Systems methodologies employed according to the logic of TSI Phase Task Tools Outcome Summary Outcome Highly relevant and coordinated change, improving efficiency, effectiveness, ethicality etc. Iterative process and logic to enrich problem solving, planning and decision making assisting in selecting and mixing methodologies to address complex problem domains using systems-based methodologies While the main structure of the approach is similar in each case having three phases to understand the problem context, the choice of methodologies and implementation/execution, the differences are driven by the desired outcome of the implementation phase. TSI has focussed on delivering a system for integrating systems methodologies. Notwithstanding any of the criticisms of TSI already noted by Flood and Jackson (1994) and Jackson (2000) among others, this has endeavoured to provide “the broadest possible coverage of systems methodologies according to their underlying assumptions” (Flood and Jackson, 1991) with the intention of improving the area of management sciences. The primary assumption underlying their approach is that “systems approaches offer the surest source of theoretical guidance for implementing an intervention A Systems Approach to Strategy and Execution in National Security Enterprises – 157 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management and change strategy …[and therefore] … we have chosen only systems-based methodologies” (Flood and Jackson, 1991). On the one hand, this assumption embeds the requirement for iteration in strategy and execution and changes forever the concept of one best strategy or one best method. It also provides for a deep philosophy to underpin methodology design and choice which is missing in the strategy literature. On the other hand, Flood and Jackson‟s primary assumption constrains the choice of methods to systems-based methodologies, excluding all others from the discussion of TSI. The world of management and business has its own methodologies and methods which are not conceived as systems methodologies. For example, strategy-based methods for scenario based planning, environmental and competitor analysis, for developing portfolios of options, financial analysis, allocating decision rights, embedding cultural change and so on abound in the literature for strategy and execution. Hence, the lack of discussion of how to select and integrate these (and other) methods into a systemic intervention diminishes the potential impact TSI could have in the area of management sciences. In the construct offered in this thesis, once started, the phases operate dynamically and in a state of flux under cognitive control to ensure that change and the process to derive it are systemically desirable, culturally feasible and timely for effective strategy and execution in a changing operating context. The complexity is driven by the importance of time: strategy and execution for survival and growth must operate over three horizons concurrently (Baghai et al, 2000). And, decisions affecting process control and strategy content directly influence the survival and growth of an enterprise. The design and management of ongoing systems intervention of dynamic problem contexts (e.g. the global environment) will approach the level of complexity of the problem itself (after Boulding 1956, and Chaffee 1985). Checkland‟s SSM has been selected as the dominant methodology to manage the cognitive complexity and to surface appropriate methods for any given element A Systems Approach to Strategy and Execution in National Security Enterprises – 158 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management of the complex problem space. Systems engineering (incorporating systems architecting) has been selected as the dominant methodology to manage the situational complexity of integrating multiple methods, even methods developed outside systems paradigms, and re-interpreting them through a systems framework (after Midgley, 2000) to address different problem contexts concurrently by leveraging the recursive nature of systems engineering. The differences between TSI and the approach presented in this thesis thus far outweigh the similarities in the complexity of the undertaking. The similarities, however, give sufficient cause for a re-evaluation of an approach to TSI to adapt to the more complex problems facing global enterprises in the 21st Century. 4.5 Conclusion In the first part of the literature review in chapter 3, a new theoretical model for an integrated strategy framework is presented. The dominant philosophy is one of theoretical pluralism (Midgley, 2000) where multiple interpretive, adaptive and rational modes of strategy intervention are integrated (after Chaffee 1985 and Van der Heijden 1996). The resulting conceptual model also employs a cognitive control process whereby skills-, rules- and knowledge-based control (Rasmussen, 1994) guide the process of integrating the different modes of strategic intervention. The theoretical pluralism of the model engages the full range of Boulding‟s nine levels of systems complexity, which are hierarchically structured (Boulding 1956) and offer useful insights into the principles for managing complexity in social systems (at level eight) by employing three models of strategy-making concurrently (Chaffee 1985). The insights gained from the literature enable a deceptively simple theoretical construct for an integrated strategy framework (Figure 3-10) to be brought into practice. In chapter 4, the thesis reflected on how the systems literature can help to implement an integrated strategy framework, and found there are no simple prescriptive solutions. While the work of Jackson (2000) has made it easier than before, with four classes of systems approaches operating, it is still carries a risk of being difficult to manage the cognitive complexity of designing a methodology A Systems Approach to Strategy and Execution in National Security Enterprises – 159 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management to select a mix of methods to address a hierarchy of problems and produce a holistic outcome. Therefore, a theoretical basis has been constructed by seeking trichotomies in the description of problem contexts and in the available systems approaches to address them. Building on a simplified construction for strategy and execution, methodological views are constructed for measuring performance, for identifying and addressing problems with a mix of methods (after Kline 1995). Theory is translated to practice through a review of selected methodologies to fit the theoretical foundation. SSM and systems engineering are selected as the dominant methodologies. The recursive nature of systems engineering is shown to add further value by forming a strong interdependency among all elements in the conceptual model. The main systems engineering elements of „analysis and control‟ and „test and validation‟ form the basis for this covalent bond. A comparison of the proposed implementation with TSI indicates some similarities in the construct of the approach. Yet, the differences thus far outweigh the similarities in the complexity of the undertaking to operate a strategy and execution process dynamically to drive high performance. The design and management of ongoing systems intervention of dynamic problem contexts (e.g. the global environment) may then approach the level of complexity of the problem itself (after Boulding 1956, and Chaffee 1985). New systems approaches to strategy and execution are demanding. The limits of the capacity of the human mind mean we must “move back and forth” (after Kline 1995, Simon 1976) between the different views of a systems intervention into a complex enterprise. The aim of using these elements as a composite platform for design of a multi-method approach is to ensure the complex sociotechnical organisation designs its own systems approach to strategy and execution; that it will gain from it a reasonably good understanding of how the organisation might adapt its enterprise (in its operations and its strategic direction) to adjust to influences of its complex environment; and, with that A Systems Approach to Strategy and Execution in National Security Enterprises – 160 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management understanding, drive action that ensure the organisation will survive and grow in ways meaningful to itself. In a way, then, each organisation can apply systems thinking and practice to „emancipate‟ itself (Jackson, 2000)18 from the oppression of singularly mechanistic approaches to strategy and execution (Demos et al, 2001) and „find‟ its own strategic direction and means of getting there (after Hamel & Prahalad 1994, Hamel 2000). Jackson (2000) provides a summary of the emancipatory theoretical rationale in Chapter 3, and presents in Chapter 8, a practical overview and critique of the emancipatory systems approach 18 A Systems Approach to Strategy and Execution in National Security Enterprises – 161 – Chapter 4: Literature Review 2 – A Systems Approach to Strategy Management A Systems Approach to Strategy and Execution in National Security Enterprises – 162 – Chapter 5: Case Study 1 – Defence 5 Case Study One – Defence Capability Planning in Australia Between the idea And the reality Between the motion And the act Falls the Shadow For Thine is the Kingdom (T.S. Eliot, The Hollow Men, 1925) Abstract The first of two major case studies is drawn from the contribution of the authorxviii to the work of the Defence Strategic Policy and Planning Division in the period 1999 to 2001. The intended outcome of the work was to develop a stronger basis for capability planning that results in the 10year, $50-billion Defence Capability Plan achieving traceability back to higher-level strategic policy. This chapter presents the design and implementation of an integrated systems methodology for Defence strategic and capability planning. From the outset, the case study focuses primarily on integrating an adaptive, learning-based approach into existing capability planning processes as a means to improving connections between strategy and capability development. An integrated, multi-method approach is constructed to manage the cognitive and situational complexities using a combination of Checkland‟s 1981 Soft Systems Methodology (SSM) and Systems Engineering. SSM is shown to be helpful in managing the cognitive complexity of adapting a strategic planning approach dynamically to ensure the process is systemically desirable and culturally feasible – that is, it is inclusive of the „right‟ people, uses the most appropriate tools and techniques (bearing in mind cost, time and availability of people, data and systems support) and delivers defensible advice through a transparent process. Systems engineering is shown to be helpful in managing the situational complexities involved in conducting the analysis and decision making involved in designing a force structure that is fit for purpose in meeting the Government needs of Defence for a given cost. This synthesised overall process and the tools developed to support it are described, including „control actions‟ taken at regular intervals in order to scope and scale a viable multi-methodological approach at the enterprise level. A Systems Approach to Strategy and Execution in National Security Enterprises – 163 – Chapter 5: Case Study 1 – Defence The chapter also describes the adaptation of the systems engineering processes to determine functional capability requirements at the enterprise level. The resulting strategic functional architecture or „agility matrix‟ is described, indicating the progressive increases in the functional and performance characteristics required of a set of Defence capabilities across a range of contingencies representative of possible Government needs of Defence. The use of adaptive approaches in translating the functional requirements of the „agility matrix‟ into force structure designs is described. In practice, however, the approach was hampered by the timing of the formal development of the 2000 Defence White Paper. The case study concludes with a summary assessment of the extent to which the different rational, interpretive and adaptive methodologies developed an effective „sweet spot‟ for Defence planning. The case study suggests the methodological application of systems engineering concepts at the Defence enterprise level of systems complexity may have application as a framework of ideas to the wider national security and industry domains, which are areas of concern with similar issues faced by Defence capability planners. The response to the work within Defence has been positive. The author received a DSTO Achievement Award for “Best contribution / Advice to Defence in the area of Force Options Testing and Analysis” and, more significantly, the work continues as a formal part of the Defence capability development process in its more evolved state, used most recently as part of the analysis process supporting the development of the 2008 Defence White Paper. 5.1 Introduction The case study with Defence was conducted as a DSTO task to support Strategic Policy and Planning Division in Defence Headquartersxix. It was driven, for the reasons explained in chapter 2, during a period when Defence sought to improve its strategic planning processes and improve the connection between strategic policy and the Defence Capability Plan. Fundamentally, Defence had a long history of:  conducting strategic analysis which scoped the Government‟s potential needs of Defence,  conducting capability analysis to support the development of a Defence Capability Plan; and, A Systems Approach to Strategy and Execution in National Security Enterprises – 164 – Chapter 5: Case Study 1 – Defence  failing to connect the strategic and capability analyses in a coherent and consistent manner (McIntosh et al 1997, Edwards 2006). Defence had created its own “recipe for disaster” by organisationally separating the largely social and political analysis of strategy from the more technical business of capability analysis (Mitroff, 1985). The Division had formed late in 1997 with a view to redressing the strategic planning issues identified by the Defence Reform Program (DRP). It comprised four branches: Strategic Policy, Military Strategy, Capability Policy and Planning and Capability Analysis. The very structure was designed to bridge the gap between strategy and capability planning. While the theory behind this organisational design was sound, in practice the situation was more complex. Strategic Policy and Planning Division operated in the needs phase of the Defence capability life cycle and reported to the Deputy Secretary Strategy. Defence had also established Capability Systems Division, responsible for development of capability requirements phase, and this Division reported to a different 3-star appointment: the Vice Chief of Defence Force. The interface between these Divisions was not well understood in the early days and, common with many systems, the greatest challenges for changing past practice and the greatest opportunities for improving the strategic management capability in Defence appeared at the interface (Rechtin, 1991, 2000) and most influenced the outcome of this case study. In the first eighteen months in SPP Division, the author worked progressively with the different Branches in a waterfall approach:  assisting Strategic Policy (SP) Branch by coordinating a review of technology futures to assess the implications of technological developments for Australia‟s strategic analysis, and supporting the conduct of a major USAustralia strategic wargame on regional and coalition policy approaches. A major goal of SP Branch was to analyse a range of possible choices for Government in how it might employ military power with other elements of national power and to define the policy parameters for such employment. A Systems Approach to Strategy and Execution in National Security Enterprises – 165 – Chapter 5: Case Study 1 – Defence  assisting Military Strategy Branch (MSB) with the development of the Krait series of technology wargames, designed to help planners learn how better to insert technology into the battlefield and/or change the concepts for warfighting in the ADF at a strategic level. A primary goal of MS Branch was to analyse a range of possible strategic objectives for the ADF within the policy context established by SP Branch and define, in Defence terms, the boundaries of the military response options available to Government.  assisting the Capability Policy and Planning Branch, headed by Commodore Geoff Walpole, transition from dealing with strategic issues on matters with State Governments and broader mobilization and sustainment issues to focus on capability planning and prioritisation at a force structure level. The primary goal of the [then] Force Structure Priorities Branch was to derive a set of force structure options that could be put to decision makers together with an analysis of priorities for capability development in order to achieve the Military Strategic Objectives set by MS Branch, within the strategic policy context set by SP Branch. The author spent relatively little time with Capability Analysis Branch, per se. Although it studied important topics such as air defence or maritime surface warfare, which contributed to force structure prioritisation, it did not extend to the development and analysis of force structure options as a whole-of-force problemxx. 5.2 Approach A strategic planning methodology for this class of problem would need to  appreciate the cognitive complexity of the problem (Checkland 1981, Warfield 1994)  design and/or adapt a multi-method approach (Midgley, 2000) guided by (1), to manage the cognitive complexity of the problem in tandem with changes in the situational complexity (Warfield,1994) and, A Systems Approach to Strategy and Execution in National Security Enterprises – 166 – Chapter 5: Case Study 1 – Defence  use systems thinking and systems engineering principles to configure a mix of rational, adaptive and interpretive modes of strategic and operational analysis for investigating the complex situation and validating the outcomes. Discussion of the case study begins with an overview of problem complexity and adapts Checkland‟s Soft Systems Methodology (Checkland, 1981) to achieve the first two design goals. It then describes the mix of methodologies used to achieve the third design goal and the results obtained from it. In view of the time pressures with the case study, and the impending White Paper review, a literature review was conducted in parallel with the need to begin work on the task. The work in this case study therefore followed Checkland‟s pragmatic advice of keeping the theory and practice tied closely together (Checkland, 1981). 5.3 Appreciate the Cognitive Complexity of the Problem and the Principal Problem-Solving Components A simplified view of the Defence capability planning process (at least in concept) involves the Defence Executive focussed on managing change through four main steps: 1) knowing the current capability of Defence; 2) understanding what future state is desired; 3) determining the „gap‟ and how this might be addressed; and, 4) agreeing a balance of investment between current and future capabilities. In concept, the process is no more complex than for any organisation or business. In practice, the greater complexity arises due to three enduring issues at the time this case study began in late-1999:  the process was operated by Defence for the government of the day bringing bureaucratic and political pressures from many process owners within the Defence strategic and capability planning framework,  the process is dealing with capability, cost and schedule trade-offs across different time dimensions extending to 15-30 or more years; and,  the analysis aimed to integrate dynamically over three time periods: – an annual cycle through which Defence is resourced and kept accountable to Government; A Systems Approach to Strategy and Execution in National Security Enterprises – 167 – Chapter 5: Case Study 1 – Defence – a triennial cycle of reviewing the strategic basis for Defence planning; and, – a continuous cycle of gaining insight into issues affecting future change. This process is outlined in Figure 5-1: Capability Planning Current Capability Defence Executive Is there need for change? Future Warfare Dynamic Cycles Future Directions Desirable Outcomes Analysis & Capability Trade-off Budget Personnel & Operating Costs FYDP Capital Investment Program Figure 5-1: Concept outline of the strategic and capability planning processes Futures work was viewed as the „engine room‟ for competitive change where the new ideas are created for future warfare, for reducing cost of ownership and for delivering through-life support. In this set of activities, it was found helpful not to mandate time scales and so remove the constraints of the present when conducting futures analyses and developing new ideas. We also found it essential for the futures discovery process to have constant links to the Defence Executive and its thinking about change. With it, SPP Division built champions for new ideas and processes and without this, it would have been difficult to move many people from the constraints of recent and current operations. By having a capability planning process which integrated knowledge over the differing time domains, the Defence Executive – as architects of the Defence enterprise – had the ability to choose between a faster but partial redesign and a A Systems Approach to Strategy and Execution in National Security Enterprises – 168 – Chapter 5: Case Study 1 – Defence slower but complete redesign of the architecture. Their choice would be have been driven by the importance and/or urgency to respond to changes in the strategic (and technological) environment. Their choice would have influenced their ability to manage the capability risk through capability planning. It is also considered important to manage the complexity in planning concurrently across the three different time horizons for each of the stages of capability planning. Recalling Baghai et al‟s (2000) advice, “neglecting any horizon at any time weakens … prospects for long-term growth.” If we were to fit the process into a yearly cycle, it would be as detrimental to designing the Defence enterprise as having no capability planning process at all. Why? Because Defence‟s annual internal processes are tuned to meeting the Government budgetary cycle. They are not tuned the dynamics of change in segments of the strategic environment. They therefore cannot hope to identify subsequent implications for Defence capability planning in an appropriate time frame. For example, five years represents about three complete generations of computer processors (applying Moore‟s Law) but for a frigate, five years is about one-third of their expected half-life. Consequently, the cognitive processes by which Defence staffs are to think about future changes and set future directions need to find a „rhythm‟ that is tailored to keep pace with the rates of change in the defence strategic (and technological) environment and still synchronise with the Government‟s corporate budgeting cycle. While the designed processes are time-consuming and cyclical, an initial objective of the case study was to design and implement a „learn by doing‟ approach: the more we were to iterate through the process, the more we expect to learn and the more confidence we expect to build into Defence future directions. To summarise, the cognitive complexity for the author and his team in SPP Division was to design an abstract system for strategic and capability planning in Defence. The designed abstract system would enable the ongoing creation and prescription of designed capability systems for current and future warfare. The process to achieve this would enable learning through investigating, analysing A Systems Approach to Strategy and Execution in National Security Enterprises – 169 – Chapter 5: Case Study 1 – Defence and describing the situational complexities involved in the human activity system of warfighting. 5.4 Managing the Cognitive Complexity To address the complexity set out in the previous section, the author employed Checkland‟s Soft Systems Methodology because it provides a framework for dealing with large, unstructured problems; for conceptualising a solution to a problem; and, for comparing the cognitive output / concepts with the real world problem before taking actions to improve the problem situation (Checkland, 1981). The Soft Systems Methodology (SSM) also enables a „learn by doing‟ approach to managing the cognitive complexity of designing a new strategic planning framework for Defence. The approach uses SSM to adjust the mix of planning methods designed to address the situational complexity of warfighting. To this end the normal seven-step methodology, shown in Figure 5-2, is presented in four main elements. Soft Systems Methodology 1. Strategic Planning considered problematic 7. Action to improve the problem situation 6. Options for Change: Systemically desirable, Culturally feasible Real World Systems World 2. Problem expressed 5. Comparison of models and real world 3. Root definitions of relevant purposeful activity systems 4. Conceptual models of systems (holons) named in the root definitions Figure 5-2: Checkland‟s Soft Systems Methodology (1981) The four main elements are:  clarifying the problem definition (steps 1 & 2), A Systems Approach to Strategy and Execution in National Security Enterprises – 170 – Chapter 5: Case Study 1 – Defence  a systems definitional view of the problem space, introducing relevant conceptual models (step 3 & 4),  a comparison of the models with the „real‟ [or unreal] world of Defence strategic planning and a discussion of the appropriate changes that were designed (steps 5 & 6), and  the systems-based actions that were implemented to improve the problem situation (step 7). The author led the study team though these four steps in a naïve manner, which on reflection at the end of the process, is far from the intended process outlined by Checkland (1981). The approach outlined here may therefore not be recognisable to an SSM specialist. However naïve these actions were at the time, the application of SSM (though torn from its original methodology) proved sufficiently useful in managing the cognitive complexity of the problem to guide the application of systems engineering in managing the situational complexity. The approach taken in 1999-2001 to implement the four main elements of SSM is briefly discussed in the following sub-sections. In section 5.11.2, this naïve application of SSM is reviewed to generate a concept for its interaction with systems engineering in a dynamic strategy framework that is more consistent with the original soft systems methodology. 5.4.1 The Problem Expressed In attempting to express the problem, Argyris‟s advice is important to note: “…defining and solving problems can be a source of problems in its own right” (Argyris, 1991). A discussion aided by an aspect of Checkland‟s soft systems approach will help to bring the expression into a sharper context. In defining a system that is considered problematic, Checkland considers six focal issues: the Customers of the system; the Actors that carry out the main activities of the system; the Transformation process that is occurring; the World view (or image) of the system that makes the overall definition meaningful; the Ownership of the system; and, the Environmental constraints acting on the system. Consequently, A Systems Approach to Strategy and Execution in National Security Enterprises – 171 – Chapter 5: Case Study 1 – Defence Checkland uses the mnemonic „CATWOE‟ to assist in remembering the elements of a well-formed definition (Checkland, 1981; Checkland and Howell 1990). In the case of the Department of Defence, the discussion pertains to the world-view held in 1999 by the (then) Strategic Policy and Planning Division of the Defence Headquarters. The context for the problem is expressed in detail in chapter 2 and is summarised here using Checkland‟s mnemonic CATWOE:  The primary customer is the National Security Committee of Cabinet as represented by the Minister for Defence.  The key actors in the process are the members of the Defence leadership team or their representatives.  The transformation that is desired through the process is to continually adjust the mental models of the customers and actors directly, and indirectly the mental models of those in receipt of the products of the strategic planning process (that is, the Defence staffs who use them in capability planning and analysis). The focus of the transformation is to improve the cognitive processes of those directly involved in strategic decision-making.  The „world view‟ that the author and his team (as leaders of the transformation) begin with is that a skilful process, of gradually expanding participation in the strategic debate, improves strategic planning outcomes (after Van der Heijden, 1996).  The owner of the planning process and its products is, ultimately, the Minister for Defence. Of recent times, the Department of Defence looks to the Government through two perspectives: as owner and as customer.  The environmental constraints have been defined in large part in chapter 2 and may be seen as common to many organizations that are an amalgamation of several large „stovepipes‟. A Systems Approach to Strategy and Execution in National Security Enterprises – 172 – Chapter 5: Case Study 1 – Defence Within this context where strategic planning is considered problematic, the reasons for it are now explored with a view to expressing the problem more specifically within the context of the larger „system‟ of planning in Defence covering the spectrum from strategic planning, capability development to Defence acquisition. The „why‟, „what‟ and „how‟ for capability development starts with an assessment of the strategic environment, the output of which provides the „hooks‟ for candidate systems to contest a place in the schedule of unapproved projects (then colloquially known in Defence as the „Pink‟ Book). Unapproved projects were often little more that a reviewed set of documented capability options. As depicted in Figure 5-3, an extreme „gap‟ existed between the strategic assessments that form the beginning of a strategic planning process and the formation of capability systems designs (Baker, 2000). This is the heart of the problem being addressed by this case study. The following decision making processes of the Defence committee structures focussed on refining capability options to transform them into approved equipment acquisition strategies. However, the decision making foundations relied on to select and transform these options were not based on solid ground because of the strategic „gap in explanation‟ (Baker, 2000). Step 1: Strategic Planning Is Considered Problematic The ‗Gap in Explanation‘ Strategic Planning Capability Development Primitive needs Statement (White Paper) Acquisition Strategic Assessment Why Capability Development Statement The Strategic Planning Problem Space Candidate Systems Designs What How Capability Options Why What Approved Projects Capability Options Document Capability Systems Statement Equipment Acquisition Strategy How Operational Equipment Figure 5-3: The „gap in explanation‟ A Systems Approach to Strategy and Execution in National Security Enterprises – 173 – Chapter 5: Case Study 1 – Defence The main points of reference on this spectrum, as they stood in 1999-2000, are listed below.  The White Papers that Government issues periodically to outline their forward policies for Defence that provided the initial „hooks‟ for capability options. (The White Paper typically offers no more guidance than a primitive needs statement. It has typically said little about what capability areas we need, how much of each is enough or why.)  The Capability Development Statement that canvasses the need for new or replacement systems.  The Capability Options Documents and Capability Systems Statements through which unapproved projects move into the „Pink‟ Book as candidates for approval by Government. These pave the way for a project to be included in a budget submission for approval and then to the schedule of approved projects (the „White‟ Book).  The Equipment Acquisition strategy then translates the concept into specific systems design language for the project to proceed to its ultimate in-service capability. (The later Kinnaird Review of 2003 examined the extent to which the in-Service delivery was disconnected from the changing strategic needs.) The „strategic planning problem space‟ depicted in Figure 5-3 defines the Defence the strategic planning problem dealt with in this case study. The aim of the case study is to investigate the missing links between the primitive needs statement presented in the White Paper and the „Pink‟ Book of unapproved projects. Some might argue that the „missing links‟ were never missing, and are implicit in the White Paper. Without opening that debate, the aim of the case study is to make the argument more transparent. In other words, Defence needs to be able to find a way of uncovering the „what‟ and the „how‟ at the strategic planning level and use this understanding to define a range of joint functional abilities expressing what effects are needed in which environments and to what ends. Further, it is A Systems Approach to Strategy and Execution in National Security Enterprises – 174 – Chapter 5: Case Study 1 – Defence then to examine what priorities attach to these abilities, given the range of strategic contexts that the Government defines as important. The case study analysis then considers the standards that should apply in meeting these high-level needs. For this understanding to impact across the development spectrum, the study aims to be in a position to define better Defence‟s future capability priorities and establish some high-level measures of effectiveness, expressed in a capability priorities paper that influences and shapes the capability development and acquisition program of activities. That type of formative guidance – diagrammatically represented by the green band in Figure 5-4 – did not exist in 2000, and while the overall framework is better in 2008, there remains room for significant improvement. Step 2: Strategic Planning – Problem Expressed Must align, and evolve, with the existing spectrum Strategic Planning Capability Development Acquisition Strategic Assessment Why Joint Functional Abilities What How Capability Priorities Why Candidate Systems Designs What How Capability Options Capability Priorities Supporting High-level MoE (MISSING) Why What Approved Projects How Operational Equipment Figure 5-4: The problem expressed 5.4.2 Root Definitions and Conceptual Models for Strategic Planning With the problem thus expressed, the next phase in applying SSM is to articulate what Checkland calls “root definitions” of systems that are relevant to the problem space and develop conceptual models of these systems (Checkland, 1981). The reader may or may not agree with the root definitions used here. A Systems Approach to Strategy and Execution in National Security Enterprises – 175 – Chapter 5: Case Study 1 – Defence These are the ones that our team settled on. Those of the reader, if different, are equally valid. It is worth remembering, there are no „right‟ answers because these expressions and models exist only in the cognitive domains of those who were involved in this transformation activity as plausible descriptions (Maturana and Varela 1980, Beer 1980). These expressions and models represent our images of the real world, human activity of strategic planning in the Australian Department of Defence. For the strategic planning problem area, the study team developed root definitions of three relevant systems:  [Definition A] System to guide the design and development of an holistic strategic architecture for the Defence organisation.  [Definition B] System to sustain learning about the development, growth and survival of the Defence organisation and use that learning to design and build a Defence enterprise for Government.  [Definition C] System to design and mentor cultural and behavioural change to ensure that future actions and decisions are appropriate and culturally acceptable to fully achieving the evolving strategic intent. For each of these definitions, conceptual models of the systems were then developed. For definition [A]: System to guide the design and development of an holistic strategic architecture for the Defence organisation,  The conceptual model [A] for root definition [A] is Boulding‟s hierarchy of systems complexity, appropriately adapted to the context. As previously illustrated in Table 4-5, an adaptation of Boulding‟s hierarchy of systems complexity to Defence planning, provides a multi-disciplinary framework of methodologies across nine systems levels. Ideally, an adaptation of Boulding‟s hierarchy of systems complexity would guide the development of a strategic architecture for Defence and help decision makers not accept as A Systems Approach to Strategy and Execution in National Security Enterprises – 176 – Chapter 5: Case Study 1 – Defence final a level of analysis below that being empirically studied. This model is explained further in the proceedings of SETE99 (Hodge & Walpole, 1999). For definition [B], System to sustain learning about the development, growth and survival of the Defence organisation and use that learning to design and build a Defence enterprise for Government,  The conceptual model [B] for root definition [B] is an adaptation of a systems engineering model. In particular, the role of the test and evaluation element of systems engineering was seen as an ideal concept for testing potential force structure designs against multiple scenarios to generate learning about the critical issues of whether the force structure option being tested would deliver the functionality and capacity that the Government needs are dependent upon (as represented in each scenario). The processes of evaluation and systems analysis were also seen to offer an ideal conceptual basis for making the strategic planning process more inclusive of the “warring tribes‟ (after McIntosh et al, 1997). For definition [C], System to design and mentor cultural and behavioural change to ensure future actions and decisions are appropriate and culturally acceptable to fully achieving the evolving strategic intent,  The conceptual model [C] for root definition [C] is a performance management system based on an understanding of the intrinsic motivators for human behaviour. This is an important third component in the overall concept and is still under development. The remainder of this chapter focuses initially on root definition [B] and the adaptation of the elements of a systems engineering model that forms the conceptual model [B], as shown in Figure 5-5. Root definition [A] and its conceptual model are revisited in section 5.5.7 as part of a review of progress in implementing conceptual model [B], and prior to discussing how the data collected during the test and evaluation processes are to be analysed to develop a strategic architecture for Defence planning and execution. A Systems Approach to Strategy and Execution in National Security Enterprises – 177 – Chapter 5: Case Study 1 – Defence As a conceptual model for a system to sustain learning, systems engineering represents the „WHY‟, „WHAT‟ and „HOW‟ of a strategic planning process. Starting with a statement of what government wants Defence to achieve, the „WHY‟ is expressed in a range of scenarios, which provide the strategic context and the national security outcomes required from Defence. An iterative process of requirements analysis then leads to a statement of the „WHAT‟ – those abilities Defence must develop in order to achieve the Government‟s needs for a defined national security outcome. A design loop then leads to exploring the „HOW‟ – the particular, physical instantiation of how the Defence Organisation can be structured to in order to provide the abilities needed to achieve the Government needs. Remaining true to the systems engineering model, these force structures or capability priorities can then be tested back against the strategic scenarios (the „WHY‟) to ensure that they do meet the government requirements with which the process started. It is important to note the highly iterative nature of this process, which allows activities to occur concurrently in each part of the system. 1 CONDUCTSCENARIO PLANNING X X X X X X 7b Monitor & take Control action X X – Identify Potential Crises & Events 2 Understand the „Why‟  Discover future purpose of Defence 7a Iterate to develop requirements 4 Evaluate Solutions  Against specified future purpose (in scenarios)  Generate shared learning 5 Analyse  Performance  Costs  Risks… etc. 6 9 Develop the „What‟ Analyse  Develop statement of abilities / capability requirements  Performance  Costs  Risks… etc. 3 Define the „How‟ 8  Identify cost-effective options for solutions Iterate to design solutions 10 Develop Capability Priorities Guidance Figure 5-5: Conceptual model for adapting systems engineering to Defence strategic planning A Systems Approach to Strategy and Execution in National Security Enterprises – 178 – Chapter 5: Case Study 1 – Defence At all parts, the senior defence leadership plays a controlling role, comparing risks and trade-offs, deciding on the capability options that go to government and interpreting the guidance that emerges from their customer/owner. 5.4.3 Comparison of the Model with the Real World A qualitative and theoretical comparison of the model with the real world was conducted through discussions with the highest levels of senior leadership in the Department of Defence. The problem of interest – the „gap in explanation‟ and the need to address it – was recognised. The changes suggested by this application of systems theory and practice as captured in the model were seen as highly desirable, with the Secretary [then Mr Paul Barrett] noting that it would take some years to mature. It was recognised by the leadership that the conceptual model fits the „problem space‟ illustrated in Figure 5-6 in a manner that was consistent with Defence‟s traditional „top down‟ approach to strategic planning – the feedback and testing loops being the key difference. The leadership also anticipated the benefit of the process providing a basis for discussing with Government its needs statement (the first „WHY‟). And, how that conversation might continue as Defence adapts a systems engineering process to integrate a range of strategic planning methods to produce a Capability Priorities Statement (the second „WHY‟). The goal of which is to serve as a „line in the sand‟ that is occasionally drawn to indicate the direction and „speed‟ of change across Defence as a whole. A Systems Approach to Strategy and Execution in National Security Enterprises – 179 – Chapter 5: Case Study 1 – Defence Step 5-6: Comparison of Model with Real World Addressing the ‗Gap‘ in Explanation Strategic Planning Capability Development Acquisition Why Analysis & Control What Why How What How Why What How Validate Addressing the „Gap‟ in Explanation Figure 5-6: Conceptual model appears to address the gap in explanation The other value of the model is that is does not matter where the planner starts. That is, one also could begin „bottom up‟ by designing a new force structure and testing (constructively) it in the strategic environment. The value of the model to those taking a „bottom up‟ approach to strategic planning is best illustrated with a biological analogy of bacteria. Bacteria provide the best illustration of growth and survival from a time when oxygen was an enemy to the anaerobic life forms that inhabited the world. Davis and Meyer (1998) note: “.. [bacteria] don‟t plan, consider the competition and don‟t attempt as humans do to change the environment around them. They breed very quickly and mutate often. Breeding and mutation are sources of new information: Whether through recombination or random change, innovation is achieved. Then … the environment gets “to vote” on the usefulness of the innovation: Most die, some survive. Selection determines which few solutions survive to become part of the next round of innovation.” With this in mind, it suggests the systems model offers decision-makers the ability to uncover and import new information from the environment both „top down‟ and „bottom up‟. Comparison of the model with the real world problems suggests it is a relatively „cheap‟ way of taking many ideas about the future A Systems Approach to Strategy and Execution in National Security Enterprises – 180 – Chapter 5: Case Study 1 – Defence challenges, organisation and structure of Defence and learning what might and might not work; and then, selecting the potential winners with an understanding of the risks involved. The process repeats ad infinitum to build a large database of information enabling the observer to „see‟ what patterns emerge. In this sense, the conceptual model supports generative planning where the strategy emerges from the interaction of current capabilities operating in a dynamic strategic environment. It also supports rational planning methods that establish a hierarchy of vision, mission and goals that can be tested for validity. 5.4.4 Action to Improve the Problem Situation The senior leadership accepted the need to take action. They funded a trial of a prototype of the proposed process. They set up a group to oversee and approve the inputs to the process and they participated in the developmental test and evaluation. So, the final step in applying the SSM began with the design, development and implementation firstly of the testing process to manage the situational complexity involved in applying military power in the national interests, both now and in the future. Three teams were established:  A scenario-development team led by Mr Martin Dunn to devise a complement of 14 different vignettes written around a selection of classified military strategic objectives. These were to incorporate a threat statement of probable adversary capabilities and a suite of planning assumptions.  A force-option development team led by LTCOL Cameron Hooke and LTCOL Tony Casey to design options for force structures around three different resource profiles. All three Services and the HQ staff of the Australian Theatre were intimately involved in creating these testing artefacts.  A third team led by the author to develop a testing methodology within a systems-engineering framework. Tools such as databases and collaborative computing techniques to collect and assess the required data were to be developed. And, evaluation of the process to ensure the analysis provided the transparency needed to develop a Capabilities Priorities Paper for Defence. A Systems Approach to Strategy and Execution in National Security Enterprises – 181 – Chapter 5: Case Study 1 – Defence Subject to the success of the prototype, the Deputy Secretary Strategy also agreed to fund the establishment of an in-house capability and move the project to operational test and evaluation and then to full-scale implementation. 5.4.5 Summary The cognitive complexity of developing a brand new process of strategic planning (for an organisation responsible for warfighting in many contingencies that are situationally complex) and adapting the mix of methods dynamically as the process is applied, was managed using a process based on Checkland‟s SSM (although far from its pure native form). SSM continued to operate in the background by surfacing the changes required in the mix of methods. SSM guided action to adapt the systems engineering process using three-Es as criteria:  efficacy – was this process adaptation right for the purpose? effectiveness – was this process adaptation effective for the purpose? efficiency – did this process adaptation achieve an effective outcome for minimum resource utilisation?   The following section now describes how the systems engineering model was adapted and implemented to support Defence strategic planning. At the time of beginning this case study, scenario based planning had fallen out of favour in the Australian Department of Defence, and in most enterprises (Mintzberg, 1994). This approach was reported at INCOSE 2001 in a panel session chaired by the author (Hodge et al, 2001), pre-dating similar activities in the UK, US and Canada by some years. 5.5 Design / Implement an Approach to Manage the Situational Complexity To ensure analysis resulting from a Defence strategy process is seen as credible to major stakeholders like the Chief and Vice Chief of Defence Force and the Chiefs of the three Services, the strategic planning process needs to manage the situational complexity of warfare. The risk otherwise is that financial and programming decisions fail to reflect the strategic ends, ways and means of A Systems Approach to Strategy and Execution in National Security Enterprises – 182 – Chapter 5: Case Study 1 – Defence military operations and give Government an adequate range of military response options. Therefore, the goals of the strategy process were:  to bring the organisation through the torrents of ambiguity and uncertainty that are endemic in Defence planning (and stick with that process until action is taken) instead of thrusting upon the Government the best plan of several bright minds and directing that it be acted upon.  to establish transparency throughout the process to give auditability of information quality and build greater credibility with Defence stakeholders  to direct human behaviour by a shared image of reality that would, through the planning process, change peoples‟ mental models to a point where the models coalesce to form a basis for organisational change that is „owned‟ by the participants. 5.5.1 Configuring a Mix of Rational, Adaptive and Interpretive Approaches To achieve our aim of bringing the organisation along with planning decisions, the study team needed to ensure that the selected conceptual model of a given process offered consistency above all else in the way in which it assessed the strategic value of options for force structuring. In any process where high-priced force structure trade-offs are made, there will always be some people who will not like a proposed solution and respond by attacking the methodology that delivered such an answer (Brabin-Smith, 1999). The major variables in the planning process, whether in a current or future time domain, are the strategic objectives and the shape of force structures. The relationships between these major inputs are depicted in Figure 5-7. A Systems Approach to Strategy and Execution in National Security Enterprises – 183 – Chapter 5: Case Study 1 – Defence Integrating Current & Future Thinking Scenariobased Planning Strategic Assessment Future Military Objectives Military Strategic Objectives (Current) Future Options & Concepts Resources Current & Future Objectives (Planning Base) Force Structure Options Options for Options for Government Government Analysis and Evaluation of Options Against Objectives Goal: Consistency in Approach Figure 5-7: Integrating current and future thinking The need for consistency in the analysis and evaluation of options against objectives was recognised early on as paramount in presenting options for Government. However, the methods to integrate analyses of current and future forces and design options for Government were not designed by the author until just before we reached the point of needing to adapt the systems engineering processes for the purpose – that is, the process definition depicted by the area in blue in Figure 5-7 was to be designed „just in time‟ before exercising it. The apparent risk was mitigated by using a standard systems engineering process as a methodology to guide the integration and implementation of appropriate subordinate methods and tools. The continually iterative nature of the systems engineering model offers a capability to:  manage a process in a dynamic environment where Government needs and system requirements are ill-defined, are changing and/or changeable – thus supporting the development of various „use cases‟ in multiple scenarios, A Systems Approach to Strategy and Execution in National Security Enterprises – 184 – Chapter 5: Case Study 1 – Defence  develop and assess multiple force structure solutions at different levels of interoperability,  test and evaluate potential solutions to examine their fitness for purpose in delivering the Government needs for joint and/or combined operations,  to capture and analyse the data in each of the preceding process elements to examine the common and critical issues affecting the fitness for purpose of each force structure option – whether at the technical, conceptual or behavioural levels of interoperability. Focussing first on the testing component of the systems engineering methodology was a good place to start a transformation of the Defence strategic planning process because it satisfied two criteria from Checkland‟s SSM. It was systemically desirable because it enabled the author to design and integrate a mix of interpretive, adaptive and rational methodologies into the planning process. It was also culturally feasible because the major stakeholders retained ownership and control of the major inputs – namely, the development of the scenarios and the force structure options. This brought in a large number of senior and middle-ranking people from the strategy group, the operations community and the capability development group. It proved to be a catalyst for them to participate in the testing process, then to assess the efficacy, effectiveness and efficiency of the force structures, and then to own the outputs of the test and evaluation process they contribute to. The interplay between managing the cognitive complexity of transformation and managing the situational complexity of developing and implementing new processes for achieving better clarity in decision making on warfighting incorporated Checkland‟s SSM and systems engineering into direct and symbiotic interplay throughout the case study. While SSM helped to define the problem and select a mix of methods by which to take action, systems engineering provided a structured framework of processes by which the mix of methods could be integrated. Monitoring of the effectiveness and efficiency of the mix of A Systems Approach to Strategy and Execution in National Security Enterprises – 185 – Chapter 5: Case Study 1 – Defence methods continued as a background SSM activity and control action was taken to adjust the mix to suit the evolving planning conditions. 5.5.2 Developing the Scenario Planning Base (Expression of the „Why‟) A set of 14 real-world scenarios were developed to represent the type of operations that the Australian Government would expect the Australian Defence Force to succeed in. They include a range of geographical locations, various adversaries and cover many potential points along the operational intensity spectrum from support to national operations to defence of Australia. It is important to note that although current data and trends were analysed to predict what scenarios may be possible in the future, the set of scenarios used represented a set of circumstances that the Australian Government would expect Defence to act in, rather than a set of future events expected to occur with some level of certainty. One must keep in mind the benefit of studying less likely scenarios if the impact of their occurrence is significant. The scenario set is not static, but is subject to review and updated when necessary, to ensure that the scenarios studied still represent the Government needs, Australia‟s strategic circumstances and regional capabilities. The scenarios used are fairly detailed, however they do not give much more information to the players than that provided by the level of intelligence that Australia could expect in the timeframe studied. They do not contain exact information on the adversary, for example, the exact location and plans of the red forces may not be known. However, information is provided on the likely Order of Battle (ORBAT) of the adversary as well as their likely location. The scenarios include information such as the events leading up to the crisis, the political climate, the geographical location, time of year, rules of engagement as directed by the Government, and timing imperatives. They also indicate what Australian forces are currently tasked elsewhere and therefore may not be available for use in this crisis. Other players, such as coalition forces, are also described in the document. A Systems Approach to Strategy and Execution in National Security Enterprises – 186 – Chapter 5: Case Study 1 – Defence Each scenario is accompanied by a Concept of Operations (CONOPS) describing a possible way to tackle the problem, including indicative objectives and missions. This is used as a strawman during the testing, allowing the players to modify it and in this way gain ownership of the data gathered. 5.5.3 Developing the Force Structure Options (Expression of the „How‟) Force structure options can be designed to meet various criteria. For the first run with the methodology, three capability options were designed to three different cost profiles, 0%, 3% and 6% real growth over seven years. For the methodology to be accepted within Defence, the inputs to it must also be accepted. Hence it was important to ensure that all three services were fully involved with the development of these capability options. This produced fairly conservative capability options but they were culturally acceptable within Defence and therefore generally accepted by the players. Other capability options can be, and have been, developed along other themes such as an expeditionary force, or the priorities set out in the Defence White Paper. It is important that as the process matures and becomes more accepted within Defence that Defence stretches the boundaries and tests more radical capability options that perhaps do not include the traditional means (e.g. F/A-18) for a particular effect (such as strike in the land environment), forcing the participants to consider how essential those means are to successful achievement of an end state. Being unable to complete a mission without a particular platform or „capability‟ in a strategic simulation of warfighting is stronger evidence for its necessity in the ORBAT than being able to complete a mission with ease using it. All capability options were costed, albeit approximately, to ensure that they do not exceed the realms of plausibility. This allows Defence to give Government guidance along the lines of the statement “If you structure the ADF this way, and spend approximately this much money, these are the military response options available to Government, and these are the things that you cannot achieve”. A Systems Approach to Strategy and Execution in National Security Enterprises – 187 – Chapter 5: Case Study 1 – Defence Unfortunately, the need for costing tends to make the capability options rather platform focussed as these are easy to cost. Ideally though, capability options should contain information on the readiness levels of the force elements and their sustainability to allow these aspects to be experimented with and tested. In addition, softer issues should be included if possible such as the general organisation, doctrine and people that together with platforms make capability. 5.5.4 Developing the Testing Methodology (Expression of the „So What‟) In the process of implementing the conceptual model of systems engineering, a seminar gaming approach was selected to bring together the senior stakeholders in an orchestrated debate that was aided by several software tools. A two-part process was designed. In the first part, the assembled SMEs debate and agree the efficacy of the objectives and missions to achieve a military strategic objective. The approach is based on a modified military appreciation process which connects strategy to tasks and resources. In the second part, the assembled SME‟s debate the fitness for purpose of the allocated forces to achieve the hierarchy of objectives and activities, using key criteria of likelihood of success (effectiveness) and capacity (efficiency). This process is outlined in Figure 5-8 and in the following text. Overall Fitness for Purpose Strategic Risk to National Interest Objective Theatre Likelihood of Success Objective Part Two: SME Judgement Process Mission Likelihood of Success Objective TO(j) Part One: Modified Military Appreciation Process Fitness for Purpose Tasks Abilities Indicative Force Allocation MO(k) Figure 5-8: Summary of test methodology and measures A Systems Approach to Strategy and Execution in National Security Enterprises – 188 – Chapter 5: Case Study 1 – Defence The process involves eight main steps as follows. To expedite the process, a „strawman‟ answer at each step of the process has been previously prepared. The group however has complete discretion on the final data entered into the database. Step 1: An assembly of 12-20 military expert representatives from the Single services, ADHQ, Intelligence staffs and DSTO are briefed on a real-world scenario and a force structure option of a particular cost and design profile. The group is asked to develop a concept of operations from the inputs and develop an agreed military strategic objective, noting that the aim is to assess the fitness-forpurpose of the given force structure option to achieve the Strategic Objective. Step 2: The Strategic Objective is reduced to several Theatre Objectives, followed by several Mission Objectives for each of the Theatre Objectives. The essential aspect is to ensure the objectives clearly state what effect is to be achieved in which environment. A range of indicative tasks are then listed for each Mission Objective. These are mainly used as aides-memoire when assigning forces to each Mission Objective. A list of abilities essential to achieving the Mission Objective is also collected. Finally, force elements are assigned to each Mission Objective, with these assignments being restricted by the number and type available in the ORBAT that is being played. Multiple assignments of force elements are tracked throughout the process so that the degree of over-use of force elements can be gauged. The Strategic Objective is not broken down any further. Note that although there are loose similarities to the military appreciation process, deliberate planning is not done. Step 3: The players then assume the mantel of „Military Inspectors-General‟ and work in reverse order up the hierarchy of objectives, making judgements about the likelihood of success of the allocated forces to achieve each objective. First they consider the fitness-for-purpose of the allocated force elements by considering the functionality and the capacity of the allocated force to achieve the objective. The likelihood of success of the Mission Objective is assessed with an indication of the impact of failure of this Mission Objective on the outcome of the A Systems Approach to Strategy and Execution in National Security Enterprises – 189 – Chapter 5: Case Study 1 – Defence Strategic Objective to give some sense of the strategic criticality of each objective. These judgements are made for all the Mission Objectives. Step 4: One bridging judgement is made at the Theatre Objective level. The likelihood of success of the Theatre Objective is assessed bearing in mind the forces allocated and the judgements arrived at for the Mission Objectives underlying that Theatre Objective. This is done for each Theatre Objective. Step 5: Before making the final strategic judgements of risk and overall fitnessfor-purpose, the participants are asked to identify key strategic issues relating to the Defence Fundamental Inputs to Capability19 and preparedness. This brings out issues such as there not being adequate doctrine for a particular way of doing things or a lack of support in particular areas. It also allows the participants to focus on the broad spectrum of issues in making their judgement, rather than just on the underlying judgements obtained during the process to this point. Step 6: At the strategic level, the likelihood of success is assessed based on the hierarchy of judgements previously made. The participants are also asked to assess the risk to the National Interest. This is defined as the product of the likelihood of failing to achieve the Strategic Objective and the impact of such a failure. While the scenario based planning and evaluation to this point keeps the two major inputs constant throughout, it is important at the end of the process to give the participants an opportunity to review how sensitive their collective decision making was to any change in the scenario and the force structure option. Thus Steps 7 and 8 in the process were included: Step 7: The participants are asked to judge the sensitivity of the outcome to changes in the scenario by asking: what small change, if any, in adversary capabilities would significantly reduce the judged likelihood of success at the Strategic level? This See Defence (2006) Capability Development Manual: The Fundamental Inputs to Capability are: Personnel, Organisation, Collective Training, Major Systems, Supplies, Facilities, Support, Command and Management 19 A Systems Approach to Strategy and Execution in National Security Enterprises – 190 – Chapter 5: Case Study 1 – Defence allows the participants to highlight issues such as if the adversary had slightly more capable platforms, the Force Option would have been unlikely to succeed. Step 8: The participants are then asked to judge the sensitivity of the outcome to:  the given course of action by estimating the relative value of other friendly courses of action;  the given CONOPS by identifying changes that would significantly improve the campaign plan; and,  the given force structure by identifying changes in capabilities that would significantly improve the effectiveness of the force. The purpose of Step 8 is to prompt the participants to suggest elements that would increase the overall capability of the force structure option being played. The participants are free to think „outside the square‟ and include futuristic suggestions. However, for each suggestion made, an offset must be indicated in an attempt to keep the enhanced force structure option affordable within its broad cost profile. Not surprisingly, the participants find it much easier to suggest additions rather than find offsets. Confidence in the outcomes of force option testing is directly proportional to the people selected to make the judgements. This also represents a critical vulnerability with the process itself. To mitigate this vulnerability, Defence takes some care to carefully select participants with appropriate expertise. While it can be said that expertise brings its own bias, the process requires all participants to „vote‟ to achieve a collective judgement. An onus therefore falls on the experts to convince their peers of the strength of their position so that overall, the „wisdom of the crowd‟ prevails20. See James Surowiecki The Wisdom of Crowds – Why the many are smarter than the few and how collective wisdom shapes business economies, societies and nations. The central tenet of this book is that under the right circumstances, “groups are remarkably intelligent and are often smarter than the smartest people in them. Groups do not need to be dominated by exceptionally intelligent people … even if the most of the people within a group are not especially well informed, it can still reach a collectively wise decision. ” (p. xiii) 20 A Systems Approach to Strategy and Execution in National Security Enterprises – 191 – Chapter 5: Case Study 1 – Defence A „Game Book‟ developed to orchestrate the seminar gaming process is included at Appendix A. The Game Book lists the key roles of the exercise control team members, the players, the questions they are to address and where they iterate, and the definitions that apply on each judgement scale. 5.5.5 Tools for Data Capture and Knowledge Elicitation In this final section of designing an approach to manage the situational complexity, it is vital that good tool design supports the elicitation and capture of vast quantities of data. The designed gaming process was to be applied over 40 times in the period 1999-2001, where each run addressed one combination from a matrix of [then] 14 scenarios with over six options for force structuring (at least four future force structure designs, the force programmed to exist in three years time and the current force structure). Even one seminar game draws out much information about the risks and benefits of changes to Government strategic needs, or capability solutions to meet these needs, and their implications for resource allocation. Repeating this process extensively, as was programmed and achieved, the design of the data capture process required tools that would support the analysis and reporting of these trials in two forms:  Scenario reports – termed „phase one reports‟ that were likened to „lab‟ reports detailing what happened in each seminar game and identified the principal issues that became evident,  Effects-based reports – termed „phase 2 reports‟ that analyse multiple „phase one reports‟ to identify what effects in which environments are delivered noting the commonalities and criticalities across all scenarios. The tools that were designed and used included:  map-based software to situate the scenario and support the military appreciation process;  electronic meeting support equipment to capture individual inputs, voting on the values for all of the measures and categorisation of key issues; A Systems Approach to Strategy and Execution in National Security Enterprises – 192 – Chapter 5: Case Study 1 – Defence  a relational database of the agreed hierarchy of objectives, force allocations and the agreed judgements on the measures; and,  a visual reference of the decision tree and the judgements recorded in the primary database to allow the players to contextualise any one judgement within a view of the whole framework of decisions they have made. These tools are schematically represented in Figure 5-9 projecting four sets of information concurrently across four screens. Map Grouputer Database Treeview Projectors Projectors PC PC PC HUB Group Keyboards Multiplexor Laptops / GEMS Peripherals Figure 5-9: Seminar gaming tools for force structure analysis Before describing the major tools briefly in the next sub-sections, it is worth mentioning that operations analysts observing the seminar games used Lotus Notes software, over a Windows-NT network, running a DSTO-developed GEMS (Group Enabled Meeting Support) template allows analysts to expand their record of the seminar game as it was proceeding. This allowed analysts to work asynchronously on the same report, while capturing important points that arose from spoken conversations and the recording of any assumptions made. 5.5.5.1 The Primary Database The gaming database is built in Microsoft AccessTM aligning with the flow of the seminar game from the strategic to theatre levels, down to the mission and force allocation level in part one of the game, then in reverse order capturing the A Systems Approach to Strategy and Execution in National Security Enterprises – 193 – Chapter 5: Case Study 1 – Defence judgements against each of the measures. Sample screenshots are depicted in Figure 5-10. STRATEGIC LEVEL THEATRE LEVEL MISSION LEVEL SAMPLE RECORD OF ASSESSMENT Figure 5-10: Main screens of primary database The primary database stores the strategic breakdowns, force allocations and the first order judgements for all scenarios and force options in a testing series. The Grouputer database is combined with the gaming database at the end of a testing series and the judgements and comments are stored together ready for comprehensive analysis. Various report forms have been designed in this database to extract the data in convenient formats for analysis21. In the course of each event, assessments are selected from a five point scale of first order judgements only. As the force structure options testing is seeking to The author acknowledges the contributions of Shane Arnott, Technical Director at the Boeing Corporation and his team for the development of the initial MS Access database; subsequent development of the database was driven by Dr Kym Hendrickson and Mr Rene Konrad of the [then] Force Structures Priorities Branch. 21 A Systems Approach to Strategy and Execution in National Security Enterprises – 194 – Chapter 5: Case Study 1 – Defence inform the strategic level of decision making, this is considered sufficient to develop good initial guidance on force structuring. Fitness for Purpose Fit Mostly Fit Moderately Fit Marginally Fit Unfit Level of Risk Trivial Minor Bearable Critical Catastrophic A set of first order judgements uses a word picture and colour scale that the participants are comfortable with Figure 5-11: Scales for First Order Judgements Single words and colours that are meaningful to the players are chosen for each point on the scale. There are two variants, red to blue for fitness-for-purpose and likelihood judgements and red to green for risk and impact judgements. This allows rapid and intuitive understanding when looking at previous judgements – red is bad, green or blue is good. 5.5.5.2 Visualisation of the Decision Tree22 To help manage the situational complexity of the military assessment process, the data in the primary database is visualised using a visual basic application used to show the decision tree and all previous judgements in colour coding to the participants. This aids the participants to make more informed judgements and also shows them where they are currently focussed in the gaming hierarchy. The view can be restricted to one scenario or one force structure option to reduce the amount of data presented. The treeview can be expanded or contracted in much the same way as Windows Explorer works. The data can also be expanded one more level than shown in Figure 5-12, to show the forces allocated to each mission. As in the previous footnote, the author acknowledges the contributions of Shane Arnott, Dr Kym Hendrickson and Mr Rene Konrad 22 A Systems Approach to Strategy and Execution in National Security Enterprises – 195 – Chapter 5: Case Study 1 – Defence Figure 5-12: Visualisation of the decision tree 5.5.5.3 Electronic Meeting Support and Other Tools The agenda developed for the seminar wargame is also recorded in an electronic meeting support tool. In this case, the team selected an Australian product GrouputerTM 23. The process allows the agenda to be reviewed at the start of each testing series, and the questions are modified if necessary to ensure that the data being collected for each seminar game is driven by the „right‟ questions. At the point in the agenda when the players are to decide on judgements, the voting facility of GrouputerTM is utilised, which provides a useful histogram of the vote spread. A sample screen-shot from GrouputerTM with illustrative data is shown in the left side of Figure 5-13. As shown, GrouputerTM allows concurrent collection of data from 12 key boards. This allows each of the players to enter their views without the loudest voice dominating proceedings. At the end of a GrouputerTM is a trademark of Grouputer Pty. Ltd. At the time of the reported testing, the team used Decisions 4 and Decisions 5 products which limited the screen to 12 players. Later web-based versions of the tool remove that restriction and allow sessions of up to 96 people to participate from distributed locations. 23 A Systems Approach to Strategy and Execution in National Security Enterprises – 196 – Chapter 5: Case Study 1 – Defence testing series, the data collected by GrouputerTM is transferred to the gaming database and linked to the relevant Mission, Theatre or Strategic Objective. Grouputer Maps   ILLUSTRATIVE DATA ONLY Figure 5-13: Electronic decision support tools The map-based projections were derived from MS EncartaTM or ESRI ArcViewTM products, allowing simple overlays to be made (as shown) or more complex geospatial products from the Defence intelligence community with military symbology and other overlays. The main value of the map based tools is to provide all players with a constant and consistent view of the scenario they are deliberating. 5.5.6 Managing the Data for Analysis At the end of a testing series (several events), a wealth of data, such as Grouputer comments and judgements, is available for analysis, however, this data is structured efficiently for data capture and from an analysts view, the body of data is now largely unstructured. Nevertheless, trends do emerge from the analysts awareness of this body of data as it was captured, thus yielding an „iceberg‟ of evidence with major and minor trends supported by a vast expanse of data. Linking data with a common theme together allows easy identification of evidence for any trend as shown conceptually in Figure 5-14. A Systems Approach to Strategy and Execution in National Security Enterprises – 197 – Chapter 5: Case Study 1 – Defence Manage the ‗Iceberg‘ of Evidence Code data points, enabling rapid identification of sub-sets of data that are relevant to questions posed Events Trends Coded Evidence Figure 5-14: Managing the 'iceberg' of evidence With many qualitative comments embedded in the data sets, the study team experimented with a qualitative analytical tool, called NvivoTM, to help build a stronger audit trail from the data sets of all scenarios to the key questions or issues that were guiding our research. The outputs of the GrouputerTM and the reports of the primary database were exported into rich text files and linked to NvivoTM as referenced source documents. The essence of the tool is that it allows comments in a document to be coded to a topic and these comments, and all others on the same topic from other documents, can then be viewed when the topic‟s node is opened. Comments can be coded to as many nodes as necessary. This then allows questions such as “what is the utility of Air-to-Air Refuelers?” to be rapidly answered once the coding has occurred from the data across all scenarios. It also allows for analysts comments to be added and thus provides a rich and auditable data source across multiple scenarios to bring out the „wisdom of the crowd‟ (after Surowiecki, 2004). If all comments which were considered important in the Phase One – Scenario Reports or the Phase Two – Effects-Based reports were coded to one node, with the analyst‟s comments about relevance or otherwise of each comment, the team builds an audit trail from the raw data to their convergence on a supported conclusion. A screen shot of the NvivoTM screen is shown in Figure 5-15. In the screen shot in Figure 5-15, the documents appear in the top A Systems Approach to Strategy and Execution in National Security Enterprises – 198 – Chapter 5: Case Study 1 – Defence right, the list of nodes in the bottom right and an example of one of those nodes open in the bottom left. The control panel for the Nvivo project is in the top left corner. NVivo NVivo Control NVivo Control Panel Panel Documents Documents An Open Node An Open Node Nodes Nodes Figure 5-15: Structured analysis of qualitative data As you may notice, in the interests of maintaining security compliance, the data shown here do not relate to strategic planning in Defence! It is one of the tutorials provided with the tool for demonstration purposes. One of the team‟s longer term goals was to code all the comments gathered through the GrouputerTM in this manner, then have web based copies of all reports that allow the reader to drill down to lower level reports and the raw comments and analyst annotations, enabling any reader to audit the validity of the report‟s conclusions by following the data trail. 5.5.6.1 Anaylsis Phase 1 – Scenario-based Reports Once each scenario has been tested against all the force structure options relevant for a trial, it is analysed by a desk officer. There are various inputs to this process, A Systems Approach to Strategy and Execution in National Security Enterprises – 199 – Chapter 5: Case Study 1 – Defence including the information collected in the gaming database which is extracted as reports, the coded data from Nvivo and the comments taken in LOTUS Notes by analysts throughout the gaming process. Sound military knowledge and an understanding of the scenario being analysed are also essential. The analyst must be careful to identify bias and hidden agendas in the comments recorded during the games and ensure that the analysis is not unduly coloured by their own biases. For example, if the need for tanks is often repeated by an armoured corps officer alone, that data should perhaps be regarded with more care than similar statements supported by participants from other Army corps or other Services. Averting this bias is one of the reasons for the analyst to be present at all of the seminar games, and highlights the benefit of the non-anonymous data recording provided by GrouputerTM. The initial outputs of the phase one analysis is a set of reports, one for each seminar game assessing the performance of the force structure option as it was tested in each scenario. The analyst then examines the initial reports for one scenario addressing all of the capability options tested in that scenario. The analyst then repeats that process until all scenarios are analysed. These scenario-based reports draw out significant capabilities for each scenario as well as high-lighting any assumptions made, the CONOPS used and the success, or not, of the force structure options tested. The draft phase one reports are then sent out to the players for comment. 5.5.6.2 Phase Two Analysis – Effects-based Reports The phase one reports of the scenario-based analysis are then analysed across broad environmental areas to understand the key strategic functionality required to structure a force for military success across the scenario planning space. In the 1999-2001 period, the analysis addressed eight areas: strategic issues (e.g. preparedness), combat-strike effects, combat-maritime effects, combat-land effects, combat-air effects, cyber effects, support enablers, knowledge enablers. Although the phase one reports are a major input, the desk officer considers the data collected during gaming and uses their military knowledge and intimate A Systems Approach to Strategy and Execution in National Security Enterprises – 200 – Chapter 5: Case Study 1 – Defence knowledge of the scenarios. The effects based reports are then workshopped to ensure all the analysts present during the testing have input and validate the analysis. The output is a set of reports that draw information from all scenarios and all capability options and indicate the common and critical issues as well as the range of strategic needs and indicative forces required to meet these needs. The phase two reports are also sent out to the players for review and comment. 5.5.7 Reviewing Progress against the Conceptual Model In managing the cognitive complexity of the strategic planning problem, an earlier qualitative and theoretical comparison of the model with the real world was conducted through discussions with the highest levels of senior leadership in the Department of Defence (see Section 5.4.3 of this chapter). This sub-section now briefly reflects on the action taken so far in implementing the conceptual model to assess the efficacy, effectiveness and efficiency in addressing the „gap in explanation‟ between the Government‟s strategic needs expressed in the existent White Paper and the capability solutions expressed in the Defence Capability Plan. In the action reported so far, achievements include:  a set of scenarios express of the Government needs for a wide range of military response options.  a set of force structure options express different designs of a Defence force at a range of cost profiles,  a test methodology, tools and data sets, initial analysis of the effectiveness and efficiency of a the force structure options to operate in each scenario – the „phase one reports‟.   initial analysis across all scenarios of the commonality and criticality of the functional effects delivered by the force structure options – the „phase two reports‟. A Systems Approach to Strategy and Execution in National Security Enterprises – 201 – Chapter 5: Case Study 1 – Defence These elements show progress when mapped in Figure 5-16 against the conceptual model which adapts a traditional systems engineering model to address the „gap in explanation‟. Strategic Planning EXISTS: Defence White Paper Scenarios Capability Development TO BE DONE: Analysis for Strategic Functional Architectures & Performance Parameters Acquisition Why Analysis & Control Why How Scenario-based analysis of force structure options Phase 1 Reports TO BE DONE: Capability Priorities Statement What Validate Methodology Tools Data sets Force Structure Options EXISTS: Defence Capability Plan What Effects-based Analysis & Phase 2 Reports Why How What How Addressing the „Gap‟ in Explanation Figure 5-16: Review of progress against the conceptual model Further design is required to complete the analysis and configuration of the available data to develop a strategic architecture and a Capability Priorities Statement. At this point in proceedings, it was realised through the background „running‟ of SSM that the two problems left to be addressed aligned well with root definition [A]: System to guide the design and development of an holistic strategic architecture for the Defence organisation; and that, the conceptual model originally thought to be ideal was no longer so. It was clear that as a conceptual model, Boulding‟s hierarchy of systems complexity, appropriately adapted to the context would not deliver a holistic strategic architecture. Instead, the continued application of systems engineering as a conceptual model of an integrated framework for strategic planning would be appropriate, noting that further work on adapting the systems engineering methods would be required to: A Systems Approach to Strategy and Execution in National Security Enterprises – 202 – Chapter 5: Case Study 1 – Defence  adapt the traditional systems engineering analysis and synthesis functions to develop a strategic functional architecture for Defence and use that functional expression as a basis for designing a force structure that may become the programmed force represented in a future Defence Capability Plan,  design a means to assess the balance of capabilities in a force structure configured to deliver an appropriate mix of the functional effects required by Defence, and  draft a Capabilities Priority Paper as a draft guidance document – expressing the contextual „WHY‟ for capability development, that will become the second derivative of a statement of Government needs of the Defence Organisation. These issues form the basis of the next major section of this chapter. 5.6 General Approach to Synthesising Defence Capability Priorities Having begun to apply the systems engineering process to Defence strategic planning by centring on the test and evaluation process, much data is accumulated and analysed on the effectiveness of a range of force structure options in a range of scenarios that represent Government‟s needs of Defence. The scenario sets had been validated before the process began, however the force structure options had not been. As major inputs to the force option testing process they were developed with input from Defence and accepted as testing artefacts from which to learn the critical and common issues relevant to designing a preferred force structure. This section now outlines the design and implementation of an approach taken to analyse the available data and synthesise the Defence functions and performance parameters that the Government needs are dependent upon and then design a force structure to deliver that functionality within cost and performance constraints. Articulating an improved understanding of needs and functions before moving to design is critical and dependent on the analysts being able to move through a three part process: A Systems Approach to Strategy and Execution in National Security Enterprises – 203 – Chapter 5: Case Study 1 – Defence  Part 1: DEFINE NEEDS – starting with a definition of the Government‟s needs of Defence (as the user/customer and owner of the Defence „system‟),  Part 2: DEFINE FUNCTIONS – or abilities that Defence must possess as if it were a „system‟ to meet the defined Government‟s needs, and  Part 3: ARCHITECTURAL DESIGN – which translates well-defined requirements into hard capability solutions which can be costed and planned for. This is the inherently creative and perhaps fun – certainly emotive – part of the process. This is not straightforward. The goal to deliver an holistic solution for the Defence organization matched to resource profiles will likely cross single Service viewpoints and test the „cultural feasibility‟ criterion when the cognitive complexity of the process is managed concurrently.  It was then planned to work through all three parts and write-up the outputs into a Capability Priorities Statement24 to guide implementation programs and resource allocation (Capital, Operating, Personnel). These three elements of the analysis and synthesis are framed in an adaptation of a systems engineering model (DERA, 1999). From Requirements to Design Government Needs Needs Resources Commitment „Why‟ Cost estimates Risks Traceability to needs Defence Functions Organisational systemic needs „What‟ „How‟ Architectural Design Implementation Cost, schedule, quality Diagram adapted from DERA Systems Engineering Handbook, Figure 4-12 Figure 5-17: Adaptation of the systems engineering process The case study continued to work through all three parts, as reported here – however, the planned Capability Priorities Statement was never completed due to the release of the Defence White Paper, 2000. 24 A Systems Approach to Strategy and Execution in National Security Enterprises – 204 – Chapter 5: Case Study 1 – Defence The analytical products of Phase 1 and Phase 2, discussed in Section 5.5.6, form the basis for moving into a process of Synthesis and Design. 5.7 Defining Government Needs The first part - defining the needs - is the critical part of any systems engineering process. Noting the systems aphorism that „the biggest mistakes occur on Day 1‟ (Rechtin, 2000) the approach began by reviewing the traditional approach to defining „user requirements‟ as defined by Blanchard & Fabrycky (1998) and matching that with appropriate sources of data. The main process elements in defining user requirements are shown in Table 5-1 together with the source material that was adapted for each process. Table 5-1: Adaptation of user requirements process (after Blanchard & Fabrycky, 1998). Traditional Systems Engineering „User Requirements‟ Process Elements Analyse mission and environment Systems Engineering for Strategic Planning Adaptations for the Defence Case Study Analyse the scenarios – these were well defined and were easily grouped by geographic region, mission and environment. Identify requirements for strategic level effects, using judgement to synthesise the data within the phase two reports which provided a useful starting point for scenario-based functional demands. Identify functional requirements Define or refine performance and design parameters Define the constraints that will limit the solutions Define the key demands for Defence capability in each scenario by a process of synthesis of the data from the phase one and phase two reports. Define the constraints on the application of the Defence capability set in each scenario, where the principal constraints were the adversary capability, and own force readiness, reach and sustainability. Using this adaptation of the traditional systems engineering process and drawing on the data in the phase one and phase two reports, the author led the team through the following process to synthesise a first-order summary of the Government‟s needs or user requirements shown in Table 5-2: A Systems Approach to Strategy and Execution in National Security Enterprises – 205 – Chapter 5: Case Study 1 – Defence  Represent the fourteen scenarios in rows within three strategy bands corresponding to broad geographic regions – see the first two columns of Table 5-2 on the left (white background),  Summarise an analysis of the need for effects in the air, land, and maritime environments in one judgement using a coarse scale of nil-low-medium-high demand for effects in an environment for each scenario is represented as black (nil) – yellow (low) – amber (medium) – green (high) respectively. Each level is defined appropriately in capability and constraint terms. And then, make similar judgements for key capability areas of strike, strategic support and knowledge (the last category including effects in the cyber environment). In this section, one could also add a column for effects in the social environment (although this was not culturally feasible at the time, it will in time come as Defence considers how it creates broad social effect).  List the key capability conclusions for each scenario, and List the conclusions about the key constraints in each scenario, which usually addressed adversary capability, and own force readiness and sustainability. Table 5-2: First-order assessment of Government needs.  Representative Mission High level effects/ functions Key capability demands Constraints that will limit solutions Group 3 Scenarios A Systems Approach to Strategy and Execution in National Security Enterprises – 206 – ILLUSTRATIVE DATA ONLY Group 2 Scenarios Group 1 Scenarios Chapter 5: Case Study 1 – Defence While the picture of Government needs is coarse, and far too coarse to guide force structure design, a picture nonetheless begins to emerge. If Scenario Group 2 (central band) were the prime determinant for force structure design, then indications are that high demands for capability (shown in green) appear in only two of the six environments, with nil demand emerging in different scenarios for other environments. The challenge in the final analysis, of course, is to integrate the judgements across the three scenario bands because all three scenario sets drive Government needs of Defence and each will impact in varying degrees on the final design solution. Traceability in the judgements comes primarily from the phase 1 & 2 reports, and indeed, much of the information shown here is a summary of the key messages of these reports. 5.8 Defining Defence Functions To examine the system requirements for the enterprise requires thinking of Defence as if it were a „system‟. Guided again by Blanchard & Fabrycky (1998), requirements at the system level are traditionally driven by those issues listed in the left hand column of Table 5-3 – noting that they wrote this primarily focussing on project and product based systems engineering. Their guidance was adapted to Defence strategic planning as indicated in Table 5-3. Table 5-3: Adaptation of the Defence „system‟ requirements process. Traditional Systems Engineering „System Requirements‟ Process Elements Define Operational Distribution / Deployment (Geographic considerations) Define Mission Profiles to identify what the system must accomplish. Systems Engineering for Strategic Planning Adaptations for the Defence Case Study Sort scenarios into a number of groups ordered by operational demand and reach from Australia Define functions at a primary level (strategic functions indicating mission profiles) and at a secondary level (first-order statement of abilities needed by Defence to achieve the missions) Identify key performance parameters and qualify these with statements of utilisation, effectiveness, maintenance and support requirements Identify: Performance Parameters Utilisation Requirements Effectiveness Requirements Maintenance & Support Requirements A Systems Approach to Strategy and Execution in National Security Enterprises – 207 – Chapter 5: Case Study 1 – Defence Using this adaptation of the traditional systems engineering process and drawing on the data in the phase one and phase two reports, the author led the team through the following process to synthesis a first-order summary of the Defence „system‟ requirements described in the next three subsections. 5.8.1 Defining Defence Functions – Operational Distribution / Deployment Using the data from the phase one and phase two reports, the analysis of the „system‟ requirements of Defence considered first the range of strategic effects / objectives and some of the higher-level operational or theatre objectives. Eight different categories of strategic deployments were synthesised based on the geographic reach from Australia and level of warfighting intensity as follows25.  Support to domestic emergencies and peace-keeping Defending Australia (denial missions) Defending Australia (deterrent missions) Maritime operations in the „Inner Arc‟ Land operations in the „Inner Arc‟ Comprehensive Joint operations in the „Inner Arc‟ Maritime operations in the „Nearer Region‟ Comprehensive Joint operations „Nearer Region‟        In general, these strategic functions become more challenging as they progress down the list. The Government needs could span all or only part of this spectrum of strategic functions. For example, designing a force structure to achieve the one mission profile of peace keeping would have little capability to do more demanding tasks. At the time of developing these strategic functions, the Government‟s intentions (later expressed in the 2000 White Paper) were not clear. However, traceability in The terms „Inner Arc‟ and „Nearer Region‟ cannot be defined in this thesis to ensure it remains unclassified and publicly releasable 25 A Systems Approach to Strategy and Execution in National Security Enterprises – 208 – Chapter 5: Case Study 1 – Defence the systems analysis was assured because the analysis drew on the agreed statements of strategic effects recorded in the primary database from the testing of the fourteen scenarios, each of which could be shown to be directly related to one of the eight strategic functions in the Defence systems requirements. 5.8.2 Defining Defence Functions – Mission profiles The second part of defining Defence system requirements involved deriving a set of mission profiles to address the question: „what must the system accomplish?‟ In order to meet the operational deployments described in the first part, a list of eleven mission profiles were developed as follows26:  Basic services protected evacuation and counter-terrorist options (SPE/CT) Basic maritime zone security Secure bases Defeat incursion (I) Defeat incursion (II) – more demanding than (I) Assault Dominate a land area Attack adversary homeland (I) Attack adversary homeland (II) – more demanding than (I) Strategic Command, Control, Communications & Intelligence (C3I) Strategic support           The study team developed these first by working with the most challenging deployment and worked down from there, appropriately adjusting the deployment definition to determine other less demanding deployments (e.g. Defeat Incursions I & II vary according to adversary capability level, distance The author acknowledges the contribution of Martin Dunn in designing this list of mission profiles and to the study team for validating them 26 A Systems Approach to Strategy and Execution in National Security Enterprises – 209 – Chapter 5: Case Study 1 – Defence from Australia and likely duration of operation; similarly, for „attacking adversary homeland‟.) Traceability in the systems analysis was assured because the analysis drew on the agreed statements of strategic effects recorded in the primary database from the testing of the fourteen scenarios, each of which were related to one of the eight mission profiles in the Defence systems requirements. To validate the analysis, the team checked the extent to which one or more of these mission profiles, singly or in combination, would adequately describe each of the operational deployments defined by the strategic functions, as shown in Table 5-4. Table 5-4: Mapping of Mission profiles against Strategic functions. Government Needs Missions (Functions I) This set of mission profiles were more informative of the nature of the system requirements, however, they were still too coarse to enable us to think too deeply about design issues. To achieve further refinement of the activity model, a secondary level was developed to describe the mission profiles, which we referred to as the „abilities‟ required in Defence that singly or in combination will achieve the missions. The study team synthesised a set of secondary mission profiles as follows: A Systems Approach to Strategy and Execution in National Security Enterprises – 210 – Chapter 5: Case Study 1 – Defence  attack adversary strategic targets conduct mine countermeasures (MCM)  command and control conduct surveillance and reconnaissance operations (SRO)    control the air degrade adversary organise the population provide strategic lift secure land areas  control the sea insert forces protect shipping respond to incidents sustain (forces in theatre)         The list of secondary mission profiles traced directly to the list of important „capabilities‟ recorded in the primary database and in the phase one reports. With this two-tiered definition of the mission profiles / Defence system functions, the team was then in a position to examine the relationships among the primary and secondary functions to support the definition of Defence system requirements and their respective performance parameters. 5.8.3 Defining Defence Functions – Performance Parameters (Generic) The author then led the study team through a process that mapped the relationship between the primary and secondary functions to build a taxonomy of the mission profiles that Defence (as a system) must accomplish. The questions guiding the process were:  Is there a relationship between the two functions? If so, What performance parameters define the relationship? Here, the team aimed to describe the degree to which the secondary „ability‟ function was required in order to successfully achieve the primary function defining the mission profile.  The resultant chart, shown in Table 5-5, was created quickly „once-over-lightly‟ without being specific to any particular needs of Government expressed in the operational deployments. In this way, this chart provided a generic building A Systems Approach to Strategy and Execution in National Security Enterprises – 211 – Chapter 5: Case Study 1 – Defence block for later analysis when it is related to each of the Government needs of Defence. Table 5-5: Generic performance parameters among Defence functional relationships Missions (Functions I) An example is shown in the call-out box in Table 5-5 illustrating the definition of generic performance parameters for the ability „control of the sea‟ as it might be applied to the mission profile „Basic maritime zones security‟. These performance parameters often differ from cell to cell, both in the parameters that are defined and in the values ascribed to them. Traceability in the definition of performance parameters is maintained by drawing on the evidence in the primary database which captured many relationships between theatre-level and mission-level effects and the fitness for purpose of a given force to deliver the performance effectiveness needed for mission success. 5.8.4 Defining Defence Functions – Performance Parameters (Specific) The aim now is to complete the definition of Defence system requirements expressed as a function of needs (operational deployments), mission profiles (primary functions), and „abilities‟ (secondary functions). This requires building a three-dimensional model as shown from Table 5-4 (relating operational Abilities (Functions II) * Number of areas : x * Area size and geography : broad area, AS EEZ and continental shelf (incl AS Antarctic territory) * Level of opposition : asylum seekers, illegal fishing, drug traffickers, smugglers * Duration : on going * Degree of effect on adversary: exclusion and/or detention A Systems Approach to Strategy and Execution in National Security Enterprises – 212 – Chapter 5: Case Study 1 – Defence deployments to mission profiles) and Table 5-5 (relating mission profiles to abilities). Government Needs Missions (Functions I) Ab ilit ies (F un ct io ns II) Figure 5-18: Relate operational deployments, mission profiles and abilities To ease the complexity of this problem, the analysis begins by limiting the needs profile to the operational deployment for peacekeeping as shown in Figure 5-18, noting that the analysis for peacekeeping needs only relates to five primary functions / mission profiles – which is depicted in Figure 5-19. Government Needs Missions (Functions I) Missions (Functions I) Figure 5-19: Relating operational deployment to mission profile and abilities The analysis now revisits the generic performance parameter devised in Table 5-5, to reduce the number of mission profiles to focus on the five mission profiles A Systems Approach to Strategy and Execution in National Security Enterprises – 213 – Abilities (Functions II) * Number of areas : x * Area size and geography : broad area, AS EEZ and continental shelf (incl AS Antarctic territory) * Level of opposition : asylum seekers, illegal fishing, drug traffickers, smugglers * Duration : on going * Degree of effect on adversary: exclusion and/or detention Chapter 5: Case Study 1 – Defence of maritime security, SPE/CT, dominating a land area, strategic C3 and strategic support (from the set defined in section 5.8.2), as shown in Table 5-6, step 1. Table 5-6: Reducing complexity to address one operational deployment at a time. 1 GOVERNMENT NEED: PEACEKEEPING Missions (Functions I) 2 GOVERNMENT NEED: PEACEKEEPING Missions (Functions I) This action enables the analyst to take the next step of reviewing the generic performance statements for the abilities relevant to performing the five mission profiles in the context of Peacekeeping operational deployment. The analyst must synthesise the data from the testing of the scenarios that have contributed meaningfully to the collective understanding of this particular context. The process involved a single analyst developing the table to the point shown in the second step of Table 5-6. With the now refined performance parameters, the goal of the analyst is to derive ONE set of design criteria for Defence to meet the Government‟s needs for peacekeeping deployments – currently shown as an empty column in Table 5-6. To achieve this, the analyst conducted a workshop of the planning team to simplify the chart further by creating a summary of the performance parameters for each of the abilities or secondary functions. Taking a workshop approach also provided a means of validating the analyst‟s evaluation of the data from the relevant phase one reports and phase two reports. In some cases, this exercise is trivial, e.g. when the ability is not required, or is required in only one circumstance, the existing statement „rolls up‟ to become the summary design criteria for an ability (secondary function) to meet the Abilities (Functions II) A Systems Approach to Strategy and Execution in National Security Enterprises – 214 – Abilities (Functions II) * Number of areas : x * Area size and geography : broad area, AS EEZ and continental shelf (incl AS Antarctic territory) * Level of opposition : asylum seekers, illegal fishing, drug traffickers, smugglers * Duration : on going * Degree of effect on adversary: exclusion and/or detention Chapter 5: Case Study 1 – Defence Government‟s need for peacekeeping. In other cases where there is more than one set of performance parameters specified, some synthesis is required to achieve a „rolled up‟ set of criteria. For example, the design criterion was taken as the maximum value for performance parameters like „range‟; or, the criterion became an additive function for performance parameters like „capacity‟ for strategic lift. In most cases, the synthesis involved creating design criteria by trading off the multiplicity of demands (e.g. to set a duration to complete a Services Protected Evacuation: a protection force might be specified to be required on ground by D+a days, have the evacuation complete by D+b days, while sustainment and reconstruction (if required) be completed within nn days. The workshop environment proved critical to achieve consensus in the final set of design criteria. So that, in the end, the design team established a set of abilities with performance parameters synthesised specifically to assist in designing a Defence force structured, in this example, for Peace keeping. Table 5-7: Developing summary design criteria for Peacekeeping. 1 GOVERNMENT NEED: PEACEKEEPING Missions (Functions I) 2 GOVERNMENT NEED: PEACEKEEPING Missions (Functions I) Abilities (Functions II) * Range : y nm * Capacity : 10,000 people, [specify unit size] oversized cargo (x b/hawk, z LAV); or, up to x [specify unit], n x CSS and spt units * Speed : for SPE - protection force on ground by D+a, evacuation complete by D+b days; for other [specified units] within nn days To extend the summary design criteria to form a basis for designing force structures for all government needs, the same process is repeated for all other operational deployments listed in Table 5-4. This is necessarily time consuming. In the Defence case study, four operations analysts were engaged for two weeks in their analysis and synthesis of eight tables similar to Table 5-7. A further four A Systems Approach to Strategy and Execution in National Security Enterprises – 215 – Abilities (Functions II) A full set of abilities and summary performance parameters yield a functional architecture to guide the physical design of a defence force organised for peacekeeping Chapter 5: Case Study 1 – Defence people were involved in the workshops over three days to validate the eight sets of summary design criteria for the eight representative operational deployment scenarios. The eight sets of design criteria were then compiled into one large table (Table 5-8) representing all government needs of Defence at the time and the abilities (secondary functions) required in a Defence „system‟ to deliver on the needs. Table 5-8: Strategic functional architecture for Defence. Government Needs / Operational Deployment Scenarios 1 2 3 4 5 6 7 8 Working from this sheet, Defence was in a better position organisationally to engage the Minister in a conversation to refine the extant statement of Government needs. The key question discussed was: what are the minimum and desirable levels of operational deployment the Government expects Defence to be able to achieve. The outcomes of such a discussion will reflect the level of funding the Government is able to allocate to Defence outlays. In 2000, the senior executive was able to draw from that discussion a lower and upper bound. The lower, not surprisingly, on deterring attacks on Australia‟s Abilities (Functions II) A Systems Approach to Strategy and Execution in National Security Enterprises – 216 – Chapter 5: Case Study 1 – Defence national interests; the upper, was initially a small increment above that (as shown in Table 5-8), however the strategy expressed in the 2000 White Paper moved the upper bound further to the right of the one shown here. Nevertheless, the guidance at the time enabled the author to continue to adapt the systems engineering process to Defence strategic planning to position the strategic planning team to complete its requirements analysis in readiness for design activities. Using illustrative data only in Figure 5-20, the example shows that an ability to insert forces has a set of minimum acceptable and desirable performance parameters, which can then be used collectively to consider the available options for force option design that meet these functional specifications. Government Needs / Operational Deployment Scenarios 1 Ability to Insert forces Abilities (Functions II) 2 Minimum Acceptable Performance 3 4 5 6 7 8 Desired Performance Simultaneous insertion capability: x Coy lift Rate of build up: y Bn in 12 hrs; BDE GP IN 24 HRS Rate of effort: High intensity for insertion and build up period Level of opposition: Lightly equipped COY GP with MANPAD & OTHER HEAVY WEAPONS Force Design MINIMUM * TBD DESIRED * TBD Simultaneous insertion capability: x Coy lift Rate of build up: y Bn in 12 hrs Rate of effort: High intensity for insertion and build up period Level of opposition: Lightly equipped Pl with MANPAD Figure 5-20: Minimum & desirable parameters to guide design 5.8.5 From Requirements to Design – Review of Progress At the start of the journey, the author used Figure 4-12 from the DERA Systems Engineering Handbook (1998) and adapted it for systems engineering at the enterprise level, also adapting Blanchard and Fabrycky‟s guidance (1998) at each main step of the process. Progress to date is illustrated in Figure 5-21. A Systems Approach to Strategy and Execution in National Security Enterprises – 217 – Chapter 5: Case Study 1 – Defence Representative Mission High level effects/ functions Key capability demands Constraints that will limit solutions Government Needs „Why‟ Government Needs / Operational Deployment Scenarios 1 2 3 4 5 6 7 Needs Resources Commitment 8 Group 3 Scenarios Cost estimates Risks Traceability to needs Abilities (Functions II) Defence Functions Organisational systemic needs ILLUSTRATIVE DATA ONLY Group 2 Scenarios Group 1 Scenarios „What‟ „How‟ Architectural Design Implementation Cost, schedule, quality Diagram adapted from DERA Systems Engineering Handbook, Figure 4-12 Figure 5-21: Progress in moving from requirements to design The Government needs of Defence have been summarised in a chart indicating the mission requirements, the key functional demands, the key capability requirements and the constraints acting upon them. The data derived in the testing processes has been analysed and a strategic functional architecture of Defence functions has been synthesised to guide force structure design. Actually going through the design phase was a frustrating experience, particularly as a White Paper was being released within one month of our doing this work. Consequently, while the author‟s attempts at being very inclusive in the process resulted in the participants being open minded on the Defence functional architecture, they were, however, quite reserved in translating it through design to a physical architecture, espousing only the agenda they perceived appropriate for their Services‟ desired capability outcomes in the 2000 White Paper. In more ideal circumstances27, the methods described in the following section would have been applied in a wider group. Instead, they were applied by a smaller group from the [then] Force Structure Priorities Branch. 27 Timed well clear of major political agendas such as the release of the Defence White Paper, 2000 A Systems Approach to Strategy and Execution in National Security Enterprises – 218 – Chapter 5: Case Study 1 – Defence 5.9 Designing Solutions This section addresses the final step in applying systems engineering processes to the design and development of force structure options. It discusses first the design process element for force structure options and then addresses the issue of balance that is required across the capabilities within the force structure. 5.9.1 Designing Force Structure Options In view of the „wish list‟ approach that had been experienced in the first attempt at designing force structure solutions based on a functional requirement, the author reviewed the work of Coyle (2001) for a conceptual planning framework28 of Key Mission Components (KMC) which incorporates a three element table for identifying necessary design components, as illustrated in Table 5-9 (Coyle, 2001). Table 5-9: Matrix of key mission components / function interactions. Conceptual Capability (Military task to be performed, but without stating how) Forecast Deficiency (Assessed deficiency in light of the estimated threat) Worked Example Detect mines in harbour approaches Clear mines from harbour approaches Perfect capability – so no deficiency Slow clearance of conventional mines Inability to locate modern high technology mines Perfect capability – so no requirements Increase numbers of mine clearance vessels Develop new methods of mine hunting Necessary Requirement (Draws on military judgement, OA studies, exercise data to indicate appropriate solution) The author extended the work of Coyle (2001) to develop a design worksheet of six columns that includes the minimum and desirable functional requirements as a basis for design as well as a perspective of one or more forecast deficiencies. An adaptation of the KMC/Function interaction table was developed (Table 5-10). Coyle (2004) extends the discussion of the conceptual planning framework from the military context to a broader range of complex social problems. Coyle (2004) suggests the Delphi approach (or other satisfactory method or balance of methods) might be used with a view to finding good candidate solutions to remove the deficiency. 28 A Systems Approach to Strategy and Execution in National Security Enterprises – 219 – Chapter 5: Case Study 1 – Defence Table 5-10: Options design based on functional requirements and „gap‟ analysis (1) Conceptual Capability (2) ‗Backcast‘ Minimum Parameters (Functional performance parameters) (3) ‗Backcast‘ Desirable Parameters (Options for force structure / architectural design) (4) Forecast Deficiency (5) Options for Architecture/ Design (a. Forecast Options) (b. ‗Backcast Options) (6) Necessary Requirement (Military capability needed without stating how) (Assessed deficiency in light of strategic context) (Indicate appropriate solutions, use judgement, OA studies, EX data, etc) Coyle‟s array (Coyle 2001, 2004) developed from a traditional military appreciation process of „gap‟ identification and analysis, from which options are designed to close the „gap‟. However, as Government requirements change in a dynamic strategic environment, so too does the definition of the „gap‟. While the „gap analysis‟ is also a traditional planning component in Australia, the author was also interested in introducing the minimum and desirable functional and performance parameters from the strategic functional architecture as a basis for capability design. In doing so, the approach has shown the value in addressing capability design from a strategy-led, top-down and a deficiency-driven, bottomup push on capability development. In effect, this provided an avenue for bringing the future-force capability development group and the current force operations group together in designing the next generation force structure. Using illustrative data in Table 5-11, the team gained significant benefit in an orchestrated discussion to design options from both „ends‟ – and then strike a balanced solution that was systemically desirable and culturally feasible. The only new data appearing on this chart is that in columns five and six. Changes to the rest could only have been made with traceable and sustainable arguments through an orchestrated debate that involved people with diverse backgrounds in current capability systems analysis, scientists and representatives of each of the Services. The collective goal was to ensure a wide variety of options were canvassed and the solution was fit for purpose and deliverable within a given cost profile. A Systems Approach to Strategy and Execution in National Security Enterprises – 220 – Chapter 5: Case Study 1 – Defence Table 5-11: Worked example of options design. Conceptual Capability Ability to insert forces Minimum Performance (Backcasting) Simultaneous insertion capability: x Coy lift Desired Performance (Backcasting) Simultaneous insertion capability: x Coy lift Forecast Deficiency Inability to provide lift capacity appropriate to achieve desired rate of build-up (Currently programmed for low-medium intensity) Design Options (Forecast) (Backcast) Forecast Options: Replace LSH with MRA in 2015 Appropriate Solutions Bring forward: 1. LSH Replacement 2. Additional mobility assets (RW & Vehicles) Rate of build up: y Bn in 12 hrs Rate of build up: y Bn in 12 hrs; BDE GP IN 24 HRS Rate of effort: High intensity for insertion and build up period Rate of effort: High intensity for insertion and build up period Level of opposition: Lightly equipped Pl with MANPAD Backcast Options: Desired Level: * 40 (30) battlefield RW * 1 Para Bn capability * 108 vehicles * 8 C130 * amphib platforms (MRA) * LTAC Level of opposition: Lightly equipped COY GP with MANPAD & OTHER HEAVY WEAPONS Once again, this is illustrative data only. Working from the left, the task involves:  Stating the conceptual capability Defining the minimum and desired performance parameters Defining the forecast deficiency Collating the options from each „end‟ Orchestrating the debate around the information before us, with the communities of interest.     Changes could only have been made with traceable and sustainable arguments. In this way, the design process provided a functional basis for new force structure options that meet the strategic requirements within a cost profile. These newly-designed force structure options were then tested back against the same, or new, scenarios giving further insights and some validation. The performance parameters and their appropriate solution sets can then be assembled into one „common sense‟ arrangement – not to be cast in stone, rather held in a living document that is adjusted in keeping with agreed implications of changes in either the strategic environment or in the resources available to A Systems Approach to Strategy and Execution in National Security Enterprises – 221 – Chapter 5: Case Study 1 – Defence Defence. Each will impact on the abilities and their performance parameters or on all or part of the solution set. Doing this for the minimum and desired performance parameters will assist the Defence committee structure in managing the configuration of the capabilities they maintain, develop and „pay-off‟. They will never have a perfect, „follow-thisplan‟ instruction for capability development. Instead, they will have a means of dynamically planning Defence capability that reduces the uncertainty currently faced by committees in judging each proposal for its fitness-for-purpose in the Government‟s strategic context. The process survives on contestability. What is before them is open rightly to challenge, providing changes maintain traceability to the assumptions and requirements. In doing this, the same committee structures needed to address one final issue: the balance of capabilities. They recognise it is fine to design the physical elements to fit acceptably within the boundaries of functional requirements, however, they risk skewing the overall structure if they do not complete the analysis of balance in how important each ability is relative to the other abilities and then make certain the force structure is appropriately balanced. 5.9.2 Balancing Capabilities This issue is important because warfighting requires interdependent, coordinated action across the sensor, command, information and engagement grids in keeping with the commander‟s intent. As no capability acts alone, no capability should be developed without with a full appreciation of the interdependencies among them. The key question to be answered then is: in performing a given ability, how important is each of the other abilities? The author therefore led an orchestrated debate in a seminar format that listed the [then] fourteen abilities (secondary functions) in a table and addressed the key question in relation to the other abilities. A judgement was made using a five point scale of no importance (white) to critical importance (red). Analyst comments or explanatory notes were captured on most judgements. The context A Systems Approach to Strategy and Execution in National Security Enterprises – 222 – Chapter 5: Case Study 1 – Defence for the discussion was the summary backdrop of over 40 runs of force options testing, the phase one and phase two reports, the analysis of Government requirements and the design of a strategic functional architecture. Those invited to the seminar included the analysts involved to date and a small group of subject matter experts from the three Services and the Public Service. A matrix – showing only illustrative data – is depicted in Table 5-12. Table 5-12: Illustrative matrix of interdependent capabilities. ILLUSTRATIVE DATA ONLY. The resultant matrix is itself a complex picture. The importance of command and control and sustainability to a balance force structure should not be a surprise. Where a range of strong interdependencies occur (e.g., the rows for control the air, control the sea, and secure land areas in particular) the proposed force structure solution set would need to be tested for the desired level of flexibility in the capabilities to deliver adequate support to the range of interdependent abilities. Time did not permit this re-iterative testing during the case study. However, the general point illustrated is that strategy does not have an end point: rather, there is a constant to need to continue to develop options relevant to changes in the strategic environment and test them. It is worth remembering past guidance learning and planning in the face of uncertainty: A Systems Approach to Strategy and Execution in National Security Enterprises – 223 – Chapter 5: Case Study 1 – Defence ―…from the moment of acknowledgement of uncertainty the key to success moves from the idea of one-time development of ―best strategy‖ to the most effective strategy process‖ (Michael 1973, cited in van der Heijden 1996). The process challenge is to make it the most skilful, which delivers meaningful content over time and guidance at any point in time, and addresses the key strategic issues with efficiency in its use of time and human resources. 5.9.2.1 Post-Case Study Developments in the Theory of Balancing Capabilities During the case study, time constraints did not allow the study team to realise greater benefits from the data encapsulated in the chart shown in Table 5-12. In the post-study functional analysis in both the horizontal and vertical dimensions of the chart, the author synthesised additional value. Using the „control the sea‟ function as an example in Table 5-13, the relationships among the functions displayed:  in the horizontal dimension indicate the relative importance of each function as an input to the „control of the sea‟ function. This is vital information to Defence analysts involved in developing a balanced force structure.  in the vertical dimension indicate the relative importance of function as an output to the „control of the sea‟ function. This is vital information to Defence analysts involved in employing other functions in „control of the sea‟ within a balanced force structure. A Systems Approach to Strategy and Execution in National Security Enterprises – 224 – Chapter 5: Case Study 1 – Defence Table 5-13: Cross-functional analysis for developing and employing the force. Indication of the outputs contributed by the ‗control the sea‘ function to the employing all other functions Indication of inputs from other functions to the ‗control the sea‘ function – guides decisions on the inter-relationships that need to be considered in the developing capabilities to ‗control the sea‘ … ILLUSTRATIVE DATA ONLY. This matrix of inter-relationships among Defence abilities (secondary functions) is likely to prove helpful in Defence decision making committees on future capability development submissions. Whether a submission adequately supports the development and employment of a balanced force can be informed by such a chart to indicate which other key functions and interdependencies need to be addressed and with what emphasis in relation to other issues. In this manner, such a chart forms a set of „cross hairs‟ helping to sight key indicators of interrelationships among critical functions. It could also be seen as a „yardstick‟ against which to measure any proposal to restructure or rebalance the force structure. 5.9.2.2 Post-Case Study Developments in the Theory of Balancing the Defence Enterprise A systems view at the enterprise level examines three primary functions – the operational/technical focus of an organisation, the management of the organisation and how the organisation shapes the environment. Yet, we find these functions are often under tension. As the tempo of operations has heightened in the last two decades, Defence has experienced the highs and lows A Systems Approach to Strategy and Execution in National Security Enterprises – 225 – Chapter 5: Case Study 1 – Defence of public exposure. Defence has excelled in its operational performance to much acclaim, while concurrently being criticised for its management of different programs. And, Defence‟s military relationships with other nations are quietly acknowledged for their contribution to Australia‟s shaping its environment with our neighbours and allies. The root cause for these differences lies not between operations and management or between Service and civilian entities. Rather, it is the lack of systems understanding of what tensions exist at the enterprise level that would lead them better to manage the cross-functional relationships at that level. We learn from business literature that all organisations face continuing tensions: Every leader and every company faces the problem of how to make progress on seemingly conflicting objectives at the same time. And of all the competing objectives, three pairs stand out: profitability versus growth, short term versus long term, and the whole organization versus the parts. In each case, more progress on one front usually comes at the expense of progress on another… (Dodd and Favaro, 2006) The business tension of profitability versus growth has an analogue in the cost of employing the force versus investment in developing the force. The tensions of „short term versus long term‟ and „the whole organisation versus the parts‟ directly align with tensions faced in Defence – for example, in balancing the level of operational preparedness between short term contingencies versus long term contingencies; and, in managing a Defence Group versus managing the whole enterprise. The problem is not so much that managers don‘t recognize these tensions … Rather it is that managers are often not focused on the tension that matters most to their [organisation]. Although [organisations] have to manage all three tensions all of the time to some extent, at any point in time only one of them is critical to unlocking better performance. More often than not, executives pick the wrong tension as their priority. This is hardly surprising because the tensions often masquerade as one another. … Even if managers do identify the right tension, they usually make the mistake of designating a ―lead‖ objective within it—for example, focusing on profitability over growth or vice versa. As a result, the company often ends up moving first in this direction, then in that direction, then back again, never quite resolving the tension. [Dodd and Favaro] found that the best performing companies adopted a very different approach. Instead of setting a lead objective from which all decisions followed, they looked at how they could best strengthen the factor that unites the two sides of each tension. For the profitability/growth tension, that common bond is customer benefit. For the short-term/long-term tension, it is sustainable earnings. For whole and parts, the common bond is something we call diagonal assets, particular organizational resources and capabilities that help the company act as both a single company and many different businesses at the same time. (Dodd and Favaro, 2006) [emphasis added]. A Systems Approach to Strategy and Execution in National Security Enterprises – 226 – Chapter 5: Case Study 1 – Defence This recent advancement in the business literature enables a further suggestion to be made in the development of theory for managing tensions at a Defence enterprise level with a view to improving overall Defence performance. In the Defence context, then, how might one “best strengthen the factor that unites the two sides of each tension” (after Dodd and Favaro, 2006). The suggested start point for balancing investment across the enterprise is the balance of capability matrix, shown in Table 5-12 and the „cross hairs‟ shown in Table 5-13. Having been derived from an analysis of Government needs and Defence functional and performance requirements for force design, it makes it an ideal reference point for managing the tensions that arise in managing the three primary enterprise functions, illustrated in Figure 5-22. Capability Function Envt. Shaping Capability Function Envt. Shaping Functional expression of Functional expression of Environmental Shaping Environmental Shaping Needed To DEVELOP the Needed To DEVELOP the ‘Control of the Sea’ ‘Control of the Sea’ function function Management Functional expression of Functional expression of Management Support Management Support Needed to DEVELOP the Needed to DEVELOP the ‘Control of the Sea’ ‘Control of the Sea’ function function Indication of the outputs contributed by the ‗control the sea‘ function to the employing all other functions Indication of inputs from other functions to the ‗control the sea‘ function – guides decisions on the inter-relationships that need to be considered in the developing capabilities to ‗control the sea‘ … ILLUSTRATIVE DATA ONLY. Functional expression of Functional expression of Environmental Shaping Environmental Shaping Needed to EMPLOY the Needed to EMPLOY the ‘Control of the Sea’ ‘Control of the Sea’ function function Management Decision Spaces For Balancing the Decision Spaces For Balancing the The Management and Shaping Actions The Management and Shaping Actions Needed to Employ AND Develop Needed to Employ AND Develop The ‘Control of the Sea’ Function The ‘Control of the Sea’ Function Functional expression of Functional expression of Management Support Management Support Needed to EMPLOY the Needed to EMPLOY the ‘Control of the Sea’ ‘Control of the Sea’ function function Figure 5-22: Capability-based enterprise design The first tension is between the costs of employing the force versus investing in developing the force, where the common bond for managing the tension is A Systems Approach to Strategy and Execution in National Security Enterprises – 227 – Chapter 5: Case Study 1 – Defence customer benefit29. In this case, customer benefit is with Government (as customer and owner of Defence) and is determined from the strategic choices it makes in placing its investments between improving the current capability and developing future capability. A means for improving the analysis to support those choices involves establishing a prioritisation process to apply weights to the range of contingencies used in the planning process, ensuring there is a representative mix of contingencies that matches the Government‟s (as customer) needs for the current and future force. Assessing proposed force structure investments against these priorities will then assist in managing the first tension. The second tension is in balancing the short term versus long term, where the common bond is sustainable capability – absence of this common bond would lead to a force structure that is either a one-shot force or is hollow. Thus, the analysis involves assessing whether sufficient investment is made to give each capability sufficient capacity, sufficient integrated logistics support to remove hollowness and that the Defence Program of Major Service Activities (PMSA) drives the level of operational preparedness to deliver sufficient „punch‟. The process which adjusts the force structure design to deliver an appropriate balance of capabilities (as per Table 5-12) includes strategic support and strategic communications in the balancing process, specifically to address hollowness. If not already done, Defence might consider ensuring the PMSA is designed to cover a range of preparedness activities that support current short term and prospective (long term) activities. The analysis behind the PMSA will be guided by the Government priorities for current and future contingencies. This will guide the level of training and exercising for near term contingencies versus the level of engagement in environmental shaping activities to address future contingencies. Linked to the balance of capabilities matrix in this way, the ratio between preparedness and shaping activities in the PMSA can be tailored to suit the Government needs behind the interdependencies among the capabilities. After Dodd and Favaro (2006) where „customer benefit‟ is the common bond to manage the tension between profitability and growth. 29 A Systems Approach to Strategy and Execution in National Security Enterprises – 228 – Chapter 5: Case Study 1 – Defence The third tension is between the „whole organisation versus the parts‟, and the common bond is diagonal assets (after Dodd and Favaro, 2006). The matrix in Figure 5-22 illustrates these diagonal assets. In essence, diagonal assets are the knowledge of the interdependencies among capabilities linked to strategy that is based on Government needs. So to manage the whole versus the parts via the common bond, it is critical to have a strong shared vision and a shared understanding of the mission profiles and functional abilities required to give the Government an appropriate range of military response options for the range of short term and long term contingencies it is facing. Armed then with knowledge of the inter-dependencies among the functional abilities and the balance of investment between short term and long term preparedness activities, the head of each Defence group is better placed to make decisions which manage Defence in appropriate ways to achieve its operational and environmental shaping outcomes effectively and efficiently. A key vulnerability is the whether the processes are sufficiently inclusive and yet efficient to support this outcome. Achieving this outcome, Defence would find itself a long way from the tribalism is stood criticised of two years before this study began (McIntosh et al, 1997). More is yet to be accomplished in these areas, and there is some suggestion through this discussion that further extensions of the systems approaches add value to Defence strategic planning. 5.9.3 Summary Design Issues It is important to note that there are many possible solutions in the force structure space. The aim is to use the strategic functional architecture as a functional specification as a configuration management guide to force structure design options and then provide a means to balance issues of capability, cost and effectiveness need in the process. The approach leads to a series of approximate force structure designs, which are refined further using information about the relative importance of all functions and rebalancing the force structure designs into a fewer number of options for Government. A Systems Approach to Strategy and Execution in National Security Enterprises – 229 – Chapter 5: Case Study 1 – Defence A more common approach in option analysis is to determine a set of approximate weights for a range of design criteria and evaluate each force structure design against those weighted criteria. Rank-order centroid weights will accurately define the best alternative 75% - 90% of the time based upon a set of true swing weights elicited some other way (Buede, 2000) and, in the cases where they are wrong, evidence suggests they have no more deleterious effect than 3% - 7% overall (Buede, 2000). Assessment of an ordinal series of force structure options emerging from the design process using ROC weights is yet to be trialled. The method used in the 2001 case study was driven by expediency in meeting tight timeframes and more approximate by being based on an assessment of how well a force structure design delivered the cross-functionality required for a balance of capabilities as indicated in Table 5-12. Interestingly, a recent study (Byeong and Kyung, 2008) also takes a different approach to rank-order centroid weights, which is approximate in using information about: ―…the intensity of dominance that is demonstrated by each alternative. Under this approach, several different, intuitively plausible, procedures are presented, so it may be interesting to investigate their performance. These new procedures are then compared against existing procedures using a simulation study. The simulation result shows that the approximate weighting approach yields more accurate results in terms of identifying the best alternatives and the overall rank of alternatives‖ [emphasis added] The design approach using approximate methods based on information of relative importance across functions requires representation from across the organisation in making trade-offs in the design to achieve a balanced force structure. In Defence, the representatives in the design process should, as a minimum include strategic planners, capability systems staff, relevant analysts engaged in current studies and/or trials, and resources staff. It is important that those people maintain a Joint perspective in matching solutions to functions to ensure the solution balances flexibility and joint combat effectiveness within resource parameters. With the collaboration of those people and with the support of tools such as the charts presented in Figure 5-20 and Table 5-12, systems thinking and systems engineering techniques retains ongoing value in day-to-day strategic planning, analysis and decision making. A Systems Approach to Strategy and Execution in National Security Enterprises – 230 – Chapter 5: Case Study 1 – Defence 5.10 Product Development for Strategic Planning While the planning process is more important than the plan (Van Der Heijden, 1996) it is also important periodically to document a plan. This has at least two benefits: firstly, writing the plan aids the articulation of the strategic direction for dissemination to a wider audience beyond those involved in the planning process. It also places a reference point in time for comparative purposes at a later time. At the time of concluding this case study, the White Paper (Defence 2000) had been released and a Capabilities Priorities Statement was not prepared, except in outline. This section outlines a Capabilities Priorities Statement in objective terms. 5.10.1 Capabilities Priorities Statement (CPS) As the major product from the strategic planning process, the intended30 Capability Priorities Statement (CPS) aimed to address the „Why‟, „What/Where‟ and „How‟ connecting the Government needs for Defence to the capabilities it selects to deliver on those needs. This statement was to be split into four parts:  Part 1 : Designed to describe the strategic context, identifies the strategic drivers and the key assumptions for strategic planning in the national security environment in Australia. It describes events of concern and plausible crises arising in the security environment. These events relate directly to the crises represented in the scenarios that form the planning basis.  Part 2 : Designed to present a picture of the functionality needed in the Defence organization matched to the Government needs. It defines the Joint operational demands on Defence by outlining a profile of the missions and a set of abilities required by Defence to perform the missions. It expresses these in a strategic functional architecture that identifies performance parameters for each of the abilities. As noted previously, the CPS was never completed during the author‟s time in Defence. Because the Government had recently released its Defence White Paper in December 2000, it was considered inappropriate timing to complete a CPS in 2000-01. Instead a decision was taken to begin a new series of “Force Options Testing”. 30 A Systems Approach to Strategy and Execution in National Security Enterprises – 231 – Chapter 5: Case Study 1 – Defence  Part 3 : Designed to present the options for designing / architecting the organization, noting the trade-offs between capability options and strategic needs. It defines the priorities for force structuring, providing minimum and desirable criteria for force structure design. It also defines the relative importance of the abilities to ensure the final force structure design accommodates the cross-functional interdependencies involved in developing and employing the force. These statements form capability goals for Defence.  Part 4: Designed to outline the plan for ongoing development, acquisition, and analysis in the Defence capability program. The first three parts were designed essentially to report the outcomes of the synthesis and design phases previously discussed in section 5.6 to section 5.9. It is important that a CPS (or like document) adequately explained the relationship between strategic needs and options for force structuring, and the implications of changing these options. This is an essential, and up to then missing, part of the whole set of reports that traces back a particular force structuring design to government‟s requirements of defence. If the first three parts of the CPS represent a view of the future, the fourth part of the CPS brings the future into perspective as a plan for the next year: a plan for the next year‟s capability development and acquisition priorities; a plan for further analysis, studies and research, development and engineering; and, finally, a schedule of the major decisions that would need to be taken by the Defence Capability Committee. 5.11 Summary Assessment of Case Study 1 The multiple methodologies in Case Study 1 are assessed from the viewpoint of strategy formation (as a management activity) and from a systems viewpoint. 5.11.1 A View on the Comprehensiveness of the Strategy Formation It is worth remembering the guidance of Mintzberg et al (1998) on what is needed for better strategy formation: A Systems Approach to Strategy and Execution in National Security Enterprises – 232 – Chapter 5: Case Study 1 – Defence ―We need to ask better questions and generate fewer hypotheses – to allow ourselves to be pulled by the concerns out there rather than the being pushed by the concepts in here. And we need to be more comprehensive – to concern ourselves with process and content, statics and dynamics, constraint and inspiration, the cognitive and the collective, the planned and the learned, the economic and the political. In other words, in addition to probing its parts, we must give more attention to the whole beast of strategy formation. We shall never find it, never really see it all. But we can certainly see it better.‖ (Mintzberg et al, 1998: 373) From a strategy perspective, improvements were made on all counts, as summarised in the „scorecard‟ shown in Table 5-14. Table 5-14: Scorecard of case study 1 (after Mintzberg et al, 1998). Item Better strategy formation needs to: Ask better questions and fewer hypotheses The study used Soft Systems Methodology (SSM) to define the problem and the root definitions upon which a conceptual systems was used to apply systems engineering as a methodology guiding the strategic planning process to address the key question of force priorities. The concerns of the Government as customer and owner were major drivers of the content and process. Namely, an extreme ‗gap‘ existed between the strategic assessments that form the beginning of a strategic planning process and the formation of capability systems designs. It was important to establish a systemic connection between strategy and capability development that could be sustained. Design of interventions should be more comprehensive and concerned with: … process and content The process was developed in consultation with senior leadership in Defence in a manner which ensured the strategy and capability inputs remained in their control. The process aimed to bring the organisation along with, and contribute to the evolution of the content of the outcomes. Process and content were modelled in an initial trial of two weeks before further series of force structure testing and analyses were approved by the [then] Deputy Secretary Strategy. …statics and dynamics The study enabled a static understanding of Defence capabilities at any one point in time for a given force addressing a given contingency. Through taking many ‗static‘ viewpoints across a wide range of contingencies, it also enabled – through the meta-analysis – an understanding of the dynamics of the system capabilities as they both evolve day-to-day and how they might offer Government a range of military response options in the future. As a middle ranking power, Australia aspires to maintain a capability to defend its sovereign territory and contribute to regional and wider security interests. As each force structure option was constrained to given cost profile, the inspiration of the participants in force structure design and in their concepts for how to employ such a force, drove the process. Strategy as a ‗mental‘ process began with managing the cognitive complexity of the study using SSM and employing systems intervention methods such as seminar gaming to ensure the collective wisdom was captured. Defence force structure planning recognises that much of the current capability will be enhanced by new capabilities from previous planning decisions. These form legacy elements in the force structure and reduce the scope for investment in additional new capabilities. Introducing adaptive strategy interventions improve the capacity to learn new ways of designing and employing different force structure options to improve the range of military response options for Government. Summary Assessment Be pulled by concerns ‗out there‘ not pushed by strategy concepts …constraint and inspiration …cognitive and the collective …the planned and the learned A Systems Approach to Strategy and Execution in National Security Enterprises – 233 – Chapter 5: Case Study 1 – Defence Item …economic and the political Summary Assessment The construction of a strategic functional architecture that would form a major component of a Capability Priorities Statement enables Defence to improve its capacity to communicate with other economic departments of state (e.g. Treasury and Finance) and with the Government itself as force structure decisions can be related to economic implications for employing the force and political implications on the military response options available to Government. A subjective summary view of the „whole beast‟ of strategy formation in case study two is presented in the comparison between Figure 5-23, which illustrates at the start of the study the degree of integration of three modes of strategy intervention, and Figure 5-24, which illustrates the perceived extent of integration of the three modes of strategy formation during the study and the extent to which their integration improved the formation of a „sweet spot‟ from the conditions at the start of the study in 1999. Interpretive: Did:Exercise judgement Did not: Make it an inclusive process – inner circle of very limited membership INTERPRETIVE Forecasting: Did:: Introduce capability assessment reports of current capability – qualitative in nature Integrate more operations analysis from DSTO Forecasting Back casting ADAPTIVE Rational: Did: Largely maintain status quo Did not: Connect strategy making with other rational strategic planning endeavours e.g. workforce planning RATIONAL Lessons Learned / Performance Measurement: Low/nil integration of project / capability level lessons learned into rational or adaptive strategic processes Backcasting: Did: Introduce scenario based planning for strategic policy analysis Did not: Extend scenario analysis to define the possible future military challenges, nor extend it to inform the development of a strategic architecture – instead, the assessment focused on capability (equipment) solutions Figure 5-23: Interpretive viewpoint of Defence strategic planning c. 1999 A Systems Approach to Strategy and Execution in National Security Enterprises – 234 – Chapter 5: Case Study 1 – Defence Forecasting: Did: Integrate a deep understanding of current force elements, their limitations in a piecewise perspective; used this to inform the design of ‗enhanced‘ force options Did not: Integrate detailed systems modelling of capacity or prospective performance, cost estimation or traditional cost-benefit analysis Rational: Did: Recognise need for better integration and trial some modelling (e.g. evacuation) Did not: Formally integrate evacuation or other rational methodologies as the primary focus was on expanding adaptive and interpretive dimensions. Did not attempt to translate risk from an interpretive mode to a rational mode of analysis Interpretive: Did: Significantly increase the ‗gene pool‘ of contributors making judgements against a highly ‗orchestrated debate‘. Risk was dealt with in this interpretive mode Backcasting: Did: Develop scenario planning base and design structural options INTERPRETIVE for the ‗force after next‘ based on experience of what works in a capability sense; design evaluation methodology to test the force after next options & build shared Back experience base in outcomes and casting Fore process; Conduct meta-analysis to casting determine strategic architecture Did not: Have inclusive process to translate strategic architecture into ADAPTIVE designed solutions (politically, timing RATIONAL was poor) Lessons Learned / Performance Measurement: Did: Capture lessons on content & process in Phase 1 and Phase 2 reports; Use reports in designing performance parameters within the strategic architecture Did not: Adequately integrate lessons learned from other experimentation formally into the scenario gaming processes Adaptive: Did: Significantly increase the capacity for, and integration of, learning methodologies through seminar gaming Did not. Adequately design and implement a learning process to translate system requirements into force structure designs Figure 5-24: Perspectives on developing a 'sweet spot' in Case Study No. 1 While Figure 5-24 summarises the main opportunities taken to synthesise the three modes, it also provides some insights into where opportunities were missed or not taken up due to choices made by Defence. These judgements are the author‟s own, made after he had left employment in Defence. In future practice beyond this thesis, implementation of a structured and documented after action review would provide reviewable evidence to support later judgements for the continuous improvement of the systems-based, multi-method approach. Of the interventions that were not adopted in this process, the lack of engagement by the organisation in the design process was the most significant omission. In engineering a systems approach to strategy formation, this is a highly desirable inclusion because it offers a means to move force structure design from a platform replacement program to one that consolidates the trade-offs between function, performance and cost that are needed to build an agile, responsive and sustainable Defence force structure capable for a given cost. While it was systemically desirable to the strategy formation process – for the opportunity it gives to expand the rational mechanisms in use and enhance the „sweet spot‟ – it was not culturally feasible at the time to engage the Services in an A Systems Approach to Strategy and Execution in National Security Enterprises – 235 – Chapter 5: Case Study 1 – Defence agenda-free discussion at a time when a highly political White Paper process was underway. Consequently, the judgements of a small group of analysts in SPP Division prevailed as the dominant interpretive means of force design. Validation of the design was limited at the time to one-on-one discussions of the outcomes with senior executives across the Services. With this event arising, the study team considered applying modelling and simulation to help validate the new design however, time and resources acted against this. Notwithstanding the actions at the time, modelling and simulation offers significant capabilities to increase the contribution of rational modes of strategy intervention. The effectiveness and efficiency of the testing and evaluation component of the process could have been enhanced with modelling and simulation methodologies. The perceived benefits accruing would have been:  Visualisation of an Australian Illustrative Planning Scenario (AIPS) to aid the immersion of subject matter experts into each AIPS to help them internalise the start-state disposition of blue, red and other forces. This would be a significant step forward from the tools used to support scenario briefings during case study 1, which included a documentary version of the AIPS, a simple map and a briefing at the commencement of each scenario exercise. Simulation based tools ensure consistency in the briefing and enable re-use.  Simulation could be extended to all of the AIPS and used prior to the scenario game, to assist with: – the definition of a scenario, including a red-force concept of operations and new adversary capabilities; – the definition of a force option and the introduction of new technologies; and, –  the definition of an operational concept. Simulation could be applied after the scenario exercise to explore: A Systems Approach to Strategy and Execution in National Security Enterprises – 236 – Chapter 5: Case Study 1 – Defence – Key judgements where the assessed risks were high and/or the confidence in the judgements were low; and, – The sensitivities identified during the end stages of the testing process to validate the judgements made by subject matter experts and/or identify any further combat resolution issues that need to be considered. In these ways, simulation could provide strategic analysts with a form of After Action Review. The strategy formation process described in this case study used two dominant methodologies: 1. the soft systems methodology (SSM) as a methodology to manage the cognitive complexity; and concurrently, 2. the adaptation of systems engineering as a framework for multiple methods involved in requirements analysis, enterprise design, solution validation, and systems analysis; and, as a methodology to integrate the products of those processes into a tangible set of assessments and options for government. Further discussion on the systems elements of the strategy formation process is presented in Section 5.11.2. 5.11.2 A View on the Application of SSM to a Strategy Process The application of SSM occurred consciously yet the processes in practice were not formalised and a naïve interpretation was presented. Instead, a more formal application of SSM would have added greater insight and clarity at the outset to define and guide the task at hand. Notwithstanding a large number of deviations from a more traditional application of SSM, most improvement would have been gained by attention to three areas: 1. the development of a rich picture places the issues considered problematic in the wider context of the Defence planning and development activities; A Systems Approach to Strategy and Execution in National Security Enterprises – 237 – Chapter 5: Case Study 1 – Defence 2. the „nested‟ nature of the root definitions, which gives clarity to the fact all three root definitions had to be addressed from the outset, and consequently different CATWOEs needed to be developed rather than working under cover of one CATWOE as had been the case; and, 3. the development of a conceptual model that is informed by these two improvements to the process previously applied, illustrates more clearly the role SSM plays in developing the problematic strategy process into one which is more systemically desirable and culturally feasible. A rich picture (Figure 5-25) illustrates more clearly than ever before the interrelationships among the three issues considered problematic: Figure 5-25: Rich picture of the Defence strategy and execution process in 1999-2000 The three issues considered most problematic and their resolution critical to the development of an integrated framework for strategy and execution were: 1. Force structure guidance, and the process to develop it was inadequate and promoted and prolonged the “warring” amongst the Defence tribes (McIntosh et al, 1997), A Systems Approach to Strategy and Execution in National Security Enterprises – 238 – Chapter 5: Case Study 1 – Defence 2. The „gap in explanation‟ between strategy and capability development provided no basis for understanding or determining relative priorities for the development of current and future capabilities (Baker, 2000), and 3. As a consequence of 1. and 2., the available measures used to assess the effectiveness and performance of new or upgraded capabilities were at best weakly linked to capability planning. The further consequence being that the military response options available to the government of the day presented both strategic and capability gaps (McIntosh et al, 1997). This rich picture makes it clearer than before that it was never going to be enough to focus simply on root definition [B] – system to sustain learning etc – and its conceptual model [B] which sought to apply the test and evaluation elements of systems engineering to deliver a learning environment. The other problematic elements of the strategy process covered by root definitions [A] and [C] would also need to be integrated as illustrated now in Figure 5-26: Figure 5-26: Root definitions „nested‟ to deepen and enrich the outcome A Systems Approach to Strategy and Execution in National Security Enterprises – 239 – Chapter 5: Case Study 1 – Defence The application of different CATWOEs makes clear that there are three different transformations at play and three different worldviews that make the transformations meaningful. This is … ―the core of CATWOE and … the other elements in CATWOE add the ideas that someone must undertake the purposeful activity, someone could stop it, someone will be its victim or beneficiary, and that this system will take some environmental constraints as given. A root definition with attention to these elements will be rich enough to be modellable.‖ (Checkland and Scholes, 1990) The resultant conceptual model, shown in Figure 5-27, is then focussed on process development and its continuous improvement towards addressing the problematic areas. Figure 5-27: Conceptual model for the development and continuous improvement of a strategy process This is very different to the conceptual model previously constructed in Figure 5-5 around an adaptation of systems engineering as a framework for strategy and execution. The advantage of the new conceptual model in Figure 5-27 is that it focuses on managing the cognitive problem of surfacing an appropriate mix of methods to address complex real-world problems while concurrently assessing A Systems Approach to Strategy and Execution in National Security Enterprises – 240 – Chapter 5: Case Study 1 – Defence the efficiency and effectiveness of the process and identifying actionable ways to improve the process. Systems engineering is employed (based on the earlier review in Chapter 4) as the operating framework for integrating the mix of methods surfaced by SSM. Emerging from this concept, then, is the parallel execution of two dominant methodologies as shown in Figure 5-28:  SSM to manage the cognitive complexity of mixing methods to address a complex set of problems in a dynamic environment, and  Systems Engineering to manage the situational complexity of implementing a mix of methods in a coherent and consistent manner, and deliver „hard‟ guidance as an output. Managing the Cognitive Complexity of Mixing Methods to Address a Complex Set of Problems in a Dynamic Environment SSM1 – 1. Appreciate and select methods f or: • scenario planning process • scenario f ormat presentation • to develop of f orce structure options • process of evaluating options in scenarios • managing involvement of senior execs SSM2 – 1. Develop and apply criteria f or determining: • how ef f icient the process is, and • how many iterations of the process is enough to provide adequate coverage of scenarioplanning space (ef f iciency of staff time) SSM3 – 1. Appreciate and select methods f or: • analysing structured and unstructured data across multiple scenarios • synthesising a coherent strategic architecture • synthesising a consistent f ramework of measures • managing involvement of senior execs to drive process change (and yield behaviour change) SSM4 – 1. Develop and apply criteria f or determining the extent to which the process is ef f ectively meeting the Government‘s needs f or Def ence strategy and execution 2. Appreciate and action process f or developing process outputs SSM Systems Engineering 1 CONDUCTSCENARIO PLANNING X X t X X X X 7b Monitor & take Control action X X – Identify Potential Crises & Events Action within SE Framework 2 Understand the „Why‟  Discover future purpose of Defence 7a Iterate to develop requirements Action within SE Framework 4 Evaluate Solutions 5 Action within SE Framework  Against specified future purpose (in scenarios)  Generate shared learning Analyse  Performance  Costs  Risks… etc. 6 9 Develop the „What‟ Analyse  Develop statement of abilities / capability requirements  Performance  Costs  Risks… etc. 3 Define the „How‟ 8  Identify cost-effective options for solutions Iterate to design solutions 10 Develop Capability Priorities Guidance Action within SE Framework Managing the Situational Complexity of Implementing a Mix of Methods in a Coherent and Consistent Manner Figure 5-28: Interoperability of SSM and SE for Defence strategy and execution It is also worth noting that the original root definition [A] – system to guide the development of an holistic strategic architecture etc – gave rise to presenting Boulding‟s hierarchy of systems complexity as a conceptual model [A]. Clearly, in the revision presented in Figure 5-27, Boulding‟s hierarchy does not rate a A Systems Approach to Strategy and Execution in National Security Enterprises – 241 – Chapter 5: Case Study 1 – Defence mention. However, it remains on the menu of methods to be appreciated in the SSM process. Boulding‟s hierarchy has been shown in Table 4-6 to be a useful heuristic method to check whether the mix of methods being employed in the strategy process adequately covers the systems hierarchy for warfare (Hodge 1999 after Boulding 1956) and whether the analysis is adequate for that level of complexity (Boulding 1956). SSM therefore integrates well when systems engineering is used as a methodology for a set of planning processes that is adaptive and delivers suitable product. It enables learning about the process to be integrated into each iteration or use case. Being highly iterative through multiple testing / seminar gaming elements, the opportunity exists at each of the iterations to address the SSM criteria and adapt the mix of methodologies. Likewise, the adaptive and iterative process enables analysts to achieve substantive learning about Defence capability. Achieving cultural feasibility is more problematic. It depends primarily on who is involved and on the timing of implementing new ideas. In the case study, the concurrent development of the White Paper and the shifts in the internal power distribution in the Department significantly impacted the study‟s full satisfaction of cultural feasibility of the proposed changes to the planning process. The experience gained in case study 1 was facilitated to some extent because the new approaches were presented and run as an experiment. (Whether or not it was successful, the participants appreciated that it could be shut down at any time and as such was not considered a threat to participants who held significant stakes in the outcome of other strategic planning processes that were running at the same time.) The adaptive process enabled a program of experimentation to evolve and incorporate critical systems questioning and debate about the true Defence requirements and the traceability of the solutions to those requirements. This improved the level of understanding across participants, effectively reducing the “warring” reputation of the “tribes” (McIntosh et al, 1997). It also enabled systemically desirable change to be identified while concurrently building A Systems Approach to Strategy and Execution in National Security Enterprises – 242 – Chapter 5: Case Study 1 – Defence acceptance in process and content. In particular, acceptance of the new planning process built as more people became involved and found the experience and the products of the analysis and synthesis useful. For this reason, the study team felt confident at the time that the new planning process would work in the future. The process has, subsequently, stood the test of time to contribute to Defence planning as an institutionalised element in the Defence strategic planning framework endorsed by the Secretary of Defence and the Chief of the Defence Force. To this day, remains embedded (in a shortened form) in the Department‟s strategy processes. 5.11.3 A View on the Application of Systems Engineering to a Strategy Process The systems engineering framework provided the basic elements for integrating methodologies to address the „why‟, „what‟ and „how‟ for Defence strategic planning, as shown in Figure 5-29. Traditional Defence Design Path… 1. Why… Government Requirements Scenario Contexts Prioritised Needs Requirements Analysis Development Process iterates through 2 loops ... Core Product: synthesized from all testing and analysis products, this becomes the „Spec‟ against which all potential solutions should be designed and from which organisational configuration is managed Traditional Validation Path… Check fit against needs 2. What… Defence mission profiles Effects based abilities Performance parameters Check fit with performance parameters and balance of solution with abilities Design Design Process Based on functional requirements and traditional gap analysis 3. How… Broad capability solutions Broad-band priorities Broad costing of solutions Test solutions against needs Design : Only physical solutions can be costed. Functions cannot. Must move through this design loop with support from subject matter experts to influence resource prioritisation. WP Options… Figure 5-29: Application of systems engineering to Defence strategic planning A Systems Approach to Strategy and Execution in National Security Enterprises – 243 – Chapter 5: Case Study 1 – Defence Adapting a systems engineering process as a methodology for integrating a mix of interpretive, adaptive and rational approaches to strategic and capability planning offered a number of points of value for Defence. Namely:  It establishes a functional statement of what Defence abilities are important in meeting Government requirements and what performance parameters should apply. This statement is comprehensive in covering a range of potential Government requirements and so offers value to the Defence Capability Committee as one means by which they can: – – – Manage the configuration of Defence capability in uncertain times. Judge the flexibility and adaptability of each new capability proposal Judge the appropriateness of any augmentation to capabilities in the context of the whole set of functions required in Defence – Improve the level of strategic dialogue about what capabilities are important and why.  It exposes the cultural perspectives to risk assessment and offers a means for improving the level of joint understanding  It makes strategy development a more inclusive process than before. This is an important quality as uncertainty in future roles and capabilities increases over time.  It provides an avenue for inserting and „trialling‟ new and future warfare concepts as they might be designed into a force option and tested.  It provides a reference picture for other Defence capability studies and, against which a Defence experimental framework can be designed to guide Defence investments in research and development, which collectively form an essential set of strategic planning hedging strategies – in turn, providing a further reference point for single Service experimental frameworks.  It offers an adaptable process with application to other Defence functions, for example: A Systems Approach to Strategy and Execution in National Security Enterprises – 244 – Chapter 5: Case Study 1 – Defence – – – Investigating preparedness Enhancing deliberate operational planning Education and training of planners, strategic analysts, officers and cadets at Defence educational institutions Four series of trials were completed using this systems approach – amounting to over 40 separate seminar games to test a range of current and future structure options in a set of fourteen scenarios. The trials demonstrated the value of the approach in eliciting knowledge and collecting it into a form of information that was not previously available to the senior decision makers. After being briefed on the process and its products, the Minister tasked the study team to examine, and report an assessment of the capability and capacity of the Defence Force to address near term contingencies of direct interest to him. Synthesis products (such as a functional architecture and revised options for force structuring) have also been used by Admiral Barrie, the [then] Chief of Defence Force (CDF) to support his attendance at the National Security Committee of Cabinet in its deliberations of Defence strategic planning. In summary, the systems engineering process formed a basis for closing the „gap‟ in explanation, as shown in Figure 5-30. Strategic Planning EXISTS: Defence White Paper Scenarios Capability Development Effects-based Analysis in Phase 2 Reports for Strategic Functional Architectures & Performance Parameters Acquisition Why Analysis & Control Why How Scenario-based analysis of force structure options Phase 1 Reports Defence Capability Planning Guidance (in lieu of proposed Capability Priorities Statement) What Validate Methodology Tools Data sets Force Structure Options EXISTS: Defence Capability Plan What How Strategic functional architecture Why What How Closing the „Gap‟ in Explanation Figure 5-30: Systems engineering closing the 'gap' in explanation A Systems Approach to Strategy and Execution in National Security Enterprises – 245 – Chapter 5: Case Study 1 – Defence The planning scenarios generated at the beginning of this process, subsequently became known as the Australian Illustrative Planning Scenarios, which continue to provide a consistent baseline for analysis and measurement in the Strategic Planning Framework (Defence, 2006a). Subsequent to this case study, the seminar gaming process was modified to reduce the steps involved in testing force structure options and continues in its modified form as a process element in the Defence Capability Development process (Defence, 2006b). While Defence failed to complete the development of a Capabilities Priorities Statement during the author‟s tenure in Defence (for reasons previously reported in this case study), an equivalent planning product – the Defence Capability Strategy – is now an integral part of the Strategic Planning Framework. It provides “guidance to capability managers as well as explaining the DCP link to strategic guidance [and it] is the starting point for all other Group/Service capability related plans and roadmaps.” (Defence, 2006b) 5.11.4 The Value of the Systems Approach to Strategic Planning When briefing the final summary of the outcomes of the systems approach to strategic planning to LTGEN Mueller, the [then] Vice Chief of Defence Force, a senior military officer in Capability Development Group threw his copy of the briefing notes at the feet of General Mueller saying, “it‟s all intuitive”. Recounting this dramatic moment in discussion at Chatham House, the [then] Director of the Royal Institute of International Affairs remarked that strategic planners should take such remonstrations as praise for the outcomes they have achieved (Sparrow, 2000) as it is indicative of acceptance of their findings. The job of strategic planning is a difficult task encompassing:  Building an understanding of the complexity of the environment Australia and the Department of Defence operates in. The goal is to develop one‟s own view of the future (after Hamel and Prahalad, 1994). A Systems Approach to Strategy and Execution in National Security Enterprises – 246 – Chapter 5: Case Study 1 – Defence  Developing a system of values with which one can separate the desirable from the less desirable. These values form a hierarchy of measures upon which planning is transformed into action (Sparrow, 2000).  Having access to the means to take action – the processes, tools and techniques that make strategic planning products useful (Sparrow, 2000), and  Having permission to act (Sparrow, 2000). The strategic planning cycle is complete when the complexity of the strategic environment is distilled into statements that make common sense – and that achievement is “remarkably uncommon” (Sparrow, 2000). The process improvements trialled by this case study now enable strategic planners to consider and address questions such as:  How do you provide meaningful options to government? How do you involve decision makers and have their professional judgement examined by their peers? Or, how do you access judgement from across an organisation and factor in the „wisdom of the crowd‟?   How do you make intelligent judgements about trade-offs at Cabinet level, as well as at project level?  How do you develop a view of whether a strategic imperative can really be delivered on with current or future capabilities? Or, are modifications required to the statement of the strategic objectives or the resource requirements? The systems approaches applied in this case study give insights into how these questions can be addressed. They address Sparrow‟s four elements to strategic planning by articulating its planning base in a series of illustrative scenarios and by developing a functional architecture, through an auditable process, that helps decision-makers understand the boundaries on what‟s important in designing an organisational structure and relate it to the value it provides to Government. A Systems Approach to Strategy and Execution in National Security Enterprises – 247 – Chapter 5: Case Study 1 – Defence The key criteria of a Soft Systems Methodology – that action must be systemically desirable and culturally feasible – helps to manage the cognitive complexity and drives the strategic planner to achieve permission to act. If the guardians of our organisational cultures do not allow us to act, there is little more to be done. But, where permission to act exists, systems approaches will likely help a CEO to determine and apply a style of leadership appropriate to the specific groups of issues. For designing and leading this work within Strategic Policy and Planning Division, the author received the 2000 Aeronautical and Maritime Research Laboratory Achievement Award for Best Contribution / Advice to Defence. A Systems Approach to Strategy and Execution in National Security Enterprises – 248 – Chapter 6: Case Study 2 – Health 6 Case Study Two – Assessment of a National Health System‟s Capability to Respond to Serious Emergencies Abstract The second case study is drawn from the contribution of the authorxxi to a study of the capability a national health system to respond to serious and unusual emergenciesxxii. The study was conducted from January 2004 to March 2005. The intended outcomes of the study were required to have a whole of government benefit for health emergency management preparedness and have benefit for day-to-day health services delivery. Consideration of the focal health problems at a business enterprise and industry level was necessarily nested within the national government‟s broader security agenda. While the results of the study remain confidential, the design and implementation of the systems methodology is presented. A methodology to design and develop an integrated set of rational, interpretive and adaptive interventions is described, framed on Checkland‟s Soft Systems Methodology. Systems engineering is adapted as a methodology for synthesising multiple interventions. A pilot study was used to test the system of interventions at a regional level, the results of which guided the „control‟ actions required to adapt the methodologies so they could scale to a national level study. Most interventions were able to scale with little or no modification however the modification to the risk analysis was extensive and became a central integrating „force‟ in the study. The case study concludes with a summary assessment of the extent to which the different rational, interpretive and adaptive methodologies developed an effective „sweet spot‟. The case study reinforces the methodological application of systems engineering concepts at the business enterprise, industry and national levels of systems complexity and demonstrates the portability of this framework of ideas, and its adaptability to, different areas of concern. The response to the study at the higher levels of Government – notably the Department of Prime Minister and Cabinet and the Treasury – report a “good outcome”. 6.1 Introduction In the earlier chapters, it has been shown that the application of systems thinking and systems engineering principles to complex strategic planning problems can yield methodologies that can be designed specifically to suit the scale and scope of each case. As in the first case study, strategic planning methodology for this class of problem would need to: A Systems Approach to Strategy and Execution in National Security Enterprises – 249 – Chapter 6: Case Study 2 – Health (1) appreciate the cognitive complexity of the problem (Checkland 1981, Warfield 1994) (2) design and/or adapt a methodology (Midgley, 2000) guided by (1), to manage the cognitive complexity of the problem in tandem with changes in the situational complexity (Warfield,1994) and, (3) use systems thinking and systems engineering principles to configure a mix of rational, adaptive and interpretive modes of strategic and operational analysis for investigating the complex situation and validating the outcomes. Each of these issues is discussed in the next three sections. 6.2 Introduction to the Problem Terrorism has been a factor in national and international relations for many decades, however, it came to greater prominence throughout the 1990s at a time when information technology opened communication channels and widened access to information. The technological advantages underpinning economic and social globalisation equally supported terrorist‟s objectives of advancing their own ideologies. Consequently, many Governments have been engaged in a massive transformation in preparedness for serious and unusual emergencies. In short, Governments have to be capable of planning on a global basis, as well as focussing their action regionally and nationally. Events in New York on 11 September 2001, in Bali in 2002, in Jakarta at the Marriot in 2003, and at the Australian Embassy in 2004, contributed to the Australian and New Zealand Governments establishing a heightened state of preparedness appropriate to their assessment of, and tolerance for, the risks. In New Zealand, concerns about its national preparedness were brought into a sharp focus in 2003 with threats to the staging of the America‟s Cup in Auckland, and to the New Zealand Golf Open in Wellington. Concurrently, the emergence globally of Severe Acute Respiratory Syndrome (SARS) and Avian Flu emphasised the dangers facing New Zealanders from communicable diseases and A Systems Approach to Strategy and Execution in National Security Enterprises – 250 – Chapter 6: Case Study 2 – Health the risks – as well as opportunities31 – inherent from both tourism and terrorism. The following questions raised by Mr Pat Helm of the New Zealand Department of Prime Minister and Cabinet, outline two types of problem faced by central governments: how to balance the mitigation of several disparate sets of risks at a national level and how much mitigation is enough? ―1. National overview: From central government's perspective, how can we take a disparate set of national risks (welfare, national defence, fire, pandemic, foot & mouth disease, terrorism, flooding etc.) and apply an overarching risk management framework that drives mitigation efforts and costs just enough to bring risks down to ‗rough equivalence‘? In the diverse set of risks that individuals and communities face, there is no point in having some overly well managed in comparison with others. Appendix A How safe is safe enough? In the end, individuals or Councils or the national Treasurer have to apply money to the problem. Money is only part of the answer, I know, but mitigation usually involves some [expenditure]. And, it involves a discrete quantum of dollars, and therefore requires a quantitative base – however imperfect – for evaluation of the main factors (threat, chance, impact, mitigation, benefits, residual risk etc). Not only are quantitative measures important but so too are benchmarks or thresholds of tolerability (for individuals and for society collectively). [In many nations,] these tend to get set in haphazard ways, or grow irregularly over time.‖ (Helm, 2004a) The NZ Government commissioned a number of studies, examining different aspects of the national preparedness „problem space‟. Booz Allen Hamilton successfully tendered to review the NZ Health system, for which the author contributed to all aspects of the project, and led the development of a systems framework for the design of the methodology. 6.2.1 Summary of the Objectives of the Study The following key objectives were to be met by the study:  assess the capacity of the New Zealand health sector to respond to an unusual and serious health emergency, including assessments of national collaboration, regional coordination and critical elements of health service delivery; NZ made substantial progress early at a whole-of-nation level in improving its preparedness to the risks of catastrophic terrorism. It also saw the public attention that counter-terrorism drew as an opportunity to improve national preparedness to other serious emergencies and, in doing so, improve day-to-day operations. 31 A Systems Approach to Strategy and Execution in National Security Enterprises – 251 – Chapter 6: Case Study 2 – Health  provide advice to the NZ Government on options to address gaps in capability; and,  conduct a high-level cost benefit analysis of the identified options. Assess & Manage the Cognitive Complexity 6.3 An initial, linear six step process was proposedxxiii, as illustrated in Figure 6-1. Team Building & Information Gathering Test & Refine Study Methodology Establish the Capability Baseline Identify Capability Gaps Identify & Cost Enhancement Options Documentation and presentation WP1 WP2 WP3 Define Define Current Current Capability Capability Baseline Baseline WP4 Capacity Capacity Modelling and Modelling and Vulnerability Vulnerability Assessment Assessment WP5 Develop & Develop & Analyse Analyse Enhancement Enhancement Options Options WP6 Mobilisation Mobilisation Pilot Study Pilot Study (Wellington) (Wellington) Synthesis Synthesis and Reporting and Reporting Figure 6-1: Proposed six work packages Our team began the project with a short engagement with the NZ Ministry of Health to better define the scale and scope of the problem. In systems terms, the scoping study had two goals: (1) to assess and manage the cognitive complexity involved in approaching an analysis of a complex adaptive system (of over 8,000 medical practitioners, more than 45,000 nurses and allied professionals, with an expenditure in excess of NZD $8 Billion in public funds per year); and then, (2) to design a systems intervention that would enable the team to assess the health system‟s capacity to handle a series of unusual and serious emergencies (the prospective situational complexity facing the health system) and develop options for Government that integrate with other initiatives underway. The major systems elements in the systems intervention process were the soft systems methodology (SSM), used as a methodology to manage the cognitive complexity and an adaptation of systems engineering (DSMC, 1999) to manage the processes of multiple methodologies and integrate the products of those processes into a tangible set of assessments and options for government. A Systems Approach to Strategy and Execution in National Security Enterprises – 252 – Chapter 6: Case Study 2 – Health The application of SSM occurred consciously in practice yet less formally than presented in this discussion. The use of Checkland‟s SSM (1990 version) enabled more conscious management of the cognitive complexity in the design and implementation of the systemic intervention than was the experience in Case Study 1 on Defence strategic planning. In the first stage of managing the cognitive complexity, the review and control processes involved extensive consultation and negotiation with the customer and the national steering group before the integrated methodology design (as theory) could be applied in practice. Using the Checkland & Scholes (1990) version of SSM illustrated in Figure 6-2, root definitions and CATWOE assessments helped to focus the systemic intervention, while also identifying critical elements in the design and control of the systems intervention. SSM 1 – Generic to manage cognitive complexity Root Definition: A government-owned and contractor supported system of enquiry to investigate the capacity and capability of the NZ Health system to respond to serious and unusual emergencies, in order to understand the current situation and prepare options for Government to improve the system‘s capacity and capability. 1. Appreciate the cognitive complexity of the problem 3. Build an inf ormation architecture (IA) 4. Appreciate the available interpretive, adaptive & rational methodologies 2. Def ine the scope of the problem using questions C – Ministry of Health (MOH) A – Contractor Team & MOH T – Disparate knowledge sources Integrated view of current situation and its opportunities for improvement W – ‗Wicked‘ systemic problems in complex situations can be systematically addressed O – NZ Government E – Elements of the system external to NZ are taken as given, elements internal to NZ and external to the health system are to be considered where it impacts health action 5. Design a whole of nation systems intervention 6. Appreciate situational complexity (incl. cultural aspects) Take control action Review 1-5 7. Def ine measures of perf ormance (MOP)* Systemically desirable + Culturally f easible ++ + Fit to suit scope of problem ef ficiently and ef fectively ++ Balance of interpretive, adaptive, rational methodologies to suit the culture of the organisation Figure 6-2: SSM 1 – To manage cognitive complexity of the methodology Seven elements were involved in the process of managing the cognitive complexity of designing a methodology for the whole of nation intervention. The study team sought to: A Systems Approach to Strategy and Execution in National Security Enterprises – 253 – Chapter 6: Case Study 2 – Health  Appreciate the cognitive complexity of the problem „space‟, Define the problem space using research questions, Create an architecture of those agencies involved and with which we had to seek and exchange information,    Appreciate the available rational, adaptive and interpretive methodologies, Synthesise a methodology to combine the selected methods / methodologies, Appreciate the situational complexity in managing the systemic intervention in a complex area of concern,    Define performance criteria for the conduct of the implementation of the systemic intervention, and  While evaluating the performance of the methodology, take control action to ensure the systemic intervention is achieving a „good result‟. Each of these elements is now discussed. 6.3.1 Appreciate the Cognitive Complexity of the Problem Space The study addressed the cognitive complexity from three inter-related viewpoints:  Scale. Seeking to understand and define the systems complexity from a perspective of Hitchins‟ five-layer model (Hitchins, 2003),  Scope. Seeking to establish boundaries on the scope of the investigation by defining sub-ordinate research questions, and  Target. Seeking to identify the „what‟, „where‟ and „why‟ of each layer in the problem space and so establish a basis for designing the systems interventions that uncover the „how‟ and the „who‟. A Systems Approach to Strategy and Execution in National Security Enterprises – 254 – Chapter 6: Case Study 2 – Health Defining the scale of systems complexity. The first step towards addressing the cognitive complexity involved matching the broad „problem space‟ to Hitchins‟ five-layer model (Hitchins, 2003), which indicates that a multi-level analysis would be need across all five layers to truly appreciate the problem  At level 5, health is viewed as a component of whole-of-government security framework;  At level 4, health is a national enterprise system (an industry in its own right); At level 3, health is a range of regional systems of health systems providing service across primary, secondary, tertiary care, mental health, public health, community health;   At level 2, health as a complex capability focused on delivering, or enabling delivery of, a health service; for example, a system of coronary care, a system of surgical treatment, a system of aged care, a system of pharmaceutical supply, a system of engineering services in a hospital – all of which involve people, technology, processes, training, logistic support, and,  At level 1, health is a range of individual elements of complex capabilities, that are systems in their own right, such as new drug „X‟, an airworthy neonatal crib, surgical training, nurse education, people (skills, expertise), etc. While a prime tenet of the systems concept is that we can hide some complexity through abstraction at higher layers (after Boulding, 1956), the study would be conducted extensively at the higher levels of abstraction yet require a number of „deep dives‟ into the detail of selected elements at the lower levels. Conceptually, these layers are depicted in Figure 6-3, where the length of the bars illustrate the increasing level of ambiguity and scope for disagreement, and indicate an initial estimate of the division of our consulting time in order to manage the participant stakeholders of which there were many. A Systems Approach to Strategy and Execution in National Security Enterprises – 255 – Chapter 6: Case Study 2 – Health Increasing complexity Level 5: National government E.g. Integrated national security Level 4: Industry system level E.g. National health care Level 3: Business system level E.g. District health care, Level 2: Project level E.g. Facilities for acute care, Level 1: Product level E.g. critical supplies, equipment, vehicles etc… Increasing ambiguity and Scope for disagreement Figure 6-3: Indicative layers of complexity (after Hitchins 2003) Scoping the boundaries of the study and targeting the interventions were the next issues to be considered. 6.3.2 Define the Scope of the Problem Space using Research Questions In view of the broad, outcome-focussed question the study set out to address, the potential existed to overwhelm the study with considerations of every issue that might arise across the five layers of systems complexity. To help manage the cognitive complexity, and scope the boundaries of the study, the team developed a set of focal research questions in consultation with the Ministry of Health, as summarised in the first column of Table 6-1. The detailed scope of the problem was cross-matched to the scale of the problem as modelled in Figure 6-3. The identified systems layers were aligned with the research questions, as shown in the second column of Table 6-1, to generate a guide to the choice of methodologies to collect the data. Questions aligning with higher levels of systems complexity would require more emphasis on pluralist approaches. Those at the lower levels were likely to be more open to rational approaches or a mix of rational and pluralist approaches. A Systems Approach to Strategy and Execution in National Security Enterprises – 256 – Chapter 6: Case Study 2 – Health Table 6-1: Research questions – Setting boundaries & targeting the health system. Issues / Research Questions Complexity Level     Level 4     Level 4 Level 4 Methods OVERALL CAPACITY, PRIORITIES AND OPTIONS  What overall strengths in response capacity have been identified through this study? For example: skills? Planning? Flexibility? What overall vulnerabilities have been identified? For example: specific choke points? Specific skill gaps? Weaknesses in strategies/ plans? What are the options and indicative costs for addressing the gaps? What are the costs additional to those incurred through the response, that arise due to deferring ―business as usual‖? For example: increased morbidity and mortality from deferred elective procedures? What residual risks may not be addressed through these options? Level 4 Convene National Steering Group Conduct National Survey Conduct Regional Focus Groups Conduct stakeholder interviews – National Health, Inter-sectoral, and Professional Medical and Nursing Associations      Levels 1-5 CLINICAL AND OPERATIONAL MANAGEMENT  How well do current DHB emergency plans and arrangements for regional agency co-operation and overall national co-ordination service the requirements of responding to a serious or unusual health emergency? Has this analysis (within the health sector) identified any support or co-ordination issues at a regional and inter-sectoral level? What are the options for addressing identified gaps in co-ordination, e.g. in planning, interagency arrangements, exercises?  Levels 4-5     Level 5  Convene National Steering Group Conduct National Survey Conduct Regional Focus Groups Conduct stakeholder interviews – National, Regional and District level, and intersectoral emergency service agencies Conduct visits to representatives of 8 District Health Boards Conduct scenario-based analysis     Levels 4-5  WORKFORCE  Are there shortfalls in the availability of specific health occupations relevant to the emergency response? (Note: overall recruitment and retention of the health workforce is a background consideration). Are there gaps in skills related to basic professional training, specialist professional training, or training through participation in emergency response exercises? What are the options to address identified gaps, e.g. use of specific training courses, improvements to emergency planning and exercising, targeted recruitment and retention strategies (specific to emergency preparedness), sourcing personnel from other regions to meet response requirements?  Levels 1-3     Levels 1-3  Conduct National Survey Conduct Regional Focus Groups Conduct stakeholder interviews at District and hospital levels Conduct facility visits to selection of hospitals in specific areas identified in the scenarios Review nationally sourced data Conduct systems dynamic modelling of public hospital capacity Conduct scenario based analysis     Levels 1-3   INFRASTRUCTURE, EQUIPMENT AND SUPPLIES  Are there shortfalls in infrastructure, critical equipment or critical supplies that would impede the progress of an effective health emergency response? What are the options to strengthen infrastructure and improve the availability of critical equipment and supplies?  Levels 1-3     Levels 1-3  Conduct National Survey Conduct Regional Focus Groups Conduct stakeholder interviews at stores, hospitals and districts Conduct facility visits to selection of supply and infrastructure managers in specific areas identified in the scenarios Review nationally sourced data   A Systems Approach to Strategy and Execution in National Security Enterprises – 257 – Chapter 6: Case Study 2 – Health With the scope of the systemic intervention now defined, the study team was able to define those elements of the national health infrastructure that needed to be targeted and involved in this study. 6.3.3 Create an Information Architecture A mapping was created to guide which parts of the study were to be addressed against the different elements of the NZ health system. This mapping, referred to as the Information Architecture for the study, is shown in Figure 6-4 below. The architecture relates the focal areas of analysis with those functional areas of health capability with which the study team needed to interact in order to acquire adequate information and organisational perspectives for the study. Methodology – Determine Information Architecture Relating Focal Areas of Analysis to Functional Areas of Health Capabilities Focal Areas for Analysis National Capabilities • Policy • Processes • Organisation • Culture • Expertise • Specialist Capability • Processes • Organisation • Culture • Expertise • Processes Regional Management Inter-Sectoral Agencies OSHS ERMA NPC ESR Ministry of Health NRL Other National Health Agencies Blood Service Defence Health Service Inter-Sectoral Agencies Functional Areas Related to Management & Delivery of Health Capabilities Regional Capabilities Health Services Delivery Capabilities • Workforce Capacity • Resourced Beds • Expertise • Culture • Critical Equipment • Critical Supplies • Facilities Private Hospitals Primary Care Secondary Care DHB Management Public Health Service Management Medical Officers of Health Tertiary Care Public Health Services Ambulance Services Private Laboratories Private Pharmacists Rest Homes Private Radiology Practices Community Services Public Hospitals Reduction Readiness Response Recovery Figure 6-4: Information Architecture xxiv With such a wide spectrum of agencies in this information architecture, it was decided to define a thin „vertical slice‟ and exercise the intervention first at a local and regional scale before taking the step of conducting the intervention at a A Systems Approach to Strategy and Execution in National Security Enterprises – 258 – Chapter 6: Case Study 2 – Health national level across the full information architecture. This was seen as a risk reduction measure (any initial problems would not be experienced on a national scale) and as a confidence building measure once the methodology was established on a smaller scale. 6.3.4 Appreciate the Available Interpretive, Adaptive and Rational Methodologies The next step involved consideration of the modes of intervention that the study team would engage in. There were several, comprising interpretive, adaptive and rational modes. The principal interpretive modes of intervention included:  Interviews with stakeholders with responsibilities represented across all five levels of systems complexity, to identify user requirements, health system capacities and interdependencies, capability gaps and vulnerabilities, and the potential initiatives to address the gaps  Scenario-based analysis using three scenariosxxv to support focussed „deep dives‟ into the health system and its capacity to respond, noting that each incident begins locally (at the health services delivery level at one location) rapidly escalates to a regional and national contingency. The three scenarios coverxxvi: – A flu pandemic that was also representative of a possible terrorist or naturally occurring biological incident, – A building collapse that was representative of a possible terrorist incident or a possible natural disaster from an earthquake, and – A chemical poisoning incident that was representative of a major industrial accident and a possible terrorist incident including a radiological device (or „dirty‟ bomb).  Facility visits to the principal hospital facilities, public health and primary care capabilities represented in the principal locations of each of the three scenarios to determine local response capacities, A Systems Approach to Strategy and Execution in National Security Enterprises – 259 – Chapter 6: Case Study 2 – Health  Vulnerability analysis of the issues arising to identify the criticality of each issue and its interdependencies with other causal factors The principal adaptive modes of intervention included:  The National Steering Group guided the direction of the study. This group included representatives with operational responsibilities at different levels of systems complexity – including Level 5 (Department of Prime Minister and Cabinet), Level 4 (Ministry of Health), Level 3 (District Health Board representation), and Level 2 (General Manager of a major hospital).  Regional focus group meetings to validate the vulnerability assessments and explore feasible options to enhance the health system. The principal rational modes of intervention included:  National survey of all 21 District Health Boards on Emergency Management preparedness issues.  Review of nationally sourced data on emergency management preparedness plans, processes and constituent data (e.g. workforce, supplies etc.)  Modelling of health demand to provide plausible upper and lower bounds of cases of mortality and morbidity by number and type  Systems dynamic modelling of health supply capacity to assess the impact on the health system of major health demands arising from serious emergencies, taking account of the normal load on the system, the beds, people and resources available and the average length of stay for each condition.  Risk modelling and analysis of the vulnerabilities arising in the system. The cognitive framework of questions (Table 6-1) constrained and focussed the study across the five levels of systems complexity. The team anticipated that answers to these questions would yield a mix of outputs based on calculation, expertise and judgement, and that the outputs would be supportive of a mix of rational, adaptive and interpretive strategy formation modes needed to address the situational complexity. A Systems Approach to Strategy and Execution in National Security Enterprises – 260 – Chapter 6: Case Study 2 – Health The multi-methodological design, likewise, had to span all five levels. The principal constraints on the study were time (limited to nine months for delivery of the major elements of the study to ensure the outcomes fed into the Government decision cycle) and costs (it was conducted under contract as a fixed-price commercial venture). The initial assessment of the prospective methods of investigation identified in Table 6-1 reflected a mix of rational, adaptive and interpretive modes. Table 6-2: Modes of investigation Rational Modes Rational Modes •• Systems dynamic modelling of Systems dynamic modelling of workforce, beds, patient load, workforce, beds, patient load, requirements, bottlemecks requirements, bottlemecks Pandemic spreadsheet model Pandemic spreadsheet model Risk modelling Risk modelling Cost-benefit analysis Cost-benefit analysis National survey National survey National data sources National data sources •• •• •• •• Adaptive Modes Adaptive Modes Systems dynamic modelling – Systems dynamic modelling – sensitivity analysis sensitivity analysis Focus groups Focus groups Scenario-based seminars // Scenario-based seminars workshops workshops Steering Group meetings Steering Group meetings •• •• •• •• •• •• •• Interpretive Modes Interpretive Modes Scenario Analysis Scenario Analysis CEO & stakeholder interviews CEO & stakeholder interviews Facility visits Facility visits Mission needs analysis Mission needs analysis Capablity baseline Capablity baseline assessments assessments Vulnerability analysis Vulnerability analysis Design of mitigation measures Design of mitigation measures •• •• •• •• •• They addressed all five levels of systems complexity as shown indicatively in Figure 6-5. Increasing complexity Level 5: National government E.g. Integrated national security Multiple methods: CEO & Stakeholder interviews National survey Mission needs analysis Vulnerability analysis Risk assessment Steering Group meetings Level 4: Industry system level E.g. National health care Level 3: Business system level E.g. District health care, Level 2: Project level E.g. Facilities for acute care, Level 1: Product level E.g. critical supplies, equipment, vehicles etc… ‗Deep dive‘ scenario analysis in three target areas: Incorporating stakeholder and service provider interviews, facility visits, capability baseline assessments, systems dynamic modelling Regional focus group workshops Increasing ambiguity and Scope for disagreement Figure 6-5: Hitchins' 5-layer model guides methodology design This initial appreciation also suggested that, while interpretive modes of strategic analysis conceivably covered the full scale of the problem, it could not adequately address the full scope of the problem. Other means were better suited to A Systems Approach to Strategy and Execution in National Security Enterprises – 261 – Rational modes Interpretive modes Adaptive modes Chapter 6: Case Study 2 – Health investigate the detailed complexity (in operating a hospital, for example) and the adaptive nature of different communities of practice and their ability to work together. With these „pieces‟ of the intervention identified, the next step sought to integrate them into a workable whole. 6.3.5 Synthesise a Methodology The designed approach drew on the systems engineering principles, whereby these modes of intervention were interwoven across four main types of activity:  Information collection and interpretation, Analysis of the information to identify the potential weaknesses in, and requirements of, the health system,   Synthesis/design of the initiatives to address the requirements and the weaknesses, and  Evaluation of the designs to ensure that, as potential solutions, they provide an appropriate level of fit, balance and compromise to deliver a sustainable outcome for NZ Health. The application of the systems engineering model to manage the situational complexity incorporated the mix of rational, adaptive and interpretive methods for intervention in the health system, and is discussed further in Section 6.4. 6.3.6 Define Performance Criteria and to Guide Control Action From the outset, the study team recognised that its initial approach would need to be flexible to a reasonable degree to include new people, new knowledge and new or revised methods/methodologies if these were judged to be desirable. Two measures of performance were used. Consistent with Checkland (1981) they were, firstly the „fitness-for-purpose‟ of the methodology to deliver a systemically desirable outcome. Secondly, a measure was used to judge the balance of interpretive, adaptive, rational methodologies and the extent to which the process and the content was culturally feasible to be addressed by the health system. A Systems Approach to Strategy and Execution in National Security Enterprises – 262 – Chapter 6: Case Study 2 – Health These two criteria shaped many of the conversations with the Ministry staff and the judgements made by the study team in designing and conducting the intervention. 6.4 Systems Engineering Approach to Manage the Situational Complexity The four principal types of activities presented in section 6.3.5 formed the basic approach taken to the study. To manage the situational complexity involved in conducting a whole-of-nation study, it was felt prudent to test the approach in local and regional contexts first before rolling it out nation wide. These four main activities form the quadrants of a spiral development path that incremental worked from the conception of the study to its trial in a pilot study and then to a whole-of-nation level involving multiple scenarios. This spiral path is shown in Figure 6-6. Study Report Mechanisms Mechanisms •• Specialist advisers Specialist advisers •• Regional // national Regional national focus groups focus groups •• Steering Group Steering Group Validation Update Issues Register Methodology Update Issues Register Methodology Update Issues Register Methodology Key Questions Collect and interpret information Optional mechanism (not Optional mechanism (not taken up) taken up) •• National National stakeholder stakeholder seminar for option seminar for option validation and validation and prioritisation prioritisation Mechanisms Mechanisms •• Scenario developScenario development – health ment – health demand modelling demand modelling •• Key stakeholder Key stakeholder interviews interviews •• National survey of National survey of preparedness preparedness •• Facility visits Facility visits •• Regional focus Regional focus groups groups Process Process •• Synthesis Synthesis •• By definition, ‘the By definition, ‘the combination of combination of parts or elements, parts or elements, … as objects of … as objects of thought, into a thought, into a complex whole complex whole (opposed to (opposed to analysis)‘. Not a analysis)‘. Not a formalised formalised process. process. •• Design initiatives Design initiatives to mitigate risks to mitigate risks and vulnerabilities and vulnerabilities Pilot Study SCENARIO 1 SCENARIO 2 SCENARIO 3 OPTION DEVELOPMENT Processes Processes •• Vulnerability Vulnerability analysis analysis •• Systems dynamic Systems dynamic modelling – health modelling – health supply capacity supply capacity •• Sensitivity analysis Sensitivity analysis •• Risk assessment, Risk assessment, modelling & modelling & analysis analysis •• Option and Option and investment investment analysis analysis Synthesis Analysis Figure 6-6: Spiral development path for the designed methodology This approach, common to systems engineering, enables:  the methodology and the mix of component methods to be tested and validated; and, A Systems Approach to Strategy and Execution in National Security Enterprises – 263 – Chapter 6: Case Study 2 – Health  the study to evolve through a series of scenario-based investigations that allow issues to be identified, tested and evaluated in other scenarios for their commonality and criticality to the NZ Health system as a whole. The use of systems engineering framework in the pilot study and in the national study is summarised in Figure 6-7. Learning about Systems Practice Design 1 Use Case 1 (Pilot) Design 2 Use Case 2 (National) Risk component of systems analysis & control integrated more extensively across elements 1-5 Uses basic ‗building blocks‘ of systems engineering to integrate data from all modes of intervention and establish a coherent and valid set of requirements and solutions Systems Analysis & Control 1 User Needs (Why…) Requirements Loop 4 2 Capability Requirements (What…) Design Loop Capability Solutions (How…) 5 Validation (Test …) 3 Figure 6-7: 'Building blocks' of an integrated process and a rational product As in case study 1, the systems engineering framework provides the basic building blocks for integrating the data outputs of each of the interventions to define:   The user needs derived from the health system operating in the contexts set by the scenario planning base and expressed as a set of five high level preparedness objectives addressing the abilities for: – Planning and direction, to develop the critical leadership capabilities required for unity of purpose, coherent planning, resource allocation and direction, maintaining strong engagement with stakeholders A Systems Approach to Strategy and Execution in National Security Enterprises – 264 – Chapter 6: Case Study 2 – Health – Organisation and management, to develop the health system‟s capability to optimise its utilisation of available resources – Developing skills and knowledge, to raise, train and sustain the skill base and teamwork that balances directional control with adaptivity; and, provide the teams with rich feeds of vital knowledge in constant flow – Developing Emergency Management capability & support, to raise, prepare and sustain the essential capabilities, and their enabling support systems, required in response/recovery – Developing relationships and networks, to ensure consistent engagement with the health sector from strategic policy to front-line health services delivery, and to establish vital links to critical resources outside the health sector.   The health system capability requirements, in this case expressed as a set of functional capabilities that have been derived through the vulnerability assessment, risk analysis and risk treatment prioritisation processes, and   The design of health system capability solutions, that were appropriately packaged for consideration by Government in cost bands matched to the achievement of the user needs and objectives.   The conduct of systems analysis and control functions, particularly – The integration of risk extensively throughout the analysis and the „configuration management‟ of the design solutions to achieve the preparedness objectives, cover the vulnerability set and establish a culturally feasible set of options for Government.   The validation of the solution set, through interaction with the National Steering Group and in presentation of the option packages to Treasury, noting that the customer chose not to pick up the analysis option of testing the option packages with the broader health community. A Systems Approach to Strategy and Execution in National Security Enterprises – 265 – Chapter 6: Case Study 2 – Health As noted in the discussion of the user needs, the input to the framework was shaped by the context of the planning scenarios. The output of the process ultimately was a report to the customer addressing the user needs, the current capability baseline, the extant and prospective vulnerabilities and risks, the options for enhancement and a set of recommendations for Government – integrated in its analysis to demonstrate the cost-benefit-risk against the user needs and objectives. 6.4.1 Implementation With the benefit of the initial insights into prospective methods to be applied in the study, the team implemented its approach in four distinct components:  a scoping study, during which the boundaries of the system under study were defined, research questions were scoped and an initial methodology was designed and planned;  a pilot study across two District Health Boards to test and refine the methodology before applying it nationally;  an updated methodology, to elicit and collect information through multiple methods across the full 21 District Health Boards and private entities comprising the health sector, to analyse the vulnerabilities in the sector and to determine risk treatment priorities; and  a synthesis approach to generate of four options for Government, to be presented as packages of initiatives across the health „value chain‟ to mitigate the assessed risks, including a cost-benefit analysis of the proposed investments to improve health system preparedness. A linear overview of the approach is presented in Figure 6-8. Taken on face value, this representation „hides‟ the inherent systems components of the design. In reality, this linear path tracked along a spiral development path to ensure the methodology design remained adaptive to the complexity arising in the problem situation. A linear representation proves useful in managing a conversation with the client to explain in a step-wise manner the approach being taken during the A Systems Approach to Strategy and Execution in National Security Enterprises – 266 – Chapter 6: Case Study 2 – Health course of the study and assists in assuring the client that a rational mode of strategy formation with rational outputs linked to a budget will follow. Methodology – Linear Overview Key Questions Confirm focal areas of analysis Develop Information Architecture Develop, test, refine national survey Conduct facility visits and interviews Conduct capacity modelling Conduct pilot study on WGTN scenario Conduct regional focus groups Analyse/synthesise issues etc Assess pilot study Confirmed Methodology Register of issues, vulnerabilities and initiatives Conduct scenario analysis (x2) Conduct facility visits Conduct capacity modelling Conduct regional focus groups Conduct national survey Meta-analysis across outputs of each mode of investigation Synthesise issues, vulnerabilities and initiatives and update register Synthesis of options developed during the study designed to address gaps OPTION: Conduct national stakeholder seminar to prioritise the vulnerabilities and assess options Identify residual risks Write and submit study report Figure 6-8: Linear overview of the methodology 6.4.2 Testing the Methodology Design in a Pilot Study The pilot study tested the methodology using one scenario (the building collapse scenario) operating across multiple stakeholders at the national, regional and local levels of operations covering two major public hospitals, three private hospitals, two District Health Boards, the Ministry of Health and the intersectoral response and recovery agencies (Police, Emergency Services, Ministry of Civil Defence and Emergency Management etc.). The critical outcome sought in the pilot study was the establishment and validation of the partitioning of the problem into the research questions that would be sufficiently coherent as a set so that the data they uncover would address the problem driving the study. It was also required that the pilot study demonstrate that the methodology and the associated research questions had the A Systems Approach to Strategy and Execution in National Security Enterprises – 267 – Chapter 6: Case Study 2 – Health ability to scale in a practical way to address the primary question at a national level. This certification – by the Ministry of Health, not the team engaged to conduct the study – that the system of systems intervention would be both satisfactory and feasible is the natural conclusion of a pilot study before widening the scope of the problem to the national level (Maier & Rechtin, 2002)xxvii. 6.4.3 Maintaining Methodological Control in a Dynamic Situation In applying the „model‟ of the designed methodology in the complex situation of the pilot study, the monitor and review functions were now able to operate with the benefit of data from the operation of the „model‟ in the real world. The high level of interaction with the customer group during the pilot study drove the discussions to extend the two criteria of systemic desirability and cultural feasibility (after Checkland, 1981) to ensure adjustments in the design could be made as the study progressed. SSM‟s „3-Es‟ (Checkland & Scholes, 1990)xxviii form the basis for an extended set of criteria:  Does this methodology, as applied, comprehensively address the primary question?  Is the use of resources efficient in conducting the study? Do the outcomes offer effective improvements to the enterprise that are systemically desirable and culturally feasible?  On reflection after the event, a further application of SSM was underway, to ensure the designed methodology remained efficacious, efficient and effective as it went along. An interpretation of the processes that were underway is given in Figure 6-9. A Systems Approach to Strategy and Execution in National Security Enterprises – 268 – Chapter 6: Case Study 2 – Health SSM 2 – Generic to manage situational complexity 1. The designed systemic intervention Root Definition: A government-owned and contractor supported system of enquiry to investigate the capacity and capability of the NZ Health system to respond to serious and unusual emergencies, in order to understand the current situation and prepare options for Government to improve the system‘s capacity and capability. C – Ministry of Health (MOH) A – Contractor Team & MOH T – Disparate knowledge sources Integrated view of current situation and its opportunities for improvement W – ‗Wicked‘ systemic problems in complex situations can be systematically addressed O – NZ Government E – Elements of the system external to NZ are taken as given, elements internal to NZ and external to the health system are to be considered where it impacts health action 2. Appreciate the context f or the study 3. Def ine application of methods to suit the context 4. Conduct study 6. Monitor 1-4 5. Def ine measures of perf ormance (MOP) Ef f icacy * Ef f iciency ** 7. Take control action 8. Def ine measures of perf ormance (MOP)* Ef f ectiveness *** 10. Take control action 9. Monitor 1-7 11. Identif y learning in terms of outcomes & methodologies * Does this methodology comprehensively address the primary question? ** Is the use of resources ef f icient in conducting the study? *** Do the outcomes of f er improvement to the enterprise that are systemically desirable and culturally f easible? Figure 6-9: SSM2 – Managing the situational complexity of dynamically changing the mix of methodologies The considerations and judgements of the „Actors‟ in the study, the „Customer‟ and the „Owner‟, (all of whom were represented in the national steering group) guided improvements in the cognitive framework to enable an improved design in scaling the methodology to a national study, keeping systems theory and systems practice close together, as illustrated in Figure 6-10. Learning about Systems Theory to Improve Management of Cognitive Complexity Design 1 Use Case 1 (Pilot) Design 2 Use Case 2 (National) Learning about Systems Practice to Improve Management of Situational Complexity Figure 6-10: Close interaction of theory and practice A Systems Approach to Strategy and Execution in National Security Enterprises – 269 – Chapter 6: Case Study 2 – Health In this manner, the cognitive complexity (of the methodological approach) and the situational complexity (of changing methodologies to suit consideration of the health system operating in unusual and serious emergencies) were both handled in an evolutionary manner. In a sense, it is fair to say the cognitive frameworks (the theory) evolved in close step with the practice of discovery and the application of analytical processes (the practice of applying the theory of investigation of a health system). Checkland‟s Soft-Systems Methodology (Checkland & Scholes, 1990) provided an invaluable framework for managing the cognitive complexity and framing the whole study. 6.4.4 Validating the Research Questions The data gathered from the various methods of intervention listed in Table 6-1 were captured in a central repository or register of relevant issues, critical vulnerabilities in health system Emergency Management preparedness, and potential enhancement initiatives. These data remain confidential to the Ministry of Health. The focal areas of analysis were derived from the research questions, which are illustrated below in Figure 6-11. Several other issues that required exploration in order to assess the effectiveness of NZ‟s health emergency management capabilities were added. In particular, as shown in red text in Figure 6-11, issues of process, organisation, and culture are important indicators of effectiveness that needed to be analysed. These tend to be significant drivers of other vulnerabilities and they lead to including initiatives impacting leadership, communication and business process that otherwise might not be considered. The interventions in the pilot study also addressed issues at all four phases of emergency management: reduction, readiness, response, and recovery (known colloquially in New Zealand as the „4-Rs‟). This emerged naturally in the course of the pilot study as the philosophy is embedded in NZ‟s emergency management legislation and its culture. It also resonated well in outcome terms with the systems-based approach to the study intended to advise on the balance A Systems Approach to Strategy and Execution in National Security Enterprises – 270 – Chapter 6: Case Study 2 – Health of improvements required in preparedness as well as response and recovery activities. Methodology – Determine Focal Areas for the Analysis Operational Management Operational Management  Assess DHB EM Planning  Assess DHB EM Planning – National coordination – National coordination – Regional cooperation – Regional cooperation  Identify any intersectoral  Identify any intersectoral issues issues National National  Effectiveness of DHB EM planning for national coordination  Effectiveness of DHB EM planning for national coordination  Intersectoral issues  Intersectoral issues  Policy, Processes, Organisation, Culture, Expertise, Specialist  Policy, Processes, Organisation, Culture, Expertise, Specialist capabilities capabilities Regional Regional Workforce Workforce  Identify shortfalls in specific  Identify shortfalls in specific occupations occupations  Gaps in skills // training  Gaps in skills training Health Services Delivery Capabilities Health Services Delivery Capabilities Infrastructure Infrastructure Critical Equipment Critical Equipment Critical Supplies Critical Supplies  Workforce capacity, Resourced beds  Workforce capacity, Resourced beds  Expertise and training, Culture  Expertise and training, Culture  Critical facilities, Critical equipment, Critical supplies  Critical facilities, Critical equipment, Critical supplies  Effectiveness of DHB EM planning for regional cooperation  Effectiveness of DHB EM planning for regional cooperation  Intersectoral issues  Intersectoral issues  Processes, Organisation, Culture, Expertise  Processes, Organisation, Culture, Expertise Reduction Readiness Response Recovery Figure 6-11: Relationship between key questions and focal areas for analysis The pilot study validated the research questions to be sufficiently complete as a set, and that with the addition of a few subordinate issues, would adequately address the problem driving the study. 6.4.5 Validating the Ability to Scale Modes of Intervention to a National Study In the pilot study, a vertical „slice‟ of the information architecture was taken by restricting the scope to two of the 21 District Health Boards (DHB) and all of the national level agencies. In that way, a sample of the full set of bilateral and multilateral relationships was tested among the national, regional (district), and local entities. This approach anticipated that scaling up to a national level study would add complexity in the detailed content to be analysed, without adding A Systems Approach to Strategy and Execution in National Security Enterprises – 271 – Chapter 6: Case Study 2 – Health significantly to the types of relationships and interfaces shared by the DHBs and each of these interfaces was tested in the pilot study. The information architecture was a key element in the design and conduct of this multi-methodological study as it identified the multiple organisational and functional boundaries and critical interfaces where – most likely – the greatest opportunities for improvement and the greatest vulnerabilities in the health system reside (Rechtin, 1991, 2000). The information architecture provided a summary integrated view of the focal areas of analysis with the actual entities of a multi-tiered health system. In doing so, it framed the cognitive complexity of the study and guided the integration of the different interventions to address the key study questions. It also guided the integration of issues arising in the assessment of the situational complexity facing the health system in its capacity to handle a series of unusual and serious emergencies, in mapping the data from the interventions, and the prospective options for Government to improve the health system, back to the problem space. The study team applied all modes of intervention in the pilot study. The summary assessment of the changes required to scale up to a national level study are indicated in Table 6-3. Table 6-3: Assessment of modes of intervention in pilot study Mode of Intervention Rational modes of intervention National survey Pilot questionnaire required clarification. Question set simplified to operate nationally to suit 21 District Health Boards on Emergency Management preparedness issues. Increased the type and quantity of data sourced from national health information sources. Reduced burden on the 21 DHBs. No adjustment required to scale to a national level. No adjustment required. Conducted by the Ministry of Health – important that the primary stakeholder set and agree the plausible upper and lower bounds of cases of mortality and morbidity by number and type. Pilot study required extensive review of, and agreement on, the assumptions impacting every entity in the model and how it interacts with other entities to represent the operating conditions of each hospital. The activity was resource intensive for the study team, the hospital advisors and the Ministry of Health, but without this effort it could not be applied acceptably at a national level. Summary Assessment of Ability to Scale to National Level Nationally sourced data Review preparedness plans & constituent data Modelling of health demand Systems dynamic modelling of capacity A Systems Approach to Strategy and Execution in National Security Enterprises – 272 – Chapter 6: Case Study 2 – Health Mode of Intervention Risk modelling and analysis of vulnerabilities Summary Assessment of Ability to Scale to National Level The risk assessment in the pilot study applied the AS/NZ Standard 4360 to assess likelihood, consequence and risk criticality of each of the vulnerabilities. To scale to a national level, the methodology required extension of the risk standard to address (1) the relative importance of the vulnerability relative to the full range of hazards facing NZ, (2) ease of addressing the vulnerability, (3) prospective cost, (4) potential for mitigation action to have wider benefits; and, (5) the impact of different judgements arising in different scenarios for any one vulnerability. This proved a significant integrating feature of the different modes of intervention (discussed further in Appendix 2). Adaptive modes of intervention National steering group The national steering group provided a strong unifying force at the national level to review and validate the judgements of the utility of the study to address the primary question and the scalability of the methodology to provide an integrated national assessment. The role of the steering group in the national study shifted to review, challenge and validate the outcomes at a national, whole-of-Government level. The pilot study demonstrated the importance of these interventions in validating the vulnerability assessments and the potential initiatives to improve the system. In scaling to a national level, care was exercised to ensure a full range of stakeholders were included in the focus groups. Regional focus groups Interpretive modes of intervention Interviews The interviews were highly productive in identifying systemic issues, particularly at the higher levels of systems complexity (Hitchins levels 3-5). The team found it important to tailor the generic research question set to the specific interests of the interviewee. It was also imperative for these to be conducted ‗anonymously‘ without attribution to interviewee. The value of these interventions during the pilot study encouraged the study team interview a broad range of stakeholders including different professional medical associations and the Ministry of Transport. Scenario-based analysis The pilot study demonstrated the importance of scenarios as a tool to bound the national problem and enable extrapolation to an ‗all hazards, all assets‘ approach. In scaling to a national study, adjustment was required to integrate the interpretive scenario analysis into the quantitative risk assessments. The pilot study demonstrated importance of validating data, assessments and assumptions in the physical environment to ensure the practical limits in each major facility and how they might manage any given scenario were satisfactorily understood. In addition, the visits often demonstrated importance for extending ‗ownership‘ in the study as examples of practical innovative thinking – e.g. in creating additional facilities for infectious patients – could be extended through the study to other DHBs. In scaling to a national study, more time was scheduled to allow extensive visits to key facilities in combination with a wide series of interviews. No change required to scale to national level. Facility visits Vulnerability analysis In summary, most modes of intervention scaled with little or no modification from the pilot study to the national level study, and this enabled the customer of the study to accept the results of the pilot study and to support it being fully scaled to a national study – subject to the modifications indicated in Table 6-3. A Systems Approach to Strategy and Execution in National Security Enterprises – 273 – Chapter 6: Case Study 2 – Health The two elements requiring greatest modification were:  the national survey instrument of health emergency preparedness to refine the required level of detail to that agreed by the Ministry of Health as being appropriate with a view to reducing the effort required in each DHB to complete the survey; and,  the risk assessment and risk treatment prioritisation methodologies. Within the constraints of the available guidance, was to integrate scenario-based judgements for each of the identified vulnerabilities and incorporate other issues important for integration into a whole-of-Government context. The changes made to the risk assessment methodology are in Appendix 2. 6.4.6 Value of Integrating Risk How risk is handled and presented in the systems approach is justified by the theoretical argument underpinning the development of the approach (chapters 3 & 4). While there are many possible candidate risk assessment approaches available globally, the study team were required by the customer to comply with the requirements of the Australian/New Zealand Standard for risk management (AS/NZS 4360:2004)32. The changes made to the risk assessment methodology to meet the customer requirements for scenario-based analysis are summarised in Appendix 2. In summary, the value of the risk model lies in several factors:  Risk modelling be adapted to match the government‟s tolerance for risk through the national steering group and accepted as an informed basis for developing options for government  Risk became a central element in the analysis process and in the process to integrate security within the Health system‟s strategy formation process This Standard has an essential companion Handbook, HB 436 Risk Management Guidelines - Companion to AS/NZS 4360. The two documents are intended to be used together, with the Handbook providing important commentary, guidance and examples on the implementation of the Standard. 32 A Systems Approach to Strategy and Execution in National Security Enterprises – 274 – Chapter 6: Case Study 2 – Health  The outputs of, and insights from, the model were validated in the regional focus groups and the national steering group, and while imperfect, provided the level of quantification required by the customer, and  The resultant communication of risk related issues had an integration role, and improved the balance between the interpretive, adaptive and rational modes of intervention to support decision making, direction setting and resource allocation. The team sought to enable progressive improvement during the study by placing risk assessment and risk management as a central systems analysis capability in the Health strategy formation process. Ultimately, this change has been adapted to establish a model for integrating security issues within strategy formation studies to assist in the design of enterprises operating at the firm, industry and national levels. In a systems sense, the pilot study achieved its desired outcomes of modelling the methodology, testing it for feasibility and scalability and refining it to better meet the needs of a national, whole-of-Government assessment. In the process, a suitable fit, balance, and compromise (after Rechtin, 1991)xxix is achieved between the interpretive, adaptive and rational modes of intervention. 6.5 Synthesis and Analysis of Options for Government To conclude the national study, options for government were synthesised and then analysed for cost, benefit and risk. 6.5.1 Synthesis of Options for Government Fifty-one high-level initiatives were developed “top down” across the four phases of preparedness (reduction, readiness, response and recovery) to address the complete set of prioritised vulnerabilities. These were mapped against the prioritised list of vulnerabilities to identify their effectiveness in reducing one or more vulnerabilities in the context of one or more of the representative scenarios. This effectively linked the “top-down” and “bottom-up” analysis to provide confidence in the completeness of the set of initiatives. A Systems Approach to Strategy and Execution in National Security Enterprises – 275 – Chapter 6: Case Study 2 – Health The 51 candidate initiatives were then assessed and ranked using a weighted process that assessed each of the initiatives against five criteria:  its risk treatment priority to prioritise initiatives addressing risks with the highest priority for treatment.  its “footprint” over the complete set of vulnerabilities to prioritise initiatives offering wider effects on reducing vulnerabilities.  its impact on representative planning scenarios – to prioritise initiatives addressing scenarios where intervention should offer higher expected benefits  its indicative cost – to prioritise those which might be relatively cost efficient; and,  its ease of implementation –to prioritise those which may be easier to implement in term of its cost-benefit. – In several respects, this prioritisation process is an extension of the risk treatment prioritisation process. The first criterion is the product of the previous process. The remaining four criteria revisit the three factors of the implementation index for risk prioritisation – ease, cost and benefit as improved judgements on cost and implementation of the initiatives can now be made, given the detail in the description of the initiatives. The benefit assessment is made more tangible by addressing both the extent to each of the initiatives impacts the wider range of vulnerabilities and the more specific benefit each of the initiatives offer to each of the scenario events. – The resultant weighted ranking of the initiatives guided the packaging of four option-sets for government:  Option A – Establishes the policy framework Option B – Establishes the operational foundations Option C – Establishes a systemic capability   A Systems Approach to Strategy and Execution in National Security Enterprises – 276 – Chapter 6: Case Study 2 – Health  Option D – Establishes an “All Hazards” national capability As each of the option sets incorporates the previous option(s), the aim was to give advice to government on different levels of improvements, at different cost bands, with different levels of residual risk. 6.5.2 Cost, Benefit and Risk Analysis of the Option Sets The approach to cost, benefit and risk analysis used a composite of well-known methodsxxx involving:  “developing a Base Case that includes the indicative costs of mortality and morbidity associated with each of the three representative emergency scenarios;  assessing the indicative capital, operating and maintenance costs of each option;  assessing the indicative quantitative benefits of each option in terms of potential cost savings through reduced mortality and morbidity in each scenario;  assessing the qualitative benefits of each option in terms of: – direct benefits to reducing vulnerabilities and improving health sector EM preparedness; and – indirect benefits to national health outcomes, national security and national EM preparedness;  assessing the costs and benefits of each option against the base case to derive net benefits;  assessing the implementation risks of each option; and providing an integrated assessment that compares the indicative costs, benefits and risks of each option in both quantitative and qualitative terms.xxxi”  A Systems Approach to Strategy and Execution in National Security Enterprises – 277 – Chapter 6: Case Study 2 – Health As a mark of the customer‟s acceptance of the results of this analysis, the customer invited the team to present the cost-benefit-risk analysis to senior Treasury officials. 6.5.3 Outcome of the Study As a result of this study, the NZ Ministry of Health developed a deeper – yet still imperfect – understanding of the issues addressing the question: what is the capacity of the nation‟s health system to respond to serious and unusual emergencies and what strategy should Government consider to enhance its preparedness? With the assistance of this complex and unique whole-of-nation assessment of health capabilities, the customer developed its agenda for improving the health system operated by 21 District Health Boards across the nation. Its agenda was subsequently endorsed and funded. 6.6 Summary Assessment of the Systems Methodologies in Case Study 2 The multiple methodologies in Case Study 2 are assessed from a systems viewpoint and from the viewpoint of strategy formation as a management activity. 6.6.1 A view on the dominant systems methodologies The „surprise‟ contributor in this study – more so than in Case Study 1 – was the influence of SSM (1990 version) as a dominant methodology. It illustrated the value it can provide to the strategy formation process by first assisting to manage the cognitive complexity of the intervention by structuring the thought processes and presenting key criteria needed to ensure a good result at the methodology level. And, then – although not by initial design – the thought processes and criteria at work in managing the situational complexity (after Warfield, 1999) of changing the piecewise methodologies or methods during an intervention. Being able to cycle dynamically between the applications of SSM at two levels (as shown in Figure 6-12) enhanced the attempts at continuously improving the design of the methodology and its application in complex situations. A Systems Approach to Strategy and Execution in National Security Enterprises – 278 – Chapter 6: Case Study 2 – Health Root Def inition: A government-owned and contractor supported system of enquiry to investigate the capacity and capability of the NZ Health system to respond to serious and unusual emergencies, in order to understand the current situation and prepare options f or Government to improve the system‘s capacity and capability. 1. Manage Cognitive Complexity of Methodology C – Ministry of Health (MOH) A – Contractor Team & MOH T – Disparate knowledge sources Integrated view of current situation and its opportunities f or improvement W – ‗Wicked‘ systemic problems in complex situations can be systematically addressed O – NZ Government E – Elements of the system external to NZ are taken as given, elements internal to NZ and external to the health system are to be considered where it impacts health action 2. Manage Situational Complexity of Mixing Methods Dynamically 1. The designed systemic intervention 2. Appreciate the context for the study 3. Define application of methods to suit the context 4. Conduct study 1. Appreciate the cognitive complexity of the problem 3. Build an information architecture (IA) 4. Appreciate the available interpretive, adaptive & rational methodologies 2. Define the scope of the problem using questions 6. Monitor 1-4 5. Define measures of performance (MOP) Efficacy * Efficiency ** 7. Take control action 5. Design a whole of nation systems intervention 6. Appreciate situational complexity (incl. cultural aspects) Review 1-5 7. Define measures of performance (MOP)* Systemically desirable + Culturally feasible ++ Take control action 8. Define measures of performance (MOP)* Effectiveness *** 9. Monitor 1-7 11. Identify learning in terms of outcomes & methodologies 10. Take control action + Fit to suit scope of problem efficiently and effectively ++ Balance of interpretive, adaptive, rational methodologies to suit the culture of the organisation * Does this methodology comprehensively address the primary question? ** Is the use of resources efficient in conducting the study? *** Do the outcomes offer improvement to the enterprise that are systemically desirable © Richard Hodge – PhD Thesis and culturally feasible? Figure 6-12: SSM as a methodology to manage cognitive and situational complexities In summary, the value of the systems engineering methodology was found in the rational organisation of main processes to derive a basis for „hard‟ decisions by Government. In particular, in this case study the systems engineering processes developed a strong basis for the design of health system capability solutions, appropriately packaged for consideration by Government in cost bands matched to the achievement of the user needs and objectives. The conduct of systems analysis and control functions provided this foundation. In particular, the integration of risk was pervasive throughout the analysis. It was assisted by the „configuration management‟ of the design solutions to cover the set of vulnerabilities of greatest concern and frame the solutions to achieve the Ministry‟s preparedness objectives. Working both dominant methodologies in combination was considered a significant contributor to the success of the study. In particular, because the solution set was „validated‟ through interaction with the National Steering Group A Systems Approach to Strategy and Execution in National Security Enterprises – 279 – Chapter 6: Case Study 2 – Health and in presentation of the option packages to Treasury, noting that the customer chose not to pick up the analysis option of testing the option packages with the broader health community. For these reasons, the combination of the dominant methodologies (SSM and Systems Engineering) was a significant factor in establishing a culturally feasible set of options for Government. Further consideration of these dominant systems methodologies is given in chapter 7, which compares and contrasts their application and benefits across the two case studies. 6.6.2 A view on the comprehensiveness of the strategy formation From a strategy perspective, improvements were made on all counts, as summarised in the „scorecard‟ shown in Table 6-4, which draws on the guidance of Mintzberg et al (1998) on what is needed for better strategy formation. Table 6-4: Scorecard of case study 2 (after Mintzberg et al, 1998) Item Better strategy formation needs to … Ask better questions and fewer hypotheses Be pulled by concerns „out there‟ not pushed by strategy concepts The study began with a primary question from which the research questions were devised and then tested in a pilot study for completeness and scalability The concerns of the NZ Government as customer that were major drivers of the content and process were:  Summary Assessment Concern for the affordable security of the people of NZ and that the Government exercised its duty of care Coverage of inter-sectoral / whole-of-government issues, Wide stakeholder engagement in interviews, visits, and focus groups Need to bring analysis to a quantitative measure to guide resource allocation    Other concerns were reflected in the range and content of the research questions driving the interventions A Systems Approach to Strategy and Execution in National Security Enterprises – 280 – Chapter 6: Case Study 2 – Health Item Summary Assessment Design of interventions should be more comprehensive and concerned with: … process and content Content and the process was framed principally by the information architecture agreed with the customer Process and content were modelled in the scoping study and tested in the pilot study and then re-modelled before being scaled to conduct the interventions at a national level …statics and dynamics The study developed a baseline understanding of the health system as it was before it could begin to understand the dynamics of the system capabilities as they both evolve dayto-day and would respond/recover to emergencies in future. Strategy analysis also incorporated spreadsheet modelling of static data and systems dynamic modelling of the dynamic complexities, where they could be modelled. …constraint and inspiration As a first world nation of c.4 million people, government in NZ is necessarily one of constraint and inspiration to sustain high quality services from a limited resource base. The strategy interventions (process) and outcomes (content) were driven by affordability, timeliness and wider concerns and benefits. Strategy as a ‗mental‘ process began with managing the cognitive complexity of the study through careful question definition and a systems approach (discussed further below). The collective processes involved a wide range of interviews, visits, focus groups and steering groups to help manage the cultural perspectives across the 21 DHBs in the health system and to cater for the cultural diversity in NZ, including its Maori and Islander populations …the planned and the learned While formal health and civil defence and emergency planning is well advanced in NZ, the study itself planned a formal strategy process – through its methodology description, to conduct the study. The study also integrated adaptive methods to generate learning and validate assessments, and gain insights into initiatives to address the situation. The study concluded with a rigorous economic analysis of expected value and cost-benefit ratio to ensure the interpretive / political perspectives of the outcomes of the study could be balanced with and informed by the bounded rationality of the cost-benefit-risk analysis. This enabled strategic conversations to be at all times constructive in bringing the study to a conclusion at a whole-of-government level. Personal conversations (Helm, 2005) indicate that the study continued to be referenced by the customer in its broader dealings with central government and other government departments. …cognitive and the collective …economic and the political A subjective and summary view of the „whole beast‟ of strategy formation in case study two is presented in Figure 6-13, illustrating the perceived extent of integration of the three modes of strategy formation and the extent to which their A Systems Approach to Strategy and Execution in National Security Enterprises – 281 – Chapter 6: Case Study 2 – Health integration improved the formation of a „sweet spot‟. While Figure 6-13 summarises the main opportunities taken to integrate the three modes, it also provides some insights into where opportunities were missed or not taken up due to customer choice. Incorporating risk was a critical element in the integration of the three modes of strategy formation. The use of risk, first to assess the identified vulnerabilities in the health system as a complete set and then to assess the opportunities for enhancement, drove the expansion of the „sweet spot‟ from the „middle out‟. The discussion presented in Section 6.4 considered the systems elements of the strategy formation process where risk as a critical component of the systems analysis and control activity functions in systems engineering. Interpretive: Did: Involve an extensive range of contributors with well structured set of research questions using interview process to promote collaborative interchange, where appropriate, in rational and adaptive interventions. Backcasting: Did: Develop scenario planning base with detail to support rational and adaptive interventions; design initiatives ‗top down‘ based on lessons learned from the scenario analysis. Did not: Have adequate inclusive process to collaboratively synthesise capability requirements into organisational design and build more ownership in the options for Government Adaptive: Did: Establish and extensively use regional focus groups and national steering groups to assist in testing and evaluating the methodologies and the substantive content arising Did not. Use seminar gaming to test, evaluate the capacity and capabilities in the option set nor to validate the options for Government Forecasting: Did: Integrate demand modelling to identify upper & lower limits of demand on the health system. Used systems dynamic modelling to support forecasting of capacity, capability; and, expected value and cost-benefit-ratio assessments, Did not: Adequately integrate trend analysis based on lag indicators – limited to impact of winter flu on hospital capacity Rational: Did: Integrated wide array of rational methodologies, including translating interpretative risk assessments into a rational framework Did not: Exhaustively pursue available ‗lag‘ data from National Information Services INTERPRETIVE Fore casting Risk Back casting RATIONAL ADAPTIVE Lessons Learned / Performance Measurement: Did: Capture lessons on content & process in pilot study and metamethodology to revise the multiple systems interventions. Capture and embed experiential learning from focus group and national steering groups to refine judgements on vulnerabilities, risks, initiatives & options for government. Did not: Have sufficient lessons learned to validate the options for Government. (see notes under Adaptive) Figure 6-13: Perspectives on developing a „sweet spot‟ in Case Study No. 2 Of the interventions that were not adopted in this process, the lack of seminar gaming was the most significant omission. It presents an opportunity to include an evaluation process to test the options for government against the requirements defined in the set of representative scenarios. In engineering a systems approach to strategy formation, this is highly desirable inclusion because it offers a means A Systems Approach to Strategy and Execution in National Security Enterprises – 282 – Chapter 6: Case Study 2 – Health to validate the options and the assessment of residual risk. While it was systemically desirable to the strategy formation process – for the opportunity it gives to expand the adaptive mechanisms in use and enhance the „sweet spot‟ – it was not culturally feasible at the time to expose the set of vulnerabilities beyond the national steering group. The application of Judgement, therefore, prevailed as the dominant interpretive means of validating the options and the residual risks. In outcome terms, the Ministry is also well positioned to help NZ understand the requirements that serious or catastrophic discontinuities place on their systems and guide courses of action they might take to continuously improve the agility of the health system in such events. In the process, the day-to-day delivery of health outcomes for the NZ people will also be improved. A Systems Approach to Strategy and Execution in National Security Enterprises – 283 – Chapter 6: Case Study 2 – Health A Systems Approach to Strategy and Execution in National Security Enterprises – 284 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7 A New Systems Engineering Model for Strategy and Execution Abstract: A high-level comparison is made of the major elements of the two case studies. Two variations of Checkland‟s Soft Systems Methodology (SSM) – the earlier 1981 model for the novice user (SSM Mode 1) and the later 1990 model (SSM Mode 2) for the experienced user (after Checkland and Holwell, 1998) are compared for their usefulness as methodologies to help manage the cognitive complexity and adapt the different multiple methodologies used in each case. SSM (especially operating in Mode 2) is considered a useful methodology for managing the cognitive complexity of developing and managing a multi-method approach to complex studies at the enterprise and whole-of-nation levels in a dynamic and political environment. A high level comparison is also made of the different combinations of rational, adaptive and interpretive modes of systems interventions used in each of the case studies. While each has its strengths and weaknesses, the tight integration of risk into Case Study 2 enhanced the effect of the other modes of intervention by acting as an integrating control factor across the different modes. The utility of the systems engineering models in each case study, which are based on DSMC (1999), are compared. Noting the importance of the role of risk analysis and performance management as part of the system analysis and control functions, a revised systems-engineering model is designed for strategy and execution. This is then reviewed in three mini case studies. In toto, a new synthesis for strategy and execution is established across three dimensions involving: 1) using Soft Systems Methodology to manage the cognitive complexity of sustaining good strategy and execution outcomes; 2) designing a new systems engineering model that establishes a pattern of process elements and a configuration of relationships among them to define the essential characteristics of a system of strategy and execution processes; and, 3) structuring any systems intervention in a way that achieves an appropriate balance between interpretive, rational and adaptive modes. 7.1 Introduction The purpose of this chapter is to compare the main elements of the approaches taken in each of the two case studies. The evaluation seeks, where possible, to identify the issues that have generic application for the design of a practical and A Systems Approach to Strategy and Execution in National Security Enterprises – 285 – Chapter 7: New Systems Engineering Model for Strategy & Execution generic systems engineering model for synthesising an integrated strategy and execution capability. 7.2 Assessment of Checkland‟s Soft Systems Methodology (SSM) SSM Mode 2 (Checkland & Scholes, 1990) is a superior model to use as a methodology to manage the cognitive complexity involved in designing and/or analysing interventions of highly complex human activity systems such as a defence and/or a health systems. In particular, the SSM functions of monitoring and taking corrective action sets a foundation for SSM to ensure a system-ofsystems intervention evolves in a systemically desirable way. SSM is not something that is solely done upfront in a strategy process to assist with structuring problems and developing actionable processes. Rather, it has been shown to be a useful methodology operating in the cognitive domain of strategy and execution to deliver continuous process improvement in the mix and operation of multiple methods. Evolving a multi-method approach in this way with SSM is more likely to meet the „cultural feasibility‟ criterion because SSM supports a step-wise and spiral development approach consistent with modelling a new approach and testing that approach in the real world. Where necessary, methodology design can be remodelled and retested in the real world, building the experiential learning in the process. SSM Mode 1 (Checkland, 1981), as used however naively in the first case study, is helpful to the extent that it enables models to be developed from root definitions for a system of enquiry and then test those models of enquiry in the real world. In the first case study, the SSM process was iterated several times to arrive at the final version of Force Options Testing and Analysis. In reality, using SSM Mode 1 in this iterative manner, the process tends to reflect more the model of the later (1990) version of SSM. This was demonstrably shown in section 5.11.2 where a retrospective revision of the application of SSM shifted to Mode 2, illustrating: A Systems Approach to Strategy and Execution in National Security Enterprises – 286 – Chapter 7: New Systems Engineering Model for Strategy & Execution 1. the value of creating a rich picture of the complex problem space to identify the „real‟ problems, 2. „nesting‟ of the root definitions within the context of the whole problem, and 3. the development of a conceptual model from the insights provided by the previous two changes to the original naïve approach. Importantly, SSM Mode 1 is less „user friendly‟ and less intuitive in the face of a customer, particularly if the customer is not familiar with SSM and does not readily separate the constructs of a systems world from the real world. In those instances, endeavouring to use SSM as a methodology with a client can hinder rather than help the management of cognitive complexity with the customer, who may see the approach tending to the theoretical rather than the practical. However, no such issues arose with the use of SSM Mode 2 (as illustrated in Figure 6-12, and repeated below as Figure 7-1). Also, given its demonstrated interoperability with systems engineering (as illustrated in Figure 5-28 and repeated below in Figure 7-2), it is therefore worth taking the time (despite organisational pressures for rapid development) for inexperienced users of SSM to engage the support of an experienced (mode 2) user. SSM Mode 2 improved the opportunity to manage a conversation with a client and develop a common approach to:  design an integrated approach of multiple methodologies to manage the cognitive complexity in a „natural‟ course of strategic conversation with a client and without educating the client on systems theory if they were not open to it,  take „corrective‟ action in real time through close engagement with the customers and the owners of the transformation process, and  adapt the mix of methods/methodologies, cognizant of the cultural setting in the enterprise. A Systems Approach to Strategy and Execution in National Security Enterprises – 287 – Chapter 7: New Systems Engineering Model for Strategy & Execution Root Def inition: A government-owned and contractor supported system of enquiry to investigate the capacity and capability of the NZ Health system to respond to serious and unusual emergencies, in order to understand the current situation and prepare options f or Government to improve the system‘s capacity and capability. 1. Manage Cognitive Complexity of Methodology C – Ministry of Health (MOH) A – Contractor Team & MOH T – Disparate knowledge sources Integrated view of current situation and its opportunities f or improvement W – ‗Wicked‘ systemic problems in complex situations can be systematically addressed O – NZ Government E – Elements of the system external to NZ are taken as given, elements internal to NZ and external to the health system are to be considered where it impacts health action 2. Manage Situational Complexity of Mixing Methods Dynamically 1. The designed systemic intervention 2. Appreciate the context for the study 3. Define application of methods to suit the context 4. Conduct study 1. Appreciate the cognitive complexity of the problem 3. Build an information architecture (IA) 4. Appreciate the available interpretive, adaptive & rational methodologies 2. Define the scope of the problem using questions 6. Monitor 1-4 5. Define measures of performance (MOP) Efficacy * Efficiency ** 7. Take control action 5. Design a whole of nation systems intervention 6. Appreciate situational complexity (incl. cultural aspects) Review 1-5 7. Define measures of performance (MOP)* Systemically desirable + Culturally feasible ++ Take control action 8. Define measures of performance (MOP)* Effectiveness *** 9. Monitor 1-7 11. Identify learning in terms of outcomes & methodologies 10. Take control action + Fit to suit scope of problem efficiently and effectively ++ Balance of interpretive, adaptive, rational methodologies to suit the culture of the organisation * Does this methodology comprehensively address the primary question? ** Is the use of resources efficient in conducting the study? *** Do the outcomes offer improvement to the enterprise that are systemically desirable © Richard Hodge – PhD Thesis and culturally feasible? Figure 7-1: SSM as a methodology to manage complexity (Reprise of Figure 6-12) Managing the Cognitive Complexity of Mixing Methods to Address a Complex Set of Problems in a Dynamic Environment SSM1 – 1. Appreciate and select methods f or: • scenario planning process • scenario f ormat presentation • to develop of f orce structure options • process of evaluating options in scenarios • managing involvement of senior execs SSM2 – 1. Develop and apply criteria f or determining: • how ef f icient the process is, and • how many iterations of the process is enough to provide adequate coverage of scenarioplanning space (ef f iciency of staff time) SSM3 – 1. Appreciate and select methods f or: • analysing structured and unstructured data across multiple scenarios • synthesising a coherent strategic architecture • synthesising a consistent f ramework of measures • managing involvement of senior execs to drive process change (and yield behaviour change) SSM4 – 1. Develop and apply criteria f or determining the extent to which the process is ef f ectively meeting the Government‘s needs f or Def ence strategy and execution 2. Appreciate and action process f or developing process outputs SSM Systems Engineering 1 CONDUCTSCENARIO PLANNING X X t X X X X 7b Monitor & take Control action X X – Identify Potential Crises & Events Action within SE Framework 2 Understand the „Why‟  Discover future purpose of Defence 7a Iterate to develop requirements Action within SE Framework 4 Evaluate Solutions 5 Action within SE Framework  Against specified future purpose (in scenarios)  Generate shared learning Analyse  Performance  Costs  Risks… etc. 6 9 Develop the „What‟ Analyse  Develop statement of abilities / capability requirements  Performance  Costs  Risks… etc. 3 Define the „How‟ 8  Identify cost-effective options for solutions Iterate to design solutions 10 Develop Capability Priorities Guidance Action within SE Framework Managing the Situational Complexity of Implementing a Mix of Methods in a Coherent and Consistent Manner Figure 7-2: Interoperability of SSM with systems engineering (Reprise of Figure 5-28) A Systems Approach to Strategy and Execution in National Security Enterprises – 288 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7.3 Assessment of Two Systems of Systems Interventions The resultant approaches have strengths and weaknesses which have been discussed individually for Case Studies 1 and 2 in Sections 5.11 and 6.6 respectively. The diagrams used to represent the modes of systems interventions are set side-by-side in Figure 7-3 where the major differences in the two case studies are apparent in the mix of rational and adaptive methodologies and the role of risk as an integrating element. INTERPRETIVE INTERPRETIVE Fore casting Back casting Fore casting Risk Back casting ADAPTIVE RATIONAL RATIONAL ADAPTIVE 1999-2001 Case Study 1 2004-05 Case Study 2 Figure 7-3: Comparison of the mix of strategy modes used in Case Studies 1 & 2 In both case studies, the mix of methodologies displayed strong interpretive components. Both approaches mixed methods that engaged subject matter experts using a well structured agenda to guide the course of strategic conversations. They allowed the participants freedom to address a wide range of policy, capability, and process issues within boundaries established by the scenario planning base. The Health Case Study demonstrated a particularly strong agenda led by research questions that integrated issues across the spectrum of needs, functional requirements and design solutions to enable „topdown‟ and „bottom-up‟ issues to be tightly integrated. In the Defence Case Study, the interpretive interventions could have been strengthened had they been able to A Systems Approach to Strategy and Execution in National Security Enterprises – 289 – Chapter 7: New Systems Engineering Model for Strategy & Execution achieve a better „fit‟ when going through the design loop of the systems engineering process. The Defence Case Study demonstrated a much stronger mix of adaptive methodologies. It was advantaged with greater use of seminar gaming (now established in the Department of Defence as the Force Options Testing process) to identify Defence needs, critical operational issues and vulnerabilities in terms of both functions and physical design solutions. This process was used extensively. It integrated into strategic and capability planning to enable different force structures to be examined across a range of scenarios and risks identified in strategic, capability and technical terms. This was not the case with the Health Case Study, which would have benefitted from the design solution being tested and evaluated using seminar gaming in a similar fashion to that used in Case Study 1 with Defence. While this option was proposed to the customer, it was not adopted due to a number of factors – not the least being the commercial cost of delivery, the difficulty in getting „busy‟ people to participate and the time it would take to prepare for the gaming and then deliver the results. The challenge is always to deliver a value proposition that makes the benefit of the investment in time and money clear to the customer. The two case studies also differed in the extent to which rational methods of intervention were integrated into the strategy formation process. The Defence Case Study was disadvantaged with a relatively low integration of rational methods. It was dominated mostly by following the cause of integrating adaptive methodologies into the process, where none before existed, to address current and future capability requirements. The Health Case Study had the advantages of a high integration of rational methods in conducting the baseline assessment and using systems dynamic modelling to indicate ideal capacity requirements and identify bottlenecks and vulnerabilities with the existing baseline capacity. Other rational methods involved quantitative elements in the risk assessment and risk treatment prioritisation and then in the cost-benefit-risk analysis. As many of these elements were missing in the first case study, the A Systems Approach to Strategy and Execution in National Security Enterprises – 290 – Chapter 7: New Systems Engineering Model for Strategy & Execution approach in the second case study enabled a larger „sweet spot‟ to emerge in the mix of systems methodologies. In particular, the Health Study was advantaged with the central integration of risk to force a “middle out” growth in understanding in a way that ensured risk assessments were matched to the cultural disposition of the customer. The summary analysis suggests that building the strengths of each case study into future designs for systems intervention would allow strategic analysts to design an even better balance of rational, adaptive and interpretive methodologies. The goal in bringing the strengths of each case together is to enable a larger and optimal „sweet spot‟ to emerge, as illustrated in Figure 7-4. INTERPRETIVE INTERPRETIVE Fore casting Back casting Fore casting Risk Back casting ADAPTIVE RATIONAL RATIONAL ADAPTIVE 1999-2001 Case Study 1 INTERPRETIVE 2004-05 Case Study 2 Fore casting Back INTEGRATIVE casting RATIONAL Risk & Performance Management ADAPTIVE Lessons Learned 2006 Goal Architecture Figure 7-4: Design goal – to optimise „sweet spot‟ A Systems Approach to Strategy and Execution in National Security Enterprises – 291 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7.3.1 Mintzberg Revisited – Part 1 In reviewing Mintzberg et al (1998) in chapter 3, it was noted that the schools of strategy appear extremely rich in techniques for analysis, and it was observed that they do not appear to be so rich in helping its practitioners achieve synthesis by codifying the methods and the results of past syntheses for others to learn by. In view of the proposed design goal for strategy process formulation derived from the synthesis of the two case studies (as illustrated in Figure 7-4), Mintzberg‟s classification of the ten schools of strategy formation is reviewed and a generalised „best fit‟ with the rational, adaptive and interpretive modes of intervention is proposed in Table 7-1. Table 7-1: Schools of strategy making (after Mintzberg et al 1998) Strategy Group / Schools Prescriptive Group Design Planning Positioning Descriptive Group Entrepreneurial Cognitive Learning Power Cultural Environmental Configuration Focus Suggested Classification with a Mode of Systems Intervention Prescribing how strategies should be formulated Strategy making as process of conception Strategy making as a formal process Strategy making as an analytical process Describing how strategies are made Strategy making as an visionary process Strategy making as a mental process Strategy making as an emergent process Strategy making as a process of negotiation Strategy making as a collective process Strategy making as a reactive process Integrating other schools of thought: process and content, organisational structures and contexts Strategy making as a process of transformation Integrative Mode Interpretive Mode Interpretive Mode Adaptive Mode Adaptive Mode Adaptive Mode Interpretive Mode Rational Mode Rational Mode Rational Mode Configuration Regrouped, the ten schools may be viewed overlaid on the goal architecture for strategy formation derived from the synthesis of the two case studies as shown in Figure 7-5. A Systems Approach to Strategy and Execution in National Security Enterprises – 292 – Chapter 7: New Systems Engineering Model for Strategy & Execution INTERPRETIVE Drawing on the processes & tools from: Entrepreneurial School Environmental School Cognitive School Fore casting INTEGRATIVE Drawing on the processes & tools from Configuration School Back casting RATIONAL Drawing on the processes & tools from: Design School Planning School Positioning School ADAPTIVE Lessons Learned Drawing on the processes & tools from: Power School Cultural School Learning School Figure 7-5: Relating the modes of systems intervention to Mintzberg‟s ten schools However coarse, the model presented in Figure 7-5 provides a cognitive framework to enable the strategic analyst to mix and match the methodologies from the ten schools and create new syntheses in a manner that is structurally balanced to guide strategy and execution in uncertain strategic environments. This regrouping of the ten strategy schools enables the strategic analyst to take one step towards achieving the goal outcomes suggested by the synthesis of the two case studies. In doing so, it would also take one step forward towards achieving the “good practice” sought by Mintzerg et al (1998) in their concluding remarks where they call for the field of strategic management “… to get beyond the narrowness of each school: [and] … to know how the beast called strategy formation, which combines all of these schools and more, really lives its life.” While suggesting that better alignment of the ten strategy schools with the modes of systems interventions is a necessary structural condition towards achieving a comprehensive whole (after Mintzberg), it is suggested that it is not sufficient of itself to provide the „fluid process‟ of merging strategy formulation and implementation (after Lucier et al, 2002). A Systems Approach to Strategy and Execution in National Security Enterprises – 293 – Chapter 7: New Systems Engineering Model for Strategy & Execution The following section analyses the two applications of a standard systems engineering model at an enterprise level for the value it provides in delivering a „fluid process‟ for strategic intervention that merges strategy with execution. 7.4 Assessment of Two Applications of a Standard Systems Engineering Model at an Enterprise Level Prima facie, the two case studies applied the same standard systems engineering model within a strategy formation process to define – in different degrees – the user needs, the enterprise functional requirements and to design prospective organisational and capability solutions. The systems engineering model also guided the application of different validation and systems analysis and control functions through the analysis and design phases of each study. The primary focus and output of each study was different. As illustrated in Figure 7-6, the main product of the Defence case study derived from iterative cycles through the model to conclude at the end of a „requirements loop‟. The Health study, on the other hand, iterated several times through all elements of the model to conclude at the end of the „design loop‟. Case Study 1 – Defence Main Output: 2 Strategic Architecture of Capability Requirements Main Enabling Functions: 5 Test & Evaluation of Options for Force Structuring 4 Systems analysis and control 1 User Needs (Why…) Requirements Loop 4 Systems Analysis & Control 2 Capability Requirements (What…) Design Loop Capability Solutions (How…) 5 Validation (Test …) 3 1 User Needs (Why…) Requirements Loop 4 Systems Analysis & Control Case Study 2 – Health Main Output: 3 Capability Options for Government Main Enabling Functions: 4 Enterprise Analysis of Risk, Costs and Benefits 2 Definition of functional requirements for capabilities 2 Capability Requirements (What…) Design Loop Capability Solutions (How…) 5 Validation (Test …) 3 Figure 7-6: Comparison of systems engineering application A Systems Approach to Strategy and Execution in National Security Enterprises – 294 – Chapter 7: New Systems Engineering Model for Strategy & Execution The Defence case study focussed on defining the „what‟ in order to bridge the „gap in explanation‟ (after Baker, 2000) between the strategic policy that defines Government needs across a range of contingencies and the Defence Capability Plan that defines the capability investments Government will make over the following ten years to achieve its needs. To this end, the designed strategy formation process remains an open system of enquiry. The process enables any perspective to be taken on the Defence needs (the „why‟) and/or the Defence capability solutions (the „how‟), providing each can be expressed in a form that allows it to be used as an input to the system of enquiry. This enables Defence and its national security stakeholders to challenge all assumptions in strategic policy and develop new contingencies that Australia might confront. It enables them also to challenge conventional wisdom in how Defence might adapt and invest to meet new contingencies and design different force structures (within reasonable cost parameters that do not break the bounds of plausibility). It also allows those who hold faithfully to conventional wisdom in both areas to maintain conventional inputs to the system. The key enabling functions in the Defence case study are the „test and evaluation‟ and „systems analysis and control‟ elements of the enquiry. These elements employ a mix of rational, interpretive and adaptive methods to focus on defining what functions are required by Defence, while giving everyone a place to input novel or conventional viewpoints on the „why‟ and the „how‟ and then contest their views with the wider stakeholder community. The end product of the process is a strategic architecture that defines the Government‟s functional requirements for Defence and the minimum and desirable performance parameters that guide Defence performance of each function across the approved range of contingencies. The intended benefit of the strategic architecture is for it to become an essential „blueprint‟ with which to discuss with Government its functional requirements of Defence and, against which all capability development decisions are measured for „fitness-for-purpose‟. A Systems Approach to Strategy and Execution in National Security Enterprises – 295 – Chapter 7: New Systems Engineering Model for Strategy & Execution In the Health case, the principal focus was on defining the „how‟. That is, the design of costed options for Government that could be presented with a clear understanding of the cost-benefit (expressed in relation to the needs – the „why‟) and the risks (expressed in relation to the needs, the functional requirements and the solutions). The key enabling functions in this approach to Case Study 2 were:  the capability analysis required to identify current and future vulnerabilities in the Health system in functional terms, and  the systems analysis and control functions of analyzing costs, benefits and risks. Consequently, significantly less time was spent on defining the „what‟ in the Health study than in the Defence study. In this aspect, the Defence objectives for the study drove a much more detailed application of the systems engineering model, to create a high-level – but detailed – strategic architecture that establishes minimum and desirable boundaries for capability development. The Defence application of the systems engineering model was not so successful in operating through the „design loop‟. The political context of the time – the development of a new Defence White Paper – diminished the value of attempts to design force structure options objectively based on the functional requirements that had been determined in the draft strategic architecture. In the Health case, however, functional requirements were identified through assessing current and prospective vulnerabilities and risks. The identified functions were then employed in the „design loop‟ to ensure the designed solutions mitigated the vulnerabilities, reduced the risk (including the residual risk) and provided costeffective benefits for the Health system. While the designed systems approach to strategy formation in the Health study went through the „requirements loop‟ at a higher level of abstraction than the detailed approach used in Defence, it was sufficient to enable the activities in the „design loop‟ to deliver a costed set of options for Government with an audit trail A Systems Approach to Strategy and Execution in National Security Enterprises – 296 – Chapter 7: New Systems Engineering Model for Strategy & Execution from „needs‟ to „requirements‟ to „solutions‟. Consequently, the prospect that someone might observe a critical „gap in explanation‟ (after Baker, 2000) in the Health study had lower probability of occurrence. Furthermore, should such a gap in explanation arise, it might have lesser impact on the Health system because the processes of validation and systems analysis and control provided the information to establish a defensible position for the decisions taken in forming the options for Government. In retrospect, and from an ideal perspective, the application of the systems engineering model would have been improved in both cases:  In the case of the Health study, the client had allowed more resources and effort to be applied to adopt those aspects of the Defence case study which involved: – testing the options for Government, to validate the options and evaluate the residual risks to the Government, to the Health system and to the people in adopting the recommended options; and, – refining the capability requirements in functional terms to create a strategic architecture to guide Health future strategy formation and dayto-day decision making on health capabilities.  In the case of the Defence study, the prevailing political processes involved in writing the White Paper had not forestalled the critical design and analysis processes. Had the Defence environment enabled a similar application of the systems engineering model as applied in the Health case study, the Defence study would have been improved through: – designing capability options for Government based on the functional requirements identified through the „requirements loop‟, – integrating risk assessments in each scenario, and across all scenarios, to identify treatment priorities to guide the design process and the analysis of options for Government for the inherent residual risks they incur, and A Systems Approach to Strategy and Execution in National Security Enterprises – 297 – Chapter 7: New Systems Engineering Model for Strategy & Execution – integrating a rational (as opposed to interpretive) cost benefit analysis in the presentation of options to Government relative to each scenario and, in combination, to inform the extent to which the full set of Government objectives were being addressed. In combination, these studies illustrate the practical difficulties of achieving evidence-based policymaking (EBP) in Government. [EBP] advocates a more rational, rigorous and systematic approach. The pursuit of EBP is based on the premise that policy decisions should be better informed by available evidence and should include rational analysis. This is because policy which is based on systematic evidence is seen to produce better outcomes. The approach has also come to incorporate evidence-based practices. (Sutcliffe and Court, 2005) While the political and cultural dimensions of the studied environments espouse a theory of evidence-based policymaking (EBP) on the one hand, the resources applied by the policy makers to implement EBP do not allow an appropriate level of evidence to be acquired in one or more elements of the systems approach. Consequently, the challenge of replacing ideologically-driven decision making with an integrated systems approach that rationally connects strategy to execution will continue to take time. As benefits are demonstrated by application of a systems approach, it will be more likely to acquire appropriate resources. The determination of fit, balance and compromise (after Rechtin, 2000) applies as much in the adaptation of the systems approach for strategy and execution in complex enterprises as it applies to the determination of designed solutions for other complex systems. Taken together, these two case studies also suggest how the systems engineering model can enable a more dynamic strategy formation process to emerge that connects futures assessments, strategic planning, and annual planning with risk management and performance management. Organisations would then be better positioned to see the „whole beast‟ of strategy formation (after Mintzberg, 1998) were they better able to adapt the systems engineering model and the lessons learned from the two case studies to guide the design and implementation of their strategy formation processes. A Systems Approach to Strategy and Execution in National Security Enterprises – 298 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7.4.1 Validation and Repeatability of the Systems Approach to Strategy and Execution A rational, positivist approach to science is most common and with it, the most common view of methodology validation is that an approach is repeatable by other researchers (Neuman, 2000). The modern drive for objectivity has sought to separate the observer from the observedxxxii. However, methodologies that combine interpretive and adaptive or critical systems methods are not readily amenable to validation in a logical, positivist sense. The individual contexts for each application of a multi-method approach influence the choices made about which methods and people are included in the process (Neuman, 2000). The author was inextricably involved in the design, development and implementation of each case study. To observe any element of strategy and understand its properties and effects at any point in time, light had to be „shone‟ on other elements interacting with it (after Heisenberg, 1930). The case studies dealt with interventions to improve social enterprises. Choices of methods were necessarily made relevant to the contexts and the people at the time of conducting the intervention. Yet, underlying the choices, there was an objective reality in the forms of the combined framework of SSM and systems engineering methodologies that governed how these methods operated as a whole. While another study leader operating at a different time and with different contexts will likely select different methods, each study is able to be reproduced independent of the author at a critical level of the broad framework within which interventions for strategy and execution are conducted. It is the broad methodological framework guiding the concurrent application of the SSM and systems engineering methodologies that is able to be replicated independent of the author. 7.5 A New Enterprise Systems Engineering Model as a Pattern for Organising Strategic Management Processes Both case studies used a “top down” strategy formation process that benefitted from a strong systems analysis and control process. Yet, the systems engineering A Systems Approach to Strategy and Execution in National Security Enterprises – 299 – Chapter 7: New Systems Engineering Model for Strategy & Execution model (the „egg‟ diagram) (DSMC, 1999) does not adequately represent the central role of those functions in strategy and execution. A revised model is suggested in Figure 7-7, which incorporates the „why‟, „what‟ and „how‟ of strategy formation with the usual requirements and design loops. In summary, while the suggested change in presentation is minimal, it illustrates more meaningfully for strategy formation the critical roles of validating the strategy and the analysis control processes which refine the judgements on value, benefits, costs and risks across the spectrum of needs, requirements and solutions. The other key feature is the background strategic context which remains a dynamic input to all of the process elements. WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Strategic Context Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy Process Assess Value –Benefit – Cost – Risks in Strategy Content Figure 7-7: Revised systems engineering model for strategy formation Both case studies incorporated judgements about the performance of current capabilities to meet changing needs and requirements and the capability „gaps‟ arising between performance demands and the enterprise‟s ability to supply. The Defence case study, benefitted from a new process Defence was developing to produce Capability Assessment Reports (CARs) which established a capability baseline. In the Health study, the study team conducted a baseline analysis of the health system which involved assessing current capabilities, capacities and performance and identifying potential vulnerabilities in the system. In both cases, the assessments of current capabilities fed forward into an analysis and control process to deliver a series of options, decisions and actions to improve the delivered capabilities. This process is illustrated in Figure 7-8, which includes elements for performance management and for testing operational capabilities. A Systems Approach to Strategy and Execution in National Security Enterprises – 300 – Chapter 7: New Systems Engineering Model for Strategy & Execution Their inclusion in this illustration is no indication that both functions were performed all of the time in all of the organisations under review. SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Operational Process Assess Value –Benefit – Cost – Risks in Operational Actions Operational Benefits Operational Risks Operational Environment TEST Operational Capability Determine Action Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability Figure 7-8: Representative model for operational capability management In many ways, both organisations operated these management processes in a manner that is consistent with Argyris‟ single learning loop (Argyris, 1977, 1991). That is to say, a stimulus in the operational environment drives an organisational response in a single loop that corrects actions to ensure stated objectives are achieved. In the Defence and military context, this often involves step-wise processes of observation, orientation, decision and action (OODA)xxxiii. As noted in both case studies, rapid changes in the operational environment frequently cause senior executives to pass through a single loop of OODA as each issue arises. And, in view of the multiple urgent issues arising in the operational context, busy executives were found not having time to undertake „double-loop‟ learning that challenges underlying assumptions, beliefs and values and transforms behaviour (Argyris, 1993). During both case studies, it was frequently illustrated how the step-wise processes of stimulus and action drove agendas as the „urgent‟ was frequently found to outweigh the „important‟ in prioritising executives‟ time. Consequently, the conventional step-wise paradigm of strategy followed by execution was predominant in both of the case study organisations, as illustrated in Figure 7-9, which presents our revised models from Figure 7-7 and Figure 7-8 in a conventional order of business. A Systems Approach to Strategy and Execution in National Security Enterprises – 301 – Chapter 7: New Systems Engineering Model for Strategy & Execution WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Strategy Strategic Context Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy Process Assess Value –Benefit – Cost – Risks in Strategy Content followed by ... Operational Environment SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Operational Process Assess Value –Benefit – Cost – Risks in Operational Actions Operational Benefits Operational Risks Execution TEST Operational Capability Determine Action Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability Figure 7-9: Revised models in conventional pose of strategy followed by execution Neither of the systems approaches employed in each case study actually reflected this „duality‟, however, for two reasons. Firstly, the strategic context and the operational environment were largely indistinguishable. Both studies began with an assessment of the effects that might arise in either or both of the strategic context and operational environment. These effects formed the basis for generating scenarios representative of the challenges to be faced by the system now and in the future. In many respects, the operational environment and strategic context are treated as one in the same for the purposes of the systems intervention and analysis. Secondly, the process of considering the strategic and operational issues shifted dynamically between the two blocks of strategy and execution processes. Each study began with the strategic analysis to define the scenarios. It then rapidly shifted to assess the baseline of current capability in each organisation which dynamically informed ongoing assessments of the strategic risks, the capability requirements, and the current operational risks. In view of the high degree of inter-connectedness between the processes of strategy and execution, it proved impossible to separate them in the systems analysis processes. Other strategists have experienced similar difficulties: ―The simple fact is that strategy and decision making – functions that for decades were causally related and sequenced – are becoming increasingly difficult to A Systems Approach to Strategy and Execution in National Security Enterprises – 302 – Chapter 7: New Systems Engineering Model for Strategy & Execution separate. Whereas strategy once determined the decisions and transactions necessary to advance the company, today operational decisions and transactions can often redefine the company‘s strategy and thus alter the path forward. In this interlinked environment, strategic learning by the management team can be as important as the strategic plan. And adapting the strategy is as crucial as the initial approach.‖ (Demos et al, 2001) Consequently, the separate models for strategy and execution processes (as shown in Figure 7-9) are concatenated to deliver an integrated strategy-to-action process model operating in a dynamic context for strategy formation and operations that is more representative of the actual approaches undertaken in each case study. The new systems engineering model for dynamic strategy-toaction processes is presented in Figure 7-10. WHY WHAT Require -ments Loop Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Strategic Context & Operational Environment Identify User Needs Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability Figure 7-10: New systems engineering model for strategy-to-action The value of this model lies in its enabling a capability for “double-loop” learning (after Argyris, 1977, 1991, 1993). It embodies an inclusive process of test and evaluation – for strategies being formulated and for extant capabilities – that promotes good communication to “unblock” learning (after Argyris, 1994). It has, at its core, the cognitive functions of systems analysis and control to achieve an appropriate fits, balance and compromise in the strategy-to-action processes (after Rechtin, 2000) and assess value, benefits, costs and risks in the strategy-toaction content. A Systems Approach to Strategy and Execution in National Security Enterprises – 303 – Chapter 7: New Systems Engineering Model for Strategy & Execution It also supports the perspective on systems thinking and systems practice that it is not so important where you start, but that you start (Checkland, 1981). As long as your processes fit within a systems methodology, it does not matter in the long term where one begins providing the interventions migrate to address all essential elements of the model in a systemic manner. Traditional approaches of „Ready – aim – fire – ready – aim – fire‟ might be preferred however, if a direct call to „fire‟ initiates not only that action but also initiates a sequence of actions „Fire – ready – aim – fire –ready –aim – fire…”, the immediate action falls into a systemic pattern of activity. In practice, that means strategic analysts using the model can find their place within the model that best aligns with where the problem is first defined by the customer and then flow activities through other elements of the model. In this way, the pattern of relationships between the process elements will determine the essential characteristics of the system-of-systems interventions and will ensure the outputs of the process (such as recommendations addressing the defined problem) are founded in a holistic, enterprise-wide perspective. Thus, it does not matter whether the defined problem to be addressed is initiated from:  Top-down seeking, for example: Strategic Context & Operational Environment WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy – Futures planning to identify enterprise needs Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks – Mission analysis to define capability requirements TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability – Design of capability options and capability solutions Figure 7-11: Starting „top-down‟ – Testing strategy in terms of assuring the sustainability of the business A Systems Approach to Strategy and Execution in National Security Enterprises – 304 – Chapter 7: New Systems Engineering Model for Strategy & Execution Strategic Context & Operational Environment  Bottom-up seeking, for example: – WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy an assessment of the vulnerabilities and challenges arising in the operating current capabilities, Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability Figure 7-12: Starting „bottom-up‟ – Improved management of current operations, maintenance, supply chains, customer relationships etc – Performance management of the enterprise as an integral part of operational and strategic planning – Crisis management, and testing an organisation‟s ability to respond to and recover from serious and unusual emergencies Strategic Context & Operational Environment  Middle-out seeking, for example: – WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Analysis of value for money, return on investment and/or balance of investment Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability – – – Analysis of cost benefit Organisational reviews Operational Capability Figure 7-13: Starting „middle-out‟ Capability analysis – whether at the enterprise, program or project level to determine the fit and balance of current capabilities to meet current and/or prospective needs – Risk assessment of the current and/or prospective organisation and its capabilities to address a range of current or prospective challenges – Analysis, monitoring and control of the systems interventions to adapt to the situational complexity, and A Systems Approach to Strategy and Execution in National Security Enterprises – 305 – Chapter 7: New Systems Engineering Model for Strategy & Execution – Management of cognitive complexity to ensure effective understanding of a problem and the effectiveness of a systems intervention and the solution it derives. Wherever a start is made, the model usefully guides strategic analyst to identify connections to other parts of the model. For example, to connect strategy formation processes with current operational issues, paths are available through the testing of strategy and/or testing current capabilities dynamically to „learn their way forward‟ and understand the full spectrum of risks – strategic risks, mission risks, capability risks, and operational risks that inform decision making. In another example, conducting a „bottom-up‟ analysis of the vulnerabilities in the current operational capability leads to a risk analysis of those vulnerabilities, which offers the opportunity to connect the vulnerability analysis with the needs, missions and capabilities at a strategy level. In this example, „bottom-up‟ initiation offers the opportunity to impact strategy formation directly. Guided by the model, strategic analysts are better able to design more comprehensive systems interventions that address „wicked‟ or „messy‟ problems at the enterprise level with results that are both systemically desirable and culturally feasible (after Checkland, 1981). If, however, strategic analysts find themselves limited by their customer‟s demands to “just answer that question”, the analyst is able to conduct their analysis and use the context of the new systems engineering model for strategy-to-action to identify the residual risks that emerge from taking a limited perspective and make recommendations on what further intervention(s) may be required to mitigate the risk. The model thus enables the strategic analyst to design and implement a series of systems interventions from any starting point and to move forward to achieve a multi-methodological approach that ultimately connects strategy to action and manages the connections dynamically as an ongoing process. The model may also illuminate the generic core capabilities required to build an integrated strategy and execution capability within an organisation. A Systems Approach to Strategy and Execution in National Security Enterprises – 306 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7.6 Identifying the Core Strategic Management Capabilities It is one thing to engage specialist advisers to conduct studies such as described in the two case studies, yet it is quite a different matter to build a capability for strategy and execution and to institutionalise that capability to continue the design of, and manage, the strategy-to-action process. The question arises though, as to whether organisations have all the component capabilities and processes required for organisations to develop an integrated strategy and execution capability. The key component capabilities are readily identified in relation to the new systems engineering model for strategy-to-action. Scenario based Planning Requirements Analysis Organisational design & integration Strategy formation Leadership WHY Strategic Context & Operational Environment Intelligence (Threats & Opportunities) WHAT Require -ments Loop Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Identify User Needs Strategic Simulation & Gaming Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy Adaptive Risk Management SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks TEST Operational Capability Innovation & Experimentation Knowledge Management Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Capability Analysis & Capacity Modelling Operational Capability Communication (Internal & External) Decision Support Systems Change Management Performance Management Vulnerability Analysis Figure 7-14: Principal capability elements needed to implement new systems model The main elements displayed in Figure 7-14 are not mutually exclusive to each other however each provides a „centre of expertise‟ essential in developing and sustaining a strategy-to-action capability:  Intelligence capability, skilled in assessing the strategic and operational environment and identifying potential threats and opportunities and in designing a range of „contingencies‟ or scenarios that form the planning base and are representative of the dynamic strategic and operational context. A Systems Approach to Strategy and Execution in National Security Enterprises – 307 – Chapter 7: New Systems Engineering Model for Strategy & Execution  Strategy capability, skilled in systems approaches to requirements analysis and organisational (i.e. capability) design at the enterprise level that enable strategies to be formulated.  Systems analysis and control capability, skilled in risk management, costbenefit analysis and configuration control; and, competent in identifying and integrating appropriate forms of analysis, usually grouped as: – Operations analysis capabilities, where people are skilled in a wide variety of traditional mechanisms for capability analysis, capacity modeling and vulnerability analysis, operations modeling and simulation, and „hard‟ systems engineering, and – Systems thinking capabilities, where people are skilled in approaches to manage cognitive complexity (using SSM or other approaches) and design manage and control systems interventions able to address the situational complexity of virtual enterprises in functional and performance terms.  Experimentation capability, that enables innovation through the spiral development of new ideas, testing them by experimentation into new ventures (or new capability demonstrators) and then into new forms of business (or new capability outputs). As Hamel notes: “you don‟t get a terrific new business without hundreds of dumb ideas, failed experiments and aborted ventures.” (Hamel, 2000)  Performance management capability, skilled in connecting objectives with measures, initiatives and targets that consistently drive behaviour day-to-day appropriate to achieving consistency and coherence at an enterprise level.  Knowledge management capability, that connects people (the holders of tacit knowledge) and shares the „know how‟ of the individuals to help the organization address the problems that are „wicked‟ or „messy‟ as in the two case studies. It requires agreement first to be reached on understanding the problem itself (Denning, 1999) and so contribute to managing the cognitive A Systems Approach to Strategy and Execution in National Security Enterprises – 308 – Chapter 7: New Systems Engineering Model for Strategy & Execution complexity before addressing the situational complexity (after Warfield, 1999). IT-based decision support systems, fulfil the other 20% of the knowledge management equation. IT is only “a relatively small part of the story… it‟s like saying blood is only 8% of the body… you‟ve got to have it, but it‟s not the main thing.” (Denning, 1999)  Leadership, to ensure change is driven from the top – involving high capacity for communication at all levels and succession planning in critical strategy and operations appointments.  Communications, to ensure messages are managed so that perceptions (based on the recipient of the messages) are also managed. A critical element of a communications capability involves the processes for change management. This is the combination of leadership and communications that sustains a dynamism for change from which the organisation is able to develop „agility‟ as an emergent property – that only comes from strategy-to-action capabilities being part of the “living fiber of the organization” (after Demos et al, 2001).  Strategy formation, the skilful practice of conveying not only the elements of the „why‟, the „what‟ and the „how‟ but far more importantly, the connections between them – the combination of judgement, experience and rationality that presents a story to guide the whole of the enterprise in its actions. Listing these capability elements in this way does not imply that they should all be stand-alone organisational elements. However, these elements are usually found to be physically instantiated to a greater or lesser degree across an organisation. In fact, the organisations that were the subject of the two case studies already had, in many cases, much of the capability required to address the different elements in the new systems engineering model physically instantiated in their organisations. What they appeared to need most were the systems thinking capabilities required to design and implement a systemic strategy and execution capability. A Systems Approach to Strategy and Execution in National Security Enterprises – 309 – Chapter 7: New Systems Engineering Model for Strategy & Execution 7.7 Testing the Wider Exploitability of the Generic New Systems Engineering Model for Strategy and Execution The revised systems engineering model for strategy and execution has been used by the author during a number of projects with a top tier consulting firm33. To illustrate the wider exploitability of the model in different enterprises and in different functional domains, three examples are presented as mini case studies:  Terrorism-related enterprise-level review for a private sector owner / operator of critical infrastructure,  Redesign of a strategic management system for a state department of health, and  Designing a development program for young executives for a Canberra-based „think tank‟. The short case studies present:  an overview of the situation in each case, a definition of the problem facing the client group, a description of the application of a revised systems engineering model for strategy and execution in guiding the course of action, and    a summary of the outcome achieved. Case Study 3: Terrorism-related Enterprise-level Review for a Private Sector Owner / Operator of Critical Infrastructure 7.7.1 Situation. In 2003, the Government of the State of Victoria passed into law the Counter-terrorism (Community Protection) Act. This placed an obligation on the owners / operators of declared essential services to conduct a security risk assessment and to develop a plan to manage the risks. They are also required to conduct annual audits of their security risk management planning and annual training in concert with the Commissioner of Police. 33 From 2001-2007 with Booz Allen Hamilton, now known as Booz & Co A Systems Approach to Strategy and Execution in National Security Enterprises – 310 – Chapter 7: New Systems Engineering Model for Strategy & Execution Problem. The legislation was a new requirement for the firms declared under the Act as there was no precedence within Australia to guide their actions. While it is interesting the Government did not declare any of its critical infrastructures as essential services under the Act, the declared commercial providers faced the challenge of meeting the new security requirements in a manner that balances security with their needs for commercial viability. A declared owner / operator of critical infrastructure engaged Booz Allen Hamiltonxxxiv to guide their approach to meeting their obligations under the Act. Application of the new systems engineering model. The author led the team in 2005-06 to conduct the first security risk assessment and determine the strategy and plan for addressing the risks. The approach was guided by the generic systems engineering model for strategic planning to ensure the strategy and execution remained connected through an integrated nine-element process, as illustrated in Figure 7-15. Leadership Communication (Internal & External) 1 Determine critical strategic / earnings drivers 7 Define requirements for business continuity WHAT 8 Design mitigation actions 9 Develop risk management strategy / plan 2 Strategic Context & Operational Environment Review intelligence threat assessment WHY Identify User Needs Require -ments Loop HOW Design Loop Design Capability Solutions Strategy Formation Formulate Strategy Define Capability Requirements Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks 6 TEST Strategy 3 Develop strategic & operational scenarios SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks Assess risks and risk treatment priorities TEST Operational Capability 5 Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Validate vulnerability analysis Operational Capability 4 Conduct vulnerability analysis Figure 7-15: Initial application in case study 3 (2005-06) The nine elements in the process cycled from the strategic to operational views to determine the key vulnerabilities and via a validation process and risk A Systems Approach to Strategy and Execution in National Security Enterprises – 311 – Chapter 7: New Systems Engineering Model for Strategy & Execution assessment back to the domain where risk management strategies were defined. It could be said that the process fell short in its application in the first year as the strategies were not tested, nor were the residual risks defined, at the time the engagement halted. However, in 2006, the systems process continued in the absence of the Booz Allen team as:  the risk management strategy was subjected to an external review by the Victorian Department of Infrastructure to test its compliance with the Act,  the firm made a range of decisions to adopt certain risk mitigation strategies and adjust other recommendations in the strategy / plan; and,  the firm implemented selected risk strategies to operate its business with a higher level of security and resilience. Later in 2006, the author led the conduct of the first audit of the client firm‟s progress in improving their security risk profile. A nine-element process was again guided by the new systems engineering model for integrated strategic planning and execution, illustrated in Figure 7-16, noting the first three elements had already been conducted in the interval between engagements. The flow of activities in Figure 7-15 and Figure 7-16 are shown as being linear, however, the flow of the systems intervention in both cases sustained a dynamic interaction between the process elements, more in keeping with the new systems engineering model than the nine element overlays reflect. A Systems Approach to Strategy and Execution in National Security Enterprises – 312 – Chapter 7: New Systems Engineering Model for Strategy & Execution Leadership Communication (Internal & External) 7 Refine requirements for business continuity WHAT 8 Refine risk mitigation actions 9 Refine risk management plan WHY HOW Design Loop Design Capability Solutions Strategy Formation Formulate Strategy Strategic Context & Operational Environment Identify User Needs Require -ments Loop Define Capability Requirements 1 External review of risk mgt plan Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks 6 TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks Assess risks and risk treatment priorities 2 Implement mitigation actions TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability 3 Operate improved capabilities 4 Conduct annual audit 5 Conduct annual exercise Figure 7-16: Follow-on application in case study 3 (2006-07) Outcome. The client integrates its security risk management within its normal strategy and operations activities, enabling them to improve their resilience and maintain commercial viability. Their critical success factors are leadership and communications. Risk management is driven from the CEO and the Board within a business continuity framework that integrates the new security risk management requirements on the firm. The firm also integrates security risk training throughout its induction, management and leadership programs. A measure of success came through the external assessment of the risk process and the risk management plan by the Department of Infrastructure which regarded the client as setting the „benchmark of best practice‟xxxv at the time across the owners/operators declared under the Act in Victoria. The value of new systems engineering model in the two interventions outlined in this case study was its capacity to:  act as a methodology to guide the development and integration of process elements for a specific systems intervention, and A Systems Approach to Strategy and Execution in National Security Enterprises – 313 – Chapter 7: New Systems Engineering Model for Strategy & Execution  enable an otherwise linear review and assessment process to map onto integrated processes for managing interventions in a dynamic business and strategic environment and deliver meaningful outcomes. 7.7.2 Case Study 4: Redesign of a Strategy and Execution System for a State Department of Health Situation. The gap between demand and supply in health services is compounded by high costs of service delivery and the availability of critical expertise, technology and infrastructure. While these global conditions impact all health systems, a major state health system in Australia sought to redesign its strategic and business planning processes to help improve health outcomes. Problem. Four different strands of planning were largely running with no direct connection between them. Futures planning looked out 15-20 years at new health service delivery models while strategic planning examined the 3-5 year timeframe. The annual business planning was managed at two levels – one being cabinet-in-confidence that could not be shared beyond a handful of people in the organisation – and the annual budgeting processes. The Booz Allen teamxxxvi was contracted to review the existing planning processes against current best practice and then design a strategic management framework that defined the planning components and aligned planning cycles to connect strategic planning, business planning, and budgeting with performance management and integrate risk management throughout. Application of the new systems engineering model. The new model was tailormade for the requirement in its generic form. The major issue however was that culturally, the senior decision makers within the health system demanded utmost simplicity and a linear model. Therefore the generic systems model was used to help define a 7-phase a linear model as shown in Figure 7-17. A Systems Approach to Strategy and Execution in National Security Enterprises – 314 – Chapter 7: New Systems Engineering Model for Strategy & Execution WHY WHAT Require -ments Loop Define Capability Requirements Design Loop HOW Design Capability Solutions Strategy Formation Formulate Strategy Strategic Context & Operational Environment Identify User Needs Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks TEST Operational Capability Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Operational Capability Phase 1 Strategic Assessment Phase 2 Executive Guidance Phase 3a Generate Strategy Phase 3b Test and Revise the Strategy Phase 4 Develop Operational Plans Phase 5 Align Budget Phase 6 Execute Phase 7 Review Performance Closed Loop Integrative Analysis: Assess Value, Costs and Risks Integrative Analysis: Assess Value, Costs and Risks FOCUS Gather knowledge to inform strategy and operational planning Leaders set the design principles and confirm stakeholder needs Health sets strategic directions … … and validates directions against stakeholder needs Business units plan how to get there Balances resources to match priorities Day-to-day health delivery Monitor and control performance WHY WHAT HOW DELIVERING RESULTS Figure 7-17: Relationship between integrated and linear models Of particular note, the systems analysis and control processes that incorporate risk and performance management were reflected as a band of activities that „shadows‟ all other components. The use of the chevrons in the model suggests „forward‟ movement from one phase of activity to the next yet it does show so readily the feedback in the systems analysis functions. This deficiency in the diagram is overcome with the textual clarifications under each major group of activities, as indicated in Figure 7-18. For example, assessing risk at the strategy level incorporates inputs from business planning and execution so that mitigation action for „lower level‟ risks might be taken by re-shaping the strategy. Likewise, concurrent processes of systems analysis and control are ongoing in each of the seven phases to focus decision making on value, cost and risk. A Systems Approach to Strategy and Execution in National Security Enterprises – 315 – Chapter 7: New Systems Engineering Model for Strategy & Execution Phase 11 Phase Strategic Strategic Assessment Assessment Phase 22 Phase Executive Executive Guidance Guidance Phase 3a Phase 3a Generate Generate Strategy Strategy Phase 3b Phase 3b Test and Test and Revise the Revise the Strategy Strategy Phase 44 Phase Develop Develop Operational Operational Plans Plans Phase 55 Phase Align Align Budget Budget Phase 66 Phase Execute Execute Phase 77 Phase Review Review Performance Performance Closed Closed Loop Loop Integrative Analysis :::Value, Costs and Risks Integrative Analysis :Value, Costs and Risks Integrative Analysis Value, Costs and Risks Integrative Analysis Value, Costs and Risks FOCUS Gather FOCUS Gather knowledge to knowledge to inform strategy inform strategy and operational and operational planning planning Leaders set the Leaders set the design principles design principles and confirm and confirm stakeholder stakeholder needs needs Health sets Health sets strategic strategic directions … directions … … and validates … and validates directions against directions against stakeholder stakeholder needs needs Business units Business units plan how to get plan how to get there there Balances Balances resources to resources to match priorities match priorities Day-to-day Day-to-day health delivery health delivery Monitor and Monitor and control control performance performance WHY WHY Assess Future Health Assess Future Health •Describe future environment •Describe future environment •Describe future challenges •Describe future challenges •Develop future concepts for health •Develop future concepts for health care delivery care delivery Guide the strategic management Guide the strategic management process process • •Assess value, costs, risks across the Assess value, costs, risks across the Health system for the longer term Health system for the longer term sustainability of the Health system sustainability of the Health system • •Confirm future needs of stakeholder Confirm future needs of stakeholder communities communities • •Define principles governing strategic Define principles governing strategic management products, processes and management products, processes and execution execution WHAT WHAT Generate valid strategy guidance Generate valid strategy guidance • •Define the Programs to be delivered Define the Programs to be delivered • •Define the workforce required Define the workforce required • •Define the measures of success / / Define the measures of success measures of effectiveness measures of effectiveness • •Define the information needs for Define the information needs for effective planning, management and effective planning, management and health services delivery health services delivery • •Define the assets, infrastructure and Define the assets, infrastructure and technology needs technology needs • •Define the improvements needed to Define the improvements needed to optimise the Health system optimise the Health system • •Plan actions and achievements for Plan actions and achievements for engagement with stakeholder engagement with stakeholder communities communities • •Identify the future resource Identify the future resource requirements requirements • •Guides research, teaching and Guides research, teaching and education education • •Guides interagency / /inter-sectoral Guides interagency inter-sectoral relationships relationships • •Assesses risk & balances investment Assesses risk & balances investment HOW HOW Guides delivery of care and Guides delivery of care and allocation of resources in each allocation of resources in each business unit business unit • •Defines the burden of disease Defines the burden of disease • •Describes the key challenges in each Describes the key challenges in each area area • •Defines the priorities and programs Defines the priorities and programs for the delivery of care : :acute care, for the delivery of care acute care, population health, primary care and population health, primary care and community services community services • •Defines the performance measures Defines the performance measures for the delivery of care : :acute care, for the delivery of care acute care, population health, primary care and population health, primary care and community services community services • •Define the clinical support services Define the clinical support services priorities priorities • •Assesses risk and sets mitigation Assesses risk and sets mitigation plans plans • •Defines budget and budget forecast Defines budget and budget forecast DELIVERING RESULTS DELIVERING RESULTS Guides the program execution Guides the program execution across the health system across the health system • •Aligns people with the objectives, Aligns people with the objectives, initiatives & targets and resources initiatives & targets and resources • •Sets individual enterprise-wide Sets individual enterprise-wide accountabilities accountabilities • •Manages organisational & individual Manages organisational & individual performance in alignment with performance in alignment with strategic directions strategic directions • •Assesses & reports current Assesses & reports current performance performance • •Assess risks / /Set remedial action Assess risks Set remedial action • •Manages the actions and Manages the actions and development of the people in NSW development of the people in NSW Health in current year & med-term Health in current year & med-term Figure 7-18: Systems components embedded in „linear‟ model Outcome. The health system‟s 40 top executives agreed the systems-based strategy and execution framework would be used to guide their future planning activities at the Departmental level and at the health service delivery level across the State. While the new systems engineering model for strategic planning did not feature in the presentations, it proved to be a useful „pattern‟ in designing the new strategic management framework by guiding the definition and organisation of the strategy, planning, execution and management processes. 7.7.3 Case Study 5: Designing a Development Program for Young Executives Situation. Delivering high performance and continuously improving on it through the systemic interplay of strategy formation and execution are key roles that challenge national security executives. In fact, many executives wrestle with improving the ability of their organisations to understand, and react to, impending challenges that may either revolutionise their business or threaten their very survival (Hamel, 2000). Problem. A national security strategy „think tank‟ proposed to design and deliver a seminar series for young executives. The aim of the series is to give A Systems Approach to Strategy and Execution in National Security Enterprises – 316 – Chapter 7: New Systems Engineering Model for Strategy & Execution them exposure to the theory and practice behind the issues involved managing national security enterprises, such as the Department of Defence or the Department of Foreign Affairs. Application of the new systems engineering model. The author offered the new systems engineering model to frame the course content (see Figure 7-19). Strategy Options for 2020 Strategy Formation Formulate Strategy Systems Thinking & Systems Approaches to Strategy Leadership Strategic Context & Operational Environment Fundamentals of Air & Maritime Strategy Fundamentals of Land, Revolutionary & Terrorist Strategy WHY Identify User Needs Require -ments Loop WHAT Define Capability Requirements Design Loop HOW Design Capability Solutions Strategic Strategic Value Risks Mission Benefits Mission Risks Capability Cost Capability Risks TEST Strategy SYSTEMS ANALYSIS & CONTROL PROCESS Achieve Fit, Balance & Compromise in Strategy-to-Action Process Assess Value –Benefit – Cost – Risks in Strategy-to-Action Content Operational Benefits Operational Risks Systems Analysis TEST Operational Capability Combined Military / Police Operations Decide Action Taken Delivered Operational Capability Performance Management Monitor & Review Operational Capability Adaptive Risk Management Operational Capability Communication (Networking Skills) Managing Transformational Change Portfolio & Program Management Figure 7-19: Mapping course content to new systems engineering model The proposed course designxxxvii incorporated eleven modules to be delivered one per month in a calendar year. Four modules focus on „strategy content‟ to provide a rich examination of strategic uncertainty that provides a context for the other seven modules, which address „strategy process‟ (identifiable in Figure 7-19 by the red blocks). While there is much in the systems body of knowledge that itself could fill many more modules (for example, covering test and evaluation), the proposed balance between „strategy content‟ and „strategy process‟ was considered appropriate. It is also worth remembering the words of Van der Heijden: “the less things are predictable, the more attention you have to pay to the strategy process (his emphasis). Uncertainty has the effect of moving the key to success from finding “the optimal strategy” to “the most skilful process” (van der Heijden 1996). A Systems Approach to Strategy and Execution in National Security Enterprises – 317 – Chapter 7: New Systems Engineering Model for Strategy & Execution Outcome. The strategy „think tank‟ incorporated a session on systems thinking for strategic planning into its proposal for Defence. The author was not able to contribute to the delivery of the program in 2007 and to his knowledge, the model was not used in the delivery of the program. However, it remains useful in future education services for young executives and/or senior executives to frame thinking on how national security organisations operate as a „virtual‟ enterprise setting its agenda, its vision and values, how it evaluates performance and compliance, and how it develops leadership through „living its agenda‟ (after de Geus, 1997). 7.8 In Review Short reports of three diverse case studies (addressing a strategic security assessment for a commercial organisation, designing an integrated strategic management framework for a large scale health system, and in designing a professional education program for executives) have shown the potential for value to be realised in different areas of concern in strategy and execution. This is briefly discussed in the context of revisiting Mintzberg. 7.8.1 Mintzberg Revisited – Part 2 This thesis has built on the lessons of two major case studies to synthesise a revised systems engineering model for strategy and execution and then test the utility of the revised model in three different areas of concern. In doing this, the author has taken steps to supplement earlier criticism (chapter 3, section 3.1) of Strategy Safari (Mintzberg et al, 1998) with a new, codified synthesis for an integrated strategy and execution framework. In particular, the new synthesis that has emerged offers advantages to:  the strategy and management field of ideas by coding a general pattern of organizing key strategy and execution processes and aligning the relationships between processes in a way that helps to manage complexity in uncertain strategic and operational environments; A Systems Approach to Strategy and Execution in National Security Enterprises – 318 – Chapter 7: New Systems Engineering Model for Strategy & Execution  the strategy and execution processes by enabling extensive adaptability at the „solution‟ level. Practitioners may extend their choice of techniques, tools and strategy practices from the ten strategy schools that will be best suited to each of the key strategy and execution processes, providing the selection they make is both systemically desirable and culturally feasible for the organisation. In short, the new systems engineering model offers value as a methodology for combining multiple methods for strategy, operational, performance and risk management processes in a manner where each component process is able to contribute to functioning of other processes; and,  strategy and management practitioners in diverse organizations by coding a pattern of organizing their cognitive processes and behavioural actions with a view to doing better with the resources they have available. In revisiting Mintzberg et al, strategy practitioners may not only pick, choose and combine the works of many eminent strategists as “building blocks, or, better still … the ingredients of a stew” (Mintzberg et al, 1998), they now have a codified systems engineering model within which they can combine their „ingredients‟ at an enterprise level and deliver a „fluid process‟ for strategic intervention that merges strategy with execution (Lucier et al, 2002). They may also use the new synthesis to codify their own systems integration of strategy and execution practices and report the results of their syntheses for others to learn of the systemic value, cost-benefits, and risks that may accrue. A Systems Approach to Strategy and Execution in National Security Enterprises – 319 – Chapter 7: New Systems Engineering Model for Strategy & Execution A Systems Approach to Strategy and Execution in National Security Enterprises – 320 – Chapter 8: In Conclusion 8 In Conclusion (after T.S. Eliot) Between the conception And the creation Between the emotion And the response Falls the Shadow Life is very long (T.S. Eliot, The Hollow Men, 1925) 8.1 “Between the Conception and the Creation” At its conception, this work focussed on helping the Australian Department of Defence address the complexity of the problem of developing a transparent and auditable Defence capability strategy and planning framework. And, the author was driven by a professional desire to help the „tribes‟ of Defence to integrate their high-level planning more holistically into the national security context. The systems intervention focussed initially on trialling the application of systems thinking and systems engineering principles to improve the integration of a learning paradigm within the strategy development process (after Hamel, 2000). In its creation, this work has taken a journey beyond Defence as a single area of concern, to explore the application of the theory and practice in the wider strategy contexts of health, transportation and broader national security domains. While the work continues to progress, the thesis at this point in time supports conclusions to be offered in terms of its contribution to the fields of ideas, to methodology design and to the different areas of concern where it has application. Principles from the fields of ideas in systems thinking, systems engineering, complexity theory and management theory have been synthesized to create a theoretical and partially tested framework for developing and maintaining a integrated, systems-based framework for strategy and execution system. The synthesis demonstrated the inseparability of three focal elements of a „living‟ strategy and execution system: A Systems Approach to Strategy and Execution in National Security Enterprises – 321 – Chapter 8: In Conclusion  The integration Soft Systems Methodologies from systems thinking have demonstrated a capacity to help manage cognitive complexity of defining one or more problems and surfacing an appropriate mix of methods (that are systemically desirable and culturally feasible), enabling their conceptualization as a „cognitive process‟ in a strategy and execution system where the selected methods are executable within a systems engineering framework;  The synthesis of a revised systems engineering model for strategy and execution has demonstrated its utility in defining the key processes of strategy and execution and in understanding the set of relations among them. The results have enabled the new systems engineering model to be conceptualized as a definition of a „pattern of organising‟ and integrating a mix of methods for a strategy and execution system.  The use of a macro model using Venn diagrams has been demonstrated to guide the structure of the system of strategy and execution processes in a way that maintains a balance across adaptive, interpretive and rational modes of systems interventions. While simple, the tool helps to guide decisions on the mix of methodologies so that a balance in the mix of methods can be achieved over the long term to achieve requisite variety in the strategy and execution system and so widen the „sweet spot‟ for high performance. Noting, of course, that in the short term irregularities in the mix of expertise, judgement and calculation arise from the flow of people, processes, tools and methodologies through the strategy and execution system. A new methodology for strategy and execution has been created in the form of a revised systems engineering model. It has been tested and shown to add value by:  Providing a „pattern‟ for organizing key processes in strategy and execution and an understanding of the set of relations among them. With this knowledge, the strategic analyst is better able to design, implement, monitor and adjust multiple methodologies / systems interventions into complex A Systems Approach to Strategy and Execution in National Security Enterprises – 322 – Chapter 8: In Conclusion enterprises accessing facts, judgement and expertise across the enterprise to ensure strategy and action remained connected top-down and bottom-up.  Connecting all core strategy and execution processes to risk management processes to ensure the products/outputs of interventions support each other in a manner that guides decision making that is systemically desirable and culturally feasible for the enterprise as a whole. The result for decision makers is a greatly improved understanding of the extent to which strategic imperatives can be delivered.  Supporting CEOs in determining an appropriate style of leadership to specific groups of issues so that an appropriate mix of rational, adaptive and interpretive modes of intervention is applied. Systems thinking, Soft Systems Methodology and systems engineering have been tested in different areas of concern for strategy and execution. Their application as an integrated framework for strategy and execution has been demonstrated in the areas of:  Capability design in Defence, where a traditional model of systems engineering guided the integration of learning based methods into the existing rational and interpretive strategy and planning framework, and build a strategic functional architecture as a guide to Defence capability decision making;  Capability analysis of a health system as national critical infrastructure, where a traditional model of systems engineering guided the design and implementation of a framework of analysis across government, private and non government organizations – especially identifying the role of risk analysis as a central component of systems analysis and control functions that were critical in developing options for Government;  Preparedness analysis of a commercial transport owner operator of critical infrastructure, where the revised systems engineering model for strategy and execution guided the design and implementation of different systems A Systems Approach to Strategy and Execution in National Security Enterprises – 323 – Chapter 8: In Conclusion interventions to yield advice for the CEO on measures that balanced security obligations at law with commercial imperatives;  Re-design of strategic planning processes for a large State Government health system, where the new systems engineering model for strategy and execution guided the systems interventions of review and re-design, using a model-test-model approach;  Design of an education program for young executives to acquire, develop and maintain skills that would prepare them for operating and leading a system of strategy and execution processes. In short, the traditional systems engineering model demonstrated significant utility as a methodology in conducting systems interventions in complex environments. Subsequently, the revised systems engineering model for strategy and execution has also demonstrated its value as a methodology for intervention in complex socio-politico-technical areas. The nature of contemporary systems engineering continues to be debated and, most recently, Cook and Ferris (2007) have constructed an argument to revise the established management science view of systems engineering: ―By the 1970s systems engineering had also caught the attention of the management science and systems thinking communities who characterised it as a hard systems approach because it was seen as deriving its underpinning philosophy from the hard sciences, in particular its emphasis on the achievement of objectively stated goals related to the delivery of technical products (Checkland, 1981). … [Cook and Ferris] construct an argument to revise the above established management science view of systems engineering. [They] argue that systems engineering in practice is a meta-methodology that is well-suited to tackling a wide range of systems situations in which technology is likely to form a significant part of the solution.‖ (Cook and Ferris, 2007) While philosophical argument has reached a point of characterising systems engineering as a meta-methodology, the work of this thesis has taken systems engineering through several action research processes to demonstrate the value of systems engineering as a methodology to integrate a mix of methods across the domains of art (qualitative judgement), science (objective calculation) and expertise (tacit knowledge). A Systems Approach to Strategy and Execution in National Security Enterprises – 324 – Chapter 8: In Conclusion While being a more demanding route to high performance than traditional strategy approaches, case studies have shown a systems-engineering approach enables solutions to be designed on an architecture of activities (or functions) that the enterprise is to be capable of; and, it enables those designs to be tested against defined purpose(s) in multiple scenarios. These processes then enable greater alignment of the solution to the functional requirements. In turn, this improves the adaptability of an enterprise to different futures, by which an organisation is able to drive higher performance (WEF, 2000). The concept of aligning around adaptability (WEF, 2000) has been shown to be achievable when systems engineering is included as a critical enabling process in strategy and execution to drive high performance. 8.2 “Between the Emotion and the Response” The emotional change has been telling. My initial belief was that many people needed and wanted help to learn what is important for the organisation in general and for their component in particular. Armed with a better understanding, they might then reduce the amount of nugatory work in their lives and contribute more effectively through personal growth and achievement in their organisation. With that vision I could then hope to see cynicism and fear replaced with optimism and understanding. From the creations that have occurred in this work, I hold strongly to the same vision. But stronger yet is the emotional attachment to the concept of building a „living‟ strategy and execution system within which individuals have greater capacity, and awareness of their capacity, to influence strategy, operations and performance of the system as a whole, by seeing the whole as a set of relations among systems processes. With an integrated framework for strategy and execution, individuals are better able to understand where their contribution fits and how it relates to other processes. As the mix of people and methods change, the constancy of the integrated framework provides a means of achieving alignment around an organisational adaptability to change. A Systems Approach to Strategy and Execution in National Security Enterprises – 325 – Chapter 8: In Conclusion Thereafter, it will come to many (as it does to a few now) to realise that as individuals, we (not nature) create the codes by which we live (Maturana and Varela, 1980). This concept of purposelessness that emerges from Maturana and Varela‟s (1980) essay on autopoiesis (the organisation of the living) has forever changed my view. ―The subordination of the individual to the species cannot be supported. „Biology cannot be used any more to justify the dispensability of the individual for the benefit of the species, society or mankind, under the pretense that its role is to perpetuate them.‟ After that the world is a different place.‖ (Beer, 1980, preface to Maturana and Varela, 1980). Understanding this, we as individuals should suffer no more a crisis of identity within an organisation – we have a means of understanding where we as individuals fit along with the methods we use. As we live within our enterprise of choice, we should see more individuals do more than survive urgent demands to grow to lead initiatives of their design. Their purpose – if any at all – is to create their own identity. In doing so, they will create irregularities that we understand are beneficial for a system of strategy and execution processes to maintain a stable form over the long term. In response to the initial work, Defence recognised the author‟s contribution with a research award in 2000. Defence continues to conduct force options testing to examine capability gaps in the force structure. This is ongoing nine years after its initial trials and eight years since the author left the organisation. In the transport sector, the work for security risk management has been informally recognised as setting the current „gold standard‟ in the State of Victoria under its Counter Terrorism (Community Protection) Act. 8.3 “Falls the „Shadow‟ – Life is Very Long” In the shadows of these responses rest areas of doubt where more work is needed to provide further insight. On the Defence front, the Government has maintained a 3% compound increase in its spending on Defence over the period 2000-2009, there has been sufficient money to make acquisition commitments and little need to determine questions of whether a function is needed or not (after Howard, 1973). A Systems Approach to Strategy and Execution in National Security Enterprises – 326 – Chapter 8: In Conclusion As the time nears (2010-14) when Defence will have to address issues of through life support for its acquisitions, a need for more comprehensive force structure analysis will arise. While an analytical approach outlined in this thesis is available, it has not been tested in full. Instead of resting in the shadows, it should be subjected to further testing and improvement. While the systems analysis process has progressed in Defence since 2001, it is questionable whether it is sufficiently robust. It will need to be adapted and made efficient for the forthcoming demands of assisting Defence in a highly challenging task of knowing not only what capabilities it needs, but also how much of each is enough and at what levels of preparedness each needs to be sustained. In the national security environment, the national strategy is only just emerging. ―The Governments plans for adapting to the broad forces driving change within this environment are not clear. At the same time, …[there are] concerns about the passage of information, staff skills and availability, resource allocations and planning systems‖ (Connery, 2007). While the syntheses created in this work have been tested in the Defence, health and transport domains and they appear to work in these adjacent domains, further research is required to test their application at the centre of the national security environment if they are to assist the development of a central system of strategy and execution processes. In the broader context, there has been little testing in the commercial context. However, the greater shadow over its commercial application is the nature of the education system for business, management, science and engineering. While business schools teach systems thinking, this is principally influenced by the work on systems dynamics from the MIT School from Jay Forrester through to Peter Senge. Similarly, systems engineering schools teach the practical approaches to make complex systems work yet rarely teach the practical tools of strategy – which offer many structural „pieces‟ to help connect strategy to action. The author could find no evidence of systems thinking (as a science) and systems engineering (as a technology) being connected with education being delivered through business schools – nor, for the converse. Yet, as the philosophy and A Systems Approach to Strategy and Execution in National Security Enterprises – 327 – Chapter 8: In Conclusion practice of systems engineering merges to deliver demonstrable benefits to the leadership and management of socio-politico-technical systems, the business schools and the systems engineering schools should come out of the shadows to unite in designing and delivering an education system rooted in creating and maintaining „living‟ enterprises. Life may be very long, and there is much to be done. Many organisations and firms, like starving children, may be saved from extinction with better application of systems thinking and systems engineering by creating and maintaining „living‟ strategy and execution systems. While life may be very long, and there is much to be done, time may also be of the essence. We earlier considered the issue of national security agendas expanding to include global security and climate control within their ambit. We recognised “the issue [of climate control] is so multi-disciplinary, there are few true experts in the field, and even fewer who can articulate what the problem might mean to the general public and what we should do about it” (Flannery, 2005). When large security issues are at play, the national and global capacities to find people able to switch dynamically between control decisions on strategy process and substantive decisions on strategy content are extremely limited. Consequently, as strategy task forces are raised to address complex security issues, it is incumbent on leaders to identify people who can lead strategy process as well as those who can contribute to strategy content. It is then incumbent on those process and content leaders to operate symbiotically with neither process nor content dominating. The united disciplines of systems thinking and systems engineering present an integrated framework for national security strategy and execution. They may also assist in orchestrating the mix of methods to find solutions to the world‟s latest and biggest challenge so that life may continue to be very long. A Systems Approach to Strategy and Execution in National Security Enterprises – 328 – Chapter 8: In Conclusion The refrains from Eliot‟s (1925) poem The Hollow Men have been used to introduce and frame this chapter because it captures in far more succinct terms that this thesis could ever aspire to, the essence of the problem. The systemic desirability of change will always be balanced by cultural feasibility (Checkland, 1981) which, in essence, opens strategy and execution to greater influence by individuals (with support of modern technologies) to shape the common good. Thus, the process of systemic intervention in complex enterprises is best summarised by a refrain from Eliot (1925): Here we go round the prickly pear Prickly pear prickly pear Here we go round the prickly pear At five o’clock in the morning. (T.S. Eliot, The Hollow Men, 1925) The author appreciates the opportunity he has had within these pages to offer a view on potential ways ahead for individuals, business, academia and governments to work together on the complex, socio-politico-technical systems that operate globally as part of the many national security enterprises. To close, once again, I must thank the many who have joined me in these endeavours and I invite the reader once again to revisit the acknowledgements I have made to those involved. Richard Hodge A Systems Approach to Strategy and Execution in National Security Enterprises – 329 – Chapter 8: In Conclusion A Systems Approach to Strategy and Execution in National Security Enterprises – 330 – Appendix 1 – Game Book for Testing Force Structure Options Appendix 1 – Game Book for Force Structure Options A Systems Approach to Strategy and Execution in National Security Enterprises – 331 – Appendix 1 – Game Book for Testing Force Structure Options A Systems Approach to Strategy and Execution in National Security Enterprises – 332 – Appendix 1 – Game Book for Testing Force Structure Options Replace these 2 pages with file <Thesis_Hodge_Appendix 1> A Systems Approach to Strategy and Execution in National Security Enterprises – 333 – Appendix 1 – Game Book for Testing Force Structure Options Replace these 2 pages with file <Thesis_Hodge_Appendix 1> A Systems Approach to Strategy and Execution in National Security Enterprises – 334 – Appendix2 – Risk Assessment Model for Case Study 2 Appendix 2 – Risk Assessment Model for Case Study 2 A Systems Approach to Strategy and Execution in National Security Enterprises – 351 – Appendix2 – Risk Assessment Model for Case Study 2 A Systems Approach to Strategy and Execution in National Security Enterprises – 352 – Appendix2 – Risk Assessment Model for Case Study 2 Adapting the Risk Methodology for a Whole-of-Nation Study The discussion in Appendix 2 summarises the changes made to the risk assessment methodology to extend the standardised approach to integrate scenario-based assessments. The team sought also to enable progressive improvement during the study to place risk assessment and risk management as a central systems analysis capability in the Health strategy formation process. Ultimately, this change has been adapted to establish a model for integrating security issues within strategy formation studies and for assisting in the design of enterprises operating at the firm, industry and national levels. The Difficulties Assessing Risk Solely by the Standard Assessments of risk in Australia and New Zealand are frequently required to draw on the Australian/New Zealand Standard on Risk Management (AS/NZ 4360:1999) and this formed the basis for the initial assessments in the pilot study. The process of conducting a risk assessment began once the initial tranche of vulnerabilities was identified. The initial methodology assessed the criticality of the risks arising from the vulnerabilities using the matrix in Figure 9-1 as a guide to combine the likelihood and impact judgements (guided by AS/NZ 4360:1999). Risk Criticality Matrix Catastrophic Risk Impact Severity Critical Bearable Inconsequential Moderate Low Trivial Trivial Most Unlikely Significant Moderate Low Trivial Unlikely Major Significant Moderate Low Occasionally Severe Major Significant Moderate Moderately Severe Severe Major Significant Near Certainty Risk Occurrence Probability Figure 9-1: Risk Criticality Matrix For each and every vulnerability, attempts to address the question: “by not addressing the vulnerability, how much risk is the health system carrying?” the answer was always the same: “it depends”. Difficulties arose in considering both dimensions of the risk criticality judgement. Judging the risk occurrence probability for a single vulnerability was entirely dependent on the scenario and A Systems Approach to Strategy and Execution in National Security Enterprises – 353 – Appendix2 – Risk Assessment Model for Case Study 2 the terrorist threats each of them portrayed. Also, a single vulnerability could, in some scenarios, yield a catastrophic impact while in other scenarios it might have little or no impact. The scenarios and threats used in this and subsequent studies typically portray catastrophic consequence, low probability events, for which the Standard (AS/NZS 4360:1999) was not designed to concentrate upon. Yet, the requirement to conduct the study in a way that is consistent with the Standard yielded difficulties where it provides little or no guidance on integrating multiple perspectives for a single issue, or on refining risk treatment priorities. Integrating Multiple (Scenario-based) Perspectives of a Single Vulnerability The revised methodology retains the initial focus on starting with the identified vulnerabilities and the same focal question of: by not addressing the vulnerability, how much risk is the Health system carrying? Addressing this for each of the vulnerabilities requires an answer to two separate questions:  How likely will the vulnerability have an impact on delivering health services in an emergency? How severe will its impact be on achieving those outcomes?  This approach is consistent with AS/NZS 4360 in that a risk formula takes the form of: Risk = Likelihood x Consequence Where this approach differs from AS/NZS 4360 is that the judgements on each question are formed initially in the context of each of the threat scenarios, to enable summary judgements of likelihood and impact to be made. In making the judgement on likelihood, no value judgement is made of the relative likelihood of the scenarios occurring – that remains (as it should) the province of national intelligence and government policy agencies. The likelihood judgement is based on the question, if this vulnerability did eventuate, what is the likelihood it would have an impact in the scenario? The clear focus is on the chance of a problem arising. In assessing impact in each of the scenarios, a big picture viewpoint is taken of the national consequence for NZ, noting the caution that some scenarios can become extremely complex and consequence/impact can be A Systems Approach to Strategy and Execution in National Security Enterprises – 354 – Appendix2 – Risk Assessment Model for Case Study 2 extra-ordinarily difficult to judge when vulnerabilities and consequences are magnified through them being exploited by terrorists in a coordinated manner (Scott and Cromwell, 2005). In both cases, the critical discussion to have with the „customer‟ / „owner‟ of the enterprise system being assessed is to determine and agree a series of relative weightings to apply across the set of scenarios that form the planning base to serve two purposes. Firstly, the weightings are incorporated (by means of a standard sum-product algorithm) into the summary judgements of likelihood and impact, and secondly, the discussion initiates the integration of interpretive, adaptive and rational interventions and strengthens the strategy formation process. A spreadsheet model (partly illustrated in Figure 9-2Error! Reference source not found.) provides a tool for capturing these judgements and the key points are defined in Table 9-1Error! Reference source not found.. Range Table Likelihood Low Upper 5 N/A 3.5 5 2.5 3.5 1.5 2.5 0 1.5 TO MAINTAIN INTEGRITY OF THE WORKSHEET --ADJUSTMENTS MAY BE MADE IN THE GREY AREAS ONLY INTEGRITY OF THE WORKSHEET ADJUSTMENTS MAY BE MADE IN THE Scenario Short Title Large Vehicle IED Central Computer Control System Cyber Attack Mail Bomb Chemical Agent Release Release Multiple Bomb Attacks Building Siege / Fire Weight Raw Score - Likelihood 0.30 30 9 Near Certainty 0.20 20 4 Moderately 0.10 10 3 Occasionally 0.10 10 2 Unlikely 0.20 20 1 Most Unlikely 0.10 10 1.00 100 E4 Abbrev. NC MOD OCC U MU Score - Impact Severity Severity 9 Catastrophic 3 Severe 2 Bearable 1 Inconsequential A 1 2 3 4 5 6 B Range Table Impact Low Upper Abbrev. 5 N/A CAT 3 5 Sev 2 3 B 0 2 IN F4 Descending Order Severe Major Significant Moderate Low Trivial ILLUSTRATIVE ONLY Serial Issue Vulnerabilities What could go wrong? For sensitivity analysis -- adjust raw score adjust raw score Likelihood Impact Severity E1 Sc1 How likely is it to have an impact in the scenario? have an impact in the scenario? Sc2 Sc3 Sc4 Sc5 Sc6 Value E2 E3 impact be in the scenario? the F1How severe will its impact be inF2scenario? F3 Sc1 Sc2 Sc3 Sc4 Sc5 Sc6 Value Impact So, how critical is the risk? G Likelihood C 1 Deterrence - personnel security personnel security D No robust process to manage a situation where an employee with significant insider manage a situation where an employee with significant insider knowledge of vulnerabilities leaves the organisation with ill will. vulnerabilities leaves the organisation with ill will. 2 4 The current inspection regime for the assets is based more on the need for inspection regime for the assets is based more on the need for maintenance. They are too infrequent to detect likely terrorist precursor activity and are too infrequent to detect likely terrorist precursor activity and they are also not tied to threat levels. tied to threat levels. Extant processes do not currently address the requirement to exercise control (to the not currently address the requirement to exercise control (to the maximum reasonable extent) following an act of terrorism on between the incident extent) following an act of terrorism on between the incident occurring and the police taking over command. police taking over command. Lack of exercising and training in rebuilding information systems, including prioritising and training in rebuilding information systems, including prioritising restoration of sub-systems, for traffic and plant management control sub-systems, for traffic and plant management control 4 9 Risk Criticality LookUpTable Raw Scores SumProd RangeTable Raw Scores SumProd RangeTable 4 2 4 4 3.2 OCC 3 9 3 2 9 9 5.9 CAT Major 2 Detection - surveillance surveillance 1 4 1 1 9 3 3.4 OCC 1 3 1 2 3 3 2.1 B Moderate 3 Response - Operations Operations 9 4 9 9 9 9 8 NC 9 3 3 3 3 9 5.4 CAT Severe 4 Recovery - Training 2 2 3 9 4.9 MOD 2 9 1 1 2 9 3.9 Sev Major 5 et cetera Identify the major function What could go wrong? How likely is it to have an impact in each scenario? How severe will the impact be in each scenario? Identify the risk criticality (Look Up) Figure 9-2: Integration of scenario-based judgements for risk (Illustrative only) A Systems Approach to Strategy and Execution in National Security Enterprises – 355 – Appendix2 – Risk Assessment Model for Case Study 2 Table 9-1: Description of main elements in the risk spreadsheet Item A B C D E List of scenarios Relative weighting of each scenario (from distribution of 100 points across the set) The major organisational function hosting the vulnerability enables a quick look at where biggest risks reside The vulnerability description of what could go wrong – the ‗IF‘ element of an ‗IFTHEN‘ risk statement (Schoening, 2004) E1. Scenario-based assessments using a quantitative rating addressing „How likely will the vulnerability have an impact on delivering health services in an emergency?‟ E2. Sum-product of the scenario-based assessments E3. Sum-product annotated as a qualitative expression E4. Range table to convert sum-product to a qualitative expression, enabling ranges to be adjusted according to the risk ‗thermostat‘ for those involved (Adams, 1995) F F1. Scenario-based assessments using a quantitative rating addressing „How severe will the vulnerability impact on achieving those outcomes?‟ F2. Sum-product of the scenario-based assessments F3. Sum-product annotated as a qualitative expression F4. Range table to convert sum-product to a qualitative expression, enabling ranges to be adjusted according to the risk ‗thermostat‘ for those involved (Adams, 1995) G Qualitative expression of risk guided by the look up table (Figure) using the qualitative expressions at ‗E3‘ and ‗F3‘ as inputs. Summary Description Refining Risk Treatment Priorities The risk treatment prioritisation process developedxxxviii following the pilot study answers two logical questions:  Step 1: Assess the priority of the vulnerabilities and their assessed risks, to answer the question: how important is this particular vulnerability and risk relative to all hazards that impact the delivery of health services? – There is a tendency for risk assessments to encompass hundreds of risks which raises a clear and present danger that the most significant vulnerabilities are lost in the analysis or that lesser issues are given a higher level of attention than they deserve from a wider perspective. – A judgement on relative priority is made using a simple and qualitative high, medium and low priority rating system and is combined with the previous risk criticality judgement. This judgement can vary extensively A Systems Approach to Strategy and Execution in National Security Enterprises – 356 – Appendix2 – Risk Assessment Model for Case Study 2 by scenario for each of the vulnerabilities / risks. The assessment uses the matrix in Figure 9-3 below as a guide. Index of Risk Attention Risk Criticality Trivial Risk Relative Priority Profile H M L Low Moderate Significant Major Severe F G G E F G D E F C D E B C D A B C Figure 9-3: Risk Attention Matrix  Step 2: Assess the mitigation priority of the risks to answer the question: what relative priorities apply to treating these vulnerabilities and their inherent risks? – A judgement to form an implementation indexxxxix is composed from rough order of magnitude assessments of how easy the mitigation action is to complete, its potential cost and its potential to yield wider benefits beyond mitigating the single vulnerability. – The implementation index is combined with the previously formed judgement on risk attention to yield the risk treatment priority. The assessment uses the matrix in Figure 9-4 below as a guide. Risk Treatment Priority Matrix Index of Risk Attention G H Implementation Index M L F E D C B A 7 8 8 6 7 8 5 6 7 4 5 6 3 4 5 2 3 4 1 2 3 Figure 9-4: Risk mitigation priority matrix A spreadsheet model (that is partly illustrated in Figure 9-2) is extended in Figure 9-5 to complete the development of a tool to capture the complete range of judgements involved. The key points are defined in Table 9-2Error! Reference source not found.. A Systems Approach to Strategy and Execution in National Security Enterprises – 357 – Appendix2 – Risk Assessment Model for Case Study 2 TO MAINTAIN INTEGRITY OF THE WORKSHEET - ADJUSTMENTS MAY BE MADE IN THE GREY AREAS ONLY Scenario Short Title Large Vehicle IED Central Computer Control System Cyber Attack Mail Bomb Chemical Agent Release Multiple Bomb Attacks Building Siege / Fire Weight Raw 0.30 30 0.20 20 0.10 10 0.10 10 0.20 20 0.10 10 1.00 100 Abbrev. NC MOD OCC U MU A 1 2 3 4 5 6 B Descending Order Severe Major Significant Moderate Low Trivial Range Table Rel Import Score - Relative Importance Low Upper 9 High 3 Medium 1 Low 5 3 0 N/A 5 3 H4 Abbrev. H M L Descending Order A B C D E F G J5 Score - Ease & Benefit 9 High 3 Moderate 1 Low Score - Cost 9 Low 3 Moderate 1 High Abbrev. H M L Range Table Implementation Index Low Upper 19 N/A 9 19 0 9 J2 Benefit Benefit Descending Order 1 2 3 4 5 6 7 8 Likelihood Vulnerabilities Serial Issue What could go wrong? How likely is it to have an E So, how critical is the How severe risk? will its Impact Severity F G H1 Sc1 Sc2 1 9 Risk Relative Importance How important is risk cf. hazardscape? Sc3 Sc4 Sc5 Sc6 Value H2 3 H3 Relative Import'ce RangeTable M How attentive must we be? I J1 Ease Ease 3 Risk Implementation (ROM Estimate) Cost Cost J3 J4 Value 15 M What priority to treat risk? Summary Estimate K C 1 Deterrence - personnel security 2 Detection - surveillance D No robust process to manage a situation where an employee with significant insider knowledge of vulnerabilities leaves the organisation with ill will. The current inspection regime for the assets is based more on the need for maintenance. They are too infrequent to detect likely terrorist precursor activity and they are also not tied to threat levels. Extant processes do not currently address the requirement to exercise control (to the maximum reasonable extent) following an act of terrorism on between the incident occurring and the police taking over command. Lack of exercising and training in rebuilding information systems, including prioritising restoration of sub-systems, for traffic and plant management control Likelihood Impact Risk Criticality LookUpTable Attention Index LookUpTable Summary RangeTable RangeTable Raw Scores SumProd Raw Scores Sum RangeTable Risk Treatment Priority LookUpTable OCC CAT Major 9 1 3 4 C 9 3 4 OCC B Moderate 1 9 1 3 9 3 4.6 M E 9 3 3 15 M 6 3 Response - Operations NC CAT Severe 9 3 3 3 3 9 5.4 H A 1 3 3 7 L 3 4 Recovery - Training MOD 5 et cetera Sev Major 1 9 1 1 1 9 3.4 M C 9 9 3 21 H 3 ILLUSTRATIVE ONLY Assess the risk criticality for each vulnerability Considering the full range of risks in the ‗hazardscape‘ of each scenario, how important is this one? Identify the risk attention index (Look Up) What is the ROM estimate of ease, cost & benefit to mitigate risk? Identify the risk treatment priority (Look Up) Figure 9-5: Extension of risk assessment to guide risk treatment prioritisation Table 9-2: Description of main elements in the risk spreadsheet Item A-G Summary Description As presented in Figure 9-5Error! Reference source not found. and described in Table 9-2 H H1. Scenario-based assessments using a quantitative rating „Considering the full range of risks in the „hazardscape‟ of each scenario, how important is mitigating this risk to delivering health services successfully?‟ H2. Sum-product of the scenario-based assessments H3. Sum-product annotated as a qualitative expression H4. Range table to convert sum-product to a qualitative expression, enabling ranges to be adjusted to suit the risk ‗thermostat‘ of those involved (Adams, 1995) I J Risk attention index – guided by the look up table (FigureError! Reference source not found.) using the expressions at ‗G‘ and ‗H3‘ as inputs J1. ROM assessments of ease, cost and wider benefit of any mitigation action J2. Scales used for ROM assessments (ease & benefit : High (9) / Medium (3) / Low (1); cost: Low (9) / Medium (3) / Low (1)) J3. Sum of the numeric values of ROM assessments of ease, cost and benefit J4. Sum annotated as a qualitative expression (High / Medium / Low) J5. Range table to convert sum to a qualitative expression, enabling ranges to be adjusted according to the risk ‗thermostat‘ for those involved (Adams, 1995) K Numeric indication of risk treatment priority guided by the look up table (FigureError! Reference source not found.) using the qualitative expressions at ‗I‘ and ‗J4‘ as inputs. A Systems Approach to Strategy and Execution in National Security Enterprises – 358 – Appendix2 – Risk Assessment Model for Case Study 2 Balancing Culture and Complexity within the Risk Model In designing this approach, the author was influenced by three viewpoints: the cultural and behavioural dimensions to risk that argue against attempting to measure it (Adams, 1995), the need nonetheless of coming to a quantitative measure to guide the allocation of limited resources (Helm, 2004b) and the appearance of power laws as “normal” for many complex systems which for all enterprises suggests that “most of the risk it faces should be tied up with relatively infrequent and unpredictable events that alter its environment in a significant way” (Buchanan, 2004). Clearly, Helm‟s (2004b) practical view prevailed in this study as evidenced by the previous discussion. However, the mechanics of the design sought to cater for the perspectives of Adams and Buchanan. Adams‟ risk “thermostat” (Adams, 1995, pp.19-24) illustrates the cultural dimension of understanding and managing risk. It is an interactive phenomenon and each of us individually and collectively in our organisations have different risk tolerances for different events and different tolerances for the same events taking place in different contexts. Adams argues that risk is dynamic and attempts to measure it alter the perspective of the risk …problems of relativity and indeterminacy confront those who seek to pin down risk with objective numbers. Risk is constantly in motion and it moves in response to attempts to measure it. The problems of measuring risk are akin to those of physical measurement in a world where everything is moving at the speed of light, where the act of measurement alters that which is being measured, and where there are as many frames of reference as there are observers.‖ (p.29) To cater for this cultural dimension of risk within the mechanics of the risk model certain critical values can be varied to suit the perspective and risk tolerance of the customer by adjusting one or more of six areas:  the number of scenarios that can be included (enabling extension to integrate the enterprise‟s full set of planning scenarios). A Systems Approach to Strategy and Execution in National Security Enterprises – 359 – Appendix2 – Risk Assessment Model for Case Study 2  the relative weighting of the scenarios, which changes the sum-product values for likelihood and impact judgements and for the attention index, and  the four sets of range values for translating into qualitative expressions used in the look up tables, the sum-product values of likelihood, impact and the attention index and the sum value for the implementation index. As a set, the scope for adjustment allows the customer to integrate risk as a central component of its strategy formation process and to balance – to some degree – the mechanics of the risk model with the levels of risk tolerance of the organisation and its key decision makers. It further supports decision making by enabling sensitivity analysis to be conducted on the effects of different scenario weightings and the effects of different values in the range tables. Buchanan (2004) argues “when interdependence is important, a power-law pattern frequently takes the place of the bell curve” where the “fat tails” of a power law curve imply that “large disruptive events are not only more frequent than intuition might dictate they are also disproportionate in their effect.” Buchanan cites falls in the stock market, distribution of wealth, and large catastrophic losses due to hurricanes and earthquakes as empirical evidence of more accurate estimates of the effects of major discontinuities. As the scenario planning base for this study is designed around potentiallycatastrophic events that quickly escalate from local to regional, national and international events, understanding interdependence risks are critical considerations. Consequently, it is prudent to embed a power law into the risk model (Buchanan, 2004), intuitively inserting a numerical representation of (1, 3, and 9) for the qualitative judgements across in all four streams of assessment – likelihood, impact, attention and implementation judgements. This change had the effect of raising within the model the relative priority of enabling issues and vulnerabilities such as telecommunications for example, for which the power to approve mitigation action often resided within other nonhealth organisations. Or, by way of a second example, leadership and A Systems Approach to Strategy and Execution in National Security Enterprises – 360 – Appendix2 – Risk Assessment Model for Case Study 2 communications which enabled „non-discussible‟ issues within the health system to be surfaced and dealt with. 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A Systems Approach to Strategy and Execution in National Security Enterprises – 373 – References A Systems Approach to Strategy and Execution in National Security Enterprises – 374 – Endnotes Endnotes The application of the chosen experimental approach was not without its detractors in the Defence Science and Technology Organisation which employed many senior scientists imbued with the rationalist paradigm. i Two major studies covered defence strategy and execution and national health preparedness; three minor studies in health strategic planning, transport security and executive development for young security executives. ii Capability Analysis Branch progressively reduced its complement of staff and by end of 2000 had been transferred to DSTO and integrated into its [then] newly formed Theatre Operations Branch (TOB). Subsequently, TOB transformed into Defence Systems Analysis Division which, as of 1 July 2008, became known as Joint Operations Division. iii On timing, Betts 1982 p5, reports “the combat capability of the side achieving surprise changes the ratio (of casualties) in favour of the attacker from 1:1 to 5:1. The additional subjective impact of surprise cannot be quantified, but it can be just as significant.” iv At the time of writing, the author was the Honourable Edward L. (Ted) Warner III, Assistant Secretary of Defense (Strategy, Requirements and Resources) v Figure 2-1 was developed by the author based on an early framework created by AVM Peter Nicholson, then Head of Strategic Policy and Planning Division vi The five participant nations of The Technical Cooperation Program (TTCP) have subsequently set up a collaborative group to research and share methods and tools for capability based planning. vii Drucker is often quoted: “knowledge has become the key economic resource and the dominant – and perhaps even the only – source of competitive advantage”. See: Ruggles and Holthouse “Gaining the Knowledge Advantage”, in: The Knowledge Advantage Ruggles, R. and Holthouse D. (eds) Capstone Publishing 1999, p1 viii ix x See http://www.santafe.edu/ Structure Based School was developed by Warfield, his colleagues and associates based at George Mason University, Institute for Advanced Study in the Integrative Sciences, Fairfax, Virginia, USA One is reminded of the sign that once hung in Einstein‟s office in Princeton: "Not everything that counts can be counted, and not everything that can be counted counts." xi Kelly‟s Personal Construct Theory is reviewed by Midgley (2000) noting an important aspect is Kelly‟s claim that “an individual works to construct his or her reality primarily in terms of activities. Thus, what is of primary importance in the construction of a reality is the alternative paths for action that the individual has taken, or could take in the future. It is the things that are perceived as impacting on decision making for action that become part of reality.” (see Midgley, pp.26-27). xii In Australia‟s case there are two CEO-equivalents in the Department of Defence – the Secretary of the Department and the Chief of the Defence Force who are often referred to as the diarchy. xiii xiv xv These examples should be thought about “as if they were systems” (in the Checkland mould). Einstein, A. to the US Commission of Nuclear Scientists, 24 May 1946, in the context that “the release of atom power has changed everything except our way of thinking…”. What the authors are suggesting is that Defence needs to raise its level of thinking higher, beyond the physical domains of even a complex bomb when considering an even more unpredictable and complex system that is strategic planning. Checkland, P, Systems Thinking, Systems Practice, J. Wylie & Sons Ltd, Chichester, 1993 (Reprinted with corrections from original publication in 1984). See pp 189-191 for a discussion of the differences between „hard‟ and „soft‟ systems thinking, noting especially that „soft‟ systems methodologies “provides a structure for a debate about change which hopefully will be of good quality as a result of the insight captured in root definitions [of problems]”. xvi I have changed Nonaka and Konno‟s use of terms. They talked about tacit knowledge not implicit knowledge. I think it is useful to integrate the thinking of Michael Polyani and Prof Karl-Erik Sveiby into this work. Polyani and Sveiby make the following distinctions: „EXPLICIT knowledge‟ is knowledge that can be expressed categorically. „IMPLICIT knowledge‟ is knowledge that has not been made explicit but could be. „TACIT knowledge‟ can NOT be made explicit – it‟s the “know-how” that individuals possess and use instinctively and intuitively. xvii A Systems Approach to Strategy and Execution in National Security Enterprises – 375 – Endnotes In his professional capacity as a senior analyst with the Defence Science and Technology Organisation (DSTO) based in the [then] Strategic Policy and Planning Division of the Australian Defence Headquarters. xviii The author acknowledges the contributions of the [then] Force Structure Priorities Branch, which implemented the design and offered many constructive suggestions for its improvement. xix Capability Analysis Branch progressively reduced its complement of staff and by end of 2000 had been transferred to DSTO and integrated into its [then] newly formed Theatre Operations Branch (TOB). Subsequently, TOB transformed into Defence Systems Analysis Division which, as of 1 July 2008, became known as Joint Operations Division. xx xxi xxii In his professional capacity with the strategy and technology consulting firm, Booz Allen Hamilton The author acknowledges Les Haines of Booz Allen Hamilton for his leadership of this project and encouragement to instil a systems framework of ideas and a systems methodology within this study. The author also acknowledges the contribution of the Booz Allen team led by Joan Bishop in the United States and her team‟s persistence in applying systems dynamic modelling as one of the „rational‟ interventions in the study. xxiii xxiv xxv Prepared by Les Haines (December, 2003) in the firm‟s proposal to the customer. Diagram prepared by Les Haines of Booz Allen Hamilton These scenarios were developed by the Ministry of Health in consultation with the Booz Allen team to ensure they provided adequate context and information to support all relevant modes of intervention. The study team remains indebted to the work of Dr Nick Wilson and Ms Jane Allison of the Ministry of Health for their medical research and preparation of the scenario descriptions. xxvi Adapted from Maier and Rechtin (2002, p.179) discussion of the goal of scoping, which is to “form a concept of what the system [of intervention] will do, how effectively it will do it, and how it will interact with the outside world. The level of detail required is the level required to gain customer acceptance first of the continued development [in this case, during the pilot study] and ultimately of the built system [in this case, when considering the final outcomes on the NZ Health System].” xxvii Checkland and Scholes, 1999 p.39: „3-Es‟ : efficacy (for „does the means work?‟), efficiency (for „amount of output divided by amount of resources used‟), and effectiveness (for „is T meeting the longer term aim?‟). xxviii Rechtin 1991, p.156, summarises “pairs of competing factors pulling in opposite directions, held together by fit, balance and compromise – the essence of systems architecting”. Similarly, architecting interventions of complex adaptive systems such as a national health system, requires an appropriate fit, balance and compromise to be found between the competing modes of intervention. xxix The author contributed significantly to the costing of the individual initiatives, the packaging of the options for government and to the risk analysis in this work step. Andrew Tessler (Booz Allen Hamilton) conducted the economic analysis (EV and CBR) and contributed with Les Haines (Booz Allen Hamilton) and the author to the qualitative analysis. xxx xxxi xxxii The abbreviated bullet-point description of the methods, as quoted here, was prepared by Les Haines. Heisenberg, W. (1927) Uncertainty Principle, simply put, states that “it is impossible to know both the exact position and the exact velocity of an object at the same time … [and] by learning the position, you have rendered any information you previously had on the velocity useless. In other words, the observer affects the observed.” Reference: http://www.bbc.co.uk/dna/h2g2/A408638 (Last accessed: 14 June 2008). The author does not mean to diminish the importance of the OODA loop, which as Colin Gray describes in Modern Strategy (1999) has wide applicability: “The OODA loop may appear too humble to merit categorization as a grand theory, but that is what it is. It has an elegant simplicity, an extensive domain of applicability, and contains a high quality of insight about strategic essentials, such that its author [COL John Boyd, USAF] well merits honourable mention as an outstanding general theorist of strategy.” xxxiii The author led the Booz Allen team in the assessment of the problem, the design and implementation of the systems-based methodology, and he maintains an ongoing „trusted advisor‟ with the client. xxxiv Our client email reporting the outcome of a meeting with Department of Infrastructure‟s Principal Risk Advisor (dated 10 July 2006) contained the following: “DoI regards the BAH risk assessment methodology to be the benchmark of best practice!” xxxv xxxvi The team was led by Mr Les Haines of Booz Allen. The author led the design components of the study. A Systems Approach to Strategy and Execution in National Security Enterprises – 376 – Endnotes The course structure was designed by Professor Ross Babbage, Executive Director Kokoda Foundation. The use of the new systems engineering model to frame the modules was suggested by the author and agreed by Professor Babbage. The author and Professor Babbage had proposed to deliver the course modules jointly on „Systems Thinking and Systems Approaches to Strategy‟ and „Systems Analysis‟. xxxvii Khoo, B. (1999) The author acknowledges being highly influenced by the work of Beng Khoo during 1999-2000 who as a PhD student at the time from Macquarie University developed similar tables to assist in decision making on risk prioritisation. xxxviii Helm, P. (2004b) The author acknowledges the contribution of Pat Helm (NZ Department of Prime Minister and Cabinet member of the national steering group) during discussions with the author on constructing the „implementation index‟ and reviewing the final composite of the risk methodology. xxxix A Systems Approach to Strategy and Execution in National Security Enterprises – 377 –