Introduction System Dynamics

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Introduction System Dynamics

• Un instrument for System Thinking

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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

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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

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An experiment

• Suppose a simple supply chain that has been in
  steady-state for some time. The Retailers
  inventory has been constant at some level for a
  long time,

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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.

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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.

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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
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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.

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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
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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

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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)

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Language causal diagram
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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

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Feedback loop with delay
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The means of arrows
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Negative feedback

• Balancing Process for Adjusting Cash Balance to
  Cash Surplus or Shortage

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Positive feedback

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

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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.

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Creating our own Market Limitation

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People Express example

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People Express example

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Reference

• Peter Senge,
• The Fifth Discipline, 1990
• Chapter 5

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Learning in and about Complex Systems Sterman
(1994)
Unknown structure Dynamic complexity Time
Delays Impossible experiments
Real World
Virtual World
Known structure Variable Complexity Controlled
Experiments
Selected Missing Delayed Biased Ambiguous
Implementation Game playing Inconsistency Short
term
Information Feedback
Decisions
Misperceptions Unscientific Biases Defensiveness
Strategy, Structure, Decision Rules
Mental Models
Inability to infer dynamics from mental models
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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

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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

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The system dynamics modeling process
Adapted from Saeed 1992
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Processes focusing on system structure
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Processes focusing on system behavior
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Two kinds of validating processes
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• 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)

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Forresters 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

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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.

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Dynamics
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New York City Population, 1900-2000
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Global Atmospheric Methane (1860-1994)
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Global Average Temperature (Reconstruction
1400-1980 Data 1902-1998)
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Stocks and Flows
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Stocks and flows help to explain self-reported
drug use data
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The Simplified Structure--p. 133
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Structure
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The Simplified Structure--variables

• NAME MNEMONIC
• Actual Inventory AI
• Desired Inventory DI
• Order Rate OR
• Adjustment Time AT

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The Simulation Structure--Reinforcing Loop
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Challenging the clouds in a study of leasing in
the automobile industry
Were not in the used car business!
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Stocks and flows in new car purchase and leasing
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Intuitive view of effect of leasing on auto sales
Leased car pipeline
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Stocks and Flows in Global Warming
Thought experiment
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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!
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Feedback Thinking

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

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The Classic Cybernetic Balancing Loop
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The Cybernetic Loop with Complications
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The Cybernetic Loop with Complications
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The Cybernetic Loop with Complications
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A Classic Reinforcing Loop(Myrdal 1944, Merton
1948)
Prejudice against the minority group
Majoritys perception of the inferiority of the
minority
Economic and educational discrimination against
the minority
(R)
Achievements of the minority group
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Structure and Dynamics of Terrorist Cells
(R)
Interfering with terrorist funding
Terrorist funding
Peripheral support for terrorists
(B)
Efforts to suppress terrorists
(R)
Terrorist actions
(B)
(B)
(R)
Recruiting terrorists
Terrorist group
Losing terrorists
(R)
(B)
Terrorist zeal
(R)
(R)
Terrorist martyrs to the cause
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Insights about building teamwork in a public
school
Teamwork and Communication are self-reinforcing
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Isolation of teams and punishing risk-taking
inhibit the growth of trust
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But longterm experience with teamwork can build
communication
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Risk taking can enhance effectiveness, which can
build trust
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A team-player culture is self-reinforcing an
opportunity or a trap
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Likely leverage points
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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 ones
  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?

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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

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Investing in the Middle
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Investing on the Edges
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Base, Edges, and Middle ComparedPopulations
on the Welfare Rolls
Edges looks better.
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Total Job-Finding Flows from TANF
Middle looks better.
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Program Expenditures
Edges looks worse, then better.
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Populations in the Welfare System
Middle looks worse than Base! Edges looks
much better.
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Total Recidivism Flows (back to TANF)
The hint for understanding the puzzling dynamics
recidivism.
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A Stock-and-Flow Archetype at Work Here
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Behavior of the Archetype in response to
increased TANF support capacity
Total families at risk
Families on TANF
Post-TANF employed
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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!

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

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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

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A Loop View of the Archetype in Detail
Suppose TANF support capacity increases
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White bar (left) is the time slice of
interest Red arrows (below) are the dominant
influences
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White bar (left) is the time slice of
interest Red arrows (below) are the dominant
influences
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Dynamic complexity even in a structure this
aggregate and tiny!
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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.

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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 cant get away from
  using the coupons because their customer base is
  hucked on coupons

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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

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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

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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

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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

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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 cant deliver
  on your lead time promise of eight weeks. We
  know weve heard from your other customers.
  In fact, the company relaxed its lead-time
  standard out to twelve to sixteen weeks because
  of insufficient capacity.

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The Reinforcing Loop
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The Balancing Loop Following the LTG Archetype
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The Growth Curve Page 117
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Whats happened?

• WTs management did not pay much attention to
  their delivery service. They mainly tracked
  sales, profits, market share and return on
  investment. WTs 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.

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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.

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The Shifting the Burden Component
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Put the whole thing together
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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

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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

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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 doesnt label his edges with or - signs

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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

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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 doesnt have to sell her
  demonstrator and show models. Sonyas 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.

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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.

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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.

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What are the main sectors and how do these
interact?

• Population
• Housing

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What is the structure within each sector?

• Determine state/rate interactions first
• Determine necessary supportng infrastructure
• PARAMETERS
• AUXILIARIES

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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

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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

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What is the structure between sectors?

• There are only AUXILIARIES, PARAMETERS, INPUTS
  and OUTPUTS

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What are the between-sector auxiliaries?

• Housing desired
• Housing ratio
• Housing construction multiplier
• Attractiveness for in-migration multiplier
• PARAMETER Housing units required per person

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System Dynamics

• Douglas M. Stewart, Ph.D.
• Anderson Schools of Management
• University of New Mexico

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

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Introduction to Systems Diagrams

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

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Example Filling a glass of water
Am I filling the glass of water?
Desired Water Level
Faucet Position
Perceived Gap
Water Flow
Current Water Level
Or is the level of water controlling my hand?
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Building Blocks of Systems Thinking

• Reinforcing Loops (Positive Feedback)
• Balancing Loops (Negative Feedback)
• Delays

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Reinforcing Loops
If the product is good we have a virtuous cycle.
Sales
Positive Word of Mouth
Satisfied Customers
If the product is bad we have a vicious cycle.
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Reinforcing Loops

• The snowball effect
• Accelerating growth or accelerating decline
• These systems can take you by surprise!

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Balancing Loops
Body Temperature
Desired Body Temperature
Adjust Clothing
Temperature Gap
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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

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Delays The Sluggish Shower
Current Water Temperature
Desired Water Temperature
Delay
Shower Tap Setting
Temperature Gap
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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

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An Example Reducing Burnout
Actual Hours Worked
Implicit goal of 70 hour workweek
Threat of being perceived as uncommitted
Heroism Gap
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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.

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Limits to Growth
Size of Market Niche
Motivation and Productivity
Saturation of Market Niche
Morale
Growth
Delay
Promotion Opportunities
Where is the leverage?
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Limits to Growth

• The tendency is to push hard
• The leverage not in the reinforcing loop, but
  removing the limits on the balancing loop
• Dont push growth. Remove the factors that limit
  growth

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Archetype 2 Shifting the Burden

• An underlying problem generates symptoms that
  demand attention.
• Butunderlying problem is obscure or costly to
  confront.
• So people shift the burden to other solutions
  that address the symptoms.

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Shifting the Burden
Bring in HR Expert
Expectations that HR Experts will solve problem
Personnel Performance Problems
Delay
Develop Managers Abilities
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Shifting the Burden

• Beware the symptomatic solution
• Benefits are short term at best
• Pressure on symptomatic response only gets larger

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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.
  Butevery time the schedule begins to slip, they
  add to quoted delivery times.

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Eroding the Goals
Early warning symptom Its OK if our
performance standards slide just a little until
the crisis is over
Pressures to Adjust Goal
Goal
Gap
Actions to Improve Conditions
Condition
Principle Hold the vision
Delay
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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.

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Success to the Successful
Warning symptom One of two interrelated
activities is beginning to do very well and the
other is struggling
Resources to A
Success of A
Allocation to A instead of B
Principle Look for overarching goal to balance
both, or decouple the shared resource.
Resources to B
Success of B
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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.

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Tragedy of the Commons
Warning Symptom There used to be plenty for
everyone. Now things are tough. I will have to
work harder to succeed.
Individual As Activity
Net Gains For A
Resource Limit
Gain per Individual Activity
Total Activity
Delay
Principle Manage the commons through education
and self-regulation or an official regulation
Individual Bs Activity
Net Gains For B
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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.

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Growth and Underinvestment
Principle Build in advance of demand as
strategy for developing it. Hold the vision on
quality standards.
Reputation
Increased Flights
Number of Passengers
Delay
Quality Standard
Revenues
Service Quality
Warning We used to be best and will be again,
but right now we need to conserve resources and
not overinvest
Perceived need To improve quality
Service Capacity
Additions to Service Capacity
Delay
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Spend on RD to Drive Growth
Size of Engineering Staff
RD Budget
Management Complexity
Delay
Revenues
Management Burden to Senior Engineers
New Products
Product Development Time
Senior Engineers Ability to Manage
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The growth of survey based business research.
Researcher As Surveys
Net Research For A
Business Survey Tolerance
Survey Burnout and Resistance
Total Surveys
Delay
Researcher Bs Surveys
Net Research For B
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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).

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What is a System? (Contd)

• 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).

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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, thenprecisely through
  such returnit becomes an ordering element for
  such seriesSuch 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).

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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 systems connectedness, and hence the system
  itself. (Sherwood, 2002)

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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
  failurethats what connectedness is all about.
  (Sherwood, 2002).

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Systems Theory

• General Systems Theory
• Chaos Theory
• Quantum Theory
• Ecological Theory

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Systems Principles

• Openness
• Purposefulness
• Multidimensionality
• Emergent property
• Counterintuitivess

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Systems Thinking

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

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Systems Thinking Methodologies

• Soft Systems Methodologies
• Hard Systems Thinking
• The Fifth Discipline

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Systems Thinking Tools

• Archetypes
• Causal Loop Diagrams
• Stocks and Flows
• Simple Structure Dynamics

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Systems Thinking Models

• Archetypes
• Causal Loop Diagrams
• Stocks and Flows

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Archetype Fixes That Backfire
The problem symptom alternately improves. It goes
down, then comes Back up again and usually comes
back worse than before (Senge, 1994).
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Archetype Limits to Growth
Growth occurs and sometimes dramatic but levels
off and/or falls into decline (Senge, 1994).
156
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).
157
Archetype Tragedy of Commons
Total activity grows, but the gains from
individual activities are dropping off. Parts of
the organization are suffering for the whole
(Senge, 1994).
158
Archetype Accidental Adversaries
Each sides performance either declines or stays
level and low, while competitiveness Increases
over time (Senge, 1994).
159
Causal Loop Diagrams
160
Pressure from Contractor for More Dollars
Pressure on the Government to stay Within cost
O
S
Quality of the Government-Industry relationship
Risk of cost overruns
O
S
Pressure on the Government to deliver A workable
system
Pressure on the Government to control The
contractor
S
S
Pressure on the Government to control Costs and
quality
S
S
S
Requirement for high Technical and
service Quality standards
Risk to the Government of Cost escalation
S
S
Dependency of the Government on the contractor
Pressure on the Government To satisfy the
taxpayers
S
Government Cost Model Adapted From
Sherwoods Causal Loop Diagrams
S
Policy of outsourcing
161
Causal Loop Diagram
Total Work Capacity
My Goals
Your Goals
My Consumption of Dollars
Your Consumption of Dollars



-
-


Work Available
My Need for Work
Your Need for Work


-
My fear that you will Not leave enough work me
Your fear that I will Not leave enough work you
-
-
Number of activities competing For work
-
Conflict


Option 1 Two reinforcing loops (Sherwood, 2002)
162
Causal Loop Diagram
Total Work Capacity
My Goals
Your Goals
My Consumption of Dollars
Your Consumption of Dollars



-
-
-
-


Work Available
My Need for Work
Your Need for Work



My fear that you will Not leave enough work me
Your fear that I will Not leave enough work you
-
-
Police the Work allocation

Appeal to A higher authority


Option 2 Limit consumptionbefore turf war
(Sherwood, 2002)
163
Causal Loop Diagram
Total Work Capacity
My Goals
Your Goals
My Consumption of Dollars
Your Consumption of Dollars
-
-



-
-


Work Available
My Need for Work
Your Need for Work


My fear that you will Not leave enough work me
Your fear that I will Not leave enough work you
-
-
My willingness to Participate in a
cooperative Goal-setting process
My willingness to Participate in a
cooperative Goal-setting process
Recognition of The need for cooperation




Option 3 Players See the Sense in Cooperation
(Sherwood, 2002)
164
Causal Loop Diagram
Causal Loop Diagram


Mutual Trust
Best Solution Goals MatchCombined Benefit!
165
System Dynamics Growth and Goal Seeking
Structure and Behavior
Goal
state of the system
state of the system
Time
Time
Goal (desired state of the system)

state of the system

-

discrepancy
State of The System
Net Increase Rate

Corrective action

166
Stocks and Flows
Valves represent the flow of inventory into and
out of the warehouse
Stock
Inventory
source
sink
Production (inflow)
Shipments (outflows)
Sources and sinks are outside the model boundary.
Stocks and Flows are used in Causal Loop Diagrams
to cover some of their limitations of not being
able to capture stocks and flows within systems
(Sterman, 2000).
167
Some Models from Soft SystemsMethodology--Checkla
nd
168
The inquiring/learning cycle of SSM (Checkland,
1999)
perceived real-world problem or situation
leads to selection of
comparison (question problem situation using
models)
models of relevant purposeful activity systems
each based on a declared world-view
action to improve
find
a structured debate about desirable and feasible
change
accommodations which enable

• Principles
• real world a complexity of relationships.
• relationships exploded via models of purposeful
  activity
• based on explicit world visions.
• inquiry structured by questioning perceived
  situation using the models as a
• source 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 of
• interested parties give the process away to
  people in the situation.

169
Method for Unstructured Problems
7. action to improve the problem situation
1. the problem situation unstructured
6. feasible, desirable changes
2. the problem situation expressed.
5. comparison of 4 with 2
Real world
Systems thinking
4. conceptual models
3. root definitions of systems
4.a. formal systems concept
4.b. other systems thinking
Checkland, 1999
170
An area of reality containing Concerns Issues Pro
blems Aspirations
Gives rise to
IDEAS
from which may be formulated
THEORIES Substantive Methodologies
provide
Other sources
which support criticism of
which present
CASE RECORDS
PROBLEMS
documented in
which may be analyzed using
which yield
to be used in action (intervention,
influence, observation) in
MODELS
which may be manipulated using
METHODOLOGY
TECHNIQUES
A developing subject
which may be used in
ANY DEVELOPING SUBJECT (Checkland, 1999)
171
Laws of Systems Thinking

• Todays problems come from yesterdays 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 resultsbut 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