This website or its third-party tools use cookies which are necessary to its functioning and required to improve your experience. By clicking the consent button, you agree to allow the site to use, collect and/or store cookies.
Please click the consent button to view this website.
I accept
Deny cookies Go Back

Intelligent Management

Deming and Theory of Constraints for CEOs and Executive Teams for the Age of Complexity. Ess3ntial Critical Chain Project Management

  • Home
  • about us
    • the founders
    • Dr. Domenico Lepore
    • Intelligent Management Success Stories
    • Our Books
    • Clients
    • Expanding Spiral of Positive Systemic Results with Intelligent Management
  • Decalogue Methodology
    • Decalogue Methodology for Whole System Management
      • How to adopt systemic organization management
    • Management Must Evolve Fast – 15 Days to Radically Improve Company Performance
    • 10 Steps for Transformation
    • Systemic Organization Management
    • Resource Library for Systemic Management
    • Our Education Modules for Systemic Management
  • Contact
  • Our Whole System Blog
  • Intelligent Management Italia
You are here: Home / Systems Thinking / How to Predict the Future in Uncertain Times

Jun 26 2017

How to Predict the Future in Uncertain Times

Screen Shot 2017-06-26 at 5.12.49 PM
What exactly do we mean when we talk about prediction? In uncertain times it’s a relevant question. However, we’re not talking here about having a crystal ball but the relevance of prediction in the field of management. A little less exciting than Tom Cruise but very important nonetheless. Dr. Giovanni Siepe explains…

What do we mean when we talk about prediction?

There is an ongoing discussion about the meaning we assign to the words “prediction” and “forecast” among economists and scientists. Their major concern seems to be our ability to “predict” extra-ordinary events. But what is an extra-ordinary event, and if it’s extraordinary, can’t we assume that by its very nature it cannot be predicted? So why bother?

The problem is that the very definitions of “prediction” and “predictability” have been heavily misunderstood and, as a consequence, we also misunderstand the definition of an extra-ordinary event. Referring to ‘Black Swans’ and ‘fat tails’ can be misleading.

What we can predict – process behavior

There is indeed a realm where predicting things is not only possible but crucial. Thanks to the work of Walter A. Shewhart (and indeed Dr. W. Edwards Deming), we can measure and predict processes. Why should that be of interest to anyone? Because every repeated activity in an organization is a process. If we can predict the behaviour of our processes we can predict what will happen in our company. It’s as simple as that. Conversely, if we don’t achieve profound knowledge of our processes then we don’t really know what’s going on. That is a very worrying prospect.

Predictability in management concerns the behavior of processes. Thanks to the development of Statistical Process Control, we can measure a process and how it oscillates between its own upper and lower limits.

The upper and lower limits are “intrinsic” to the process, and are calculated – NOT imposed like specifications – from the process behavior itself. It is the intrinsic (natural) oscillation of the process that determines the limits. The calculation of the limits, based on a statistical formula, is very straightforward.

The first step is to define what a process is. We define a process as a set of activities that repeat themselves over time according to a given procedure.

Here the concept of time is extremely relevant. What we are going to investigate is something that changes over time, i.e. something that is dynamic and not static. In order to understand our reality we don’t need a snapshot and we don’t need to  shoot a short “movie” of it. What we want to measure is the variation that affects our process.

How to measure the behavior of a process

Let’s assume we know the algorithm for calculating the limits of our process. The mathematics behind their calculation is 100 years old and can be found in any book about Statistical Process Control as well as Wikipedia.

We use the first 20-25 data points of a series to calculate the limits, and we set the limits accordingly. Then, we monitor the unfolding of the process and we study the trend. What do we do with the chart we obtain? How do we use it to make “predictions” about the process? The rules are simple. They are empirical rules, based on statistical and economical considerations, but NOT dictated by any statistical prejudice.

Statistical considerations means we use statistics to calculate the limits, and economical considerations means we set the rules so that we don’t waste time and money investigating something that is irrelevant. This is because we are interested in achieving knowledge that gives us a real, practical advantage.

In a subsequent post we will look in detail at the tool for measuring the behavior of a process and how this can help us with the Quality of what we do.

Dr. Giovanni Siepe

Screen Shot 2016-05-14 at 5.38.10 PM

Sign up to our blog here and shift your thinking towards broader, systemic possibilities for yourself and your organization. Intelligent Management provides education and training  on W. Edwards Deming’s management philosophy and the Theory of Constraints  (Decalogue methodology) in North America and Europe.

About the Author

Angela Montgomery Ph.D. is Partner and Co-founder of Intelligent Management and author of the business novel+ website  The Human Constraint . This downloadable novel uses narrative to look at how the Deming approach and the Theory of Constraints can create the organization of the future, based on collaboration, network and social innovation.  She is co-author with Dr. Domenico Lepore, founder, and Dr. Giovanni Siepe of  ‘Quality, Involvement, Flow: The Systemic Organization’  from CRC Press, New York.

Written by angela montgomery · Categorized: Systems Thinking, systems view of the world, Theory of Constraints · Tagged: Deming, forecast, prediction, process behavior, statistical process control, W. Edwards Deming

Search Form

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Sign up for our Blog and receive our White Paper ‘Out of the Crisis – A New Kind of Science for Management’

Sign up for our blog here to receive all our blog posts by e-mail.

Search Form

Recent Posts

  • Physics and Management: What You Must Understand to Lead and Manage Today April 15, 2021
  • Systems Thinking and Quantum Theory – Why We Need Them for Business April 8, 2021
  • How to Cope With Change: Understanding Cause and Effect March 26, 2021
  • Managing Change Effectively with a Systemic Framework and Method March 17, 2021
  • Decisions and Change – Thinking Processes for a Complex World March 10, 2021
  • Effective Decision-Making? Understand Your Driver Needs First March 6, 2021
  • Why Is Managing Change So Hard and How Can We Make it Easier? February 25, 2021
  • Creating Connections Between Company Functions – Back to Deming February 19, 2021
  • Human Resources – a New Perspective for Our Post-Pandemic World February 10, 2021
  • What’s Driving Profitability in Your Business and What Isn’t – How to Find Out February 3, 2021
  • Business, Politics, Wall Street: the Learning Organization and Our Interconnected Future January 29, 2021
  • What Does it Take to Be a Leader in Today’s Complex World? January 21, 2021
  • A New Economics for Sustainable Prosperity – Out of the Crisis Series Part 7 January 13, 2021
  • Identifying Assumptions to Unlock Innovation and Move Beyond the Crisis – Out of the Crisis Series Part 6 January 6, 2021
  • Learning to Think Systemically to Make Informed Decisions and Pre-empt a Crisis – Out of the Crisis Part 5 December 30, 2020

Social Icons

  • Facebook
  • Google+
  • RSS
  • Twitter

Archives

  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • March 2013
  • February 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011

Recent Posts

  • Physics and Management: What You Must Understand to Lead and Manage Today April 15, 2021
  • Systems Thinking and Quantum Theory – Why We Need Them for Business April 8, 2021
  • How to Cope With Change: Understanding Cause and Effect March 26, 2021
  • Managing Change Effectively with a Systemic Framework and Method March 17, 2021
  • Decisions and Change – Thinking Processes for a Complex World March 10, 2021

Connect with us on LinkedIn and Twitter

  • LinkedIn
  • Twitter

Sign up for our blog

  • Home
  • Blog Theory of Constraints & Deming
  • Library
  • How to adopt systemic organization management
  • Knowledge Base for ‘The Human Constraint’
  • Contact Us

© 2020 Intelligent Management Inc. Canada

Privacy Policy