This paper is to be presented at the 39th Annual Fall Meeting of the Society of Petroleum Engineers on Oct. 11–14, 1964, in Houston, Tex., and is considered the property of the Society of Petroleum Engineers. Permission to publish is hereby restricted to an abstract of not more than 300 words, with no illustrations, unless the paper is specifically released to the press by the Editor of JOURNAL OF PETROLEUM TECHNOLOGY or the Executive Secretary. Such abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in JOURNAL OF PETROLEUM TECHNOLOGY or SOCIETY OF PETROLEUM ENGINEERS JOURNAL is granted on request, providing proper credit is given that publication and the original presentation of the paper.
Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussion may be presented at the above meeting and considered for publication in one of the two SPE magazines with the paper.
The paper will discuss the use of mathematical models for the development of top-management strategy. A generalized model of a corporation operating simultaneously in all four of its basic operating environments will be developed.
A second model dealing with the timing of new product announcements and new-product-announcement strategy will also be developed.
It will be shown that while mathematical models are not intended as a substitute for management judgment, they can be used to narrow the range over which corporate decisions must be made on the basis of judgment alone.
After I had accepted the Society's invitation to participate in this discussion of new developments in corporate planning, and agreed to speak on "A Corporate Model as a Decision-Making Tool", I could not help but wonder what was really new in corporate planning, or more generally, in the area of applying quantitative techniques to management or policy decisions. The subject of model-building itself is quite broad, and could easily cover a wide multitude of sins. After developing my arguments, I suddenly realized that what I have to say is, indeed, not very new.
Consider the use of simulation techniques. A young economist had just developed an analog simulation of the pricing mechanism. To justify his simulation he wrote, "The elements which contribute to the determination of prices are represented each with its appropriate role and open to the scrutiny of the eye. We are thus enabled not only to obtain a clear and analytical picture of the inter-dependence of the many elements in the causation of prices, but also to employ the mechanism as an instrument of investigation and, by it, to study some complicated variations which could scarcely be successfully followed without its aid." I think we would all agree that this statement could have appeared in a recent issue of Operations Research, Management Science, or almost any business publication. The factors in this statement appear in Irving Fisher's "Mathematical Investigations in the Theory of Value and Prices" which was published in 1892. This study is Fisher's doctoral thesis which was prepared between 1888 and 1891. This statement is at least 73 years old.
I then considered the general need to be more quantitative in our analyses. This is not a particularly new thought. Alfred Marshall, reviewing the state of economic science before the Royal Economic Society in 1906, noted that "Qualitative analysis has done a greater part as its work" and that the "higher and more difficult task" of quantitative analysis "must wait upon the slow growth of thorough and realistic statistics." In many cases, we have been waiting for the past 55 years. At this point, we may wonder, "Is there really any-thing new under the sun?"
