Fast, Cheap, 
(and Out of Control)
by Pat Craig 

from the Fall 2000 issue 
of the Complexity Management Chronicles


"We wrote a paper for the Journal of the British Interplanetary Society on  using very small robots to explore planetary surfaces. The title we came up with was Fast, Cheap, & Out of Control, A Robot Invasion of the Solar System. Instead of sending one 1,000 kg. robot to explore Mars, our idea was to send a whole bunch of one kilogram robots, maybe a 100 of them. If we had about 100 little robots, you might be willing to try a higher risk thing with one of the robots. If you fail and you lose that robot, it’s not the end of the mission." 
From a videotaped interview with Rodney Brooks, the robotics scientist and Director of the Artificial Intelligence Lab at MIT

The point? Seeking out cheaper alternatives to solve problems can lower the risk and sometimes offer unexpected opportunities. Upper management might take more risks if the financial impact of each individual decision was less. The quotation from Professor Brooks serves to introduce our newsletter on diversification (and pooling).

This represents our final newsletter in the risk management series. We have followed the risk management framework developed by Donald Lessard, MIT Sloan School of Management, and Roger Miller, Universite Quebec a Montreal. They propose a six step framework 1) Identify / understand risks, 2) Shape risk, 3) Create options / Build in flexibility, 4) Take risks strategically, 5) Transfer or hedge risk, and 6) Diversify the risk or pool it. This newsletter discusses step 6. 

Why diversify? Why pool? To minimize your firm’s overall risk and maximize its investment.

Spreadsheet usage has proliferated in business. Like Rodney’s robots, spreadsheets in Excel or Lotus are fast to build, they are cheap, and sometimes appear out of control. One of our banking clients had over 1,000 spreadsheet "systems". The most critical spreadsheets evolved upwards into more robust Access database systems. Crucial Access databases evolved upwards into more powerful customized software. This client lowered their risk by allowing diverse systems to be built on diverse technical platforms with little central control.

"More Companies Cut Risk by Collaborating With Their Enemies" was the headline in a page one article of the 1/31/00 edition of the Wall Street Journal. The article provides good examples of pooling. It discussed a venture capital firm specializing in the Internet, similar to CMGI, that persuades the start-ups it invests in to cooperate with each other. These Internet start-ups add value to the whole by including web links to each other’s web sites and by adding or dropping functionality to complement the aggregate organization. The article also discussed the partnership (pooling) of AOL and Microsoft in Roadrunner, a high speed cable Internet business. Buying software packages, something many of us are familiar with, also represents pooling with other buyers.

We trust these brief examples will provide ideas on how diversification or pooling can help mitigate your software development risks. You can view our entire risk series on this site http://world.std.com/~pcraig.

©2000 by Complexity Management
Somerville, Massachusetts, in Metropolitan Boston 


Complexity Management Chronicles, a newsletter for software quality assurance professionals, is published in print form four times a year. Send your name and snail-mail address to the e-mail address below if you would like to be on the mailing list - at no cost to USA mailing addresses. 

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Contact Pat Craig at patcraig@alum.mit.edu