Introduction to System Dynamics

Customer Satisfaction Culture Price Wars R&D Spending What do I mean by System? A System is an interconnected series of pieces that work together to achieve some objective. Economy Competitors Growth Customer Satisfaction Culture Price Wars R&D Spending Employee Satisfaction Profit Margin Install Cycle Time Staff Skillset Morale Market Share

What is System Dynamics? System dynamics is an approach to understanding the behavior of complex systems over time. It deals with internal feedback loops and time delays that affect the behavior of the entire system. Developed in the 1950s at MIT and used across disciplines: notably business, the urban planning, then the environment, etc. The Study of: Complex Cause and Effect relationships over time Understanding the future consequences of today’s actions Death Spirals & Virtuous Circles Business irony: Things get worse before they get better Success begets success / Success to the Successful / The Rich get Richer The Law of unintended consequences Fixes that backfire The harder you push, the harder they push back Improves in the short-term, gets worse in the long term. Tipping Points Advanced Version: Building Management Flight Simulators

Hierarchy of Behavior Events Patterns Systems East Hospital has a bug in release 4.0 Increasing Leverage as You understand and solve the deeper problem Patterns Release 4.0 was released too soon (like many releases) Systems Bringing in revenue pressures teams to release early (perhaps causing problems and reducing revenue in the future)

Seeing the World in Loops

An Interchange after a Team Leadership Class Senior Leader: “We were debating as a team whether we win because we are cohesive or are we cohesive because we win” CEO: “Which is it?” Senior Leader: “We decided that we win because we are cohesive”

Which Causes Which? Team Success Team Cohesion Team Success Team Cohesion Could it be both?? Team Success Team Cohesion

A Feedback Loop Team Success Team Cohesion Can be written as Team Success Team Cohesion

Interchange at CEO Staff Meeting Regional Leader: “We are missing our numbers because NPIs are late” Late NPIs Missing Numbers Any other relation you can think of? Late NPIs Missing Numbers NPI = New Product Introduction

Late NPIs Missing Numbers Another Feedback Loop Missing Numbers Limited Hiring or Backfilling