Abstract for: "Where Did the $300 million Go?": Using Systems Thinking to Solve a 9-Figure Problem

A Sunnyvale-based Internet company builds its own data centers, a huge capital expenditure (capex). At the latest CEO meeting, an annual capex budget overrun of $300 million was reported. The original budget was $400 million. Actual spending was $700 million. No one in the company was able to answer the question from the CEO, “Where did the $300 million go?” This situation could not continue. The firm's senior executives decided the solution would be to design and implement a monitoring and reporting system required to control capital expenditures. Systems thinking was used to design the proper control system. Essential to the design were the concepts of observability and controllability. A system was designed with cross-functional and cross-border stakeholders. A program was launched to implement the newly developed capex control system using a holistic approach. The following year, capital expenditures came in below budget by $50 million. The savings were attributed to tighter measurement and control and to a mindset change regarding spending behaviors. A big question remains: "Can last year's success be replicated this year?" Systems thinking has applications at the macro, micro, and nano levels. There is no problem that is too big or too small. Significant financial benefits are possible using systems dynamics. Systems dynamics can also save you your job. One future direction of the work is applying artificial intelligence in real-life project planning and execution.