BNET: What are the big unsolved problems for OR in
practice today?
Schruben: We have to realize that what we’re actually doing is
forecasting. We are trying to model what will happen in the future, and that’s
the biggest practical challenge — how to get away from models with
static assumptions and develop predictive models that can respond in real time
to changes in the world.
BNET: What do you mean by static assumptions?
Schruben: As it is now, we collect data and build a model based on
assumptions we think are reasonable at the time. But our results only tell us
what would have happened in the past, when those assumptions were valid. Most
models assume that input data are independent and identically distributed
(IID), but that’s almost never true. Assuming IID data is assuming
that events in the world don’t depend on each other, and that the
probability of them happening doesn’t change over time. But things
are changing constantly in business.
BNET: So what is the right approach to OR modeling?
Schruben: We have to integrate forecasting and risk analysis with OR
modeling. We have to integrate models with dynamic market information and forecasting.
Simulation is the workhorse to do this, because it can handle that kind of
dynamic complexity, whereas most OR models tend to be optimization, static kind
of models.
BNET: Do you think it’s accurate to say
that OR is more of a theoretical exercise than a practical solution to business
problems? Or is the practical application of OR techniques more of a defining
factor now?
Schruben: There’s a lot of theoretical OR that has given the
field a bad name. This comes from the “managerial insight”
section of OR research papers. Most of the insights are either obvious or
wrong. And these insights are often couched in such obscure terms that they
confuse and disillusion managers. So the theoretical stuff tends to give the
field a bad name. But the practical application of OR is the reason we’re
still in business. There’s no question that OR in practice has made a
huge impact on business.
BNET: How much do you think packaged business
analysis programs, like SAP or Oracle’s ERP solutions, help or hinder
the advancement of OR in business practice?
Schruben: In order to compete, software companies have to say “all
problems are solved by our software,” which just isn’t
true. In that sense, packaged or embedded solutions are probably hindering OR
in practice. A lot of out-of-the-box OR techniques are 20 years old. Innovation
is largely coming from academic researchers, but unfortunately, a lot of these
software companies don’t welcome academic input. In the ideal world,
there would be a lot more collaboration.
BNET: How do you see the role of OR in business
changing over the next 10 years?
Schruben: I’m hoping that managers become much more
knowledgeable about analytics and OR. I see the education of new MBAs focusing
much more on business analysis. MBAs need to be able to ask the right questions
and develop a systematic way of thinking about problems. Learning particular
analytic techniques alone won’t get you very far, but the training
will teach you how to discipline your thinking, how to ask the right questions
and become a wise software consumer. Software vendors need to say, “Wow,
we can’t keep up with the MBAs.”
