Introduction System Dynamics Un instrument for System Thinking

Introduction System Dynamics

Un instrument for System Thinking

Learning Objectives

After this class the students should be able to: recognize their cognitive capacity limitation

to deal is dynamic systems; understand the mean concepts of

System Dynamics, such as feedback loop, delays; and archetype of systems; and

interpret System Dynamics diagrams

Time management

The expected time to deliver this module is 50 minutes. 20

minutes are reserved for team practices and exercises

and 30 minutes for lecture

An experiment

Suppose a simple supply chain that has been in steady-state for some time. The Retailer’s inventory

has been constant at some level for a long time,

steady-state supply chain

A retailer maintains an inventory of product that is shipped to customers on demand.

Upon shipping, the retailer always orders immediately from his supplier the same amount of product just shipped.

The supplier also is very regular. He always deliveries the product to retailer 7 days after the he places the order.

The supplier has never been out‑of‑stock (and never will be!).

No product shipped by the supplier is ever, or will ever be, defective, damaged or lost in transit.

Demand changes

Suppose, all of a sudden, the volume of demand from customer coming into the retailer steps up to a new higher level, and then remains there.

Sketch the new behavior

On the axes provided in Figure I, sketch the pattern you think will be traced by the level of the retailer's inventory, over time, following the one‑ step‑increase to customer demand. ( Each team has 5 minute to give a answer. )

Figure 1

The retailer's inventory behavior

following the step‑increase in demand, the Retailer's inventory will decline in a straight‑line manner for 7 days; it then will level off and remain at the new, lower level.

Cognitive Capacity limitation

“In the long history of evolution it has not been

necessary until very recent historical times for

people to understand complex feedback

systems. Evolutionary processes have not given

us the mental ability to interpret properly the

dynamic behavior of those complex systems in

which we are now imbedded.” Forrester, 1973

System Dynamics

In particular, to analyze how the interaction between structures of the systems and their policies determine the system behavior

Methodology to study systems behavior

Filling a cup of water

Each team is invited to describe through any kind of diagram (or algorithm) the process to fill a cup of water. Imagine this as an exercise of operation management. (10 minutes)

Desired Water Level

Perceived

Gap

Faucet

Position

Current

WaterLevel

WaterFlow

Language: causal diagram

Feedback loop and Delay

When we fill a glass of water we operate in a "water‑regulation" system involving five variables:

our desired water level, the glass's current water level; the gap between the two; the faucet position; and and the water flow.

These variables are organized in a circle or loop of cause‑effect relationships which is called a "feedback process.“

Delays are Interruptions between actions and their consequences

Desired Water Level

Perceived

Gap

Faucet Positio

n

CurrentWaterLevel

WaterFlow

Delay

Feedback loop with delay

Desired Water Level

Perceived

Gap

Faucet

Position

Current

WaterLevel

Water

Flow

The means of arrows

Desired Inventor

y Level

Perceived

Gap

OrderPlaced

CurrentInventory

Level

Supply Line

-+ -

+

+

+ Balancing Process for Adjusting Cash

Balance to Cash Surplus or Shortage

Negative feedback

Sales

Satisfied Custome

rs

Positive Word Mouth

+

Reinforcing Sales Process Caused by Customers Talking to Each Other About Your Product

Positive feedback

Archetypes of systems

Certain patterns of structure recur again and again. These generic structures are named "systems archetypes".

Archetype systems are a set of reinforcing and balancing feedback and delays interconnected.

A relatively small number of these archetypes are common to a very large variety of management situations.

Approach developed to study system behaviors taking into account complex structures of feedbacks and time delays.

The industrial environment, seen as a set of stocks and activities linked by flow of information and flow of material submitted to time delays, is a typical object for System Dynamics study.

Creating our own Market Limitation

People Express example

People Express example

Reference

Peter Senge, The Fifth Discipline, 1990 Chapter 5

Decisions

Real World

Information Feedback

Strategy, Structure, Decision Rules

Mental Models

Virtual World

SelectedMissingDelayedBiased

Ambiguous

ImplementationGame playingInconsistency

Short term

Unknown structureDynamic complexity

Time DelaysImpossible experiments

MisperceptionsUnscientific

BiasesDefensiveness

Known structureVariable Complexity

Controlled Experiments

Learning in and about Complex Systems

Sterman (1994)

Inability to infer dynamics from mental models

Dynamic Complexity arises because systems are…

Changing over time

Tightly coupled Governed by

feedback Nonlinear:

changing dominant structure

History-dependent

Self-organizing Adaptive Counterintuitive Policy resistant Characterized

by tradeoffs

System Dynamics Contributions Thinking dynamically

Move from events and decisions to patterns of continuous behavior over time and policy structure

Thinking in circular causal / feedback patterns

Self-reinforcing and self-balancing processes

Compensating feedback structures and policy resistance

Communicating complex nonlinear system structure

Thinking in stocks and flows

Accumulations are the resources and the pressures on policy

Policies influence flows Modeling and

simulation Accumulating (and

remembering) complexity Rigorous (daunting) model

evaluation processes Controlled experiments Reflection

The system dynamics modeling process

SystemConceptualization

ModelFormulation

Representation ofModel Structure

Comparison andReconcilation

Perceptions ofSystem Structure

Empirical andInferred Time

Series

Comparison andReconciliation.

Deduction OfModel Behavior

Adapted from Saeed 1992

Processes focusing on system structure

EmpiricalEvidence


ModelFormulation




Mental Models,Experience,Literature

Diagramming andDescription Tools

Processes focusing on system behavior

EmpiricalEvidence


ModelFormulation

Literature,Experience


Series



ComputingAids

Two kinds of validating processes

EmpiricalEvidence


ModelFormulation




Mental Models,Experience,Literature

Literature,Experience


Series



Diagramming andDescription Tools

ComputingAids

StructureValidatingProcesses

BehaviorValidatingProcesses

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

Six Traditions Contributing to the Evolution of Feedback Thought•Biology: math models•Econometrics•Engineering•Social Sciences•Biology: homeostasis•Logic

Two Threads of Feedback Thought•System dynamics arises in the servomechanisms thread(the first four in this list)

Forrester’s Hierarchy of System Structure Closed boundary around the system Feedback loops as the basic structural

elements within the boundary Level [stock] variables representing

accumulations within the feedback loops Rate [flow] variables representing activity

within the feedback loops Goal Observed condition Detection of discrepancy Action based on discrepancy

The Endogenous Point of View

The closed causal boundary takes top billing

Dynamics arise from interactions within that boundary

Systems thinking is the mental effort to uncover endogenous sources of system behavior.

Dynamics

New York City Population, 1900-2000

9000000

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000

01900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

BronxBrooklynManhattanQueensStaten Island

9000000

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000

01900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

BronxBrooklynManhattanQueensStaten Island

Global Atmospheric Methane (1860-1994)

Global Atmospheric Methane

0

50

100

150

200

250

300

350

4001860

Global Atmospheric Methane

0

50

100

150

200

250

300

350

4001860

Global Average Temperature (Reconstruction 1400-1980; Data 1902-1998)

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

Stocks and Flows

Stocks and flows help to explain self-reported drug use data

Potentialusers

Occasionalusers

Frequentusers

Past users

Haveeverused

The Simplified Structure--p. 133

No. of pass. carried

Fleet size & flights

Revenues

Reputation

Delay

Service quality

Service capacityPerceived need to improve quality

Service quality standard

Additions to service capacity

Delay2

R B

B

Structure

state of stockgrowing action slowing action

BalancingReinforcing

The Simplified Structure--variables NAME MNEMONICActual Inventory AIDesired Inventory DIOrder Rate ORAdjustment Time AT

Inventory

Desired inventory

Adjustment time

Order rate dEMAND

The Simulation Structure--Reinforcing Loop

No. of pass carried/yr

Revenues/yr

Avg. Revenue/pass

Fleet capital

Addns to fleet capital

Rev. to fleet fract

Flights/yr Flights/$-yr

Deprec

Lifetime

Avg. load factor

R

‘Challenging the clouds’ in a study of leasing in the automobile industry

“We’re not in the used car business!”

New vehicleinventory

Production Purchaseor lease

?

Stocks and flows in new car purchase and leasing

New vehicleinventory

Production

Vehiclesbeing driven

Purchaseor lease

Scrapping

Usedinventory

Sell ortrade in

Purchaseused

Relativeattractivenessof leased cars

Trade cycle

Intuitive view of effect of leasing on auto sales:

Leased car pipeline

Stock

SalesStrength of the economy, price

Stocks and Flows in Global Warming

Capitalstock

capitalinvestment

AtmosphericCO2CO2 annual

productionBreakdown of

atmopheric CO2

Economicactivity

Global heatenergyincoming solar

heat energyoutgoing global

heat energy

Thought experiment:

Earth Ocean and Atm heat

Earth ice

Net thawing

Earth heat radiation

Earth water Water vapor in atm

Condensation

Water in clouds

Cloud cover~

GH gas reten efct

Evaporation

Precipitation

~

Cloud reten efct

Solar heat incoming

Atm temp

Surface temp

Solar heat reaching earth

~

CO2 reten efct

Atm volumeWater vap conc

Ice cover

Aerosols in atm

Atm volume

Aerosol production

GH gases in atm

Aerosol breakdown GH gas production GH gas breakdown

Aerosol concentration

~

Aerosol albedo efct

Life of GH gases in atm

Water density

Total albedo

GH gas concentrationAtm volume

CO2 in oceans

Life of aerosols in atm

Carbon in ocean biomass

Ocean photosynthesis

Ocean biomass decay

Ocean CO2 breakdown

CO2 in atm

CO2 ocean release

CO2 ocean uptake

Carbon in earth biomassAtm CO2 breakdown

Atm CO2 production

Atm volume

CO2 atm conc

Ocean CO2 production

Earth water volume

Earth photosynthesis

Earth biomass decay

Ice thickness

Ice density

Earth area

CO2 water conc

Cloud volume

Ice volume

Ice areaCloud area

Earth area

Cloud density

Cloud thicknessWater vap reten efct

Evap factor

~

Net thawing factor

~

Ice and cloud cover

But although the stock-and-flow insight holds, global climate is of course much more complex than that.

And still much more complex than this simple global climate model, as well!

Feedback Thinking

“For one good deed leads to another good deed, and one transgression leads to another transgression.” (Pirke Avot)

The Classic Cybernetic Balancing Loop

Goal Perceivedgap

Plannedaction to

reduce gap

Implementedaction

Intendedactions

Actual state ofthe system

Perceivedstate

Implicit,unstated goals

Changes inthe State ofthe system

The Cybernetic Loop with Complications

Goal Perceivedgap

Plannedaction to

reduce gap

Implementedaction

Intendedactions


Perceivedstate

Autonomouschanges in the state

of the system




Goal Perceivedgap

Plannedaction to

reduce gap

Implementedaction

Intendedactions


Perceivedstate

Unintendedactions


of the system




Goal Perceivedgap

Plannedaction to

reduce gap

Implementedaction

Intendedactions


Perceivedstate

Unintendedactions


of the system

Ramifyingeffects



A Classic Reinforcing Loop(Myrdal 1944, Merton 1948)

Prejudice against the minority group

Majority’s perception of the inferiority of the

minority

Economic and educational

discrimination against the minority

Achievements of the minority group

(R)

Structure and Dynamics of Terrorist Cells

Recruiting terrorists

Terrorist group

Losing terrorists

Terrorist actions

Efforts to suppress terrorists

Terrorist zeal

Peripheral support for terrorists

Terrorist funding

Terrorist martyrs to the cause

(R)

(B)(R)

(R)

(R)

(B)

(R)

(R)

Interfering with terrorist funding

(B)

(B)

Teamwork and Communication are self-reinforcing

Insights about building teamwork in a public schoolInsights about building teamwork in a public school

Quality ofcommunication

Trust

Risktaking

Teamwork

+

+

+

(+)


within teams

+

+

Resistance toteamwork

-

Isolation of teams and punishing risk-taking inhibit the growth of trust


Trust

Risktaking

Teamwork

+

+

+

Quality ofcommunicationbetween teams

+

(+)

Individualexperiments

Positiveresponses toexperiments

+?

+

(+/-)


within teams

+

+ -(-)


-

But longterm experience with teamwork can build communication


Trust

Risktaking

Teamwork

+

+

+

Cumulativeexperience with

teamwork

+


++

(+)



+?

+

(+/-)


within teams

+

+ -

+

(-)

(+)

Teameffectiveness


-

-

+ +

Risk taking can enhance effectiveness, which can build trust


Trust

Risktaking

Teamwork

+

+

+


teamwork

+


++

(+)



+?

+

(+/-)


within teams

+

+ -

+

(-)

(+)

Teameffectiveness


-

-

+

Personal learning+

Average personaleffectiveness+

+

+

A team-player culture is self-reinforcing: an opportunity or a trap


Trust

Risktaking

Teamwork

+

+

+


teamwork

+


++

(+)



+?

+

(+/-)


within teams

+

+ -

+

(-)

(+)

Teameffectiveness


-

-

+

Personal learning+


+

+

Attractivenessof the org toteam players+

Fraction ofstaff who areteam players

+

+

Likely leverage points


Trust

Risktaking

Teamwork

+

+

+


teamwork

+


++

(+)



+?

+

(+/-)

Quality ofcommunicationwithin teams

+

+ -

+

(-)

(+)

Teameffectiveness


-

-

+

Extent ofLearning

Organizationcharacteristics

present

Admteaching

role

+

+

Personal learning+


+Understanding

stages ofcommunity

building

+

+

Attractivenessof the org toteam players+

Fraction ofstaff who areteam players

+

+

Dialoguetraining

+

+

The Problem: 1996 U.S. welfare reform

Since 1930, a guarantee of lifetime Federal support

1996 legislation ended that: Temporary Assistance for Needy Families - TANF At most five years of Federal support in one’s lifetime

The clock started for everyone on TANF in 1997 People began timing out in 2002 Financial burden will begin shifting to the states

and counties A series of facilitated group modeling efforts in

three New York State counties tried to help counties cope. Where are the leverage points?

Three Policy Mixes Base run (for comparison)

Flat unemployment rate Historical client behaviors

Investments in the “Middle” Additional services to TANF families Increased TANF assessment & monitoring Safety net assessment & job services

Investments on the “Edges” Prevention Child support enforcement Self-sufficiency promotion

Investing in the “Middle”

Investing on the “Edges”

Base, “Edges,” and “Middle” Compared:Populations on the Welfare Rolls

“Edges” looks better.

Total Job-Finding Flows from TANF

“Middle” looks better.

Program Expenditures

“Edges” looks worse, then better.

Populations in the Welfare System

“Middle” looks worse than “Base”! “Edges” looks much better.

Total Recidivism Flows (back to TANF)

The hint for understanding the puzzling dynamics: recidivism.

A Stock-and-Flow Archetype at Work Here

Families onTANF

Post TANFemployedJob finding

rate

Recidivism

Load on employmentsupport capacity

Probability ofrecidivism

+

+

Time to findfirst job

Load on TANFsupport capacity

To mainstreamemployment

-

Enter TANF

(R) (R)

(R)

6,000

4,500

3,000

1,500

0

0 6 12 18 24 30 36 42 48 54 60Time (Month)

Families on TANF : archetype base familiesPost TANF employed : archetype base familiesTotal families at risk : archetype base families

Behavior of the Archetype in response to increased TANF support capacity

Total families at risk

Post-TANF employed

Families on TANF

The Behavior of the Archetype

Families on TANF initially declines, as more support hastens job finding.

Post-TANF families employed initially increases, just as policy makers would predict.

Eventually (it takes a year and a half to begin to see it), … Families on TANF rises higher to a new high, Post-TANF Employed declines to a new low, And Total Families at Risk rises!

…All because of increased TANF support capacity!

Enter TANF Families onTANF+

-

Recidivism

+

Outflow from postTANF employ

Post TANFemployed

Time in postTANF employ

Job findingrate +

-


-




TANF supportcapacity


Post TANF employmentsupport capacity

Why? • Increasing TANF support• Speeds job finding, • Swamping downstream Post-TANF jobs and support

Misattribution? Desirable rise in Post-TANF employed

continues for almost a year and half after the intervention

Families on TANF falls below initial for over a year after increasing TANF support capacity

Very hard (impossible?) to see that the rise in Total Families at Risk is attributable solely to the improvement in TANF support capacity

Dynamics almost certainly to be blamed on a weakening economy, a rise in client pathologies, or other exogenous factors


-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







A Loop View of the Archetype in Detail

Suppose TANF support capacity increases…

120

B: Employed load controls recidivism

4,000

3,000

2,000

1,000

0

0 30 60 90Time (Month)


-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







White bar (left) is the time slice of interest

Red arrows (below) are the dominant influences

120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







White bar (left) is the time slice of interest

Red arrows (below) are the dominant influences

120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







120


4,000

3,000

2,000

1,000

0



-

Recidivism

+


Post TANFemployed


Job findingrate +

-


-







Dynamic complexity even in a structure this aggregate and tiny!

System Dynamics and Dynamic Complexity Thinking dynamically moves us beyond separate

events and decisions, toward understanding.

Feedback thinking extends traditional causal thinking.

It improves (makes more realistic) how we think about the world and how we think about changing it.

The endogenous point of view is empowering.

Create your own “Shifting the Burden” Story Is there a problem that is getting

gradually worse over the long term? Is the overall health of the system

gradually worsening? Is there a growing feeling of helplessness? Have short-term fixes been applied?

The Casa Olay problem of using cupouns to generate business and then can’t get away from using the coupons because their customer base is hucked on coupons

To structure your problem

Identify the problem Next, identify a fundamental

solution Then, identify one or several

symptomatic solutions Finally, identify the possible

negative “side effects” of the symptomatic solution

Review

We have now seen two of the basic systems archetypes. The Limits to Growth Archetype The Shifting the Burden Archetype

As the archetypes are mastered, they become combined into more elaborate systemic descriptions.

The basic “sentences” become parts of paragraphs

The simple stories become integrated into more involved stories

Seeing Structures, not just Trees

Helps us focus on what is important and what is not

Helps us determine what variables to focus on and which to play less attention to

WonderTech: The Chapter 7 Scenario

A lesson in Growth and Underinvestment

What Senge gets out of this is the Growth and Underinvestment Archetype A combination of variants of the

Limits to Growth Archetype and the Shifting the Burden Archetype

The WonderTech Scenario

WonderTech continues to invest in the growth side of the process. Sales grow but then plateau. Management puts more sales people into the field. Offers more incentives to sales force. But because of long lead times, customers wane. “Yes you have a great product, but you can’t deliver on your lead time promise of eight weeks. We know; we’ve heard from your other customers.” In fact, the company relaxed its lead-time standard out to twelve to sixteen weeks because of insufficient capacity.

The Reinforcing Loop

Number of Orders

Revenues

Size of Sales Force

REINFORCING

The Balancing Loop: Following the LTG Archetype

Number of Orders

Revenues

Size of Sales Force

Size of Backlog

Delivery Time

Delay

Sales Difficulty

The Growth Curve: Page 117

What’s happened?

WT’s management did not pay much attention to their delivery service. They mainly tracked sales, profits, market share and return on investment. WT’s managers waited until demand fell off before getting concerned about delivery times. But this is too late. The slow delivery time has already begun to correct itself. The management was not very concerned about the relaxed delivery time standard of eight weeks.

The WonderTech Scenario

The firm decides to build a new manufacturing facility. But the facility comes on line at a time when sales are declining and lead times are coming back to the eight-week standard.

Of every 10 startup companies, 5 will disappear with five years, only 4 survive into their tenth year and only 3 into their fifteenth year.

The Shifting the Burden Component

Number of Orders

Size of Backlog

Delivery Time

Delay

Sales Difficulty

Production CapacityPerceived need to improve delivery time

Delivery time standard

Planned additions to capacity

Delay2

Put the whole thing together

Comments on The Senge Methodology

Sees problems as conforming to a finite number of “archetypes”

Formulates models based on combinations of the archetypes

Addresses problem-driven situations What about situations and systems that

are technology-driven, dynamics-driven, exogenously-driven, anything but problem-driven

More Comments on the Senge Methodology

But does this become sufficiently general to accommodate all dynamical “scenarios and situations”?

It is difficult to translate his archetypes and causal models into running system dynamics simulations A lot of variables (RATE VARIABLES,

specifically) get left out in terms of connections

More Comments on the Senge Methodology

The focus is on characterizing the dynamics, not on how to capture that in terms of stocks, flows and information paths

He doesn’t label his edges with “+” or “-” signs

Another methodology: The Sector Approach to SD model formulation Begin by identifying the sectors

A “sector” is all the structure associated with a single flow

There could be several states in a single sector Determine the within-sector structure

Reuse existing “molecules” where possible Determine the between-sector information

infrastructure There are no flows and therefore no stocks or

rates here

A Single-sector Exponential goal-seeking Model Sonya Magnova is a television retailer who wishes to maintain a desired inventory of DI television sets so that she doesn’t have to sell her demonstrator and show models. Sonya’s ordering policy is quite simple--adjust actual inventory I toward desired inventory DI so as to force these to conform as closely as possible. The initial inventory is Io. The time required for ordered inventory to be received is AT.

A Two-sector Housing/population Model

A resort community in Colorado has determined that population growth in the area depends on the availability of hoousing as well as the persistent natural attractiveness of the area. Abundant housing attracts people at a greater rate than under normal conditions. The opposite is true when housing is tight. Area Residents also leave the community at a certain rate due primarily to the availability of housing.

Two-sector Population/housing Model, Continued The housing construction iindustry, on

the other hand, fluctuates depending on the land availability and housing desires. Abundant housing cuts back the construction of houses while the opposite is true when the housing situation is tight. Also, as land for residential development fills up (in this mountain valley), the construction rate decreases to the level of the demolition rate of houses.

What are the main sectors and how do these interact? Population Housing

What is the structure within each sector?

Determine state/rate interactions first

Determine necessary supportng infrastructure PARAMETERS AUXILIARIES

What does the structure within the population sector look like? RATES: in-migration, out-

migration, net death rate STATES: population PARAMETERS: in-migration normal,

out-migration normal, net death-rate normal

What does the structure within the housing sector look like? RATES: construction rate, demolition

rate STATES: housing AUXILIARIES: Land availability multiplier,

land fraction occupied PARAMETERS: normal housing

construction, average lifetime of housing

PARAMETERS: land occupied by each unit, total residential land

What is the structure between sectors?

There are only AUXILIARIES, PARAMETERS, INPUTS and OUTPUTS

What are the between-sector auxiliaries?

Housing desired Housing ratio Housing construction multiplier Attractiveness for in-migration

multiplier PARAMETER: Housing units

required per person

System DynamicsDouglas M. Stewart, Ph.D.

Anderson Schools of Management

University of New Mexico

Adapted from Senge, P. The Fifth Discipline, Doubleday/Currency, 1990.

Why System Dynamics

TQM requires a systems view of the world

A new paradigm required See the interrelationships rather

than the linear cause-effect chains See the process of change rather

than a snapshot In systems thinking every influence

is both a cause and effect

Introduction to Systems Diagrams

From any element in a situation you can trace arrows that represent the influence on another element.

Example: Filling a glass of water

Faucet Position

Water Flow

Current Water Level

Perceived Gap

Desired Water Level

Am I filling the glass of water?

Or is the level of water controlling my hand?

Building Blocks of Systems Thinking

Reinforcing Loops (Positive Feedback)

Balancing Loops (Negative Feedback)

Delays

Reinforcing Loops

Sales

Satisfied Customers

Positive Word of Mouth

If the product is good we have a virtuous cycle.

If the product is bad we have a vicious cycle.

Reinforcing Loops

The snowball effect Accelerating growth or

accelerating decline These systems can take you by

surprise!

Balancing Loops

Body Temperature

Desired Body Temperature

Temperature Gap

Adjust Clothing

Balancing Loops

System reverts to status quo Often in business the goals are

implicit When there is resistance to

change, look for a hidden balancing process

Delays: The Sluggish Shower

Current Water Temperature

Temperature Gap

Shower Tap Setting

Desired Water Temperature

Delays

When you tell the story add the word “eventually”

Cause the system to overshoot the target

Aggressive action produces the opposite of what is intended

An Example: Reducing Burnout

Actual Hours Worked

Heroism GapThreat of being perceived as uncommitted

Implicit goal of 70 hour workweek

Archetype 1: Limits to Growth

A reinforcing process is begun to produce a desired result. It works, but also creates unintended side-effect (a balancing process) that eventually slows down success.

Limits to Growth

Growth

Promotion Opportunities

Morale

Motivation and Productivity

Saturation of Market Niche

Size of Market Niche

Where is the leverage?

Limits to Growth

The tendency is to push hard The leverage not in the reinforcing

loop, but removing the limits on the balancing loop

Don’t push growth. Remove the factors that limit growth

Archetype 2: Shifting the Burden

An underlying problem generates symptoms that demand attention.

But…underlying problem is obscure or costly to confront.

So… people shift the burden to other solutions that address the symptoms.

Shifting the Burden

Personnel Performance Problems

Bring in HR Expert

Develop Managers’ Abilities

Expectations that HR Experts will solve problem

Shifting the Burden

Beware the symptomatic solution Benefits are short term at best Pressure on symptomatic response

only gets larger

Archetype 3: Eroding Goals

A shifting the burden type structure where the short term solution is letting the long term goal decline.

Customers are dissatisfied with late schedules. Production scheduling never really under control. Company says we ship to schedule 90% of time. But…every time the schedule begins to slip, they add to quoted delivery times.

Eroding the Goals

Gap

ConditionActions to

Improve Conditions

Pressures toAdjust GoalGoal

Early warning symptom:“It’s OK if our performance standards slide just a little until the crisis is over”

Principle: Hold the vision

Archetype 4: Success to the Successful

Two activities compete for limited resources. The more successful one becomes, the more support it gains, thereby starving the other.

Manager has two protégés. One gets sick for a week, the other gets preferential treatment. The first feeling approval flourishes and therefore gets more opportunity. The second, feeling insecure, languishes and eventually leaves.

Success to the Successful

Allocation to A instead of B

Resourcesto B

Success of B

Resources to A

Success of A

Warning symptom: One of two interrelated activities is beginning to do very well and the other is struggling

Principle: Look for overarching goal to balance both, or decouple the shared resource.

Tragedy of the Commons

Individuals use a joint resource on the basis of individual need. At first they are rewarded for using it. Eventually they get diminished returns, which causes them to intensify their efforts. The resource becomes depleted.

Several divisions use a common retail sales force. Each is concerned that sales force will not give enough attention to their products. One manager sets higher than needed targets. Other managers followed. Sales force becomes tremendously overburdened, performance declines and turnover increases.

Tragedy of the Commons

TotalActivity

Individual B’sActivity

Net GainsFor B

Individual A’sActivity

Net GainsFor A Resource

Limit

Gain perIndividualActivity

Warning Symptom: There used to be plenty for everyone. Now things are tough. I will have to work harder to succeed.

Principle: Manage the commons through education and self-regulation or an official regulation

Archetype 5: Growth and Underinvestment

Growth approaches a limit which can be pushed out with investment in additional capacity. But if investment is not aggressive enough to forestall growth, it may never get made.

People express was unable to build service capacity to keep up with demand. Firm tried to outgrow problems. Deteriorating service quality, increased competition and lower morale followed. Firm relied on underinvestment strategy until customers no longer wanted to fly airline.

Growth and Underinvestment

Number ofPassengers

IncreasedFlights

Revenues

Reputation

ServiceQuality

Perceived needTo improve quality

Additions toService Capacity

ServiceCapacity

QualityStandard

Warning: We used to be best and will be again, but right now we need to conserve resources and not overinvest

Principle: Build in advance of demand as strategy for developing it. Hold the vision on quality standards.

Spend on R&D to Drive Growth

Revenues

R&D Budget

New Products

Size of Engineering Staff

Management Complexity

Management Burden to Senior Engineers

Product Development

Time Senior Engineers Ability to Manage

The growth of survey based business research.

Total #Surveys

Researcher B’sSurveys

Net ResearchFor B

Researcher A’sSurveys

Net ResearchFor A Business Survey

Tolerance

Survey Burnout andResistance

What is a system?

A definition as offered by Gregory Watson in his book, Business Systems Engineering: “System means a grouping of parts that operate together for a common purpose.” (Watson, 1994).

What is a System? (Cont’d) Definition as adapted from Random House Dictionary:

A system is an assemblage or combination of elements or parts forming a complex or unitary whole, such as a river system or a transportation system; any assemblage or set of correlated members, such as a system of currency; an ordered and comprehensive assemblage of facts, principles, or doctrines in a particular field of knowledge or thought, such as a system of philosophy; a coordinated body of methods or a complex scheme or plan of procedure, such as a system of organization and management; any regular or special method of plan or procedure, such as a system of marking, numbering, or measuring (Blanchard & Fabrychy, 1998).

What is Thinking? What, precisely, is thinking? When at the reception

of sense impressions, memory pictures emerge, this is not yet thinking. And when such pictures form a series, each member of which calls forth another, this too is not yet thinking. When, however, a certain picture turns up in many such series, then—precisely through such return—it becomes an ordering element for such series…Such an element becomes an instrument, a concept. I think the transition from free association of dreaming to thinking is characterized by the more or less dominating role which the concept plays in it (Einstein, in Schilpp, 1949).

Connectedness

“If you wish to understand a system, and so be in a position to predict its behavior, it is necessary to study the system as a whole. Cutting it up into bits for study is likely to destroy the system’s connectedness, and hence the system itself.” (Sherwood, 2002)

Connectedness

“If you wish to influence or control the behavior of a system, you must act on the system as a whole. Tweaking it in one place in the hope that nothing will happen in another is doomed to failure—that’s what connectedness is all about.” (Sherwood, 2002).

Systems Theory

General Systems Theory Chaos Theory Quantum Theory Ecological Theory

Systems Principles

Openness Purposefulness Multidimensionality Emergent property Counterintuitivess

Systems Thinking

Problem Solving Tool Pioneered By Biologists Looks At The Whole View Reduces Complexity Controls System Behavior

Systems Thinking Methodologies

Soft Systems Methodologies

Hard Systems Thinking The Fifth Discipline

Systems Thinking Tools

Archetypes Causal Loop Diagrams Stocks and Flows Simple Structure Dynamics

Systems Thinking Models

Archetypes Causal Loop Diagrams Stocks and Flows

Archetype: Fixes That Backfire

The problem symptom alternately improves. It goes down, then comesBack up again and usually comes back worse than before (Senge, 1994).

Original threshold of tolerance

FixProblemSymptom

Unintendedconsequences

delay

Slippery slope

balance

Archetype: Limits to Growth

Growth occurs and sometimes dramatic but levels off and/or falls into decline (Senge, 1994).

ActualperformanceProblem

Symptom

Growth process

Limiting processCorrective

action

Archetype: Shifting the Burden

Three patterns exist side by side. The reliance on short-term fixes grows stronger, while efforts to fundamentally correct the real problems grow weaker, and the problem symptom alternately improves and deteriorates (Senge, 1994).

Limiting process

Quick fixes

ProblemSymptom

Root cause

Sideeffects

CorrectiveActions

delay

Limiting process

Archetype: Tragedy of Commons

Total activity grows, but the gains from individual activities are dropping off. Parts of the organizationare suffering for the whole (Senge, 1994).

A’s growthprocess

B’s growthprocess

A’s growingaction

actual performancethat A measures

A’s limitingprocess

limits or constraints

total growing action

gain perindividual

activity

B’s limitingprocess

B’s growingaction

TRAGIC DEGRADATIONPROCESS

actual performance

that B measures

delay

Archetype: Accidental Adversaries

Each sides performance either declines or stays level and low, while competitivenessIncreases over time (Senge, 1994).

A’s activity with B(actions in B’s favor)

B’s activity with A(actions in A’s favor)

A’s unintendedobstruction of B’s success

B’s unintendedobstruction of A’s success

A’s success

B’s success

A’s fixes toImprove A’sown results

B’s fixes toimprove B’sown results

Causal Loop Diagrams

Pressure on the Government to stay

Within cost

Pressure on the Government to deliver

A workable system

Requirement for high Technical and service

Quality standards

Pressure on the GovernmentTo satisfy

the taxpayers

S

O

O

S

S

S

Dependency of theGovernment on the

contractor

Policy of outsourcing

Risk to the Government ofCost escalation

S

S

S

S

Pressure on the Government to control

Costs and quality

Pressure on the Government to control

The contractor

Quality of theGovernment-Industry

relationship

Pressure fromContractor forMore Dollars

Risk of cost overruns

S

S

S

Government CostModel Adapted

From Sherwood’sCausal Loop

Diagrams

My Goals Your Goals

My Consumption ofDollars

Your Consumption ofDollars

Total WorkCapacity

WorkAvailableMy Need for Work Your Need for Work

My fear that you willNot leave enough work

me

Your fear that I willNot leave enough work

you

- + -

+

++

++

++

+

-

-

Conflict

Number of activities competingFor work

-

-

Causal Loop Diagram

Option 1: Two reinforcing loops (Sherwood, 2002)

Causal Loop Diagram

Option 2: Limit consumption—before turf war (Sherwood, 2002)

My Goals Your GoalsMy Consumption of

DollarsYour Consumption of

Dollars

Total WorkCapacity



me


you

- + -

+

++

++

++

+

-

+

Appeal toA higherauthority

Police the Work allocation

-

+

- -

My Goals Your Goals

My Consumption ofDollars

Your Consumption ofDollars

Total WorkCapacity



me


you

- + -

+

++

++

++

+

-

Recognition ofThe need forcooperation

-

Causal Loop Diagram

Option 3: Players See the Sense in Cooperation (Sherwood, 2002)

My willingness toParticipate in a cooperative

Goal-setting process



++

- -

Causal Loop Diagram

Best Solution: Goals Match—Combined Benefit!

Causal Loop Diagram

My Goals Your GoalsMy Consumption of

DollarsYour Consumption of

Dollars

Total WorkCapacity



me


you

- + -

+

++

++

++

+

-

Recognition ofThe need forcooperation

-





++

- -

Mutual Trust

+ +

Time Time

Goal

State of The System

Net IncreaseRate

+

+

R B

state of the system

state of the system

state of the system

Correctiveaction

discrepancy

Goal (desiredstate of

the system)

-

+

+

+

System Dynamics: Growth and Goal Seeking Structure and Behavior

Stocks and Flows

Inventory

Stock

Production (inflow) Shipments (outflows)

source sink

Valves represent the flow of inventory into and out of the warehouse

Sources and sinks are outside the model boundary.

Stocks and Flows are used in Causal Loop Diagrams to cover someof their limitations of not being able to capture stocks and flows

within systems (Sterman, 2000).

Some Models from Soft SystemsMethodology--Checkland

perceived real-world

problem or situation

models of relevant purposeful activity

systems each based on a declared world-view

‘comparison’(question problem

situation using models)

accommodationswhich enable

Principles• real world: a complexity of relationships.• relationships exploded via models of purposeful activitybased on explicit world visions.• inquiry structured by questioning perceived situation using the models as asource of questions.• ‘action to improve’ based on finding accommodations (versions of the situation which conflicting interests can live with)• inquiry in principle never-ending; best conducted with wide range ofinterested parties; give the process away to people in the situation.

leads toselection of

action to improve

find

a structured debateabout desirable

and feasible change

The inquiring/learning cycle of SSM (Checkland, 1999)

1.the problem situation:

unstructured

7.action to improve

the problemsituation

6.feasible, desirable

changes

2.the problem

situation:expressed.

5.comparison of 4 with 2

3.

root definitions ofsystems

4.conceptual

models

4.a.formal systems

concept

4.b.other systems

thinking

Method for Unstructured Problems

Checkland, 1999

Real world

Systems thinking

IDEAS

THEORIES:Substantive

Methodologies

PROBLEMS

MODELS

TECHNIQUES

METHODOLOGY

CASE RECORDS

An area of reality containing:ConcernsIssuesProblemsAspirations

Other sources

ANY DEVELOPING SUBJECT (Checkland, 1999)

Gives rise to

from which maybe formulated

which present

which may beanalyzed using

which may bemanipulated using

which may beused in

which yield

provide

documented in

which supportcriticism of

A developing subject

to be used in action(intervention, influence,

observation) in

Laws of Systems Thinking Today’s problems come from yesterday’s solutions. Moving the problem around.

The harder you push, the harder the system pushes back. Compensating feedback.

Behavior grows better before it grows worse. The easy way out usually leads back in. The cure can be worse than the disease. Faster is many times slower. Cause and effect are not closely related in time and space. Small changes can produce big results—but the areas of

highest leverage are often the least obvious. You can have your cake and eat it too, but not at the same

time. Dividing the elephant in half does not produce two small

elephants. There is no blame.

Senge, 1990

Documents

Introduction System Dynamics Un instrument for System Thinking