Systems Thinking, System Dynamics, Simulation

1. Systems Thinking, System Dynamics, Simulation James R. Burns Summer II 2008

2. Course Content Structure—see Syllabus • System Dynamics • Continuous Deterministic Simulation • VENSIM • Systems Thinking • Goldratt • Discrete Stochastic Simulation • PROMODEL

3. Goals of this course relative to SYSTEM DYNAMICS… • To learn how to solve problems, not just study interesting situations • To learn the basics of causal modeling • known as Causal Loop Diagramming, CLD • To learn how transfer CLD’s to Stock & Flow Diagrams, SFDs • To learn how to implement SFD’s in VENSIM

4. More Goals of this course relative to system dynamics…. • To learn how to parameterize a VENSIM model • To learn how to validate a VENSIM model • To learn how to conduct what-if experiments • To learn some basic structures, procedures in VENSIM

5. Goals of this course relative to SYSTEMS THINKING… • To learn Senge’s five disciplines • How to build a learning organization • How to challenge mental models • Master the seven laws of systems thinking • Understand the principle of leverage • Master the FIVE DISCIPLINES • Understand openness, localness, a manager’s time, micro-worlds, archetypes

6. How do these goals align with your… • goals for the course • expectations for the course in general?

7. Would you like to …. • Learn the basics of SD modeling and the use of VENSIM? • learn about the Archetypes? • learn how to recognize and apply the Archetypes

8. What kinds of processes, systems? • Energy and natural resources • Global warming • Agricultural processes • Project management • Enronitus • Growth and over-investment • WHAT ELSE? Project proposal is due Sept (Tuesday)

9. Requirements for Completion • Midterm worth 30% • Final worth 30% • Homework worth 10% • Term project worth 20% • Presentation worth 5% • Class participation worth 5%

10. Pace • More relaxed • No ties • Driven more by the needs of the students

11. Grades??!! • If you satisfactorily complete all the work required in this course, you will get at least a B • My guarantee • If you turn in unsatisfactory work, I will ask you to redo it • To get an A you must have a course grade above 89.999

12. Term Project • You get to choose the topic • Topic is Due on 9-13 • Will ask you to turn-in as homework your • Causal loop diagram • Stock-and-flow diagram

13. Definitions and Terms • ST--Systems Thinking • SD--Systems Dynamics • CLD--Causal Loop Diagram • BOT--Behavior Over Time Chart • SFD--Stock & Flow Diagram • Also called Forrester Schematic, or simply “Flow Diagram” • quantity--any variable, parameter, constant, or output • edge--a causal link between quantities

14. Senge’s Five Disciplines • Personal Mastery • because we need to be the very best we can be • Mental Models • because these are the basis of all decision-making • Shared Vision • because this galvanizes workers to pursue a common goal • Team Learning • because companies are organized into teams • Systems Thinking • because this is the only tool for coping with complexity

15. System Dynamics Software • STELLA and I think • High Performance Systems, Inc. • best fit for K-12 education • Vensim • Ventana systems, Inc. • Free from downloading off their web site: www.vensim.com • Robust--including parametric data fitting and optimization • best fit for higher education • Powersim • What Arthur Andersen was using

16. What is system dynamics? • A way to characterize systems as stocks and flows between stocks • Stocks are variables that accumulate the affects of other variables • Rates are variables that control the flows of material into and out of stocks • Auxiliaries are variables the modify information as it is passed from stocks to rates

17. A Simple Methodology • Collect info on the problem • List variables on post-it notes • Describe causality using a CLD • Translate CLD into SFD • Enter into VENSIM • Perform sensitivity and validation studies • Perform policy and WHAT IF experiments • Write recommendations

18. Causal Modeling • A way to characterize the physics of the system • Lacking: a Newton to describe the causality in these systems, to characterize the physics in these processes—that’s what you will be doing

19. What systems, processes • Socioeconomic systems • Energy/Environment/Economy systems • Biological systems • Managerial systems • Socio-psychological systems • Human-interaction systems • Organizational systems

20. Energy systems • We are very interested in developing a current national energy model and have a start on that based on earlier work that I did years ago at Sandia National Laboratories

21. Biological systems

22. Key Benefits of the ST/SD • A deeper level of learning • Far better than a mere verbal description • A clear structural representation of the problem or process • A way to extract the behavioral implications from the structure and data • A “hands on” tool on which to conduct WHAT IF

23. Stock and Flow Notation--Quantities • STOCK • RATE • Auxiliary

24. Stock and Flow Notation--Quantities • Input/Parameter/Lookup • Have no edges directed toward them • Output • Have no edges directed away from them

25. Inputs and Outputs • Inputs • Parameters • Lookups • Outputs

26. Stock and Flow Notation--edges • Information • Flow

27. Some rules • There are two types of causal links in causal models • Information • Flow • Information proceeds from stocks and parameters/inputs toward rates where it is used to control flows • Flow edges proceed from rates to states (stocks) in the causal diagram always

28. Systems Thinking basics • Effects are spatially and temporarily separated from their causes • Today’s problems are yesterday’s solutions • Complexity coping requires understanding dynamic complexity, not detail complexity

29. Nature’s Templates: the Archetypes • Structures of which we are unaware hold us prisoner • The swimmer scenario • Certain patterns of structure occur again and again: called ARCHETYPES

30. We are creating a “language” • reinforcing feedback and balancing feedback are like the nouns and verbs • systems archetypes are the basic sentences • Behavior patterns appear again in all disciplines--biology, psychology, family therapy, economics, political science, ecology and management • Can result in the unification of knowledge across all fields

31. Recurring behavior patterns • Do we know how to recognize them? • Do we know how to describe them? • Do we know how to prescribe cures for them? • The ARCHETYPES describe these recurring behavior patterns

32. The ARCHETYPES • Provide leverage points, intervention junctures at which substantial change can be brought about • Put the systems perspective into practice • About a dozen systems ARCHETYPES have been identified • All ARCHETYPES are made up of the systems building blocks: reinforcing processes, balancing processes, delays

33. Before attacking the ARCHETYPES we need to understand simple structures • The reinforcing feedback loop • The balancing feedback loop

34. ARCHETYPE 1: LIMITS TO GROWTH • A reinforcing process is set in motion to produce a desired result. It creates a spiral of success but also creates inadvertent secondary effects (manifested in a balancing process) that eventually slow down the success. • All growth will eventually run up against constraints, impediments

35. Management Principle relative to ARCHETYPE 1 • Don’t push growth or success; remove the factors limiting growth

36. ARCHETYPE 1: LIMITS TO GROWTH • Useful in all situations where growth bumps up against limits • Firms grow for a while, then plateau • Individuals get better for a while, then their personal growth slows. • Falling in love is kind of like this • The love begins to plateau as the couple get to know each other better

37. Structure growing action state of stock slowing action Balancing Reinforcing

38. Understanding the Structure • High-tech orgs grow rapidly because of their ability to introduce new products • This growth plateaus as lead times become too long

39. How to achieve Leverage • Most managers react to the slowing growth by pushing harder on the reinforcing loop • Unfortunately, the more vigorously you push the familiar levels, the more strongly the balancing process resists, and the more futile your efforts become. • Instead, concentrate on the balancing loop--changing the limiting factor • This is akin to Goldratt’s Theory of Constraints--remove the bottleneck, the impediment

40. Applications to Quality Circles and JIT • Quality circles work best when there is even-handed emphasis on both balancing and reinforcing loops • JIT has had to focus on recalcitrant suppliers • THERE WILL ALWAYS BE MORE LIMITING PROCESSES • When one source of limitation is removed, another will surface • Growth eventually WILL STOP

41. Create your own LIMITS TO GROWTH story • Identify a limits to growth pattern in your own experience • Diagram it • What is growing • What might be limitations • Example--the COBA and University capital campaigns • NOW, LOOK FOR LEVERAGE

42. Test your LIMITS TO GROWTH model • Talk to others about your perception • Test your ideas about leverage in small real-life experiments • Run and re-run the simulation model • Approach possible resistance and seek WIN-WIN strategies with them

43. ARCHETYPE 2: shifting the burden • An underlying problem generates symptoms that demand attention. But the underlying problem is difficult for people to address, either because it is obscure or costly to confront. So people “shift the burden” of their problem to other solutions--well-intentioned, easy fixes that seem extremely efficient.

44. Shifting the burden scenario, continued • Unfortunately, the easier solutions only ameliorate the symptoms; they leave the underlying problem unaltered. The underlying problem grows worse and the system loses whatever abilities it had to solve the underlying problem.

45. The Stereotype Structure Symptiom-Correcting Process Addictioin Loop Problem-Correcting Process

46. Special Case: Eroding Goals • Full employment meant 4% unemployment in the 1960s, but 6 to 7% unemployment in the early 1980’s • Gramm-Rudman bill called for reaching a balanced budget by 1991, but this was shifted to 1993 and from 1993 to 1996 and from 1996 to 1998 • “If all else fails, lower your goals..”

47. EXAMPLE

48. Another Example

49. Still Another Example Symptom-correcting process Addiction Loop Problem-correcting Process

50. Still other Problems • What about retention of students • The perceived fix is raise the admission standards • What about drug-related crime • The perceived fix is to remove the drugs from the street