L 1 Overview

Systems Thinking, System Dynamics, Simulation

sugeng purwoko, JTI utm

Course Content Structure—see Syllabus• Systems Thinking• System Dynamics• Continuous Deterministic Simulation

– VENSIM• Goldratt• Discrete Stochastic Simulation

– PROMODEL


Goals of this course…• 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

• To learn the basics of causal modeling– known as Causal Loop Diagramming, CLD


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SD Process• Issue statement. The issue

statement is simply a statement of the problem that makes it clear what the purpose of the model will be.

• Variable Identification.Identify some key quantities that will need to be included in the model for the model to be able to address the issues at hand.

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• Reference modes.A reference mode is a pattern of behavior over time. Reference modes are drawn as graphs over time for key variables, but are not necessarily graphs of observed behavior. For example, a company's sales history may be growing but bumpy, and the reference mode may be the up and down movement around the growth trend. Reference modes can refer to past behavior, or future behavior.

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• Reality Check. Define some Reality Check statements about how things must interrelate. These include a basic understanding of what actors are involved and how they interact, along with the consequences for some variables of significant changes in other variables. Reality Check information is often simply recorded as notes (often mental notes) about what connections need to exist. It is based on knowledge of the system being modeled. Chapter 14 of the User Guide makes this information explicit using the Reality Check functionality in Vensim.

http://www.vensim.com/documentation/usr14.htm

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• Dynamic hypotheses. A dynamic hypothesis is a theory about what structure exists that generates the reference modes. A dynamics hypothesis can be stated verbally, as a causal loop diagram, or as a stock and flow diagram. The dynamic hypotheses you generate can be used to determine what will be kept in models, and what will be excluded. Like all hypotheses, dynamic hypotheses are not always right. Refinement and revision is an important part of developing good models.

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• Simulation Model.A simulation model is the refinement and closure of a set of dynamic hypotheses to an explicit set of mathematical relationships. Simulation models generate behavior through simulation. A simulation model provides a laboratory in which you can experiment to understand how different elements of structure determine behavior.

• The above process is iterative and flexible. As you continue to work with a problem you will gain understanding that changes the way you need to think about the things you have done before.

• Vensim provides explicit support for naming variables, writing Reality Check information, developing dynamic hypotheses and building simulation models. Dynamic hypotheses can be developed as visual models in Vensim, or simply sketched out with pencil and paper.

Workforce, Inventory and OscillationBackground • You are involved in the production and sale of

prefabricated window frames. Overall your company is doing quite well, but you often go through periods of low capacity utilization followed by production ramp up and added shifts. While all of this is normally blamed on market demand and the condition of the economy, you have your doubts. Looking back at sales and production over the last 8 years it seems that sales is more stable than production. Your goal is to determine why this might be, and what you can do about it.

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• In attacking this problem you want to simplify as much as possible your current situation. There are a number of reasons for this simplification:1. It is easier to understand a simple model.2. You can get results quickly and decide if you are

on the right track.3. It is more effective to start with a simple model

and add detail, than to build a complex model and attempt to extract insights from it after it is complete.

4. Using a simple model forces you to take an overview which is usually useful in the initial modeling phases.

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Reference mode• A reference mode is a graphical statement about a problem. Verbally, the problem was stated as "production is less stable than sales."

• This reference mode is a sketch of behavior we might expect a model to produce. It might be real data from your records, or your expectation of what might happen in a new situation. The reference mode is used to focus activity. Having mapped out one or more reference modes the goal is to define the simplest structure that is sensible and capable of generating patterns of behavior that qualitatively resemble the reference modes. If appropriate, such a structure can also be refined in order to develop a model that can be validated quantitatively against the available data.

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Reality CheckLets put down some common sense statements about how the business works.

1.Without any workers there is no production.2.Without any inventory we can't ship.3.If sales go up for a sustained period we will try

to expand production.4.With no production inventory will never go up.Reality Check information in this form should be

kept in the back of your mind as you develop dynamics hypotheses and build a simulation model.

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Dynamic HypothesisA dynamic hypothesis is an idea about what structure might be capable of generating behavior like that in the reference modes. For this example we can formulate a dynamic hypothesis simply by thinking about how the two variables in the reference mode are connected — that is by specifying the set of policies (or rules) that determine production given sales. The dynamic hypothesis for this firm is that a manager is setting production based on current sales, but is amplifying the amount resulting in higher (or lower) production than is necessary. The reference mode supplies us with two variables — production and sales — that we will want to include in the model. This is a reasonably good basis on which to begin a sketch, so let us put these variables down to start the model.

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Workforce / Inventory ModelProduction and sales related• Physical: production is required to

produce goods to sell• Information: managers base production decisions

on current or recent salesHowever, as a first approximation, more

people make more products, and this is a good starting point, so we add the level Workforce.

The things that change workforce are hiring, layoffs, firings and retirements. Again, for simplicity we combine all of these into a composite concept — the net hire rate. Note that net hire rate can either increase or decrease the workforce.

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The behaviorIn completing the information connection, we will try to keep

things as simple as possible. Starting with production we want to remove all the complexities of adding shifts and mothballing equipment and simply state that production is proportional to Workforce. We add the proportionality constant productivity. Also, net hire rate is dependent on the value of Workforce. This gives us:

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Equation Set wfinv1.vmfFINAL TIME = 100Units: MonthINITIAL TIME = 0Units: MonthTIME STEP = 0.25Units: MonthSAVEPER = TIME STEPUnits: MonthInventory = INTEG( production-sales, 300)Units: Framenet hire rate = (target workfo

rce-Workforce)/time to adjust workforce

Units: Person/Monthproduction = Workforce*prod

uctivityUnits: Frame/Month

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productivity = 1Units: Frame/Month/

Personsales = 100 + STEP(50,20

)Units: Frame/Monthtarget production = salesUnits: Frame/Monthtarget workforce = target

production/productivityUnits: Persontime to adjust workforce =

3Units: MonthWorkforce = INTEG( net hi

re rate, target workforce)

Units: Person

Model Refinement (wfinv2.vmf)In order to refine the model we introduce target

inventory, inventory correction and two additional Constants. The idea is simple — target inventory is the amount of stock that should be held based on expectations about sales. The inventory correction is the correction for a deviation of Inventory from its target. A new loop has been introduced and is highlighted.

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Additional equationtarget production = sales + inventory correction Units: Frame/Monthinventory correction = (target inventory - Inventory)/

TIME TO CORRECT INVENTORYUnits: Frame/MonthTIME TO CORRECT INVENTORY = 2 Units: Monthtarget inventory = sales * INVENTORY COVERAGE Units: FrameINVENTORY COVERAGE = 3 Units: Monthinventory correction is a stock adjustment formulation, just

as net hire rate was. Thetime to correct inventory represents the time required to notice significant changes in inventory and schedule corrections in production.

The important difference between this formulation and that of net hire rate is that the net hire rate directly influences the stock it is attempting to adjust (Workforce) whereasinventory correction influences target production, net hire rate,Workforce, production and finally inventory. This connection has an intervening level,Workforce, which has important dynamic consequences.

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


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 80.999sugeng purwoko, JTI utm

Term Project• You get to choose the topic• Topic is due on 7-9• Will ask you to turn-in as

homework your– Causal loop diagram– Stock-and-flow diagram


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


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 the control the flows

of material into and out of stocks• Auxiliaries are variables the modify

information as it is passed from stocks to rates


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


Causal Modeling• A way to characterize the physics

of the system• Lacking: a Newton to describe the

causality in these socioeconomic systems


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


Reinforcing Loop: Structure

Growth rate

Population

Sales

SatisfiedCustomers

Positive word ofmouth


Reinforcing Loop: Behavior

Population20 B

10 B

00 20 40 60 80 100 120 140 160 180 200

Time (Year)

Population : pop1Population : Current sugeng purwoko, JTI utm

Balancing Loop: StructureDesired

Inventory

Actualinventory

Inventorygap

Order rate

O B


Balancing Loop: BehaviorInventory

1,000

500

00 10 20 30 40 50 60 70 80 90 100

Time (Month)

Inventory : inv1 sugeng purwoko, JTI utm

Stock and Flow Notation--Quantities• STOCK

• RATE

• Auxiliary

Stock

Rate

i1

i2

i3

Auxiliary

o1

o2

o3


Stock and Flow Notation--Quantities• Input/Parameter/Lookup

• Have no edges directed toward them• Output

• Have no edges directed away from them

i1

i2

i3

Auxiliary

o1

o2

o3sugeng purwoko, JTI utm

Inputs and Outputs• Inputs• Parameters• Lookups

• Outputs

Input/Parameter/Lookup

a

b

c


Stock and Flow Notation--edges• Information

• Flow

a b

xsugeng purwoko, JTI utm

Some rules for translating CLD’s into SFD’s• There are two types of causal links in

causal models (but we don’t distinguish between them)– Information– Flow

1.Information proceeds from stocks and parameters/inputs toward rates where it is used to control flows

2.Flow edges proceed from rates to states (stocks) in the causal diagram always


Systems Thinking basics• Having established two basic loop

types—reinforcing and balancing—let us proceed to a discussion of archetypes

• Archetypes use the basic reinforcing and balancing loops


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


We are creating a “language”

• reinforcing feedback and balancing feedback are like the nouns and verbs

• systems archetypes are the basic sentences• Certain 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


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


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


As mentioned, before attacking the ARCHETYPES we need to understand simple structures

• The reinforcing feedback loop• The balancing feedback loop


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


Management Principle relative to ARCHETYPE 1• Don’t push growth or success;

instead, remove the factors limiting growth


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


Structure

state of stockgrowing action slowing action

BalancingReinforcing


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


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


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


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


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


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.


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.


The Stereotype Structure

Problem

Symptomatic Solution

Fundamental Solution

Side effect

BALANCING

BALANCING

REINFORCING

Symptom-CorrectingProcess

Problem-Correcting Process

Addiction Loop


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 1997

• “If all else fails, lower your goals..”


EXAMPLEAlcohol

Stress/Depression

Reduce workload

Health

BALANCING

BALANCING

Alcohol

Stress/Depression

Reduce workload

Health

BALANCING

BALANCING


Another Example

Costs of Higher Ed not funded by State or Students

Raise tuition, add course fees, etc.

Lower enrollments

Perceived cost to the student


Still Another ExampleHeroics and Overtime

Project Delayed

Efectiveness of PM practices

Reward for heroic behavior

Improvement of processes/practices

Symptom-correctingprocess

Problem-correctingProcess

Addiction Loop


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


“Shifting the Burden” is an insidious problem• Is has a subtle reinforcing cycle• This increases dependence on the

symptomatic solution• But eventually, the system loses

the ability to apply the fundamental solution

• The system collapsessugeng purwoko, JTI utm

Senge Says• Today’s problems are yesterday’s

solutions• We tend to look for solutions

where they are easiest to find• The easy way out usually leads

back in


HOW TO ACHIEVE LEVERAGE• Must strengthen the fundamental

response– Requires a long-term orientation and

a shared vision• Must weaken the symptomatic

response– Requires a willingness to tell the truth

about these “solutions”sugeng purwoko, JTI utm

Create your own “Shifting the Burden” Story

• Is there a problem that is getting gradually worse over the long term?

• Is the health of the system gradually worsening?

• Is there a growing feeling of helplessness?• Have short-term fixes been applied?

• The local Mexican restaurant problem of using coupons to generate business and then can’t get away from using the coupons because their customer base is hooked on coupons


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


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 “sentences” become parts of paragraphs• The simple stories become integrated into

more involved stories


Robust Loops• In any loop involving a pair of

quantities/edges, • one quantity must be a rate• the other a state or stock, • one edge must be a flow edge• the other an information edge


CONSISTENCY• All of the edges directed toward a

quantity are of the same type• All of the edges directed away

from a quantity are of the same type


Rates and their edges

q1

q2

q3

RATES

q4

q5

q6

Informationedges

Flow edges


Parameters and their edges

PARAMETER

q1

q2

q3

Informationedges


Stocks and their edges

q1

q2

q3

STOCK

q4

q5

q6

Flow edges Information edges


Auxiliaries and their edges

AUXILIARY

q1

q2

q3

q4

q5

q6

Informationedges

Informationedges


Outputs and their edges

OUTPUT

q1

q2

q3

Informationedges


STEP 1: Identify parameters• Parameters have no edges

directed toward them


STEP 2: Identify the edges directed from parameters• These are information edges

always


STEP 3: By consistency identify as many other edge types as you can


STEP 4: Look for loops involving a pair of quantities only• Use the rules for robust loops

identified above


q1

q2

q3 q4

q5

q6

q7

q8


q3

q6

q2

q7

q1

q4

q5 q8


Distinguishing Stocks & Flows by NameNAME UNITS

Stock or flow• Revenue• Liabilities• Employees• Depreciation• Construction starts• Hiring• material standard of living


The VENSIM User Interface• The Time bounds Dialog box





A single-sector exponential growth model• Einstein said the most powerful

force in the world was compound interest

• interest taken in relation to principal

• Each stock requires an initial valueinterest prinicipal

Interest rate

R

Principal

Interest

Interest rate


Let’s DO IT• Create the stock principal• Include the rate interest• Include the information connector• Initialize the stock• Simulate


John vs. Jack• Each works for 30 years before retiring• John makes $2000 contributions to his IRA

each year for the first five years and none there after.

• Jack makes $2000 contributions to his IRA each year beginning in year six and continuing through year 30

• Each IRA yields a 15% compounded return• Which turns out to be larger?


John vs. Jack--two interest accounts.mdl

Principal

Interest

Interest rate

Principal 0

Interest 0

Interest rate 0

contributions

contributions 0

<Time>

John

Jack


John vs. Jack800,000

400,000

00 6 12 18 24 30

Time (Year)

Principal : int1Principal 0 : int1


Contributions of John vs. those of Jack2,050

1,525

1,000

475

-500 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Time (Year)

contributions : int1contributions 0 : int1 sugeng purwoko, JTI utm

Another single-sector Exponential growth Model• Consider a simple population with infinite

resources--food, water, air, etc. Given, mortality information in terms of birth and death rates, what is this population likely to grow to by a certain time.

• A population of 200,000, growing at 1.3% a year.

• A population of 1.6 billion with a birth rate norm of .04 and a death rate norm of .028


Experiments with growth models• Models with only one rate and one

state• Average lifetime death rates• Models in which the exiting rate is

not a function of its adjacent state


Example:• Build a model of work flow from work

undone to work completed.• This flow is controlled by a “work rate.” • Assume that are 1000 days of undone

work• Assume the work rate is 20 completed

days a month• Assume the units on time are months• Assume no work is completed initially.


Solving the problem of negative stock drainage• pass information to the outgoing

rate• use the IF THEN ELSE function


Shifting loop Dominance• Rabbit populations grow rapidly with a

reproduction fraction of .125 per month• When the population reaches the carrying

capacity of 1000, the net growth rate falls back to zero, and the population stabilizes

• Starting with two rabbits, run for 100 months with a time step of 1 month

• (This model has two loops, an exponential growth loop (also called a reinforcing loop) and a balancing loop)


Shifting loop Dominance• Assumes the following relation for Effect of

Resources• Effect of Resources = (carrying capacity -

Rabbits)/carrying capacity• This is a multiplier• Multipliers are always dimless (dimensionless)• When rabbits are near zero, this is near 1• When rabbits are near carrying capacity, this is

near zero– This will shut down the net rabbit birth rate


RabbitsNet Rabbit Birth rate

Effect of resourcesCarrying capacity

Normal Rabbit Growth Rate

B

R


Rabbits1,000

40

00

0 20 40 60 80 100Time (Month)

Rabbits : rab1Net Rabbit Birth rate : rab1


Dimensionality Considerations• VENSIM will check for dimensional

consistency if you enter dimensions• Rigorously, all models must be

dimensionally consistent• What ever units you use for stocks,

the associated rates must have those units divided by TIME

• An example followssugeng purwoko, JTI utm

Cascaded rate-state (stock) combinations• In the oil exploration industry, unproven

reserves (measured in barrels) become proven reserves when they are discovered. The extraction rate transforms proven reserves into inventories of crude. The refining rate transforms inventories of crude into refined petroleum products. The consumption rate transforms refined products into pollution (air, heat, etc.)


Another cascaded rate-stock combination• Population cohorts. Suppose

population is broken down into age cohorts of 0-15, 16-30, 31-45, 46-60, 61-75, 76-90

• Here each cohort has a “lifetime” of 15 years

• Again, each rate has the units of the associated stocks divided by time


A single-sector Exponential goal-seeking Model• Sonya Magnova is a resources planner

for a school district. Sonya wishes to a maintain a desired level of resources for the district. Sonya’s new resource provision policy is quite simple--adjust actual resources AR toward desired resources DR so as to force these to conform as closely as possible. The time required to add additional resources is AT.


The Sector Approach to the Determination of Structure• What is meant by “sector?”• What are the steps

– to determination of structure within sectors

– to determination of structure between sectors


Definition of sector• All the structure associated with a

single flow• Note that there could be several

states associated with a single flow– The next sector in the pet population

model has three states in it


Sector Methodology, Overall• Identify flows (sectors) that must

be included within the model• Develop the structure within each

sector of the model. – Use standard one-sector sub-models

or develop the structure within the sector from scratch using the steps in Table 15.5


Sector Methodology, Overall Cont’d• Develop the structure between all

sectors that make up the model• Implement the structure in a

commercially available simulation package


Steps Required to Formulate the Structure for a Sector from Scratch• Specify the quantities required to

delineate the structure within each sector

• Determine the interactions between the quantities and delineate the resultant causal diagram

• Classify the quantity and edge types and delineate the flow diagram


• Resource, facility and infrastructure (desks, chairs, computers, networks, labs, etc.) needs for an educational entity are driven by a growing population that it serves. Currently, the population stands at 210,000 and is growing at the rate of two percent a year. One out of every three of these persons is a student.

• One teacher is needed for every 25 students. Currently, there are 2,300 actual teachers; three percent of these leave each year. Construct a structure for each that drives the actual level toward the desired level. Assume an adjustment time of one year. Set this up in VENSIM to run for 25 years, with a time-step of .25 years.


• One teacher is needed for every 25 students. One-hundred square feet of facility space is needed for each student. Thirty-five hundred dollars in infrastructure is needed for each student. Currently, there are 2,300 teachers; three percent of these leave each year. Currently, there is five million sq. ft of facility space, but this becomes obsolescent after fifty years. Currently, there is $205,320,000 in infrastructure investment, but this is fully depreciated after ten years. For each of infrastructure, teachers and facility space, determine a desired level or stock for the same. Construct a structure for each that drives the actual level toward the desired level.


• Set this up in VENSIM to run for 25 years, with a time-step of .25 years. Assume adjustment times of one year. DETERMINE HOW MUCH IN THE WAY OF FACILITIES, TEACHERS AND INFRASTRUCTURE ARE NEEDED PER YEAR OVER THIS TIME PERIOD.


What are the main sectors and how do these interact?• Population• Teacher resources• Facilities• Infrastructure


Factors affecting teacher departures• Inside vs. outside salaries• Student-teacher ratios• How might these affects be

included?


Teacher departure description• It is known that when the ratio of average

“inside the district” salary is comparable to outside salaries of positions that could be held by teachers, morale is normal and teacher departures are normal

• When the inside-side salary ratio is less than one, morale is low and departures are greater than normal

• The converse is true as wellsugeng purwoko, JTI utm

Teacher departure description• When student-teacher ratios

exceed the ideal or desired student teacher ratio, which is twenty four, morale is low and again departures are greater than normal

• The converse is true as well


A Two-sector Housing/population Model• A resort community in Colorado has

determined that population growth in the area depends on the availability of housing 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.


Two-sector Population/housing Model, Continued• The housing construction industry, 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.


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


What is the structure within each sector?• Determine state/rate interactions

first• Determine necessary supporting

infrastructure– PARAMETERS– AUXILIARIES


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


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


What is the structure between sectors?• There are only AUXILIARIES,

PARAMETERS, INPUTS and OUTPUTS


What are the between-sector auxiliaries?• Housing desired• Housing ratio• Housing construction multiplier• Attractiveness for in-migration

multiplier• PARAMETER: Housing units

required per personsugeng purwoko, JTI utm

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


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


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


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


Before attacking the ARCHETYPES we need to understand simple structures• the reinforcing feedback loop• the balancing feedback loop• THE DEMO


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 alancing process) that eventually slow down the success.


Management Principle relative to ARCHETYPE 1• Don’t push growth or success;

remove the factors limiting growth


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


Structure

state of stockgrowing action slowing action

BalancingReinforcing


Understanding the Structure• High-tech orgs grow rapidly

because of ability to introduce new products

• This growth plateaus as lead times become too long


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


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 once source of limitation is removed, another

will surface• Growth eventually WILL STOP


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


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


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. 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.


The Stereotype Structure

Problem

Symptomatic Solution

Fundamental Solution

Side effect

BALANCING

BALANCING

REINFORCING

Symptiom-CorrectingProcess

Problem-Correcting Process

Addictioin Loop


Special Case: Eroding Goals• Full employment meant 4%

unemployment in the 60’s, 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..”


EXAMPLEAlcohol

Stress/Depression

Reduce workload

Health

BALANCING

BALANCING

Alcohol

Stress/Depression

Reduce workload

Health

BALANCING

BALANCING


Another Example

Costs of Higher Ed not funded by State

Raise tuition, add course fees, etc.

Lower enrollments

Perceived cost to the student


Still Another ExampleHeroics and Overtime

Project Delayed

Efectiveness of PM practices

Reward for heroic behavior

Improvement of processes/practices

Symptom-correctingprocess

Problem-correctingProcess

Addiction Loop


“Shifting the Burden” is an insidious problem• Is has a subtle reinforcing cycle• This increases dependence on the

symptomatic solution• But eventually, the system loses

the ability to apply the fundamental solution

• The system collapsessugeng purwoko, JTI utm

Senge Says• Today’s problems are yesterday’s

solutions• We tend to look for solutions

where they are easiest to find


HOW TO ACHIEVE LEVERAGE• Must strengthen the fundamental

response– Requires a long-term orientation and

a shared vision• Must weaken the symptomatic

response– Requires a willingness to tell the truth

about these “solutions”sugeng purwoko, JTI utm

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 coupons to generate business and then can’t get away from using the coupons because their customer base is hooked on coupons


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


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


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 pay less attention to



Documents

L 1 Overview