Tuesday, March 26, 2013

Measuring the real cost of water

Water Bride....
Water Bride.... (Photo credit: f1uffster (Jeanie))

Big savings are available to companies that look beyond their utility bills and understand the broader economic costs of their water consumption.

McKinsey Quarterly:

The low nominal cost of water in many regions means that a lot of investments aimed at cutting its use don’t seem to offer satisfactory returns. The picture may change when organizations take a broader view of water: as a “carrier” of production inputs and outputs to which a variety of costs and recoverable values can be assigned. Since these elements may total as much as 100 times the nominal cost of water, optimizing its use can yield significant financial returns.
One pulp-and-paper company analyzed its water-use costs as a carrier, including tariffs, charges to dispose of effluents, and water-pumping and heating expenses. It also examined the value of recoverable chemicals and raw materials “carried” by water from its factories and the potential heat energy lost in cooling processes. By closely surveying these operations, the company identified opportunities for better water storage and for reducing chemical use in paper bleaching. Additionally, the company recaptured heat from condensation processes and reduced the amount of steam consumed by boilers. These moves saved nearly 10 percent of measured carrier costs, reducing total operating expenses by 2.5 percent and improving sustainability by cutting water use nearly in half. Industries such as steel, packaged goods, chemicals, and pharmaceuticals have similar carrier cost–value profiles. Companies may be able to identify substantial savings by focusing on the broader economic costs of water.

About the Authors
Kimberly Henderson is a consultant in McKinsey’s São Paulo office, Ken Somers is a consultant in the Antwerp office, and Martin Stuchtey is a director in the Munich office.

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Big data in the age of the telegraph

Daniel McCallum’s 1854 organizational design for the New York and Erie Railroad resembles a tree rather than a pyramid. It empowered frontline managers by clarifying data flows.

McKinsey Quarterly:
MARCH 2013 • Caitlin Rosenthal

1834 New York & Erie RR map
1834 New York & Erie RR map (Photo credit: Wikipedia)
In 1854, Daniel McCallum took charge of the operations of the New York and Erie Railroad. With nearly 500 miles of track, it was one of the world’s longest systems, but not one of the most efficient. In fact, McCallum found that far from rendering operations more efficient, the scale of the railroad exponentially increased its complexity.1

The problem was not a lack of information: the growing use of the telegraph gave the company an unprecedented supply of nearly real-time data, including reports of accidents and train delays.2 Rather, the difficulty was putting that data to use, and it led McCallum to develop one of the era’s great low-tech management innovations: the organization chart. This article presents that long-lost chart (see sidebar, “Tracking a missing org chart”) and shows how aligning data with operations and strategy—the quintessential modern management challenge—is a problem that spans the ages.
1855 map
1855 map (Photo credit: Wikipedia)
Big data,’ then and now
Just as information now floods into companies by the tera-, peta-, and exabyte, during the mid-19th century, governments, businesses, and universities produced and grappled with what one historian has called an “avalanche of numbers.”3 To be sure, McCallum’s rail lines may not have generated even a megabyte of information. ... Although the telegraph’s speed made more information available, organizing and acting on it became increasingly difficult. One delayed train, for example, could disrupt the progress of many others. And the stakes were high: with engines pulling cars in both directions along a single set of rails, schedule changes risked the deadly crashes that plagued 19th-century railroads.
1884 map
1884 map (Photo credit: Wikipedia)
As McCallum reflected, “A superintendent of a road 50 miles [long] . . . may be almost constantly upon the line engaged in the direction of its details.” But on railroads like his, which stretched for hundreds of miles, no individual manager could be responsible for all of the necessary schedule changes. (See exhibit, “The first modern organization chart,” for McCallum’s solution.)

The first modern organization chart

org chart
Download the full image (PDF−4,435KB).

Inset 1
Daniel McCallum created the first organization chart in response to the information problem hobbling one of the longest railroads in the world. In surprising contrast to today’s top-down organization pyramids, in McCallum’s chart the hierarchy was reversed: authority over day-to-day scheduling and operations went to the divisional superintendents down the line, who oversaw the five branch lines of the railroad. The reasoning: they possessed the best operating data, were closer to the action, and thus were best placed to manage the line’s persistent inefficiencies.
org chart

Inset 2
Each superintendent was responsible for the physical geography of the tracks and stations and for the men who moved along the rails: conductors, brakemen, and laborers. Coordinating activities between these two branches, the superintendents managed both the fixed depots and the rolling stock that moved between them.
org chart

Reversing the information hierarchy
In crafting the organizational plan, McCallum sought to improve the way the railroad used information. ... Far from the static, hierarchical pyramids that we today associate with such charts, his was modeled after a tree. McCallum drew the board of directors as the roots, himself and his chief officers as the tree’s trunk, and the railroad’s divisions and departments as the branches.
Critically, McCallum gained control by giving up control, delegating authority to managers who could use information in real time. ... Following one of McCallum’s key precepts—“a proper division of responsibilities”—authority over day-to-day scheduling went to the divisional superintendents down the line.
Most of the chart spans the domains of these superintendents: the railroad’s five branch lines. Each superintendent was responsible for two subbranches of the tree. The first was a straight branch representing the physical assets of tracks and stations, the second a winding branch consisting of the men who moved along the rails, ... The divisional superintendents were responsible for coordinating these two branches—the depots and the rolling stock, and the employees who moved between them.
Even as McCallum decentralized decision making along the railroad, he also insisted that targeted metrics had to be reported back to its board of directors. ...  As “interesting as this information is,” he reflected, it is only in its “practical application . . . that its real value consists.” McCallum therefore designed a system of hourly, daily, and monthly reports that enabled him to calculate practical metrics, such as cost per ton-mile and average load per car. By comparing the profitability and efficiency of different routes, the board could identify opportunities for improvement.
A message for today’s leaders?
Modern managers, of course, have more sophisticated tools than McCallum did. ...
... Executive attention spans are already stressed, and many leaders report that they are overwhelmed by copious data flows.4 A more fruitful approach might begin with McCallum’s low-tech reflections on organizational structures and priorities. Within today’s organizations, emerging social networks—often married to sources of big data—have a certain kinship with McCallum’s logic. These networks too provide opportunities for greater information sharing and collaboration at relatively low levels in the organization, and they too can improve operations, customer service, and innovation. Curiously, digital mappings of these social interactions bear a resemblance to the nodes and branches of McCallum’s chart.
Drowning in the details of operations, Daniel McCallum stepped back and redesigned the railroad’s organization. His insights on how to meld local authority with information gave his managers better operating tools—which are just as relevant in the age of the Internet as they were in the age of the telegraph.

About the Author
Caitlin Rosenthal, an alumnus of McKinsey’s Houston office, is the Harvard–Newcomen postdoctoral fellow at the Harvard Business School.

The author wishes to acknowledge Michael Chui for his contribution to this article.
1 This article’s details on the railway’s operations and organizational thought come from Homer Ramsdell and D. C. McCallum, Reports of the President and Superintendent of the New York and Erie Railroad to the Stockholders, for the Year Ending September 30, 1855, New York, NY: Press of the New York and Erie Railroad Company, 1856.
2 Tom Standage quotes contemporaries who called the telegraph the “highway of thought” in The Victorian Internet: The Remarkable Story of the Telegraph and the Nineteenth Century’s On-line Pioneers, first edition, London, UK: Weidenfeld & Nicolson, 1998. An excellent recent account of the telegraph’s impact is Richard John, Network Nation: Inventing American Telecommunications, first edition, Cambridge, MA: Harvard University Press, 2010.
3 The phrase “avalanche of numbers” comes from Ian Hacking, writing on the spread of probabilistic and statistical reasoning, in The Taming of Chance, first edition, Cambridge, UK: Cambridge University Press, 1990.
4 Steve LaValle et al., “Big data, analytics and the path from insights to value,” MIT Sloan Management Review, 2011, Volume 52, Number 2, pp. 21–32.

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Thursday, March 21, 2013

Domestic Drones on Patrol

English: Merrifield Hall on the campus of the ...
English: Merrifield Hall on the campus of the University of North Dakota in Grand Forks, North Dakota, USA. (Photo credit: Wikipedia)

Drones: A Booming Business?: Unmanned aerial vehicles, also known as drones, may soon become commercialized. In Grand Forks, N.D., people are preparing for a coming boom in drones-related business.

GRAND FORKS, N.D. — On the pilot’s computer screen, planted at ground level a few yards 
English: CBP Air and Marine officers control a...
English: CBP Air and Marine officers control and watch images taken by Unmanned aerial vehicles (drones) of the CBP. This surveillance provides information concerning illegal activities taking place in remote areas to Border Patrol agents. (Photo credit: Wikipedia)
from the airport runway here, the data streaming across the display tracked an airplane at 1,300 feet above a small city on the coast, making perfect circles at 150 miles per hour.
To the pilot’s right, a sensor operator was aiming a camera on the plane to pan, tilt and zoom in a search among the houses on the ground for people who had been reported missing.
On his screen, cartoonlike human figures appeared in a gathering around a camp fire between the houses.
“There they are,” Andrew Regenhard, the pilot and a student, said in a flat tone that seemed out of place with a successful rescue mission.
Seal of the University of North Dakota
Seal of the University of North Dakota (Photo credit: Wikipedia)
In fact, no one was missing; the entire exercise used imaginary props and locales. Mr. Regenhard was taking part in a training session at the University of North Dakota. The first to offer a degree program in unmanned aviation, the university is one of many academic settings, along with companies and individuals, preparing for a brave new world in which cheap remote-controlled airplanes will be ubiquitous in civilian air space, searching for everything from the most wanted of criminal suspects to a swarm of grasshoppers devouring a crop.
“The sky’s going to be dark with these things,” said Chris Anderson, the former editor of Wired, who started the hobbyist Web site DIY Drones and now runs a company, 3D Robotics, that sells unmanned aerial vehicles and equipment. He says it is selling about as many drones every calendar quarter — about 7,500 — as the United States military flies in total. ...
privacy (Photo credit: Sean MacEntee)
The rapidly expanding market has not gone unnoticed by lawmakers and privacy watchdogs. On Wednesday, the Senate Judiciary Committee will hold a hearing on the privacy implications of drones like the ones being developed at Grand Forks.
English: Official photo of Senator Patrick Lea...
English: Official photo of Senator Patrick Leahy (D-VT) (Photo credit: Wikipedia)
Senator Patrick Leahy, the Vermont Democrat who is chairman of the committee, said this year: “This fast-emerging technology is cheap and could pose a significant threat to the privacy and civil liberties of millions of Americans. It is another example of a fast-changing policy area on which we need to focus to make sure that modern technology is not used to erode Americans’ right to privacy.”
Some fans of the technology wince at the word “drone,” which implies that there is no pilot. And they have grown resentful about the alarms raised over privacy issues, noting that a few city and state governments have begun banning drones even where they do not yet operate.
Men perform pre-flight checks on an unmanned a...
Men perform pre-flight checks on an unmanned aerial vehicle before launch. (Photo credit: Official U.S. Navy Imagery)
Tom K. Kenville, chairman of the North Dakota chapter of the trade association, Unmanned Applications Institute, International, said such bans would discourage technological progress. “I don’t think we had rules for the road before we had roads,” he said.
Back in the university lab, Rico Becker, a software developer with Corsair Engineering, which had written a program for the students, emphasized that the “missing persons” exercise was just one of many hypothetical missions that students would fly, and was purely theoretical. “We’re not training pilots to spot people camping in their backyards,” he said. ...
Volunteer fire departments in places like Grand Forks, Mr. Kenville said, would provide a clear market. An unmanned vehicle, he said, was “going to beat all the cars there,” to determine the scope of a problem.
“If it’s a chemical fire, it will tell us to stay away, or it’s just some hay bales, drive slower,” he said. ...

PhotonQ-Swarming Drones
PhotonQ-Swarming Drones (Photo credit: PhOtOnQuAnTiQuE)
“This is money,” said Matthew L. Opsahl, in another part of the University of North Dakota simulation lab, at a work station where an operator could coordinate the activities of several remotely operated planes. One person could handle six cargo planes at a time, he said, or direct ground-based crews of several remotely operated planes that were scanning a large-scale event, like a spreading forest fire. The operator could compare the aerial images with those from Google maps, identifying street names and addresses to forward to a 911 call center.
Mr. Opsahl, a former pilot on a regional jet, is now an instructor in the North Dakota program, where Mr. Regenhard, 21, a junior from Prescott, Wis., has a double major in commercial aviation and in unmanned aerial systems. Mr. Regenhard is also building a six-rotor helicopter that will beam pictures back to the ground, one that might inspect rooftop air-conditioners or offer a bird’s-eye view of a crime scene. ...
The unresolved question is how to avoid midair collisions, because the operator on the ground cannot see other traffic in the air. The F.A.A. plans to have a system ready by 2015 called “sense and avoid” in which each plane in the sky, manned or unmanned, uses GPS equipment to locate itself, and sends that information to a computer on the ground that draws a map showing all targets. The computer then rebroadcasts that map to every pilot in the air — or at a computer workstation on the ground, as the case may be.
The progress of electronics seems relentless. Mr. Anderson, of 3D Robotics, said that all the components in a drone — a fast processor, a good battery, a GPS receiver and microelectromechancial sensors — were present in an iPhone. ...
The field is embryonic. “We’re in the Wilbur Wright years of the U.A.S. industry,” said Bruce Gjovig, director of the Center for Innovation, a business incubator, at the University of North Dakota.
Benjamin M. Trapnell, an associate professor and a mainstay of the unmanned aircraft systems program here, ... said the trick was not just in learning to fly such vehicles, but also in designing them, including the cameras or other sensors they could carry, and the ground stations from which they can be controlled.
The technology seems so flexible and promising that even some companies involved in conventional aviation are interested. For example, at Applebee Aviation, which flies 11 helicopters out of Banks, Ore., mostly to spray crops, Warren Howe, the sales manager, said a remotely piloted vehicle might never replace a conventional one for that purpose. In a drone, he said, “you’re limited to looking with a camera; you wouldn’t be able to see necessarily the wind changes that control drift, or a spotted owl or something, or beehives in a neighboring yard.”
“You may not see that kid coming down the street to take a look because he thinks a helicopter is really cool,” Mr. Howe said.
But at the same time, he said, his light helicopters cost $1,100 an hour to charter, and a lot of survey work could be done with a drone instead, mapping out what a manned helicopter would be needed for.
Mr. Anderson, in contrast, said that later this year, his company would introduce a helicopter for agricultural surveillance that would sell for less than $1,000. “That’s not per hour, that’s for the helicopter,” he said.

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