Professional Documents
Culture Documents
DOI 10.1007/s11573-012-0643-3
ORIGINAL PAPER
1 Introduction
The world is changing rapidly. People, goods and information travel easily and fast
across state boundaries in a widely interconnected world. We become more familiar
with different cultures and connect to people in ways we could not imagine even a
few years ago. At the same time, we also get connected to companies. These
companies are accountable not only to their typical stakeholders like shareholders
M. Besiou
Kuehne Logistics University, Brooktorkai 20, 20457 Hamburg, Germany
e-mail: Maria.Besiou@the-klu.org
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88 L. N. Van Wassenhove, M. Besiou
for their profitability, or state regulatory authorities, but also to new ones like non-
governmental organisations (NGOs) for their social and environmental profiles and,
of course, to consumers (e.g. through social media). The goals and objectives of
these various groups are not necessarily the same as the companies’ and many times
they are quite different.
Let’s take Nestlé as an example. In 2010 Greenpeace conducted an investigative
report of suppliers of palm oil, a key ingredient for Nestlé and other multinational
food makers and, as a result, targeted Nestlé with a global boycott for destroying the
rainforest. A ‘‘commercial’’ on YouTube in which an employee, while opening a kit
kat candy bar, finds himself eating a blood-spouting orang-utan finger, implied the
apes suffer from clearing forests for palm oil plantations. The ‘‘commercial’’ had
many followers. So even if Nestlé was acting according to the shareholders’ interest,
it was not necessarily acting in the interests of the broader community that
Greenpeace and its followers sought to represent.
Another example is the supply chain of Nike, the international retail sportswear
company. Some decades ago its suppliers were based in developed countries. To
decrease the production cost in the short-run and become more competitive, Nike
moved its supply to developing countries losing some control over its suppliers’
operations. In June 1996 Life magazine showed a young boy with pieces of a Nike
soccer ball around him who would spend most of his day stitching them together for
60 cents. News media (Gevirtz 1996; Ikram 1996), activist groups (including
UNICEF and Sweatshop Watch) and student groups (Duncan 1997) supported union
and NGO protests. Their campaign was also noticed by consumers and regulators
alike (Palazzo and Basu 2007). In the end these stakeholder pressures forced Nike
into establishing a code of conduct on labour and environmental practices
(O’Rourke 2006).
Optimisation models are often accused of being highly stylised representations of
problems that achieve robust results while sacrificing contextual information
(Besiou et al. 2012a). They frequently ignore time delays induced by various
actions, complexity arising from multiple feedbacks caused by typical non-linear
interactions of multiple stakeholders, and may capture a single trade-off but hardly
interconnected ones. Current research is also accused of becoming increasingly
disengaged from real-world applications and not being directly relevant to
practitioners (Sodhi and Tang 2008). Applying operations research (OR)/manage-
ment science (MS) is not always sufficient. Therefore we need to choose a
methodology that will allow us to achieve insights into the big drivers of a complex
system’s behaviour rather than precise solutions to sub-problems that may crop up.
We suggest system dynamics (SD) as a methodology that can link reality with the
OR/MS models.
System dynamics is a powerful methodology for obtaining insights into problems
of dynamic complexity and policy resistance. SD is based on feedback loop/control
theory. Models are developed using differential equations and the results arise
through simulations. Sterman (1991) mentions that ‘‘if the system to be optimised is
relatively static and free of feedback, optimisation may well be the best technique to
use’’. SD can capture the behaviour of dynamic, non-linear systems with feedback
loops, time delays and uncertainty. It can also capture the differences between short-
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2 Multi-stakeholder problems
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Complex problems with multiple stakeholders 91
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92 L. N. Van Wassenhove, M. Besiou
Today’s quick flow of information has made consumers aware of what is happening
around the world and better equipped to fight for a better quality of life.
Expectations are changing and consumers may prefer environmentally friendly
products from companies with a good social and environmental reputation.
Companies increasingly invest in CR strategies under pressure from employees,
consumers and society in general.
Along with changing consumer expectations, one of the outcomes of the financial
crisis is that society should not blindly trust big business. Company CR policies are
being watched by shareholders, financial analysts, consumers, employees, regula-
tors, NGOs, media, and society as a whole. All these stakeholders have conflicting
goals. Shareholders and financial analysts focus mostly on the company’s
profitability. Employees support their interests and oppose for example a factory
closure, even if this would increase a company’s profitability. Regulators increase
legislation, which usually raises the cost of goods or services. NGOs criticise
companies for not being environmentally friendly or not promoting social
sustainability. The media are keen to publish negative news about companies, as
this tends to boost sales. Traditional media are gradually losing power to social
media and media controlled by stakeholder communities and groups (stakeholder
media, see Hunter et al. 2011). Therefore an important challenge to companies in
implementing a CR strategy is to anticipate reactions from (new) stakeholder
groups. OR/MS research has not paid any attention to complex interactions that
arise with the implementation of new CR strategies.
Consider as an example BP PLC, the world’s second-largest oil firm. In 2000 BP
made an announcement branding itself as ‘‘Beyond Petroleum’’ (Hunter et al. 2011)
promising, among others, to produce greener fuels and to install photovoltaic panels
on the roofs of their retailers. With this campaign BP sought to show to the public an
oil firm concerned not only about its own profits but also about the planet’s future.
At the beginning, even if some news media and investors were skeptical towards the
campaign and others ridiculed it, most thought of it as an example of successful and
effective rebranding. However, some environmental groups accused BP of being
dishonest while others were even more aggressive. For example, Greenpeace
redefined BP as ‘‘Burning the Planet’’, occupied one of BP’s arctic drilling
operations, and sought to organise BP’s activist shareholders against management
(Hunter et al. 2011).
BP eventually dropped the ‘‘Beyond Petroleum’’ campaign. This, however, was
not the outcome of reactions of environmental groups, investors and news media but
largely because of the reactions of its own employees and the stakeholder media
they used. A series of accidents at Prudhoe Bay, along with accusations that BP was
failing to meet its own safety and environmental standards, were reported by
employees on their own online media. Soon enough, these reports drew the attention
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of news media and regulators. In 2005, a serious accident at BP’s refinery in Texas
City and an oil spill in Alaska severely damaged the ‘‘Beyond Petroleum’’
campaign.
Besiou et al. (2010) apply system dynamics to understand the interaction of
stakeholders whose opinions and activities affected the ‘‘Beyond Petroleum’’
branding campaign of BP in 2001–2005 (Hunter et al. 2011). The analysis showed a
complex system full of feedback loops where, at different moments, different
stakeholders play a highly visible watchdog function in defence of their own
objectives. These delayed responses of stakeholders made the system even more
complex and it became impossible for the company to regain control. Following this
SD analysis, specific impacts of CR policies could be further explored with targeted
OR/MS models, e.g. to explore when and why employees would turn against their
company and how this could be avoided.
A pedagogical case for the students could also be built from the BP case to be
used in education in OR/MS as a real-world problem that research can tackle. For
example, the students could first try to understand the impact that the employees can
have on a company’s CR strategy at a conceptual level and then to design a
parsimonious OR/MS model to capture some specific trade-offs.
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94 L. N. Van Wassenhove, M. Besiou
Uncertainty Returns quantity, Timing, place and magnitude of New forms of media
quality and age disaster controlled by stakeholders
Needs of beneficiaries
Dynamics Changing material Increased frequency and impact Changing consumer
prices of disasters expectations
Increased diversity of Changing media landscape
stakeholders (large number, (decreasing power, trust,
changing by disaster, lots of influence of traditional
new ones) media)
Time delays Usage period Time of response Time for reaction
Stakeholders Producers, Beneficiaries, donors and Shareholders, financial
with consumers, international community analysts, consumers, media,
conflicting PROs, employees, regulators,
goals municipalities, NGOs, society
scavengers
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reality, i.e. do the recommendations of the OR/MS model work in practice? In this
way, the current dominant OR/MS paradigm of narrowly defined models will be
better anchored in reality since this triangulation ensures that relevant and critical
sub-problems of a larger reality are tackled and recommendations and insights do
indeed work in practice.
A good example is the humanitarian context with decentralisation. Besiou et al.
(2012a) show, using SD, that if the IHO has more relief operations (rather than
development) and the exchange of resources between programs is difficult, then the
higher the decentralisation the worse the service level. Subsequently, Bhattacharya
et al. (2012) build on the results of Besiou et al. (2012a) to develop a stylised
operations economics model that includes the decentralisation and propose policy
guidelines to create a central entity to allocate resources.
In the WEEE example, Karakayali et al. (2012) study the impact of recycling
targets imposed by legislation on the operations of an original equipment
manufacturer (OEM) who develops both manufacturing and remanufacturing
activities. However, their model especially in calculating the total disposal amount
ignores products collected by scavengers. Scavenging decreases returns via official
collection channels making it harder for OEMs to comply and hence to
remanufacture (Besiou et al. 2012b). The OR/MS model of Karakayali et al.
(2012) could be extended to include scavengers and the analysis repeated to detect
at what level of scavenging recommended policies would have to be changed.
Besiou et al. (2010) study, using SD methodology, the ‘‘Beyond Petroleum’’
branding campaign to understand the challenges BP faced. However, the paper did
not explore the cost for BP of losing the war on Beyond Petroleum versus the cost
that would have resulted if they would have tried to control their employees even
more. OR/MS research could help answer this question. In such models, the cost of
leaking information and the cost of offering amenities to their employees (to keep
them satisfied) should be incorporated.
5 Conclusions
Most of today’s problems are dynamic, complex, with multiple feedbacks, and
multiple stakeholders with conflicting objectives. Time delays and uncertainty only
add to the complexity. As Yogi Berra said ‘‘The Future Ain’t What it Used to Be!’’
and we should get ready for that.
To solve these problems, we need further research. However, no analytical
methodology can tackle all of the complexity that real-world problems face. At the
same time, OR/MS research is criticised for increasingly diverging from reality.
OR/MS research focuses on optimising (narrowly defined) sub-systems, rather than
attempting to capture the whole system. Therefore, it is claimed that the findings of
its research cannot inform actual practice in a useful and comprehensive way.
What is needed is a methodology which, by capturing the whole system, would
identify the drivers of specific behaviour and the important sub-systems OR/MS
research should optimise. System dynamics methodology could be one such link as
we have shown with examples.
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The objectives of this paper were to: (1) examine whether current academic
research captures all aspects of today’s complexity; (2) identify common
characteristics of complex real-world problems; and (3) suggest a methodology
that could capture the complexity.
To achieve the first objective, in Sect. 2 examples of three complex real-world
problems with multiple stakeholders were presented. Gaps of OR/MS research were
identified as well as examples of SD research that tried to address these gaps. For
each problem examples for education in OR/MS from the pedagogical perspective
were provided.
To achieve the second objective Sect. 3 identified the characteristics these
problems have in common. The main characteristics are the complexity due to
uncertainty, the dynamic nature of the problem and time delays.
To address the third objective, system dynamics methodology is recommended as
a precursor of analytical OR/MS modelling (Sect. 4). SD is appropriate because it
can capture complex feedback loops and time delays. It can therefore suggest
multiple opportunities for analytical models looking for generic design principles or
policy guidelines that would help avoid problems with multiple stakeholders.
In all the three cases, SD and OR/MS analytical models presented form a solid
tandem as suggested by Fig. 1. We hope our paper will generate more discussion
and follow-up research on our central theme.
To conclude, we would like to emphasise that we do not claim this paper to be
either ground-breaking or completely new. Many of the things we describe were
said in one form or another before. There is a large literature on the relevance of
OR/MS as well as on the tendency in scientific research to become increasingly self-
referential and, as a consequence, irrelevant to practice (Sodhi and Tang 2008;
Singhal and Singhal 2012a; Singhal and Singhal 2012b). We avoided this huge
literature on purpose, preferring to simply discuss the current status. Our point is
deceptively simple: problems are becoming more complex while OR/MS research is
focusing on narrower topics, and this happens at an increasing rate. Consequently,
the gap widens and we need to react if we want OR/MS to continue to play an
important role in real-world problem-solving as it did so well in its World War II
origins (Singhal and Singhal 2012a).
We chose to illustrate our key premise with examples of complex multi-
stakeholder problems and to suggest some simple avenues to reverse the trend.
What is proposed does not require OR/MS to change its dominant paradigm but
allows it to remain relevant by focusing its models on critical sub-systems of
complex realities. By producing design principles or policy guidelines OR/MS can
continue to contribute to complexity reduction and management of complex
problems.
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