1. Introduction System Dynamics Un instrument for System Thinking

2. 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

3. 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

4. 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,

5. 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.

6. 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.

7. 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

8. 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.

9. 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

10. 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

11. 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)

12. Desired Water Level Perceived Gap Faucet Position Current Water Level Water Flow Language: causal diagram

13. 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

14. Desired Water Level Perceived Gap Faucet Position Current Water Level Water Flow Delay Feedback loop with delay

15. Desired Water Level Perceived Gap Faucet Position Current Water Level Water Flow The means of arrows

16. Desired Inventory Level Perceived Gap Order Placed Current Inventory Level Supply Line - + - + + +  Balancing Process for Adjusting Cash Balance to Cash Surplus or Shortage Negative feedback

17. Sales Satisfied Customers Positive Word Mouth +  Reinforcing Sales Process Caused by Customers Talking to Each Other About Your Product Positive feedback

18. 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.

19. Creating our own Market Limitation

20. People Express example

21. People Express example

22. Reference Peter Senge, The Fifth Discipline, 1990 Chapter 5

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

24. 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

25. 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

26. The system dynamics modeling process Adapted from Saeed 1992

27. Processes focusing on system structure

28. Processes focusing on system behavior

29. Two kinds of validating processes

30. 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)

31. 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

32. 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.

33. Dynamics

34. New York City Population, 1900-2000

35. Global Atmospheric Methane (1860-1994)

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

37. Stocks and Flows

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

39. The Simplified Structure--p. 133

40. Structure

41. The Simplified Structure-- variables NAME MNEMONIC Actual Inventory AI Desired Inventory DI Order Rate OR Adjustment Time AT

42. The Simulation Structure-- Reinforcing Loop

43. ‘Challenging the clouds’ in a study of leasing in the automobile industry “We’re not in the used car business!” ?

44. Stocks and flows in new car purchase and leasing

45. Intuitive view of effect of leasing on auto sales: Leased car pipeline

46. Stocks and Flows in Global Warming Thought experiment:

47. 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!

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

49. The Classic Cybernetic Balancing Loop

50. The Cybernetic Loop with Complications

53. 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)

54. 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) (B) (R) Interfering with terrorist funding (B)

55. Teamwork and Communication are self-reinforcing Insights about building teamwork in a public school

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

57. But longterm experience with teamwork can build communication

58. Risk taking can enhance effectiveness, which can build trust

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

60. Likely leverage points

61. 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?

64. 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

65. Investing in the “Middle”

66. Investing on the “Edges”

67. Base, “Edges,” and “Middle” Compared: Populations on the Welfare Rolls “Edges” looks better.

68. Total Job-Finding Flows from TANF “Middle” looks better.

69. Program Expenditures “Edges” looks worse, then better.

70. Populations in the Welfare System “Middle” looks worse than “Base”! “Edges” looks much better.

71. Total Recidivism Flows (back to TANF) The hint for understanding the puzzling dynamics: recidivism.

72. A Stock-and-Flow Archetype at Work Here

73. Behavior of the Archetype in response to increased TANF support capacity Total families at risk Post-TANF employed Families on TANF

74. 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!

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

76. 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

77. A Loop View of the Archetype in Detail Suppose TANF support capacity increases…

78. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month) White bar (left) is the time slice of interest Red arrows (below) are the dominant influences

79. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

80. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

81. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

82. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month) White bar (left) is the time slice of interest Red arrows (below) are the dominant influences

83. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

84. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

85. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

86. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month)

87. 120 B: Employed load controls recidivism 4,000 3,000 2,000 1,000 0 0306090 Time (Month) Dynamic complexity even in a structure this aggregate and tiny!

88. 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.

89. 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

90. 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

91. 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

92. 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

93. 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

94. 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.

95. The Reinforcing Loop

96. The Balancing Loop: Following the LTG Archetype

97. The Growth Curve: Page 117

98. 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.

99. 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.

100. The Shifting the Burden Component

101. Put the whole thing together

102. 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

103. 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

104. 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

105. 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

106. 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.

107. 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.

108. 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.

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

110. What is the structure within each sector? Determine state/rate interactions first Determine necessary supportng infrastructure PARAMETERS AUXILIARIES

111. 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

112. 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

113. What is the structure between sectors? There are only AUXILIARIES, PARAMETERS, INPUTS and OUTPUTS

114. What are the between-sector auxiliaries? Housing desired Housing ratio Housing construction multiplier Attractiveness for in-migration multiplier PARAMETER: Housing units required per person

115. 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.

116. 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

117. Introduction to Systems Diagrams From any element in a situation you can trace arrows that represent the influence on another element.

118. 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?

119. Building Blocks of Systems Thinking Reinforcing Loops (Positive Feedback) Balancing Loops (Negative Feedback) Delays

120. 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.

121. Reinforcing Loops The snowball effect Accelerating growth or accelerating decline These systems can take you by surprise!

122. Balancing Loops Body Temperature Desired Body Temperature Temperature Gap Adjust Clothing

123. 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

124. Delays: The Sluggish Shower Current Water Temperature Temperature Gap Shower Tap Setting Desired Water Temperature

125. 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

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

127. 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.

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

129. 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

130. 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.

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

132. Shifting the Burden Beware the symptomatic solution Benefits are short term at best Pressure on symptomatic response only gets larger

133. 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.

134. Eroding the Goals Gap Condition Actions to Improve Conditions Pressures to Adjust Goal Goal Early warning symptom: “It’s OK if our performance standards slide just a little until the crisis is over” Principle: Hold the vision

135. 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.

136. Success to the Successful Allocation to A instead of B Resources to 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.

137. 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.

138. Tragedy of the Commons Total Activity Individual B’s Activity Net Gains For B Individual A’s Activity Net Gains For A Resource Limit Gain per Individual Activity 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

139. 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.

140. Growth and Underinvestment Number of Passengers Increased Flights Revenues Reputation Service Quality Perceived need To improve quality Additions to Service Capacity Service Capacity Quality Standard 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.

141. 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

142. The growth of survey based business research. Total # Surveys Researcher B’s Surveys Net Research For B Researcher A’s Surveys Net Research For A Business Survey Tolerance Survey Burnout and Resistance

143. 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).

144. 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).

145. 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).

146. 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)

147. 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).

148. Systems Theory General Systems Theory Chaos Theory Quantum Theory Ecological Theory

149. Systems Principles Openness Purposefulness Multidimensionality Emergent property Counterintuitivess

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

151. Systems Thinking Methodologies Soft Systems Methodologies Hard Systems Thinking The Fifth Discipline

152. Systems Thinking Tools Archetypes Causal Loop Diagrams Stocks and Flows Simple Structure Dynamics

153. Systems Thinking Models Archetypes Causal Loop Diagrams Stocks and Flows

154. 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). Original threshold of tolerance Fix Problem Symptom Unintended consequences delay Slippery slope balance

155. Archetype: Limits to Growth Growth occurs and sometimes dramatic but levels off and/or falls into decline (Senge, 1994). Actual performance Problem Symptom Growth process Limiting process Corrective action

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). Limiting process Quick fixes Problem Symptom Root cause Side effects Corrective Actions delay Limiting process

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). A’s growth process B’s growth process A’s growing action actual performance that A measures A’s limiting process limits or constraints total growing action gain per individual activity B’s limiting process B’s growing action TRAGIC DEGRADATION PROCESS actual performance that B measures delay

158. Archetype: Accidental Adversaries Each sides performance either declines or stays level and low, while competitiveness Increases 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 unintended obstruction of B’s success B’s unintended obstruction of A’s success A’s success B’s success A’s fixes to Improve A’s own results B’s fixes to improve B’s own results

159. Causal Loop Diagrams

160. 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 Government To satisfy the taxpayers S O O S S S Dependency of the Government on the contractor Policy of outsourcing Risk to the Government of Cost escalation S S S S Pressure on the Government to control Costs and quality Pressure on the Government to control The contractor Quality of the Government-Industry relationship Pressure from Contractor for More Dollars Risk of cost overruns S S S Government Cost Model Adapted From Sherwood’s Causal Loop Diagrams

161. My GoalsYour Goals My Consumption of Dollars Your Consumption of Dollars Total Work Capacity Work Available My Need for WorkYour Need for Work My fear that you will Not leave enough work me Your fear that I will Not leave enough work you - + - + + + + + ++ + - - Conflict Number of activities competing For work - - Causal Loop Diagram Option 1: Two reinforcing loops (Sherwood, 2002)

162. Causal Loop Diagram Option 2: Limit consumption—before turf war (Sherwood, 2002) My GoalsYour Goals My Consumption of Dollars Your Consumption of Dollars Total Work Capacity Work Available My Need for WorkYour Need for Work My fear that you will Not leave enough work me Your fear that I will Not leave enough work you - + - + + + + + ++ + - + Appeal to A higher authority Police the Work allocation - + --

163. My GoalsYour Goals My Consumption of Dollars Your Consumption of Dollars Total Work Capacity Work Available My Need for WorkYour Need for Work My fear that you will Not leave enough work me Your fear that I will Not leave enough work you - + - + + + + + ++ + - Recognition of The need for cooperation - Causal Loop Diagram Option 3: Players See the Sense in Cooperation (Sherwood, 2002) My willingness to Participate in a cooperative Goal-setting process My willingness to Participate in a cooperative Goal-setting process ++ --

164. Causal Loop Diagram Best Solution: Goals Match—Combined Benefit! Causal Loop Diagram My GoalsYour Goals My Consumption of Dollars Your Consumption of Dollars Total Work Capacity Work Available My Need for WorkYour Need for Work My fear that you will Not leave enough work me Your fear that I will Not leave enough work you - + - + + + + + ++ + - Recognition of The need for cooperation - My willingness to Participate in a cooperative Goal-setting process My willingness to Participate in a cooperative Goal-setting process ++ -- Mutual Trust ++

165. Time Goal State of The System Net Increase Rate + + RB state of the system state of the system state of the system Corrective action discrepancy Goal (desired state of the system) - + + + System Dynamics: Growth and Goal Seeking Structure and Behavior

166. Stocks and Flows Inventory Stock Production (inflow)Shipments (outflows) sourcesink 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 some of their limitations of not being able to capture stocks and flows within systems (Sterman, 2000).

167. Some Models from Soft Systems Methodology--Checkland

168. 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) 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. leads to selection of action to improve find a structured debate about desirable and feasible change The inquiring/learning cycle of SSM (Checkland, 1999)

169. 1. the problem situation: unstructured 7. action to improve the problem situation 6. feasible, desirable changes 2. the problem situation: expressed. 5. comparison of 4 with 2 3. root definitions of systems 4. conceptual models 4.a. formal systems concept 4.b. other systems thinking Method for Unstructured Problems Checkland, 1999 Real world Systems thinking

170. IDEAS THEORIES: Substantive Methodologies PROBLEMS MODELS TECHNIQUES METHODOLOGY CASE RECORDS An area of reality containing: Concerns Issues Problems Aspirations Other sources ANY DEVELOPING SUBJECT (Checkland, 1999) Gives rise to from which may be formulated which present which may be analyzed using which may be manipulated using which may be used in which yield provide documented in which support criticism of A developing subject to be used in action (intervention, influence, observation) in

171. 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