Illustrating Information’s Impact

 

In my previous blog I used the dopey literary device of furthering the idea that a management science concept could be legitimately evaluated in a fictional setting. However, many business insights can be gleaned from analogous non-fictional events, especially war events, which is perhaps why battle analysis is such a popular exercise of management writers. In wrapping up our November theme of information technology and its impact on management, I want to evaluate some common but wrong-headed management science concepts, and how they are shown to be invalid by the way that events unfolded at the Battle of Midway.

Midway is an atoll, as the name implies, approximately midway across the Northern Pacific Ocean. After the Doolittle Raid against Japan in April 1942, the Japanese high command sought to extend the defensible perimeter around the home islands, and elected to invade and conquer Midway. And the Imperial Japanese Navy was fully capable of doing so – they had six large attack aircraft carriers, and multiple smaller carriers, battleships, cruisers, and support craft, manned and piloted by highly-trained and experience crews. Conversely, the United States had only three aircraft carriers, and one of those, the Yorktown, had been badly damaged at the Battle of the Coral Sea in May. The American aircraft could not perform as well as their IJN counterparts, and there were fewer of them. In fact, by any measure of pre-battle analysis, the situation for the U.S. Navy was virtually hopeless. But, the USN had one key advantage: they had better information.

The Japanese Naval code, nicknamed JN-25, was extremely sophisticated and considered unbreakable. However, American cryptologists had made impressive progress in reading IJN communications, and were becoming aware of an IJN target named “AF,” though it was unclear where AF was. A junior naval officer suggested that the commander of Midway transmit a plain signal that they were low on drinking water, and it was approaching crisis levels. Soon after, a JN-25 message was intercepted indicating  that AF was low on drinking water, and the USN knew that Midway was the target. By interpreting further communications, the Americans became aware of almost the entire Japanese order of battle, including major units assigned and an approximate timetable.  Admiral Chester Nimitz decided that his best response would be to place his only available carriers, Enterprise, Hornet, and the hastily and only partially-repaired Yorktown, in a position north and east of Midway, to counter the Japanese assault.

Conversely, Admiral Chuichi Nagumo had no idea that the Americans had been tipped off to his intent, much less his approximate order of battle. Nor was he aware that the USN had any units at all in a position to counter his mission. As he approached Midway, Nagumo had his four carriers prepare for an attack against ground targets, with some reserve aircraft prepared to attack ships in the unlikely possibility that the Americans had naval units in the area. On 4 June 1942 IJN carrier-based bombers attacked Midway, but failed to damage its facilities sufficiently to allow the commencement of the ground assault. As if to punctuate the need for another strike against the island, a wave of Midway-based high-altitude bombers arrived over the Japanese fleet, and dropped their bombs. Even though none hit, the need for another hit against Midway was apparent. As the first wave of Japanese dive bombers were returning, needing to refuel and requesting to be re-armed with more ground-assault ordnance, the scout seaplane from the cruiser Tone radioed in with the worst possible news – it had sighted an American fleet, including what appeared to be an aircraft carrier. Nagumo finally decided that the planes that had already been armed for ground assault be re-armed for naval targets, and that the returning aircraft would be recovered and refueled prior to the launching of the next assault.

It was at this moment that the American carrier-based planes converged on Nagumo’s task force. Once the torpedo planes were virtually wiped out by patrolling Zeros, the American dive bombers had scarcely-defended approaches to the Japanese carriers, three of which were reduced to blasted, burning metal within minutes. The Japanese would go on to lose all four of the participating carriers, along with over 3000 valuable pilots and crews, while the Americans lost the damaged Yorktown, destroyer Hamann, and 307 pilots and crew.

 So, what are the management science lessons here? As I discuss in my recently-released, must-have book, Game Theory in Management (Gower Publishing, 2012), I believe that no asset manager in the world would had advised Nimitz to even try to defend Midway – the imbalance of material was simply too stark, and the opportunity for exacting enemy losses remote. Similarly, which commonly-practiced risk management technique would have yielded a go-ahead advisory to Nimitz?  Note that the battle-winning intelligence had nothing to do with estimating the odds of the Japanese selecting a particular approach – the intelligence simply rendered an accurate picture of what was actually happening, real-time. In reality, the only advantage the USN had was in their pre-battle information – in every other category, the Americans were hopelessly overmatched, and yet the value (or even existence) of a superior information stream, providing timely, accurate, and relevant information, is not even taken into account in the business models of the asset or risk managers. In my thinking, this reveals the asset and risk management information streams to be far more confined in their range of efficacy than has been advertised.

What’s the value of information technology to management? It changes history.