The paper describes from a client point of view some experiences with system-dynamics during the first year of Nostradamus. Nostradamus is a project, which aims at simulating the senior management of a large Dutch governmental organization with an one action orientated engeneers approach to adopt a more outwardly-orientated, creative and flexible attitude. In the beginning of the project the use of system-dynamics was intended as a central guiding aid in the proces of organizational growth. The intended use proved considerably more extensive than the actual use. Insofar this regression is attributable to system-dynamics we, as a client of system-dynamics, see in this regression a possible challenge for system-dynamics. We think system-dynamics could have been a more central supporting aid in Nostradamus if we would have found well-documented experience with system-dynamics in comparable situations. We suggest the system-dynamics-society to develop certain activities in order to stimulate demand and to better link up demand and supply in the area of systems-thinking.
While nonlinear combinations of multiple modes existing in complex oscillatory systems may generate chaotic behavior in real systems, the studies of chaos attempted in system dynamics have often resorted to forcing simplistic models of systems to chaos. This paper illustrates how chaotic modes have been constructed through the creation of mis-specifications and anomalies in the model structure and parameters. This process has not only reduced the models to artifacts with little relevance to problem solving but has also invariably introduced a stiff structure that is susceptible to considerable building up error as numerical integration methods are used with long simulation times. The paper concludes that a model must qualify as an empirically valid system by meeting the requirements of the normal system dynamics practice if the chaotic modes it generates are to be of practical value.
Few real life case study examples exist concerning optimisation in system dynamics models. This study reports an attempt to estimate relevant parameters of an AIDS spread model in order to check whether the chosen model structure can be separately parameterised and thereby explain the course of the epidemic for more than one country. The UK and USA are the two countries selected and the parameter values derived are reported for each. The values obtained are not inconsistent with emerging knowledge about the epidemic and the subsequent optimised projections reveal that the peak of the homosexual epidemic has been or is about to be reached in both countries.
Since formal modelling requires having a model boundary encompassing finite complexity, so deductive logic is possible, complex problems must be partitioned into simpler parts before being analysed. There are many ways to slice a complex problem but not all create partitions that keep together processes contributing to effective policy design. This paper explore ways in which a complex problem may be appropriately sliced so the models of the partitions can serve as effective tools for policy design.
To the date, Budget Plan definition in Italian public companies is approached with insufficient deepness. We believe this is common to other countries too.Indeed, most public organizations develop the Budget Plan basing themselves only upon the available data and not upon knowledge acquired in years of experience. Balance sheet data are therefore obtained simply adding to the previous information, an amount estabilished, for example, on the expected inflation rate.This approach although “trivial” supports the budget responsible, because during the budget presentation, very few elements can be effectively criticized. It is commonly accepted that also public companies find themselves in turbulent environments. This is due to both the increased number of endogenous variables, and to the complexity of exogenous parameters. Therefore the Budget Plan definition becomes always more critical, and consequential difficulty of its evaluation assumes relevant importance.The paper describes an experiment carried out by an Italian Public company which is adopting a dynamic economic- financial model for both, Budget Plan definition and for its evaluation. The model is based upon System Dynamics approach and evaluates a series of scenarios providing support to the budget definition responsibles in taking strategic policy decisions, and better “explaining” the effects of decisions undertaken.
Organizational learning is intrinsically systemic, because it deals with changes in thinking and acting not only in individuals, or in teams, but organization-wide. Our ability to understand and improve organizational learning will depend on having an operational systems framework, which can both sharpen theoretical insights and address practical management concerns. Building on past work in organizational learning and system dynamics, the new Center for Organizational Learning at MIT is attempting to develop a rigorous foundation of systems principles and methods so that current interest in organizational learning and “ learning organizations” can lead to significant advances in management theory and practice.
System Dynamics has not achieved widespread recognition as a paradigm of substance in the business-related disciplines of Strategic Management, Organization Behavior, Organization Theory, or Operations Management. One reason for its slow acceptance by academicians in these fields and related social sciences may lie in the specialized meanings and usages attached to common words by the System Dynamics lexicon. Words such as “open,” “closed,” “feedback,” and “structure” -- used differently than established scientists might expect --may create perceptions that System Dynamicists simply don’t understand systems theory. Writers in the field need pay special attention to the semantic implications of their presentation.
This paper describes a case study of applying organizational learning principles to the strategic change of a large German automotive company which seems to be successful alternative to the usual top-down approaches. Different models of implementing change processes are discussed, and their adequacies are assessed regarding to the degree of supporting self-transformational processes within the organizational.
The Management Flight Simulator is now being established as a tool to facilitate experiential learning with both undergraduate and postgraduate management students, and managers within learning organisations. Existing MFS provide user-friendly reports and graphical representations of historical data, designed to the limits of human computer interface (HCI) good practice. Although, existing MFS make use of sophisticated quantitative databases and models, but lack the softer data: managers’ in-trays, meeting notes, employee feedback, interviews with customers, press and television news reports, industry observers, financial analysts, and so on. Managers in real life rarely make decisions without going to look at a problem for themselves. Using multimedia MFS, users will be able to do the same, by interrogating and making observations using electronic-based media.
The savings and loan industry has been the primary source of home mortgages for American families since 1932. Since 1984, however, 25 percent of the savings and loans, approximately 700 out of 2800, have failed. Although the total costs associated with these failed savings and loans have yet to be determined, estimates range from $300 billion to $1 trillion. This paper discusses a system dynamics model of the effects of interest rate risk and default risk focusing on the savings and loan industry. Using the model to test the effects of policy initiatives specific to the prime interest rate and the default risk on loans, the authors demonstrate that the savings and loan crisis might have been lessened or even avoided if the regulators had a better understanding of the system’s structure and the effect of that structure on system behavior.
In this paper we describe a modification of the Beer Distribution Game which we have used with MBA students and executives. In this version, we introduce a change in communication rules at the end of week 24. Our game debriefing addresses all of Senge’s five learning disciplines and stresses the basic question: how do we deal more effectively with underlying structure? This variation on the usual rules shows a way for designing experiments with the Beer Game to improve our understanding of how organizations learn.
The diffusion of new technologies into the market is a critical factor in the success of any technology based company. This paper describes a system dynamics model which integrates a number of key concepts presently used to understand the diffusion process (e.g. technical progress functions, cost-experience curves). It shows how these concepts, together with management decisions regarding R&D investment, marketing, and pricing, drive the evolution of diffusion between technologies. It then illustrates how simulation can be used to understand the critical success factors in technology diffusion, and what this means for the management of technology-based companies.
This paper describes the use of System Dynamics (SD) for making a claim for Disruption and Delay. The case concerns design management of a large development project. Extensive group workshops (GDSS) with the managers, based on the cognitive mapping technique and association software tope COPE, showed that the client-contractor interaction process had set up dynamic feedback loops creating Disruption and Delay to the project. In order to qualify the extent of the Disruption and Delay, the cognitive map was transformed into an "influence diagram" and thence through the acquisition of numeric data into a large SD model. The development of the two continued in parallel, informing and checking one another. As well as simply providing explanations of trends and behavior, the SD model had to reproduce the planned and actual out-turns explicitly for it to be a creditable explanatory tool. The paper will draw lessons from the case study on the process of moving from cognitive map to a SD model, and the mutual benefits of joint development, as well as more general lessons about combining soft and hard methods.
This paper describes the evaluations results from an unsuccessful case study. In this case study, system dynamics modeling was used to support the development of an implementation plan for a corporate strategy. Three modeling sessions were conducted with senior management, which were unsuccessful. A detailed analysis of the evaluations interviews with several of the participants had identified the main cause for this failure. These causes turn out to be threefold: Firstly, most of the participants were unwilling to discuss openly this politically sensitive issue, secondly several errors were made in project design and thirdly the scope of the strategic issue is at stake was too broad to tackle effectively within the time frame allotted to the project.
Busy lines are a persistent and persuasive problem common to all telephone systems, whether it counts with the most advanced digital technology and network management or no, there will always be a period during the day on the week where telephone calls cannot be completed due to busy line with the resultant loss of revenue. If expansion programs for telephone lines were not in accordance to actual demand growth telephone calls, this problemwill grow to the point where retrials would seriously impairthe telephone system operation. This paper describes the use of a system dynamics model for designing and evaluating expansion policies that respond to actual demand and ameliorate problem.
In a world of increasing complexity and turbulence organizations run the risk to loose effectiveness as well as efficiency when managed on the base of linear thinking and shortsighted decision making. System thinking and organizational learning instead will become a prerequisite for competitiveness and survival.
This paper presents a critique of the atomistic ontology and empiricist epistemology which inform most current definitions of the concepts information, systems and, hence, information systems in the Information System (IS) literature. The notion of information as an objectively given quantifiable 'force' emanating from the real world and endowed with the essential property of dissolving uncertainty; or as possessing the same essential property but as consisting of structured or processed data, i.e. atomistic ‘facts’, about the real world are argued to be unsustainable, on both philosophical and practical grounds. It is argued, furthermore, that the notion of systems as an ontology in respect of goal seeking cybernetic machines unproblematically specifiable in terms of their boundaries, of their input and output, and of their objectives is not inappropriate to the socially-based systems in terms of which an IS must be defined, but also fails to consider the ontological, and consequently epistemological, depth implied by this concept. In view of these arguments, an alternative conceptual practice is explored by suggesting that the concept system be taken as an epistemological tool to be deployed in respect of complex coherent 'whole-entities' characterized by their emergent properties and, in the case of socially-based systems, by the essential autopoietic nature of their modes of regulation and self-representation including, above all, language. It is also suggested that information should be considered as a set of fundamentally, arbitrary signs whose 'emergent' properties i.e. syntactic, semantic and pragmatic, are intersubjectively negotiated between international organizational agents and, as such, inseparable from the forms of social life which they sustain and in which they are generated. This alternative conceptualization, proceeds from an ontology which acknowledges the essential 'depth' of its key thought objects, by virtue of the emergent properties attributions to these objects, in contrast to the flat atomistic ontology currently dominant in the IS field. Such an alternative conceptual practice, we argue, provides an initial theoretical framework in which to ground the currently ill-defined, “emergent perspective”, on the relationship between ICT and organizational change, identifiable in the IS literature. While as regarded IS practice, this re-conceptualization is found to be congruent with the object oriented approach to IS development which is currently attracting increasing practical attention and which appears to provide the basis for a common and intuitively meaningful language with which to bridge the gap between IS end-users and developers.
This paper reports the finding of an internal McKinsey research and development project designed to test the value of applying System Dynamics thinking to the life insurance industry. The aim was to understand better how management decisions and actions can affect the success or failure of a typical direct sales life company. The study compared the evaluation over 20 yeas of two companies, Equitable Life and London Life. Starting out in 1975 from virtually identical competitive positions, Equitable has become the U.K.'s most successful life company, while London Life was rescued by the AMP Society from near insolvency in 1989. We found System Dynamics a powerful means of identifying which managerial actions had accounted for the extraordinary divergence of the two companies. The lessons learned include many counter-intuitive insights that have relevance for any life company manager. Through simulation we were able to isolate which management actions made the difference to long term performance. In particular, we show how attempts exceed the maximum sustainable growth rate specific to any individual company can lock it into a slow but relentless spiral of decline, from which there is little hope of escape. This growth ceiling can be quantified and we also identify a number of a long range early warnings signs. Consequently, we believe that our conclusions are likely to change the way life companies are managed in the future.
Management practitioners have always felt the need to understand organizational contexts and processes. Consequently many different theoretical bases have been used to facilitate the evaluation. However the focus on existing approaches has primarily been on the ‘formal’ aspects of the organization. This has often resulted in inadequate and poor analysis of various complex managerial situations. In viewing organizations as communications systems, this paper introduces the responsibility analysis approach which helps in presenting a comprehensive picture of an organization environment. At a very generic level, organizations are viewed in terms of three sub-systems; technical, formal and informal. When conducting a responsibility analysis, the endeavor is to identify the responsible agents and capture the norms associated with each action. In doing so, we seek to understand the underlying repertories of behavior. This produces a high level specification of the organization and its attendant responsibilities, thus allowing a comparison to be made with the implicit and explicit structures of responsibility. The paper demonstrates these concepts with examples drawn from a National Health Service case study.
This paper shows that viewing dyadic communication from the perspective of servomechanisms and system dynamics rather than the cybernetics perspective (see Richardson, 1991, 128) allows deeper insights into the complex process of human conversations. Instead of viewing feedback from the cybernetic perspectives as the influence of input back on the output (Richardson, 128) we view dyadic communication as a closed system, with positive and negative feedback loops. This point of view helps us to better understand how to use feedback to achieve one's communications goals. A case study based on the short story The Revolt of Mother by Mary Wilkins Freeman, illustrates the reciprocal (not linear) nature of dyadic communication, and the role of breakdowns in revealing its structures. This analysis has implications for managers who engage in conversations in which they create, take care of, and initiate new commitments within an organization (Winograd and Flores, 1991, 151).