The Adaptive Market Pattern - An Introduction

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What's it all about?

Earlier in this thread, I've written about the common need to use the available tools effectively when trying to solve a problem. I'd like to generalize this a bit:

    How can we best select and instruct service providers in order to accomplish tasks effectively?

My proposal is to regard the community of service providers as a free market in which those offering services and those desiring services are free to enter into contracts for the provision of services and for compensation for having done so.

The market will be described as adaptive, as opposed to static, in recognition of the fact that many properties of the participants will change over time, including capability, capacity, resources, standards, and reputation.

I'll speak of those offering services as agents and those desiring services as clients. A participant can be both client and agent within the context of a task.

Using this terminology, the question I'll be exploring in this work is:

    How can we best select and contract with agents in order to accomplish tasks effectively?

I'm going to start this exploration by considering two cases - an individual wanting a fountain for his garden, and a company wanting to acquire expert technical advising services - and then abstracting from them a model of selecting and contracting with agents to perform tasks effectively.

Case One - Creating a fountain for my garden

Suppose that I have a garden, that I have dreamt of a fountain that would anchor one branch of it, and that I have finally saved up enough to realize my dream.

How should I go about getting my fountain built and flowing?

I know little or nothing about where to buy the stone, containment, plumbing, pumps, lighting, and control mechanisms, let alone providing water and electrical service to the fountain site.

I want to hire someone professional to take my sketches and my money and turn them into the quality fountain that I envision.

First, it will help if I have a clear idea of what I want built. Sketches, diagrams, and photographs of the setting will help, as will photographs of similar fountains and settings. Anything that I can pin down (e.g. stone preferences, sounds, lighting) will help to inform and constrain the design discussions that I participate in.

I'll need to identify the constraints that I'm working under (e.g. budget, timeframe) as well as my preferences (e.g. desire to participate, tolerance for disruption and noise).

I'll need to identify some contractors that can arrange for the construction and installation of my fountain. My sources of information may include the yellow pages, advertisements in gardening magazines, Google, X's List, friends, family, neighbors. While all of these may provide leads on contractors, some of them may also provide some information on the reputation of relevant contractors, hopefully based upon the experience of former clients.

Having identified a pool of contractor candidates, I'll filter several of them out based upon location, reputation, advertised experience, interests, and price.

I'll research the few remaining candidates further, emphasizing resources that can provide me with accounts of client interactions with the candidates, projects that the candidates have completed, and any further pricing information.

I'll start contacting each candidate, asking for an opportunity to discuss my project with each.

I'll meet with each candidate that is available, describing my project using sketches, diagrams, photographs, stone samples, and whatever else helps me to communicate my vision. Each candidate should explain his/her estimation process, experience with similar projects, ideas for this project, availability, and pricing framework.

Having had a preliminary discussion with each interested candidate, I'll then review each candidate and filter out those that don't seem right for the job.

Based upon the discussions that I've had, I'll prepare a more complete description of what I want built and a set of constraints (e.g. scheduling, disruption, participation and review) that I'll want the work completed under. These will constitute my requirements for the task.

I'll then ask each remaining candidate to prepare an estimate based on my requirements. I'll also encourage each candidate to provide me with supporting materials such as photographs of similar projects that they've completed. I'll ask to recieve these estimates and materials by a specified date. These estimates may be regarded as bids for the project.

Once my deadline for bid submission has passed, I'll review each of the bids that I received, evaluating them based upon price, schedule, my estimation of capability and capacity, and reputation.

I'll contact the candidate that offered what I regard as the best bid and suggest that we negotiate a contract for the project. Upon entering into a contract with one contractor, I'll inform the other contractors that bid on the project that I've chosen another.

I'll skip the fulfillment of that contract by both parties, except to note that the contractor that I selected did not do several aspects of the work, but subcontracted it out to several contractors who specialize in excavation, masonry, plumbing, electrical work, and lighting.

If I am not pleased with some aspect of the work performed with the contract, I'll take it up with the contractor. If it isn't resolved to my satisfaction, I'll take my complaint to some form of adjudication, one permitted or required by the contract.

On completion of the project, I'll find more than one way of communicating my pleasure or displeasure to the contractor, various reputation registries (e.g. Better Business Bureau, X's List, discussion group, blog).

Finally, I'll sit in my garden and enjoy my wonderful fountain.

Case Two - Acquiring technology advising services

Suppose the company Acme Algorithmics is considering the use of Technology X as a central part of its IS infrastructure (someone persuasive went to a conference), but Acme doesn't have anyone on staff that is very familiar with, let alone expert in, Technology X.

Acme decides that it needs to acquire expert advising services on Technology X, both with regard to some activities that they have in mind and to place on retainer. The activities that Acme envisions using these services for in the near future include education of executives and management, training of staff, and evaluation of implementations of Technology X.

After several internal discussions, Acme prepares a Request for Proposals that contains a detailed statement of the services that it desires, the constraints it requires, and the protocol underwhich bidding and bid evaluation will proceed.

Acme uses a variety of resources to identify potential service providers and researches those that it deems most likely to succeed. In addition to location, reputation, and advertised capabilities and pricing frameworks, Acme also considers the size of each company, how long it has been performing this particular service, and the set of clients that it boasts of.

Acme selects a set of candidate service providers and sends the Request for Proposals to each, specifying the protocol to be used for clarification and the due date for proposals.

Each of the candidate service providers that is interested enough to prepare a proposal tasks a team with preparing a proposal in response to the Request for Proposals. The team may communicate with Acme in accordance with the protocol for any clarification that it needs to prepare a competitive proposal. The proposal will undergo internal review by legal, business, and technical groups before being submitted to Acme. One appropriate response to the Request for Proposals may be to decide that a candidate does not want to submit a proposal, due perhaps to scheduling, capacity, capability, or business relevance concerns, as well as the reputation and demands of Acme.

While candidates are preparing their proposals, Acme is preparing the process under which proposals will be reviewed, including how proprosals will be scored.

Once the deadline for proposal submission has passed, Acme will begin to review proposals, request clarification as needed and as permitted by the bidding protocol, and score proposals. The team evaluating proposals will make a recommendation to management, which, we shall assume, decides to approach the winning candidate and propose the negotiaton of a contract. Once a contract has been negotiated, the losing candidates are informed of the outcome.

Both Acme Algorithmics and the winning candidate will contribute to the reputation of each other during the course of the contract and after.

Some interesting issues

Several interesting issues are suggested by these cases. They include:

• How does a client identify potential agents?
• How does a client come to understand and set its own priorities?
• How does a client know how to prepare a task description or task requirements?
• How does a client reduce the number of candidates to a set that it can afford to evaluate?
• How is information on reputation gained and evaluated?
• How does a client research serious candidates and evaluate what it learns?
• How does a client learn to interpret signals in the interaction process?
• How are deviations from protocols handled?
• How are deviations from the contracting process handled?
• Who owns or has rights to what information derived from or obtained during these processes?
• How should performance and outcome affect contributions to reputation?
• Does there need to be / should there be any central authority, repository, or adjudicatory institition?
• Does evaluating clients on age, size, and experience risk the blocking out innovators?
• What, if any, is the role of certification?
• How can the interactive movement towards an engagement be facilitated?
• Is a contract the best way of formalization a planned engagement?
• What is the nature of reputation?
• How can reputation accurately be ascertained?
• How can one detect and adjust for attempts to game reputation?
• How can protocols - patterns of behavior - be developed and used wisely?
• What is the role of standards?
• What are the roles of public knowledge and private knowledge and what advantages do they convey?

For each of the statements involving a client, there is a corresponding statement involving an agent.

I'll consider each of these questions in future posts. They'll shape the direction of this inquiry.

Opportunities to make use of the adaptive market pattern are seen everywhere once you start looking for them.

A bit of abstraction - some concepts and terminology

Participants in the market act either as clients, agents, or both.

Clients seek the assistance of agents in accomplishing tasks and seek to enter into contracts with agents to accomplish tasks in exchange for compensation.

A task may be hierarchically structured, in which tasks at each level are split into multiple subtasks at the next level. An agent charged with performing a task may also be a client of agents charged with performing subtasks of that task.

A registry is maintained and made accessible by a service provider as a repository of record for protocols, standards, processes, contracts, complaints, and judgements.

A directory is maintained and made accessible by a service provider as a collection of advertisements of services offered.

I'm going to stop here for tonight. An MI-5 DVD and a mystery novel are demanding some of my time.

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