Isegoria

As I’ve already mentioned, in Serious Play, Michael Schrage, of the MIT Media Lab, examines how organizations use models, simulations, and prototypes to stimulate innovation.

One of the most important tools for serious play is the spreadsheet — which may not seem particularly playful for those outside the world of finance:

“Spreadsheets totally changed the financial business,” observes George Gould, a cofounder of the Donaldson, Lufkin, Jenrette investment-banking firm and undersecretary of the Treasury in the Reagan Administration. “Certainly, spreadsheets made CFOs more powerful than they used to be — a fact that is reflected in their pay scales.”

Low-cost spreadsheet software effectively launched the largest and most significant experiment in rapid prototyping and simulation in the history of business. [...] Financial models that had once cost thousands of dollars to design and build now cost thousands of pennies. [...] Within five years of the 1979 introduction of VisiCalc, the first electronic spreadsheet for personal computers, over 1 million software spreadsheets were being sold annually.

Here’s where things get interesting:

Operationally, Gould asserts, spreadsheet affected every significant facet of finance. “They were the great leveraged-buyout tool of that [1980s] era,” he notes. “They turned what had been a traditional financial analysis into a blueprint of how to run the business to maximize cash flow. Mergers and acquisitions once driven by long-term investment-banking relationships were now being driven by aggressive young bankers with even more aggressive spreadsheet models. But they were seen as credible models, so boards of directors were legally obligated to take them seriously.”

Spreadsheets turned financial analysis into a blueprint for running the company. But that’s not the main reason they caught on, at least not initially:

Dan Bricklin, the Harvard Business School student who created VisiCalc with MIT’s Bob Frankston, attributes the success of his software to the speed with which it paid for itself. Bricklin observes that well-heeled Wall Street analysts — thoroughly sick and tired of recalculating spreadsheet after spreadsheet on paper — would cheerfully shell out over $2,500 to buy VisiCalc and an Apple II personal computer simply to be able to reduce the time and tedium associated with the manual approach. “For most of these guys,” Bricklin recalls, “the payback for their investment was under a week.”

In Serious Play, Michael Schrage, of the MIT Media Lab, examines how organizations use models, simulations, and prototypes to stimulate innovation.

I enjoyed this anecdote about the Boeing 777′s then-new computer-aided design program and how it was misused:

Boeing’s new digital design infrastructure was so clever that engineers got computer-generated e-mail alerting them to “interferences” created by design conflicts. If the avionics team and the hydraulics team developed systems that competed for the same physical space in the digital simulation, for instance, CATIA alerted both groups to the conflict. the purpose was to settle conflicts before design prototype.

Much to their surprise, the 777 project’s managers discovered that several engineers deliberately built conflicts with other systems into their proposed designs. Sabotage? Rebellion against the new technology? Engineering humor? Abuse of the prototyping medium? No, the interferences were generated so that engineers in one part of the company could figure out which of their counterparts they should meet with to discuss future design issues.