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Title: Introduction System Dynamics

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 Retailers
inventory has been constant at some level for a
long time,

5
• 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
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
Feedback loop with delay
15
The means of arrows
16
Negative feedback
• Balancing Process for Adjusting Cash Balance to
Cash Surplus or Shortage

17
Positive feedback
• Reinforcing Sales Process Caused by Customers

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
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
24
Dynamic Complexity arises because systems are
• Changing over time
• Tightly coupled
• Governed by feedback
• Nonlinear changing dominant structure
• History-dependent
• Self-organizing
• Counterintuitive
• Policy resistant

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
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
• (the first four in this list)

31
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

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

42
The Simulation Structure--Reinforcing Loop
43
Challenging the clouds in a study of leasing in
the automobile industry
Were 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
51
The Cybernetic Loop with Complications
52
The Cybernetic Loop with Complications
53
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
54
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
55
Insights about building teamwork in a public
school
Teamwork and Communication are self-reinforcing
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 ones
• 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?

62
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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 ComparedPopulations
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
Families on TANF
Post-TANF employed
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
• 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
White bar (left) is the time slice of
interest Red arrows (below) are the dominant
influences
79
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80
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81
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82
White bar (left) is the time slice of
interest Red arrows (below) are the dominant
influences
83
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84
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85
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86
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87
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
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 cant get away from
using the coupons because their customer base is
hucked on coupons

90
• 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 cant deliver
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.

95
The Reinforcing Loop
96
The Balancing Loop Following the LTG Archetype
97
The Growth Curve Page 117
98
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.

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
• Sees problems as conforming to a finite number of
archetypes
• Formulates models based on combinations of the
archetypes
• 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 doesnt 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 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.

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

120
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.
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
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
Desired Water Temperature
Delay
Shower Tap Setting
Temperature Gap
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
Implicit goal of 70 hour workweek
Threat of being perceived as uncommitted
Heroism Gap
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
Size of Market Niche
Motivation and Productivity
Saturation of Market Niche
Morale
Growth
Delay
Promotion Opportunities
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
• Dont push growth. Remove the factors that limit
growth

130
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

131
Shifting the Burden
Bring in HR Expert
Expectations that HR Experts will solve problem
Personnel Performance Problems
Delay
Develop Managers Abilities
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.
Butevery time the schedule begins to slip, they

134
Eroding the Goals
Early warning symptom Its OK if our
performance standards slide just a little until
the crisis is over
Goal
Gap
Actions to Improve Conditions
Condition
Principle Hold the vision
Delay
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
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
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
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
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
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
Delay
141
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
142
The growth of survey based business research.
Researcher As Surveys
Net Research For A
Survey Burnout and Resistance
Total Surveys
Delay
Researcher Bs Surveys
Net Research For B
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? (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).

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, 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).

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 systems 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
failurethats 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).
155
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
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
Sherwoods Causal Loop Diagrams
S
Policy of outsourcing
161
Causal Loop Diagram
Total Work Capacity
My Goals
My Consumption of Dollars

-
-

Work Available
My 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
My Consumption of Dollars

-
-
-
-

Work Available
My 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
My Consumption of Dollars
-
-

-
-

Work Available
My 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
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