Nine months ago, we at InformationWeek launched a monthly magazine called Optimize that focuses on business strategy and execution (optimizemag.com). With articles written by subject-matter experts ranging from C.K. Prahalad and Mike Hammer to Clayton Christensen and Rob Carter, Optimize helps its 70,000 executive-level readers gain deeper insights into such fields as leadership, return on investment, marketing, finance, collaborative strategies, and others.
These days, the drive for optimal achievement is indeed everywhere: in cost-cutting, in operations, in sales-force deployment and behavior, in pricing, purchasing, positioning, negotiating, and more. Companies are looking to their business-technology leaders not only to help them do more, but also to do more of the right things -- often with less: fewer people, less spending, less time, less margin for error.
"Terrorists with links to al-Qa'eda planned to blow up pilgrims in St. Peter's Square, at the heart of the Vatican, it was disclosed yesterday. But the plan was frozen two months before the September 11 attacks.... The Libyan's job was to carry out reconnaissance operations and visit the targets 'to verify the feasibility of attacks, using explosives against the American embassy or St. Peter's Square,' the report said. He quickly went to work and was seen taking photographs of the Venice church in May last year. During a meeting with fellow terrorists, which the Italians bugged, he made it plain that he favoured an attack on St. Peter's Square, where a bigger massacre would be easier to organise."
-- from the London Telegraph July 11, 2002
So this whole idea of optimization is front and center in today's challenging economic environment. But where, oh where, can one turn to find ideas and current thinking about this optimization thing? One area is the fascinating field of Operations Research. Yes, you read that right: Operations Research. Long viewed by some as the province of mad scientists obsessed with spending two hours to come up with a way to reduce a 10-minute job into a five-minute job, operations research has lately begun to emerge as something of a rock-star celebrity in the business world. The reason: These are the folks who specialize in analyzing complex systems or problems and devising the best approaches and processes for dealing with that complexity.
One of the leading voices in the field is Mike Trick, a professor at the Graduate School of Industrial Administration at Carnegie Mellon University, president of the Carnegie Bosch Institute, and president of the Informs Association. An area of particular interest to operations research experts today, according to Trick, is revenue management, wherein companies try to maximize capacity and profitability by exploiting changing supply and demand curves. Airlines, for example, change prices as the time of the flight nears because once the doors close, any unfilled seat is valueless. Trick says revenue management is extending into other fields as well, for what business isn't interested in maximizing capacity and profitability by developing models that identify the best prices in a dynamic setting? Other fields employing this type of research include cruise ships and movie theatres; will it be long, Trick asks, before it also makes its way into areas such as university admissions, toll roads, and communications systems?
And for all of you who've experienced the joy of waiting at the airport for a couple of extra hours because the plane is there, and the passengers are there, but the crew is somewhere else, take heart: Operations research is hacking through the maze of obstacles presented by union rules, FAA regulations, individual preferences, training issues, and more. Looking ahead, Trick says even more progress can be made in the field of air travel through the efforts of a new type of research called robust optimization. "While operations research has been extremely successful in reducing crew costs for airlines, we're only at the beginning of creating solutions that react well to snowstorms, airport delays, and other common disruptions," Trick says. "The big question we're pursuing is, how can we develop optimization solutions that are robust to a changing environment?"
Other areas operations research is attacking include supply-chain optimization, financial engineering, natural-resource planning, and even the new frontier of ubiquitous optimization. "As algorithms get better and computing is even faster," he says, "optimization and operations research can be embedded in more places. An optimizing toaster, perhaps?"
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