Transformational analytics

Management innovation as a strategic technology.

By Greg H. Parlier

Can “MIST” address the enormous U.S. challenges ahead?

Can “MIST” address the enormous U.S. challenges ahead?

As I write this, the Middle East is ablaze with an Islamic caliphate gaining hold in Syria, Iraq and Lebanon. Humanitarian crises, barbarian acts and charges of genocide shock our senses. Iran marches on to a nuclear weapon and delivery capability. In West Africa, the largest outbreak of Ebola virus has now caused more than three thousand deaths of hemorrhagic fever, spreading fear and causing the director of the World Health Organization to declare an international emergency. Meanwhile, the Islamist terrorist organization Boko Haram continues its kidnapping and killing spree, forcing half a million refugees in Nigeria.

After “annexing” Crimea, the Russian army remains poised on the border of eastern Ukraine. In the Far East, a growing and belligerent China confronts its neighbors, challenging international norms in the East and South China Seas, causing a worrisome regional arms race. We can only wonder if North Korea will implode before it explodes. And at home, we are overwhelmed with border security challenges and the humanitarian drama of children pouring across our own southern boundary.

Amazingly, as eminent Harvard historian Niall Ferguson explains, the greatest risk to Western democratic economic security seems increasingly to be our self-imposed precarious financial condition and dysfunctional government institutions. He refers to “the great degeneration” in Western political and social institutions. We are “squandering the institutional inheritance of centuries” due to vast public debt, the growing burden of regulations, rule of lawyers rather than law and loss of cohesion in civil society [1].

The United States truly faces enormous challenges over the next few decades. So what can we do?

The Gap

While a broader international security perspective must certainly address the current and foreseeable geopolitical environment, we are also afflicted with troubling domestic issues: disconcerting socio-demographic patterns and education challenges; national infrastructure decay in energy, transportation and civil works; sagging personal savings and national investment levels; and increasingly intractable social entitlement policies. We are now running trillion dollar annual deficits, our national debt is double-digit trillions and our current “fiscal gap” is $250 trillion.

We are mortgaging not only our future but our posterity’s as well, imposing impossible burdens on future generations. This condition in our public policy is as morally reprehensible as it is economically bankrupt. Realistic projections of these converging trends illuminate enormous risk to the United States – a potentially catastrophic gap between future expectations and unfolding realities. Needless to say, it is also strategic insanity. We must not continue along this path.

So what can we do?

We must “organize for success.” We need to better coordinate, integrate and focus our analytical horsepower on the pressing domestic and global challenges we increasingly face. We must assess the trajectory of our professional discipline and examine the adequacy of our current capabilities, capacity and organization to better address the challenges of our time. Given these challenges and evolving trends we can discern, what would a forward-looking appraisal suggest? Where do we need to be going? What should we be doing?

We must better link academic advancements to real-world problems to bridge the gap between sound theory, engineering design and effective practice. We need sound “value propositions” and supporting relationships with academia, government agencies and the corporate sector to better recognize and apply our disciplines to existing and anticipated challenges.

We must capitalize on the exploding big data environment and the surging analytics movement to promote our unique, multi-disciplinary profession, expand its reach, application and contributions to these pressing challenges of our time.

Today, as we (perhaps) transition into another post-war period, we are again struggling to maintain “balance” – over time and across our military capabilities – in an era of dramatic fiscal challenges, major budget reductions and defense resource constraints. At a crucial period when the “state of military O.R.” appears to be at a crossroads, we must harness and apply the full power of analysis – O.R., strategic analytics, management innovation – across our national security establishment in these turbulent, uncertain times to both preclude another hollow force and achieve cost-wise readiness [2].

Bridging the Gap

One place we can start the journey is by analyzing the “strategic landscape”: identifying, describing and understanding emerging technology trends and their interactions with other important geopolitical, organizational, economic and socio-demographic conditions and patterns. Key forms of innovation can be characterized: the traditional and familiar form of technology innovation which emphasizes the physics-based engineering sciences; policy innovation which incorporates the social sciences; and management innovation where the information sciences and analytically based decision support methods complement each other.

While technology advancements continue to astonish us, we must distinguish social from scientific and technical ingenuity and understand how technology, management and policy overlap in socio-technical systems. The fundamental question is not whether humans have the scientific and technological ingenuity to solve our pressing 21st century challenges, but whether our capacity for social ingenuity will be adequate. Will we be smart enough to continue promoting technological ingenuity while also bridging the growing gap in social ingenuity? [3].

Out of this recent assessment emerged the characterization and refinement of “management innovation as a strategic technology” (MIST), an enabling framework for transformational analytics. In an effort to provide an answer to the question “What can we do?” this article introduces the concept of MIST, briefly examines its critical components and explains their potential value for focusing organizational direction and performance during transformational endeavors. The building blocks for MIST can be viewed as a simple formula:
IT and MIS: Information technology (IT) continues its inexorable advance. This past August, IBM announced a “brain-like” chip that emulates the functions of neurons and synapses to perform calculations. This new chip excels at pattern recognition and object classification using a “neurosynaptic core” structure and “event-driven” logic that “fires” a particular core only when it is needed, using far less power than conventional technology used in current microprocessors – 20 milliwatts compared to 100 watts per square centimeter.

Nonetheless, while improvements in data storage and computer processing power have been astonishing, most organizations struggle to manage, analyze and transform data into useful information for knowledge creation. Empirical studies have consistently shown that “IT solutions,” even when implemented with the best information systems tools, have not produced desired or expected results without accompanying business process changes. Clearly, there is a powerful link between organizations with pronounced analytical orientations and market-leading performance. What must be created is the analytical capacity for insight, understanding, and better decision-making.
DSS: We must be especially wary of so-called “IT solutions.” Rather, information systems – especially enterprise resource planning (ERP) systems – must be connected to analytics in order to create decision support capabilities. A complementary relationship between the two – both symbiotic and synergistic – is needed to fully capitalize on their collective potential. The greatest return on investment is derived from the creation and implementation of new decision support systems (DSS) incorporating analytically based forecasting, planning and optimization technologies. Ultimately, it is this management innovation approach that will enable senior leaders and managers to generate knowledge and better decisions from the growing amounts of information and improved situational awareness made available by advances in information systems technologies.

Policy-makers and business managers struggle to properly conceptualize modernization efforts that genuinely reflect a performance-oriented focus. What has been lacking is a comprehensive strategy and implementation plan incorporating effective analytical tools (operations research) with the appropriate information technology required to enable and provide the decision support needed for cost-effective, performance-oriented results. The goal should be effective integration of analytics into organizational decision-making.

This DSS capability must be linked (using, for example, application program interface technology) to an underlying transaction-based IT enterprise information system (for example, an ERP). This “knowledge-based” DSS would be capable of providing feasible, meaningful decision options that focus on common organizational goals such as efficiency, effectiveness and resilience.

Recognizing these needs for management innovation as a strategic technology, and developing the capacity to achieve them, represent first steps toward transformational analytics.

Operations Research: A defining feature of O.R. is its strong advocacy of multi-disciplinary approaches, recognizing that no one scientific discipline is adequate to effectively deal with the complexity inherent in real-world problems. This attribute can be contrasted with IT, where so-called “IT solutions” now have ubiquitous appeal – and enormous investment levels – to substantiate this growing, widespread trend. Yet, without using the analytical, integrative power of O.R. to focus business process reengineering on desired outcomes, this growing obsession with IT may result in increasingly complexity that exceeds the interpretive capacities of the organizations responsible for developing and using them – an example of what has previously been termed an “ingenuity gap.”

So what can we do to enable and accelerate innovation toward desired outcomes?

Toward an “Integrated Management Science” (IMS)

The corporate world is routinely buffeted by competing, sequentially adopted management philosophies that periodically appear, gain popularity then recede. Despite these evanescent fads (or perhaps because of them), chronic gaps persist in strategic planning capacity resulting in systemic failure to develop concepts relevant to emerging realities.

Management options need to be decided within a strategic, ends-ways-means framework focusing on the ultimate purpose for which the organization exists. Descriptive analytics are used to segment problems, systematically diagnose structural disorders, and identify enabling remedies and potential “catalysts for innovation” (“means”). Next, cross-component integration challenges are addressed using prescriptive analytics to attain organizational objectives to characterize desired goals, for example, efficiency, resilience and effectiveness (“ends”). The design and evaluation phase incorporates predictive analytics to develop an “analytical architecture” (“ways”) providing a comprehensive roadmap for organizational transformation.

Transformational Strategic Planning (TSP)

Two distinctly different planning approaches can be distilled from the management literature: the traditional or incremental approach and a transformational perspective. The traditional approach focuses on a short-term (annual) horizon where internal budget constraints and financial targets constitute the primary management objectives to defend and extend existing business. In contrast, the transformational perspective orients on penetrating other, perhaps emerging markets and actually creating new ones. This externally focused approach views environmental conditions and future challenges as potential opportunities rather than constraints to existing business. Since past performance is now irrelevant as a benchmark for planning objectives, an organizational vision must be imagined for a future horizon, and creative plans developed to engineer progress toward this future vision.

Many of our systems seem increasing fragile and vulnerable, subject to catastrophic failure due to what is known as “tight-coupling” or even human error, whether a consequence of neglect or deliberately induced. This awareness and recognition is now leading to new design and operational management concepts. Unlike tradition engineering approaches that optimize system performance based upon a set of requirements, this new engineering philosophy presumes that the system, or how it is used, will change over time, perhaps in unanticipated ways. Hence, flexibility across a range of possibilities, rather than optimization to a specific presumed outcome, must be “built in” to accommodate adaptability and inevitable change over time – a resilient system that can adapt gracefully to alternative futures rather than fail catastrophically when the “designed” future changes [4].

How can we incorporate these new concepts and methods into transformational analytics?

Engines for Innovation (EfI)

For transformation to occur, institutional adaptation and agility require a culture of innovation. Sources to enable and encourage innovation must exist for the culture to embrace. An engine for innovation (EfI) provides such a source by building a capacity for low-risk, low-cost experimentation using a synthetic environment where analytically rigorous cost-benefit analyses can be performed to differentiate between desirable objectives and attainable (affordable) ones that can actually be implemented.

A virtual test bed is needed to provide a synthetic, non-intrusive environment for experimentation and evaluation of innovative ideas and concepts. This synthetic environment, or micro-world, guides and accelerates transformational change along cost-effective paths, providing the “analytical glue” to integrate and focus what otherwise would be disparate initiatives and fragmented research efforts.

The organizational construct consists of three components that comprise the core competencies for the EfI:

  1. an R&D model and supporting framework to function as a generator, magnet, conduit, clearinghouse and database for good ideas;
  2. a modeling, simulation and analysis component which contains a rigorous analytical capacity to evaluate and assess the improved performance, contributions and associated costs that promising good ideas might have; and
  3. an organizational implementation component which then enables the transition of promising concepts into existing organizations, agencies and companies by providing training, education, technical support and risk reduction/mitigation methods to reduce organizational risk during transformational phases.

These three components serve to:

  • encourage and capture a wide variety of inventions and good ideas;
  • “incubate” those great ideas and concepts within virtual organizations to test, evaluate, refine and assess their potential costs, system effects and contributions in a non-intrusive manner; then
  • rapidly transition those most promising into actual commercial and/or governmental practice.

Recently published research outlines the need for three key elements necessary to drive continuing improvement: (1) blueprints for growth, (2) innovation engines and systems and (3) mind-sets. The EfI provides this source of management innovation by building a capacity for low-risk, low-cost experimentation and accelerated learning.

Strategic Architectures for Analyses, Management and Planning (STAAMP)  

Strategic planning and management frameworks are also essential to enable learning within organizations and, most importantly but often neglected, to ensure that strategies achieve intended operational results. These analytically based, strategic architectures establish and visually portray meaningful performance trends to the larger objectives, goals and vision of the organization. They also illuminate the need for adaptation by providing mechanisms to sense the need for reacting to, as well as creating, change when necessary. Organizations must define and monitor metrics that are tied to strategic enterprise objectives to ensure proper alignment of individual incentives and behavior with these objectives. In organizations with strong cultures, it’s critical that incentives for behavior and performance are in the right places to attain desired institutional outcomes.

What We Can Do

“Strategy is fundamentally about dealing with change” [5]; it represents the heart of management. Under increasing organizational pressure, the tendency toward reactive, ad hoc crises management all-too-often supplants long-term strategy. To effectively overcome this common tendency, management concepts should all be guided by a clear understanding of the ultimate purpose for which the enterprise exists, an organizational vision for the future and a supporting strategy to realize the vision.

Despite the inexorable advance of technology, improved management and decision support systems, pursuing future-oriented visions linked by transformational strategic plans will ultimately enable innovation potential to be realized. Transformational analytics, empowered by MIST, can be a leading source of socio-technical innovation and the crucial enabler for sustaining continuous improvement in increasingly competitive, stressful and resource-challenged environments.

Greg Parlier is a retired U.S. Army colonel. A career Air Defense Artillery officer and combat veteran with multiple tours in the 82nd Airborne Division, he served on the West Point faculty as an engineering management instructor and assistant professor of operations research. His advanced degrees are in operations research, systems engineering and national security studies. Col. Parlier was a National Defense Fellow at MIT and concluded his military career as deputy commander for transformation at U.S. Army Aviation and Missile Command. He is currently an independent consultant and member of the adjunct research staff at the Institute for Defense Analyses (IDA). He is past president of MAS.


This article is adapted from a much longer report available upon request from the author at “Management Innovation as a Strategic Technology” will also be presented as a tutorial session within the Military Applications Society (MAS) cluster during the Annual INFORMS conference in San Francisco.


  1. Niall Ferguson, “The Great Degeneration: How Institutions Decay and Economies Die,” 2013. Penguin Press, New York.
  2. Greg H. Parlier, “The State of Military Operations Research,” OR/MS Today, Vol. 41, No. 1, February 2014.
  3. Thomas Homer-Dixon, “The Ingenuity Gap: How Can We Solve the Problems of the Future?” Knopf, 2000; National Research Council, “Our Common Journey: A Transition Toward Sustainability,” Washington, D.C., The National Academies Press, 1999.
  4. Charles Perrow, “Normal Accidents,” Basic Books, 1984; Richard de Neufville, “Flexible Design,” Engineering Systems Division, Massachusetts Institute of Technology (
  5. Arnoldo C. Hax and Dean L. Wilde II, “The Delta Project: Discovering New Sources of Profitability in a Networked Economy,” Palgrave Press, New York, 2001.