Producing (or constructing) strategic decision entails numerous cognitive and other bounds on human rationality, which often cause systematic errors and biases. Yet among the economic and management models used in strategic planning, few try to explain why decision makers remain so stubbornly and extravagantly irrational, ignoring logic, principle of optimization, and even postulated self-interest. One explanation may be the difficulty of extending methods used to study individual choice and decision-making behavior to dynamic group settings. This experimental analysis assessed the impact of cognitive simplification processes on the performance of 118 graduate business students who worked in a simulated strategic context. Randomly assigned to twenty-four teams, the subjects run international conglomerates with multiples actors, feedback loops, non-linearities and time lags and delays. The teams’ interaction, expectations, choice and model selection produced results that systematically diverged over time. Within a crossed factorial design, these results support the hypothesis that cognitive biases interact with strategic management models to influence performance. Poor performers chose models that reinforced their cognitive limits and bounds. Conversely, good performers constructed models which helped them recognize and overcome the negative effects of cognitive simplification processes. They produced effective decisions, not by optimizing functions, but through searching for recognizable patterns when they received feedback.
Any attempt to impose a computerized information system (CIS) upon an organization requires an assessment of its impact in terns of costs, benefits and procedural change. This paper briefly describes the capacity of the System Dynamics technique to capture the essence of an organization’s management structure and to assess, from a system-wide perspective, the impact of imposing a CIS. The paper employs, as a basis, two case studies set in a military context and a particular methodology developed with these applications in mind.The efficacy of system dynamics in assessing the true impact of CIS on the enterprise and the user, is appraised, based on a set of independent criteria. The significance of the methodology for CIS development generally is considered and encompasses an elaboration of its place in the software life cycle.
Policy design is a key issue in System Dynamics. It consists in the introduction of changes into the system, in order to track the objectives trajectories. Those changes are either numerical or structural. Oscillations require more structural than numerical changes.Oscillatory systems are usually undesirable because of the ups and downs they bring into the system components. For instance, the labor instability in the Labor Backlog model. (Lyneis 1980, pp 182-210).Oscillations have been found very insensitive to numerical changes in the parameters (Graham(1977)); but, they have been found very sensitive to changes in the sign, and presence of them. Where presence denotes changes from zero to something. Therefore, the design of effective policies to control oscillations is a problem that goes beyond the Classical Optimal Control Theory of nonlinear systems (Coyle 1985), and it belongs to the Structural Control Theory. However, the Optimal Control Theory is a valuable tool to model the control structure. (Ozvern; Cuneyt; Sterman J., 1989, pp 130 - 147), (Keloharu 1982).In this paper, some guiding principles for policy design in oscillatory systems are presented. The construction of the management structure is illustrated.Two classical models: Labor- Backlog and the version of Kondratieff cycles presented by (Mosekilde; Rasmussen; Sterman (1985)), serve as prototypes to try the proposed principles on.
Educational systems are serving poorly. The public response is apt to call for more of what is already not working, rather than seeking fundamentally new and more effective approaches to education. Promising new approaches are now being successfully demonstrated--system dynamics as a framework for giving cohesion and meaning to individual facts, and “learner-directed learning” to harness the creativity, curiosity and energy of young people. Together these reverse two fundamental roadblocks in traditional education. System dynamics reverses the educational sequences where deadening years of learning facts precede the use of those facts. System thinking through computer simulation introduces synthesis (putting it all together) based on facts that even elementary school students already have gleaned from life. Learner-directed learning reverses the process of a teacher’s lecturing facts at resistant students; learners take the leadership in exploration, information gathering, and creating a unity out of their educational experiences with the “teacher” acting as guide and participating learner and as a resource person.
Computers have been used as tools to facilitate complex negotiations and to resolve disputes that arise in that context. These past efforts have been limited by a view of both negotiation and of computers arising out of out pervasive technical rationality paradigm. This paper, an initial inquiry onto a new ontology for design, suggests an alternative model for negotiation and disputes based on an interpretive, communicative model that points to a richer set of possibilities for computers than merely the provision of information to the parties involved. In particular, the concepts of communicative rationality, developed primarily by Habermas, point to specific functions for computers in assisting the parties in establishing claims in rational domains beyond the positivist domain of technical rationality.
A central dilemma for system dynamics is the fact that the same human limitations that motivate the use of models also make models hard to create, debug and even hard to use. Two commonly proposed escapes from this dilemma are education and generic models. We propose a third, technical approach and give an example. The example approach, “causal tracing,” is a computer tool that makes it much easier to find the feedback loop or input responsible for a given variable’s behavior. Correctly implemented, this tool reduces the time required for causal tracing by a factor of 10 to 100. The payoff is faster and more accurate creation of models and use of models.
The general objective of this paper is to present a method for integral regional energy planning within the frame of national politics on energy and economic development.A historical database and energy balances of supply and demand allow to analyze and model the dynamics of the sector and its interaction with other economic sectors and social and technological variables.This paper contributes to understand how to mix econometric and system dynamics techniques. Whenever data is abundant and reliable, statistical analysis and modeling could be useful to reproduce historical behavior, but in order to study possible future scenarios it is required to set hypotheses on parameters evolution, probably based on system dynamics methods.On the other hand, in order to model interactions among demand, supply, prices and other economic variables, system dynamics is particularly suitable. In this context, techniques that seem to be confronted appear to be as each one complementing the other.The model was implemented by the Department of Antioquia in Colombia, which possesses a considerable amount of energy resources, particularly hydroelectricity. Specific methodological aspects for planning energy resources were considered to analyze the feasibility to introduce new elements such as gas.Recommendations on policy considered integral development of different regional energy resources in accordance with supply potentials, requirements and economic efficiency.
MODERE (MOtivation, DEsire, REality), the model described in this paper, is the result of an international cooperation between a System Dynamicist and a specialist in applied Social Sciences.This model is based on several current theories of human behavior and motivation, some of which were developed several decades ago, others more recently, but all of which have proven in daily practice to be helpful in the analysis and understanding of human motivation and corresponding behavior in the context of real environment.
New ideas are being implemented in business today with little thought of being given to the philosophical and emotional shifts that everyone in these organizations must make if American business is to succeed as an industrial power.For programs such as continuous improvement, peer review, team concept and total quality management to succeed, an understanding of systems thinking and system dynamics is necessary. It is at the root of these philosophical shifts. Business needs people who can translate a complex, technical and sometimes frustrating subject. This requires innovative and creative ways of teaching adults at all levels in the workplace.This paper deals with some of these methods and brings together a list of resources that have proven successful in communicating these ideas.
This paper analyzes some of the recent literature on language and information processing, focusing on graphic representations which model the interactions between those transmitting and those receiving messages. Having examined four models concerning interpersonal communication and information processing, I concluded that today’s most promising research on dyadic communication is that based on the model of cybernetic control systems. Most useful are the models which 1. recognize the need for the speaker and listener to commit themselves to continue the dialog until they arrive at consensus and 2. also recognize that the recursive interactions between the two individuals are based on the principle of feedback, which, in the words of Norbert Wiener, “is the property of being able to adjust future conduct by past performance” (Wiener, 1954, 33).“A fool sees not the same tree a wise man sees.” William Blake (1790)For much more than 200 years poets and philosophers have been struggling with the mysteries of the human mind, imagination and perception. Increasingly, researchers in artificial intelligence (AI), in their attempt “to design computer tools suited to human use and human purposes” (Winograd and Flores, 1986, 8) are studying what happens when two people use language. What happens when the fool tries to communicate to the wise man about the tree the fool sees? And how can the wise man communicate about the tree he sees? We now know that Korzybski was correct in recognizing that “The map is not the territory,” and that each individual carries in his/her own head maps or mental models of reality formed by that individual’s own life experiences. In other words, the word or symbol is not the reality it represents, and the words represent different interpretations of reality to each individual. Small wonder then that our lives, professional and personal, are fraught with miscommunication.
Managers of profit and non-profit organizations are often confronted with complex problems. Ill-structured diffuse problems which involve more than one domain. Problems that are hard to set let alone to solve. They differ a lot from the structured domain related problems we used to work with in school. In education little attention is given to the training of complex domain exceeded problems.In order to be able to get domain exceeded problems, managers should get the opportunity to experience this kind of problems setting in a special learning environment. In order to enhance transfer the learning environment should be as close as possible to the real-life situation. A conference room can be a good learning environment in which managers can be trained to set complex problems. Setting complex problems is teamwork. It demands knowledge of various domains. Therefore different experts should work together in making a conceptual model of the problem. This can cause serious communication problems.A free form game with a case as a prototype of a complex problem can be a good didactical instrument for training problem setting. Problem setting is defining the scope of the problem, the domains and the level of aggregation. What can be the role of computer programs like decision support system, simulations, expert systems and general problem solvers like SOAR and ACT* in the setting of domain exceeded problems?In problem setting the computer can play a part by information retrieval. An expert-system as front-end of a database can assist the experts to get the relevant data out of the database in order to form in cooperation with each other a conceptual model of the problem.
This paper highlights the authors’ attempts to develop a software environment to help analysts (1) improve their understanding of the dynamics of the energy system and (2) build confidence in a complex, highly defined system dynamics model of energy supply and demand. The envisioned organizational learning environment has at its center a human interface design from which the user controls simulations, exercises, guided tours, model modifications, experiments, etc. While efforts to date have focused upon developing a micro-computer based system, the learning environment will be extended to workshops in the future.Any energy simulation model can be intimidating to users who lack a sufficient understanding of supply/demand concepts and knowledge of the computer language employed. The situation becomes more complicated as the complexity of the simulation model increases and new operational (or system performance) concepts are introduced.We provide a brief description of an energy supply/demand simulation model, ENERGY 2020, that central Maine Power uses for demand forecasting. Developed by George Backus and Jeffrey Amlin, the long-term energy policy model is used by analysts for both utility-level planning as well as state energy policy analysis. The model is coded in PROMULA for IBM-compatible personal computers.The problem is to create a means by which new users can explore and understand the complexity of the energy system (the ENERGY 2020 Model) in a structured and non- intimidating manner. The goal is to bring the users to a higher level of understanding, mastery, and ownership of the model.
The purpose of this paper is to explain the expansion and the contraction of the Norwegian mink supply in an expanding market, as a consequence of the mink pelt price and the mink farming costs. Significant variations in price, and time lags between capacity adjustments, breeding decisions and the fur sales, makes fur farming speculative, and only a small fraction of farmers generate their main income from such farming.Moreover, we estimate, using a Bayesian approach, the farmers’ loan fraction, their response to profitability and a few delays in economic perception and capacity adjustments. This model is the first one in a series under development, portraying the national and the international fur production and market. In addition to reflecting the Norwegian mink production, this model may be considered generic for international fur production. An international demand model is under development.Finally, empirical evidence indicates the relevance of our model to the current development in the Danish mink farming and to the Norwegian fox farming.
This paper contains a snapshot of some of the activities in the Nordic countries, regarding the utilization of system dynamics as a basis for educational development. In particular we provide a brief description of the background for introducing system dynamics into public education, point out software developed in Norway for this purpose, present some of the methodological issues addressed and summarize the classroom experiences reported by two Swedish teachers.
A simple simulation model demonstrates that the outcome of a negotiation may critically be affected by (i) the structure of the negotiating problem -- the joint distribution of negotiators’ evaluations of potential settlements; and (ii) the negotiators’ tactical approach to the problem -- the decision rules that guide the choice of concessionary offers made during the bargaining process. Hampered by cognitive limits and faced with imperfect information about the other party’s interests, negotiators may relay on simple heuristics in choosing among possible concessions during the negotiating process. The model of single negotiations is extended to examine how the outcome of one negotiation may impact future negotiations. Focusing on two negotiator interests -- concern for self and concern for fairness -- the model shows how adjustments in tactical decision rules from one negotiation to the next sometimes leads to an unwarranted deterioration in the parties’ relationship.
An earlier effort at projecting the future incidence of AIDS among adult homosexuals in New York City is reviewed in the light of data for 18 more months. One of the previous models holds up well against the new data. The model projects a temporary leveling off or reduction in new AIDS incidence, followed by a long, slower resurge. The HIV transmission probability, given an infected partner, is estimated at around 0.003. This level is barely sufficient to sustain endogenous growth in the homosexual population. From this it may tentatively be concluded that the epidemic will not start to spread exponentially among the heterosexuals provided they engage in less risky sexual behaviors than homosexuals.
The research reported in this paper involved the study of end-user computing in typical organizational settings. An extensive literature review was conducted and a number of executives consulted about the effects and position of the end user computing phenomenon within their organizations. The data served as a basis for a system dynamics model that focused on the forces that create growth in end-user computing. The “tiered infrastructure” of computing in the organization is demonstrated and discussed. One problem with the study of end-user computing has been the lack of testable theory about it. The majority of research has used case studies or relatively narrow field studies as a methodology. The key purpose in using the system dynamics approach has been to provide a vehicle to capture the ideas cataloged in the various case studies and cast them in the causal map format as a dynamic theory of systems organization and behavior.
Budget instability like that seen in defense over the past 20 years cost defense about 15 percent of its force levels. This result derives from a dynamic simulation of the defense resource allocation process. The simulation assumes fiscal constraints, and uncertainty in planned future budgets. Inefficiencies depend on the severity of budget changes from budgets planned to those actually received. The effects of instability on the Army, Navy, and Air Force are shown to be quite different, with major determinants being the relative size of acquisition budgets and the life span of assets.
There are three types of variables and relationships: numerical, linguistic and pictorial. Traditional system dynamics models are defined by a set of numerical equations which are defined from causal diagrams. Expert systems modeling has shown that one could also develop and use linguistic dynamic models. IDEAS is an integrated simulation approach that considers state of the art numerical and linguistic formulations and introduces pictorial models.Pictorial models consider pictographs, symbols and signs defined by their color, shape, size and position. Operations in these models include reproduction, mutation and fertile and sterile encounters, following a biological analogy.IDEAS may be applied to variety of problems. Two simple natural resource management models are presented to illustrate its potential applications.
A game for environmental urban management based on system dynamics models is being developed. Named ANARQUIA, this game uses Hypercard as a front end. ANARQUIA, considers a town managed without a government. The goal of the game, played by teams of five players operating under anarchist principles, is to manage the environment of a city optimizing environmental quality during the maximum amount of time. The game was applied to the town of Caparica, a traditional fishermen’s town in Portugal.