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Volume 16, Number 11: Faculty Focus
November 2010

Listen to a 6-minute interview with Fredrik Odegaard on the benefits of management science   Listen (5.8MB)   Subscribe

Management Science is a relatively new field that’s being used by organizations for everything from shortening hospital wait times to deciding which aisle should display bread. In addition to being a useful problem-solving tool, it is increasingly showcased as a company service or product. Dawn Milne recently sat down with Fredrik Odegaard, Assistant Professor of Management Science at the Richard Ivey School of Business, to discuss the role of management science in business and how it gives companies a competitive edge. She started by asking him to define management science.

On a more tangible or technical definition, management science is the method of using mathematical or quantitative or analytical models to solving business problems. That’s the straight, sort of clean-cut technical aspect of it. There’s different models that you use within that. These all generally have this theme that they’re mathematical – they’re quantitative or analytical models for solving business problems. It could be any type of business problem like scheduling airlines, setting prices for hotel rooms, deciding how much resources in a factory to use and so on.

Now, on a more broader level – a little bit more abstract – what is management science? It’s a language that makes it easier for decision-makers to communicate and reason through complex situations. And so, often, a business decision-maker or a businessperson might be faced with a complex task or a complex issue – a problem – and it’s just too difficult to do that in English or Spanish or French or whatever you talk. You can’t verbalize all this – you can’t reason your way through it. So then you have to use something else and you use this language, management science, and it just facilitates the communication and the reasoning and you can then see things clearer. You can find solutions that are then not always apparent. And I think that’s one of the things that should be stressed is that this language is used to make things easier for us to understand and easier for us to derive solutions to problems – not to make it more complex. But a lot of people will look at management science and these math models or quantitative models and think, ‘Oh, that looks really, really complex’. Well, okay, sometimes it is, of course, because there’s a lot of complex problems. But often, it’s actually easier than the real problem. And I think a lot of times that gets lost in translation for the students and actually faculty or researchers as well that use this to make complex situations easier to understand, not more difficult.

How can management science be used by managers to help them make better decisions?

So, here, I think I’d also like to then say that there’s two levels to it. The first part is that management science can be used to make a decision. So forget about making better decisions. There’s a lot of complicated problems that just to come up with a solution – just to do anything – is going to be complicated. For instance, if you’re Air Canada and you have all these stewards and captains and staff and everybody who is going to have to get assigned to planes and schedules, how do you just come up with who should go where? That’s just going to be very difficult to do without some formal what’s called model or this language of management science. Then once you have reached that level where, okay, now I can talk about this problem in a more coherent and structured way, I can reach a solution. Then I can analyze, okay, how can I now do things better? So then, take Air Canada, you know you have these schedules of staff that are allocated. Now you can come in and say, ‘Okay, can I do it better? Also, can I measure?’ I have to come up with some kind of measurement of what does it mean to do it better – cost-savings, a profit-maximization or something. And then you can use again management science to derive and compare different solutions.

How can management science improve a company’s bottom line?

So, the fascinating part about how management science improves the bottom line of companies is also a two-level story. There’s companies that use management science as a product or service directly. There’s great companies that have been able to use and package management science and sell it. So an example, for instance, is a small little company called Google. So Google was a search engine and the contribution that they gave to the search engine was they came up with something called PageRank. The PageRank is based on a concept, which is a management science concept. So here is a company that packaged a particular component of management science and has become quite successful at that. It’s just actually truly remarkable that they were able to have the ingenuity to use management science as a product itself. Other firms, of course, are service-oriented. So a lot of consulting firms have management science expertise. A lot of companies will have problems. And so there’s strategic consulting, there’s technical consulting and so on. So those are companies that use management science as a product or service directly.

Then on the other level, there’s also that management science is used for companies in their operations or marketing or finance. So if you take, for instance, Proctor & Gamble or Air Canada, and all these companies – they have management science departments. Now they might not use the words management science – it could be called other things like operations research, operations management or decision support – all these names. But they use the management science tools in order to make the operations or the marketing or the finance – the human resources – more efficient and improved. It’s very fascinating to me when I think about what contribution does management science bring to the bottom line. You know finance. You know marketing. You see the stock exchange. You see the figures in the news and so on. You see marketing. You see an ad on TV, or whatever. You’re sort of aware of what area of business that you’re exposed to. Now management science is just like a secret or hidden entity that’s just – it’s all over the place – but you don’t know about it.

Is management science being used increasingly by companies today?

Yes, it is. So management science, compared to the other subjects in business or in other schools, is rather young. It grew up out of the post-World War II era. So, it’s like 50, 60 years old and so that’s why, you know, compared to finance, marketing, it’s a much younger field. And this is now where you see a huge growth. So, for instance, if you take health care – health care is one of these expanding areas that is using more and more management science because there’s lots of big problems. You have waiting times and everything. The same thing in industries. Now a lot of companies, like particularly airline companies, they are competing on very, very small margins and you have to use management science to be able to like be better than your competitor with maybe one per cent or half a per cent or something like that. And so it’s increasingly being used more and more.

That was Fredrik Odegaard, Assistant Professor of Management Science, Richard Ivey School of Business.