229DAVIE.pdf, 2004 July 25-2004 July 29

Table of Contents

The Theory of Constraints and Systems Dynamics:

A Suitable Case for Multi-methodology
J Davies', VJ Mabin’ and JF Cox?
Victoria Management School, Victoria University of Wellington, PO Box 600,
Wellington, New Zealand;
3 Terry College of Business, University of Georgia, Athens, Georgia 30602-6256
Telephone: '+ 64 4 4635382, “+64 4 4635140, +1 706 5423747
Email: ‘john.davies@ vuw.ac.nz, *vicky.mabin@ vuw.ac.nz, *jcox@uga.edu

Abstract

Prior work using the classificatory frameworks of Mingers, Mingers and Brocklesby
has proven useful in understanding the complementary nature and characteristics of
traditional Operational Research/Management Science (OR/MS), Theory of
Constraints (TOC) and systems methodologies, by examining the philosophical
assumptions that underpin them. This paper uses a case illustration to demonstrate
how the specific methods and methodologies known as TOC can be used to
complement the use of traditional systems approaches involving the associated tools
of Systems Dynamics (SD) such as Causal Loop Diagramming (CLD) and to develop
a better understanding of operational and strategic decision-making. In doing so, the
paper surfaces the systemic qualities of TOC methodologies, methods and tools, and
identifies the communality and complementarity of TOC and SD approaches to
problem solving.

Keywords
Theory of Constraints, OR/MS; Systems Dynamics; Systems, Multi-methodology.

Introduction & overview

The development of multi-methodology has received considerable attention over the
last three decades as practitioners and academics seek to develop approaches that
guide multi-methodological intervention, and thus to understand and create benefit
from the use of different yet complementary tools, techniques, methods and
methodologies. In this paper, we seek to demonstrate how the specific methods and
methodologies known as TOC can be used to complement the use of traditional
systems approaches involving Causal Loop Diagramming (CLD) and Systems
Dynamics (SD). First, we seek to clarify how these methodologies and their
associated methods and tools etc are underpinned by different philosophies, value
systems or paradigms, and how such understanding can provide a theoretical basis for
mixing methodologies and for their complementary use.

In doing so, we draw on the work of Mingers (2003a, 2000, 1997 a&b ), Mingers and
Brocklesby (M-B) (1997, 1996), Jackson (1990), Jackson and Keys (1984), and others
who have sought to develop classificatory frameworks that would be useful in

understanding the nature and characteristics of OR/MS and systems methodologies!

1 A methodology is a structured set of guidelines or activities to assist an individual in undertaking research, A methodology
will embody the assumptions and principles of the paradigm. They may develop subconsciously or emerge as prescriptions for
good practice for using particular techniques within a paradigm. A framework is a conceptualisation window to see, hear, and to

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and the philosophical assumptions underpinning them. Whilst Jackson (1990) sought
to classify and reveal the utility, strengths and weaknesses of different systems
methodologies and how such features relate to fundamental assumptions underpinning
such methodologies and the problem contexts in which they were likely to be used,
Mingers and Brocklesby (1997) had a modified vision in mind. They sought to
examine and classify the relative strengths of different methodologies as a basis for
constructing multi-methodological approaches and mixing methodologies, a purpose
in keeping with Burrell and Morgan's (1979) acceptance of multi-paradigm and
therefore multi-methodology development (Brocklesby 1993; Gioia & Pitre 1990).
Indeed, much of the work in the field of multi-methodology has arisen out of need to
better understand the complementary use of different approaches, techniques,
methods and methodologies. This need is especially marked when these approaches
etc are underpinned by different value systems or paradigms, and especially when
different world-views lead to alternative perspectives of problem situations (Davies &
Mabin 2001). Reflecting this position, and building on his previous work, Mingers
(2003a) has developed a framework facilitating the examination and classification of
the fundamental philosophical assumptions underpinning OR/MS and systems
methodologies, with a similar purpose being to better inform and support the design
of multi-methodological approaches to problem-solving.

At the practitioner level, the need for clarity about the distinctiveness, substitutability
or complementarity of different methodologies has been addressed by the
development of classification systems and frameworks (Jackson & Keys 1984; Flood
and Jackson 1991). Additionally, several frameworks regarding method choice
(Mingers 1997b; Flood 1995; Flood & Romm 1996) have also emerged. However,
one consequence has been that some descriptive frameworks such as Jackson and
Keys' System of Systems Methodologies (SOSM) have come to be viewed (and used)
uncritically, perhaps unwittingly, as frameworks providing meta-methodological
guidelines for method choice (Brocklesby 1995) - a criticism that, ironically, has also
been levelled at the M-B framework for mapping methodologies (Mingers &
Brocklesby 1997). Nevertheless, in support of that concern, we concur with Zhu
(1999) of the need to make our frameworks, tacit or otherwise, the basis for dialogue
and learning, of the need to promote critical discourse and critical appreciation of the
different methods and methodologies. We suggest that whilst existing recognition of
such needs is evident in the broad domain of OR/MS and systems, such needs must
also be addressed in the emergent domain of TOC if its potential contribution to
multi-methodological intervention is contemplated.

Whilst many people will be familiar with Goldratt’s early works such as The Goal
(Goldratt & Cox 1984, 1992; Goldratt & Fox 1987, 1986; Goldratt 1990b), the body
of knowledge now called the Theory of Constraints (TOC) which has emerged from
this base has been considerable in volume and impact, and extends far beyond the
original domain of production scheduling both in terms of application area and
methodological development. Indeed, over a period of two decades, TOC methods
and tools have grown in acceptance beyond practitioners within the field of
production and operations management (POM) to others within the POM academic

make sense of the outside world; any framework is mutually conditioned and shaped by other frameworks (5. Mingers, J. and J.
Brocklesby, Multi-methodology: Towards a framework for critical pluralism, Systemist, 1996, 18(3): p. 101-132.)

Kuhn's notion of paradigm as ‘models for thinking’ - ‘a constellation of concepts, values, perceptions and practices shared by a
community which forms a particular vision of reality that is the way a community organises itself’; -'A systematic set of ideas
and values, methods and problem fields, as well as standard solutions, that explain the world and inform action.’ ‘It’s the way we
see the world - not in terms of our visual sense of sight, but in terms of perceiving, understanding, interpreting.’ (Kuhn, 1974,
quoted in 8. Clarke, T. and S, Clegg, Changing Paradigms: the transformation of management knowledge for the 21st century.
1998, HarperCollins: London. p. 9 - 15.)

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community. TOC has already found a place alongside JIT, TQM, MRP etc in
standard POM texts (Chase et al. 2001; Finch & Luebbe 1995) and in leading POM
academic journals; and has reached a stage of developmental maturity signalled by a
recent TOC-based POM text (Cox et al. 2003). TOC’s relevance is also appreciated
in the related project management field. Indeed, we make an observation that the
broader practical problem domain in which TOC methods have been used is
essentially the same domain in which OR/MS and systems methods have been
traditionally employed. However, the development of TOC has been predominantly
practice and practitioner-led, and it has been subject to little in the manner of
methodological critique - a gap that the authors have sought to remedy here and
elsewhere (Mabin, Davies & Balderstone. 2003).

A contribution that this paper seeks to make is to understand issues of a meta-
methodological nature that relate to the use of TOC methods in multi-methodology.
We have used the classificatory frameworks of Mingers (2003a) and Mingers and
Brocklesby (M-B) (1997) to better appreciate the nature of selected TOC methods.
The classificatory analysis, which is provided in Appendices 3 and 4, helps position
such methods in relation to the tools and methods of other methodologies. We also
briefly summarise and clarify the philosophical assumptions, ontological and
epistemological that underpin the various methods and activities that make up TOC
and SD. Building on these analyses, we argue that much may be gained from further
exploring how TOC and the associated methods of SD may be used in combination.
As such, the paper seeks to provide a basis useful for comparing TOC methods and
representational tools such as the Negative Branch Reservation (NBR) Process and
the Evaporating Cloud (EC) with an alternative methodology and its associated tools,
for example, the Causal Loop Diagrams (CLD) of Systems Dynamics (SD). We do so
through examination of a case study (Appendix 5) developed for use in the classroom.
The paper now continues with a resumé of the frameworks of Mingers (2003a) and
Mingers & Brocklesby (M-B) (1997, 1996) before examining the Power case study
using the chosen methodologies.

The Mingers and Mingers-Brocklesby Frameworks for Mapping and Classifying
Methodologies

The work of Mingers and Brocklesby (M-B) and Mingers has sought to clarify the
role, function and purpose of different OR/MS and systems methodologies and their
philosophical underpinnings. Such fundamental assumptions relate to the nature of
organisational and real world phenomena - what we regard as ontology; the nature of
knowledge about those phenomena - epistemology; and the nature of ways of
studying and examining those phenomena - methodology (Gioia & Pitre 1990;
Mingers 2003a). The original M-B framework provides a basis for relating
methodology and method to problem content and problem-solving activity using a 2-
dimensional mapping grid (See Figure 1) with the purpose of alerting analysts to the
appropriateness of different methodologies in different contexts. However, Mingers
(2003a) has since suggested that as the M-B framework links methodology and
method to problem content and problem-solving activity more in a general rather than
specific way, a consequence has been that the placement of methods within the grid
has been seen as somewhat ad hoc. Such criticism can be traced, in part, to the
mapping grid capturing just two primary dimensions. The first relates to the problem
domain, specifically the nature of the world being investigated - be it social, personal
or material - and the second relates to the methodology, particularly, the conceptually
distinct but highly related phases of ‘intervention’. These phases of intervention are
described within the M-B framework, for example, as building an appreciation of the

TOC_SD_2004 Amended Submission June 10 2004
material world that provides a necessary base for analysis of that world and
relationships between key entities, before developing and assessing alternative futures
and options to bring that future about; and then finally being able to choose and
implement alternative courses of action that bring about that future. The classification
of an activity associated with a method or methodology then requires a determination
of whether that activity is one that is deliberately designed for that phase of
intervention.
Figure 1: Mingers-Brocklesby Framework for Mapping Methodologies

Phases of Intervention
Appreciation Analysis Assessment Action
of... of... of... to...
Social practices, Distortions, Ways of Generate
Social power relations conflicts of challenging empowerment
interests & altering power | and enlightenment
structures
Problem Individuals’ Different Altemative Generate
. Personal beliefs, meanings, perceptions and conceptualizations | accommodations
Domain emotions Weltanschauung and constructions and consensus
Physical Underlying causal Altemative Select and
Material circumstances structure physical and implement best
structural altematives
arrangements

Following his erstwhile self-critique of the limitations of the M-B framework,
Mingers (2003a) has sought to develop an alternative classificatory framework that
would more readily highlight salient features of traditional OR/MS and systems
methods. He does so by invoking additional dimensions that facilitate discrimination
and comparison of methodology and method, and by the explicit surfacing of the
philosophical assumptions underpinning the methodology and the purpose of
intervention. Mingers suggests that any attempt to classify methodologies should
reflect what would be their most common and general characteristics - those being,
for example, the purposive action orientation of OR/MS methodologies; an
acceptance of the notion and value of problem representation and analysis using
models; the nature of modelling itself, with different modelling and representational
approaches being founded on different philosophical assumptions; and, in some cases,
the relationship of methodologies to specific theoretical frameworks or to practical
experience, an issue which is not covered in this paper. He insightfully synthesises
these characteristics and conceptual notions into a SSM root definition for a
generalised methodology. The definition, which embeds a cognitive structure
espoused by Checkland and Scholes (1990) makes explicit and emphasises the
ontological, epistemological and axiological nature of modelling assumptions (See
Figure 2). It forms the basis for the extended classificatory framework shown in use
as Appendices 2 and 3.
Figure 2: SSM Root Definition of a Generalised Methodology
“Todo X by Y in order to achieve Z" Checkland & Scholes 1990

A system to do the process specified,

by developing models of that assumed to exist,

in the [specified form of representation] based on [necessary information| gained from [ particular,

in order to assist users achieve specific purposes .

From Mingers (2003a:562)

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Action what it does model, simulate, represent, question, diagnose,
orientation assist, surface, challenge

Ontology that assumed to exist real world measurable objects, associations,
conceptual systems, logical/causal
relationships,
choices, uncertainties, premises

Epistemology |form of representation equations, diagrams, trees, schema,
spreadsheets,
rich pictures, maps, iconic models, statements
necessary information quantities, beliefs, meanings, views, attitudes,
purposes, structure, interests, options,

likelihood
objective measures, observations, plans,
theories,
participants, discussions, workshops, groups
Axiology users analysts, researchers, facilitators, participants,
stakeholders, planners, managers
purpose_and values optimising, learning, experimenting,
challenging,
explore, understand, synthesise, surface,
clarify

Mapping of Methods and Associated Tools of Systems Dynamics

For the purpose of this paper, it will be assumed that the reader's knowledge of SD as
an umbrella methodology and its associated or constituent tools or techniques will be
sufficient to make sense of the Mingers and M-B frameworks, and how the mappings
and classifications shown in Appendices 1 and 2 have been derived. Further detailed
discussion can be found in Mingers and Brocklesby (1997, 1996), Mingers (2003a &
b, 2000, 1997a), Mingers & Gill (1997). Whilst Mingers' classificatory judgements
about the nature of SD, its associated CLDs and of SSM, summarised in A ppendices 1
and 2, were informed by advice from many of the methodology innovators or
developers, the judgements made here about the classification of TOC tools are those
of the authors (The equivalent classifications of individual TOC methods and
methodology are shown in Appendices 3 and 4).

In illustration of how that mapping takes place, we may suggest that within SSM, for
example, we regard the development of rich pictures as an activity that supports
building an appreciation of individual beliefs, meanings and emotions, whilst the
development of CATWOEs? contributes to further analysis of the different
perceptions and worldviews or Weltanschauung held by individuals. Following these
phases of activity, SSM then requires the building of alternative models and
conceptualisations that can be assessed for appropriateness in recognising and
describing the problem, and that help provide an assessment of alternative actions that
address the problem (A ppendix 1.1).

By contrast, the 'strength' of cognitive mapping lies with its purpose of capturing and
making explicit individual beliefs, meanings, assumptions and emotions, the
relationships between them, and thus the surfacing of the existence of different
perceptions and worldviews (See Appendix 1.2). At that point, cognitive mapping
has ‘done its job,' whereas SSM has been designed as a methodology to work towards
purposeful improvement of situations.

2 CATWOE =Customers, Actors, Transformation, World View, Owners, Environment

TOC_SD_2004 Amended Submission June 10 2004

a
Of course, in making these comments, we are also surfacing often implicit
assumptions about users and purpose, that is, we are entering discussion that can be
effectively characterised by Minger's classification of the underpinning philosophical
assumptions that are axiological in nature. Similarly, our awareness of ontological
issues is heightened by making explicit the beliefs, meanings and relationships which
we assume to exist and which we regard as meaningful and important in
understanding our problematic situation. Finally, that which we take for granted
about our modes of representing aspects of problems - the connotative links in rich
pictures and the cause-effect links in CLDs and in TOC diagrams - require us to
reflect upon our epistemology.
The Power Case
The Power Case (See Appendix 5) reflects a topical and recurring chronic problem for
the NZ government and for many other nations' government. In 2003, NZ was
confronted with a second electricity power crisis in three years, and the government
was faced with a perceived need to provide security of electricity supply to cover the
risk of a dry year in the hydro system - in particular, the need for about 800MW of
“firming capacity’*. The case provides sufficient information for students to identify
what may be important variables in the power generation system, the inter-
connectedness of those variables, and the predictable and otherwise emergent
properties of the overall system.
At this stage, we provide an illustration of how the case narrative may be framed
using a CLD (See Figure 3), but defer consideration and discussion of insights that
may emerge from the building of that representation, including the identification of
possible core issues and choice dilemmas, until we have outlined the possible
contribution of TOC.

Figure 3. - An Illustrative Causal Loop Diagram (CLD) for the Power Case

4/7 wdolites > coer

+ Hydro-based
Supply

Demand Supply
Gap

Now Hyato-basod
Capacity

¥)

Confidence amongst e
Private providers BI
of PoyerSation
ot High Spates
on Wholesale mazket
Mothalled Reserve
Volume of ‘Thenmal Capacity
Incentives for Fis with

vata ui lice
ens Da ves +
‘Large Electricity Usage rae ini +
r — 2 Fis i.
cimee
. ) \ee
‘cmt Tm
bo cnt
yen
I \e_. swe cites
‘ean ,
forFims = + ‘Thermal Plant

# As Reserve Capacity

We will show how TOC tools, in particular, the EC of TOC can help structure a
dilemma in the process of attempting to resolve the inherent conflict between
alternative plausible and seemingly mutually exclusive actions or options.

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The Theory of Constraints - TOC - and The Mapping of TOC Tools and
Methods

Given the nature of this paper, it may be sufficient to state that TOC as an espoused
methodology seeks to assist with the ‘management of beneficial change’ in
organisations by using logic-based modelling and analytical tools in the belief that
organisations as systems can be subject to on-going improvement aiding long-term
survival - if those barriers, obstacles and other factors constraining or limiting
improvement can be identified, and removed or managed more effectively. In brief,
TOC seeks to identify what needs to change; what to change to; and how to bring
about that change. As such, it addresses the identification of root causes to
constrained performance - what to change; it addresses organisational purpose and
strategy development - what to change to; and it seeks to identify causal actions and
action plans that will improve performance through the modelling of causal relations
believed to exist and have meaning in the organisational context. We may therefore
regard the emergence of the field of TOC as reflecting a functionalist paradigm and as
a systemic methodology reflecting an ontological assumption that organisations and
organizational contexts can be viewed or conceptualised as systems that exhibit
emergent properties manifest of interrelationships and interdependencies between
people/processes/internal/external environments.

Goldratt (1994Luck) has evolved a suite of logic tools in his quest to devise TOC as a
systemic and systematic approach to help managers develop solutions (based on both
intuition and logic) to their problems. These tools comprise four tree diagram tools
and the Evaporating Cloud (EC), which are known collectively as the TOC Thinking
Processes or TP tools (see books by Kendall 1998; Dettmer 1998; Scheinkopf 1999;
and Cox et al. 2003).

The TP’s exist for the purpose of managing change, starting with identifying what is
preventing an organisation from achieving its goal. They embrace what we refer to as
the Current Reality Tree (CRT), the Future Reality Tree (FRT), the Prerequsite Tree
(PRT), the Transition Tree (TrT) as well as the Evaporating Cloud (EC). The TPs are
constructed from three basic building blocks: cause-effect sufficiency thinking,
necessary condition thinking, and a set of mules goveming the logic-in-use
(Scheinkopf 1999). The CRT, FRT and TrT are sufficiency-based if-then logic
diagrams, whereas the PRT and the EC are necessity-based "in order to..., we must
.." logic structures (Rizzo 2001). Goldratt has provided logic mules (see the
Categories of Legitimate Reservation (CLRs) in Noreen et al. (1995), Dettmer
(1998), Scheinkopf (1999) that are used to add rigour to the modelling process and to
check the validity of the constructed logic relations.

In Appendices 3 and 4, we characterise each of the TOC Thinking Processes - TP
tools - and the 5 Focusing Steps of On-going Improvement (5FS) method used within
TOC. We provide brief descriptions of selected tools and methods as a basis for such
characterisation and classification. It is worth noting that whilst the tools and methods
may be used on their own for day-to-day problems, they would be used in
combination for more infrequent and complex situations (Mabin & Davies 2003).

The TOC Logic Trees - the CRT

Goldratt (1994L) developed the first of the logic trees, the CRT, as a map of the cause
and effect relationships perceived to underlie an existing or current undesirable
situation. His notion was that the other tree structures within the TOC can then be
used to determine the desired future (FRT) and to map out how it may be achieved
(PRT). Use of these logic trees signals an acknowledgement of broader systemic
influences that bear upon our decision making, and that need to be understood.

TOC_SD_2004 Amended Submission June 10 2004
Readers may find it beneficial to refer to other TOC texts such as Scheinkopf,
Dettmer (1998) or Schragenheim (1999), Smith (2000) or Cox et al (2003) for
elaboration on these tools.

An initial step promoted by use of the CRT frame might be to list symptoms that
currently indicate all is not well within the organisation. Such symptoms may
include, for example, ongoing friction between departments, frequent late orders, the
sales force feeling powerless and frustrated dealing with customer complaints, lots of
unplanned overtime, and the company not doing as well financially as it would like to
do. The approach then requires that for each symptom we explore a chain of possible
cause-effect relationships responsible for their manifestation. Using cause-effect
analysis with the logic rules, we attempt to trace these symptoms back to the root of
the problem, representing symptoms, intermediate cause and effects as a causal map
of entity boxes linked by directional arrows, and seeking to identify whether a single

core problem exists that needs addressing3. We note that Goldratt’s CRT may bear
some similarity to cause-effect diagrams from other disciplines, but that similarity
disappears on more detailed examination, when considering the tools as applied in
context (Zotov 2004).

At this point, we may note how seductive the previous statements about CRTs appear
in terms of their intent and purpose. As a consequence, we may overlook or take for
granted the epistemological assumptions embedded in the method or methodology
about, for example, the nature and observable existence of problems, symptoms,
causes, effects and logical relations, and how they may be modeled or represented.
Similarly, it is possible to overlook the axiological assumptions about who will make
use of the model of cause-effect relations, and who may effect or be affected by the
enactment of the method or methodology.

In continuing the discussion, we may restate a belief that CRT analysis should
identify and/or validate the core problem(s) underlying all (or most of) the symptoms,
that is the issues we normally complain about. Then given our acceptance of the
modeled logical relationships, we act assuming that if the core problem were to be
dealt with appropriately, these symptoms would disappear. Frequently, the core
problems are (at least in hindsight) well known to the organisation, but may have been
avoided or ignored for some time because they are deemed to be ‘too hard' to deal
with. Kendall (1998), for example, in describing measurements, policies and training
as ‘three pillars' of an organization, asserts that weaknesses in any of these areas are
often identified as core problems in a CRT analysis, but that they are often subject to
what Bird and Waters (1989) describe as ‘moral muteness', and are not always subject
to open discussion.

Modeling the problem situation as a CRT emphasises the acceptance of a systems
perspective, and the likely systemic nature of relationships and links between key
variables and entities. It also emphasises the view that there is no point in fire-
fighting the symptoms - it embraces a view that there may be a single or small set of
causes and that it would be useful to recognise, address and eradicate cause(s). So
whilst we suggest that the CRT highlights the web of interrelationships between
symptoms, policies, measures and behaviors etc, in a different manner to the CLD,
rather than debate the merits or otherwise of the CLD and TOC's CRT, we choose
here to draw attention to how TOC methods may complement those of SD not only in

3 There are two altemative approaches to building the CRT: one works down from the symptoms; the other works upwards from
a cloud depicting the core conflict thought to lead to the symptoms. Either way, the symptoms are traced back to the underlying
cause, the core problem, which is viewed as a conflict.

TOC_SD_2004 Amended Submission June 10 2004
building an understanding of the problem situation, but also in finding ways of
dealing with problems and their symptoms.

TOC - the Evaporating Cloud (EC) or Conflict Reservation Diagram (CRD)
Underlying many such problems would be a dilemma. In the illustration captured as
Figure 4a, we note a dilemma about whether or not the Government should intervene
to increase the security of electric power supply, which is the subject of the case
described in Appendix 5. The perspective developed by using Goldratt’s EC
framework (1992, 1990b, 1994L) is one that draws attention towards the assumptions
that underpin or give life to the dilemma. The purpose for which the EC is often used
is reflected in the alternative title used by Dettmer (1998), namely the Conflict
Resolution Diagram (CRD), though the EC title applies equally well to dilemma and
trade-off situations. The EC frames the problem starting with two diametrically
opposed actions or views (represented in boxes D & D’), and implicitly assumes these
can be resolved by a win-win solution. The frame or model is constructed as a
schematic depiction of the dilemma, and the reason for conflict can be explored by
examining the assumptions that underlie the necessity-based logic relationships,
depicted here by arrows connecting the boxes in the diagram. In order to find a
solution, we elicit those assumptions, perceptions or reasons why the relationships are
thought to hold. Some of these assumptions are often shown as annotations in
thought bubbles on the diagram.

|. because Power Companies view keeping.
inefficient, expensive equipment-for
‘occasional use a poor use of resourca

. because there's a need for

D
‘The Government
‘must intervene to
ensure older
capacity is
available as a
Reserve

‘The Government
Power Companies must not
‘must invest in intervene to
new electricity |“ }_— ensure older
generation capacity is
available asa
Reserve

Figure 4a. TOC Evaporating Cloud

The Keynesian view represented in Figure 4 is that in order to ensure security of national electricity
supply, the Government must provide a degree of insurance against demand/supply imbalances, ... and
in order to provide a degree of insurance against demand/supply imbalances, the Government must
intervene to ensure older thermal capacity is available as a reserve. On the other hand, the Free Market
view is that in order to have security of electricity supply, the Power Companies must invest in new
electricity generation, ... and, in order to ensure Power Companies invest in new electricity generation,
the Government must not intervene to ensure older capacity is available as a reserve. Hence the
conflict!

As soon as we verbalise the dilemma or conflict in this way, we may quickly come up
with ways of resolving the dilemma. Whether or not we develop immediate insights,
we may still need to elicit the assumptions that underpin each of the logical
relationships, represented as arrows in the diagram, in a more methodical way before

TOC_SD_2004 Amended Submission June 10 2004
we can confirm action solutions or surface other possible actions. Some of these
assumptions are often shown as annotations in thought bubbles on the diagram.
Figure 4b provides, in illustration only, a summary of those assumptions considered to
underpin the overall objective, and to provide a rationale for the beliefs implicit in the
cause-effect necessity relationships of B and C being requirements to achieve the
cloud objective. It also presents a list of challenges to those assumptions and beliefs,
some of which could act as ‘injections' breaking those assumptions and providing a
basis for resolving the core dilemma.

Figure 4b: The TOC Evaporating Cloud - Assumptions and Injections

Assumptions Ideas for Solutions
A Growing economy requires more electricity. A Encourage eco-friendly industry growth.
Healthy economy needs adequate power supplies. Diversify power supply to maintain
Secure supply minimises loss of industrial production. production.
Secure supply keeps prices in check. Stabilise production.
AB Existing capacity is not enough. AB Encourage greater energy efficiency amongst
Extra capacity required. industrial and retail users.
All new capacity is unaffordable. Develop/find new low-cost source of new
All new capacity is uneconomic. supply.
BD Power Companies are reluctant to maintain investment in BD Market-driven high spot prices for power will
inefficient, expensive equipment used occasionally. make older thermal capacity economic.
Power Companies view keeping inefficient, expensive
equipment for occasional use a poor use of resources $0 ... Encourage utility companies to take a
national perspective.
Power Companies view risky gains a poor trade-off against
costly mothballing and maintenance costs. Encourage through incentive rather mandate.
AC Current capacity is insufficient and inefficient. AC Make better use of existing capacity
New capacity is necessary sometimes. Encourage greater energy efficiency amongst

F - industrial and retail users.
New capacity is more efficient.

Examine altemative sources of energy
New capacity provides good retums.

Encourage home generation.

CD’ —_ Intervention to ensure old capacity is kept will distort the CD’ Interventions can be designed that do not
market. distort the market. .
Intervention lowers the retumns/profitability of new capacity, and Intervention can include tax breaks and other
discourages investment, ways of maintaining the retums/profitability
of new capacity
Market forces will be sufficient to drive investment. Interventions such as mandatory hedging

could be used to ensure sufficient profit
instead of relying on high spot prices.

Lack of intervention is necessary to allow free market Some interventions are desirable: eg..Promote
movement of spot prices providing opportunities for profit and encourage desirable behaviour, not,
taking, thus generating incentives for investment in new control or curtail.; Encourage energy-efficient
capacity. rather than cost-related behaviour.

All intervention is unwanted.

DD’ Can't ‘intervene’ and ‘not intervene’ simultaneously. DD’ There are degrees of intervention.
Intervention could be reframed as 'positive'...
as promoting and encouraging desirable
behaviour through incentives, not mandating,
controlling or curtailing ~ as rationalisation,
‘sponsorship’.

Often when assumptions and 'reasons' are surfaced and articulated, they may be seen
as false, and the conflict seems to evaporate as the thought bubble bursts! However,
even in circumstances where assumptions are initially recognized as valid, they may
then be addressed in a manner that invalidates them, that reduces their importance or

impact, and that allows for a resolution of the conflict. 4

4 By mapping these aspects of EC ‘activity’ to the M-B framework (See Appendix 4.2), and by recognizing the underpinning
philosophical assumptions set out in summary tabular form (Appendix 3), we further demonstrate how the EC method can
provide an effective bridge from the problematic current situation to the desired future by contributing to all phases of
intervention.

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TOC's other Logic Trees - the NBR, FRT, PRT, TrT

We have stated that whilst modeling the problem situation as a CRT reflects a systems
perspective and the likely systemic nature of relationships between key variables and
entities, such modelling is also founded on a belief that it is possible to identify major
causes of symptoms and to find ways of dealing with them. This can be achieved
through use of the various TOC TP tools that aim to provide guidance leading to the
successful implementation of the solution. For example, whilst the CRT links
undesirable effects to root causes, the FRT approach begins with identification of
actions, conditions or solutions of choice, what Goldratt collectively names as
‘injections', and then through the mapping of sufficiency-based logic relations,
checking whether the causal links will lead to what we have decided are preferred
desirable outcomes. As Rizzo (2001) states, construction of the FRT can be viewed
as a "what-if exercise", helping to identify what actions and conditions will be
necessary and sufficient to bring about desirable effects or change, and whether or not
additional undesirable effects will also emerge from our actions (1998).

Sub-trees (also known as Branches) may be constructed in this FRT process whenever
someone raises a “Yes, but ...” type of reservation. Such situations indicate that the
‘objector’ has thought of a possible negative side-effect of the proposed solution.
Rather than brush the comments aside or abandon the proposal, we are encouraged,
by TOC, to explore ways of adapting the proposal to avoid such negative side-effects
while still keeping the positive effects of the proposal, using a another process known
as the Negative Branch Reservations (NBR) (Cox et al. 2003; Boyd & Cox 1997).
The NBR process is used formally to create each branch of the FRT, but can be used
as a standalone tool to improve critical feedback and develop ‘half-baked’ ideas such
as, for example, changes to organisational performance measures. Such tree-based
approaches thus capture different perceptions or alternative conceptualisations and
attempt to generate accommodation and consensus, enlightenment and empowerment.
Appendices 4.3-4.4 then represent how the M-B framework captures and reflects such
assessments of the role of the FRT and NBR.

Using the NBR Process

We will now show how the NBR process can augment the previous views. Each of
the injections raised in the EC process may be good idea to some extent, but are likely
to be at most short term unless thought through. Most will lead to problematic side
effects unless carried out very carefully. For the next step in the process, the building
of a fundamental solution, we will use TOC’s cause and effect thinking tools and their
concomitant protocols, the Categories of Legitimate Reservation.

For the purposes of illustration, we will show how the NBR method can clarify (as
featured in Goldratt (1994L; 1996) or Boyd & Cox 1997) how and why a proposed
solution may be good but flawed, and how to remove those flaws to create a full,
workable solution, formally described as a Future Reality Tree (FRT). The NBR
process has recently been developed considerably into a method that guides the
analyst to draw up the CRT and Future Reality Branch (FRB), resulting in a well-
thought-through solution (Cox et al. 2003). However for the present illustration, we
will use the simpler NBR process here, and indicate later how the CRB, FRB process
would be developed.

The NBR process starts with a proposal and extrapolates the effects of undertaking
that proposal, using cause-effect logic. The usual approach is to list three positive
effects that would come out of the proposal and three negative effects, and then to
develop the logic to explain why taking the action stated in the proposal will lead to
the feared (as well as desired) effects. The final step in the NBR process is to work

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out the minimal set of supporting actions to take to ensure the positive effects arise,
but prevent the negative effects for occurring. In this example, we may start with the
proposal that the Government intervenes. Based on the case material, we propose that
two likely forms of intervention are for the Government to insist or legislate that old
plant is kept in reserve and to cap spot prices. Hence we "start" the NBR tree (Figure
5) at the "bottom" with the notion that the Government intervenes, and we lay out the
two chosen interventions.

Three positive effects we expect from intervention might include ideas listed in the
cloud, such as security of supply (our Box A in Figure 4): in terms of both the
avoidance of power shortages, and power prices that are reasonable. Negative effects
might include concerns that saving plant will lead to fewer new stations being built,
and subsequently power cuts in the future; again, these sentiments echo those in the
cloud.

The tree itself is read from the bottom up using Sufficiency Logic, read as “If ...(and
..) then...” For example: If D The Government intervenes and 10 One chosen
intervention is to insist on saving old plant capacity as reserve, then 20 Old plant is
saved. If 20 Old plant is saved, then 30 Spare capacity is in reserve if needed. If 30
Spare capacity is in reserve if needed, and 32 Some years demand exceeds supply,
then 40 Old plant is used some years when needed. We continue up the tree, reading
“and” whenever two or more arrows leading to an effect are linked by a line across
them.

After we have laid out the logic, we then identify where in the tree the effects start
becoming negative or undesirable in and of themselves. We suggest that action would
best be targeted just "below" these negative effects, and we can devise actions or
“trims” that, if implemented, would stop the negative effects from occurring, without
causing new negatives of their own! Because this stops the negative effect from
occurring, it’s like trimming the tree at that point, which is why it is referred to as a
“trim.” Because the trims are applied judiciously, there is less chance that
unnecessary or counterproductive actions are taken. And we are able to gain the
benefit of the idea, without the negative side effects.

The method was originally devised as part of the Future Reality Tree, to be used when
a listener says, “Yes, but I think that could lead to (something bad)” when the
presenter is reading a part of the FRT. At that point, an NBR can be constructed,
leading to the insertion of one or more new injections in the FRT to prevent the
negative effects from getting in the way of achieving the desired effects.
The more recent CRB method (Cox et al. 2003) is more directly linked with the

cloud, and starts with side D from the cloud and works through methodically the
positive and negative effects of undertaking D to achieve the B requirement and then

repeats the process for undertaking action D' to achieve the C requirement. In the
CRB method, a series of Current Reality Branches are developed to show in tum:

1. why taking action D leads to B and hence A from the cloud,

2. why taking action D makes it hard to achieve C, hence preventing objective
A from being achieved (since A requires both B and C)

3: why taking D' leads to achieving C and hence A

4. why taking D' leads to not achieving B and hence preventing A

TOC_SD_2004 Amended Submission June 10 2004
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5. we may also show how D (and/or D') may lead to other unanticipated side
effects that further prevent A from being achieved.

Once all these logical links are laid out, we have a more comprehensive understanding
of the logical relationships and assumptions underpinning the problematic situation. It
is much clearer to see what needs to be done. Injections from the EC are selected and
adapted till a workable solution is derived, that meets both requirements B and C and
ensures objective A will be achieved. Again, as with the NBR method, we try to
choose a minimal yet sufficient set of actions (injections) that will yield the desired
outcomes of achieving both requirements B and C and ultimately the objective A.
The resulting branches with the injections inserted will then provide a map for the
desired future, and these are termed Future Reality Branches (FRB), which together
form (part of) the FRT.

Figure 5: An illustrative tree diagram from the Negative Branch Reservation process

D Gov't intervenes.

100 Gov’ tis pressured to
intervene again in the short run.

95 Power generators have less
confidence of getting a return
for that investment.

D' Gov't doesn’t intervene.

94 Power generators
have lower levels of
guaranteed sales.

90 The Gov't sees a -
{_good side of intervening. 85 Gov't Intervention

is seen as a failure.

84 Less volume
80 There is security of is hedged,
(_sopply in the short term. a 75 Eventually there is

more likelihood of.

74 Companies

power shortages in LT.
(70 Power prices whee
sey regsonable 72 Less eee

volume needs

ot need to do so.

to be he¢

67 Older plant
is less reliable.

55 Power co's tend not
to build new stations.

60 Spot prices stay
at reasonable levels. i

40 Old plant is used some
years, when needed.

53 Building a new plant
is seen to be risky.

45 Lower profits are
available to build new plant. )

k

30 Spare capacity is 32 Some years demand 35 Power co’s cannot

in reserve if needed. exceeds supply. make high profits.
ame @ —

20 Old plant 22 Demand is )( 24 Supply is | 26 Gov'tputsacap }] Srevente

is save variable. limited. ‘on spot prices. igh prices.

10 One chosen intervention
is to insist on saving old plant
capacity as reserve.

rast is 7
noe eo
Development of the PRT, complementing and building on the FRT, seeks to identify
local obstacles, conditions and omissions that might block the path to the desired
outcomes, and then to set new ‘intermediate’ goals and objectives that would equate to
overcoming those obstacles, barriers and other forms of resistance to change - many
of which have received attention in the management of change literature (Mabin et al
2001). Development of the PRT is often conducted by a team needing to address

TOC_SD_2004 Amended Submission June 10 2004

13
obstacles that may confront it, and hence social practices and power relations will be
considered implicitly, if not explicitly. If the team structure or working relationships
are perceived to be an obstacle, then such issues will usually be raised. However, the
PRT is no more designed to account for social practices and power relations than
other tools or practices, and this is thus reflected in the presentation of A ppendix 4.5.
The development of the final logic structure, the TrT, seeks to identify the tasks and
actions both necessary and sufficient to meet the intermediate objectives of the PRT,
to overcome what might go wrong, to provide a rationale and schedule for each
action, and, as such, to provide what we may regard as a coherent step-by-step
implementation plan, which also accounts for prevailing beliefs, feelings and norms.
As we move through the tools, CRT through to T:T, there is generally more
involvement from the wider group affected by the problem, or by actions designed to
address it. We also move from a strategic to a tactical and ultimately to an
operational view of the problems, the solutions and the implementation plan. The
PRT and TrT in particular are designed to help in the implementation phase. The end
goal and normal outcome of the NBR, FRT, PRT and T:T processes is to help people
gain a better understanding of the problematic situation and the results of their
actions, and to feel empowered through having an agreed course of action. The CRT
alone enlightens but does not necessarily empower. The CRT may often paint a
gloomy picture of the current situation and of the impact of inaction, and while it does
motivate into action, it would not be seen as empowerment in the critical sense of the
concept.
We note therefore that the tools, techniques and methods of TOC contribute to all
phases of problem-solving activity that lead to implementation as well as
implementation itself. The finding becomes equally evident when Figure 6 is
presented as a summation of the analyses relected in Appendices 4.0-4.6. The
methods and tools are seen to directly target or deliver on all but one of the cells in the
M-B grid - apart from an assessment of ways of challenging and altering power
structures within the social dimension of the problem domain.

Figure 6: Mapping TOC as Meta-Methodolo

Appreciation Analysis Assessment Action
of... of... of... to...
j Social practices, Distortions, || Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and} conceptualizations | accommodations
meanings, Weltanschauung | and constructions and consensus
emotions
. Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements alternatives

We may recognise that this is because TOC does not directly set out to challenge or
assess power structures, and may not address such issues unless the diagnosis (using
say the CRT) points to the power structure as being a core problem, or if it is seen to
be an obstacle in the PRT. In these cases, the power structure will be tackled, but
TOC methods have not been necessarily designed for this purpose, and so, since TOC
does not aim to do this from the outset, nor is it a natural common outcome, and
although it can be argued that the ‘empowerment cloud’ does this, we have left this
box unshaded.

The Power Case - Comparative Views

We will now draw together the various elements that have been laid out, detailing
how the various tools/approaches might be applied to the Power case. We note that

TOC_SD_2004 Amended Submission June 10 2004
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the CLD, shown in Figure 3, captures the interconnectedness implicit in the Power
case narrative. In doing so, it helps build an understanding of the systemic nature of
the relationships, not only highlighting the dynamic time-based nature of feedback,
the existence of both balancing and reinforcing feedback loops, delays and side-
effects; but also distinguishing between individual and systems behavior, between
seemingly predictable individual behavior and local outcomes, and the systems
behavior that may be expressed as the unpredictable or unanticipated ‘emergent’
properties of the system. As such, construction of the CLD can draw attention to
patterns of behavior that arise from the systemic structure of relationships. We may
note that positive reinforcing loops can lead to virtuous or vicious cycles of escalating
participant behavior and/or to outcomes that either get better and better or persistently
deteriorate over time. Additionally, we may gain recognition of how such participant
or system behaviour can lead to unintended, unanticipated, yet often pattemed and
predictable outcomes or consequences. For example, we may note how Government
intervention that leads to capping of wholesale electricity prices may reduce the
chance of high spot prices on the wholesale market in the short term, as shown in the
balancing or negative-feedback loop B4. However, the sequence of behaviours and
effects captured in B4 when linked to the entities shown in the negative-feedback loop
B1 that plays out in the longer term, creates an extended feedback loop that
demonstrates how investment in the provision of hydro-capacity may be jeopardized
in the longer term. Similarly, we note how other forms of Government intervention
that may include mandatory hedging or fixed term supply contracts for large
electricity users (B3) or mandatory requirements for electricity generators to provide
reserve thermal plant capacity (B5) may interact with feedback loop B1 to create a
system-wide reinforcing loop that will continually undermine the favorable conditions
necessary for long-term investment in expensive hydro-capacity.

Such a CLD is developed by a process of surfacing variables as contributory causes or
consequential effects of existing entities, and then by building on and extending links
in iterative fashion until a sense of systemic wholeness and understanding is achieved.
In minor contrast, the CRT of TOC is developed by first focusing on undesirable
events and entities (UDEs), and then attempting to link them in an Effect-Cause-
Effect (ECE) chain of logic that may not only reveal a subset of the most undesirable
events to be overcome or changed, but which may also facilitate the tracking of a
causal hierarchy of links through the same ECE logic to a few root causes or core
problems. As such, the CRT also captures the interconnectedness and the systemic
nature of the relationships, but does so using a different protocol and different intent,
thus surfacing some complementary and some different insights.

For example, the very focus that is placed on consideration of UDEs helps draw out
otherwise implicit values and what may be valued as outcomes or behavior in the
system. The consideration of UDEs can also help distinguish mere symptoms from
‘genuine’ undesirable effects on the one hand, and help to identify causes and root
causes on the other hand. Indeed, we note that the TOC CRT thus helps identify what
to change, that is what is perceived to be the root cause or core problem, just as the
EC injection and the FRT identify what it needs to change to - which may be to tum
undesirable effects into desirable effects. In this case, we may recognize the lack of
sufficient ‘firming’ thermal capacity to supplement dwindling hydro-supply in times of
drought as our root cause or problem. Where the core problem presents as a choice
dilemma - as in this case, whether the Government should intervene or not - we may
then use the EC or to structure the dilemma, explore why that problem or dilemma
exists, and to begin to resolve that dilemma.

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The CLD representation of entities and relationships (Figure 3) is meant to be
reflective of the perceived systemic reality of the Power case. We may therefore find
it to be instructive to explore the subtle differences, communalities, complementarities
and synergies offered by the CLD, the CRT and the EC. Whereas it may be claimed
that identification of the core choice dilemma, that is the basis for the EC, may be
drawn from the CLD, we suggest that iterative and mutually informed construction of
both diagrams is possible and desirable. For example, we note that whereas the CLD
does not necessarily or explicitly present the choice dilemma as mutually exclusive
options, it can and does present action options for different modes and degrees of
intervention, mapping the systemic consequences and interactions that emerge. In
particular, we note that injections designed to challenge assumptions and relationships
embedded within the EC may surface as action options within the CLD. As such, we
can signal the complementary nature of the EC and the CLD, the EC and the CRT, as
well as their distinctive features. For example, whereas the EC highlights distinct
options, and seeks to establish those options as prerequisites for desired objectives,
the CLD would seek to capture the immediate and subsequent effects of these options
through a sequence of cause-effect and feedback relationships that play out over time.
It is the very existence of these feedback relationships and how they are mapped that
most clearly differentiates the CLD from the CRT.

From the EC, we may start to build the FRT as a means of identifying and
establishing the Effect-Cause-Effect chain that will link the action options to
outcomes that are desired or that may ensue. We may also ‘build’ the NBR branch
(Figure 5 illustrates one such branch) using if-then logic to identify and describe the
positive and negative effects and otherwise unforeseen side-effects that emerge from
the injection or alternative actions suggested by the EC. In the final step of the NBR
process, the solution is honed. Finally, we would show the PRT and TrT that together
provide the basis of an implementation plan that addresses potential side-effects
(NBR), overcomes intermediate obstacles in working towards to the desired
objectives identifying and sequencing actions to achieve them (PRT), and providing
the logic to cause the actions to lead to the desired effects (TrT).

We thus conclude that each of the related approaches not only helps build a
complementary understanding of complexity through specific representational
processes, either as a CLD or as a TOC CRT or EC, but can then help purposefully
develop a program of action that seek to bring about desired outcomes whilst avoiding
pitfalls and unwanted side-effects (NBR) and overcoming other anticipated obstacles
(PRT and TrT). Indeed, we offer a view that the CLD can offer a ‘helicopter’
perspective of the system and also directs attention to how to structure the NBR and
other TOC diagrams for alternative actions.

Summary and Conclusions

Elsewhere, we have shown how problems can be tackled using a variety of Goldratt’s
TOC tools, principles and methods, spanning the simplistic product mix algorithm to
the powerful thinking processes including the evaporating cloud (EC) (Cox et al 2003;
Mabin & Davies 2003; Mabin & Balderstone 2000; Cox & Spencer 1998). In the
appendices, we provide a summary indication of how these different approaches
purposefully attend to different issues and surface different insights, using different
kinds of information sourced in different ways. These matters are reflections not only
of what a tool or method is intended to do, but what it assumes to exist - its
ontological base; and the nature of what is represented or modeled, with what kind of
information - that is, its epistemology.

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The mapping of the various TOC frames, models and methods to the Mingers and
Mingers-Brocklesby (M-B) frameworks shows that they not only overlap or substitute
for each other to some degree, in terms of intent, purpose and underlying
philosophical assumptions, but that they may also be complementary in nature to the
associated systems tools and methods of SD. Whilst we may expect similar insights
to arise from different frames or methods, we find that TOC and SD frames can also
surface new insights about the problem, and how it should be tackled. At a surface
level, we may comment on how each methodology seeks to depict and understand
cause-effect relationships through similar but different forms of diagrammatic
representations.

We have shown how our Power dilemma can be reframed using two of TOC’s tools,
the Evaporating Cloud (EC) and the Negative Branch Reservation process (NBR).
The first of these tools frames the problem as a dilemma or conflict, and by
identifying the assumptions that underpin the dilemma, allow us to identify a possible
solution. This potential solution is then checked, using the NBR process, for its likely
effects, both positive and negative, before modifying the solution to enhance the
positive effects of the solution without causing any unwanted side effects.

We may comment, for example, on how the CLD draws attention to the potential
longer-term dynamics of cause-effect relationships and the inherent feedback driving
those relationships. In particular, we note how the CLD draws attention to the nature
of negative feedback loops that characterize self-correcting or self-regulating
behaviour as well as the positive feedback loops that can characterize virtuous or
vicious cycles of behaviour or outcomes. By contrast, TOC methods, by virtue of
what they seek to explore, may offer different insights about how specific goals may
be reached and about the obstacles that arise as implementation of action and policy
choices takes place.

Furthermore, TOC diagrams seek to capture and explicitly signal the precise nature of
cause-effect necessity and sufficiency logic embedded in relationships, but do so
using a different protocol to the CLD of SD. As such, we see benefits from
complementary use of the methodologies, especially the power of the tools as
complementary graphical depictions to enhance conceptualisation and understanding,
and the use of logic rules for critiquing presumed cause-effect relationships. In our
example, the EC and NBR can be seen to complement the CLD allowing the problem
owner to develop fundamental solutions to fix the real problem underlying the
problematic symptoms. We restate a view that the insights that we gain from
complementary use of such methodologies, methods and tools relate to how the
respective methodologies frame relationships, especially how and what each frame
highlights or shadows. Additionally, we restate a view that the insights that we gain
from complementary use of such methodologies relate to how the respective
methodologies frame relationships, especially how and what each frame highlights or
shadows.

In discussing this complementarity, we note how system-wide framing of entities and
relationships induced through the building of a CLD representation can provide or add
to the contextual framework by identifying emergent systemic behaviours and
outcomes that are founded on complex feedback loops. Both TOC and CLD
representations use logic rules that allow us to surface and critique often implicit
assumptions, adding to the scope for generating beneficial solutions. Whilst both
methodologies identify leverage points, the evolution of TOC tools has followed a
need to provide focused corrective action at those leverage points, as here, for
example, to rectify/prevent fixes that fail, and to develop fundamental solutions.

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We have stated that seldom are any of the TOC methods and tools used in isolation.
Indeed, further tools provided within the TOC Thinking Processes to assist with
implementation are available, but these have not been covered here. Nevertheless, we
have demonstrated that TOC, as a methodology, offers methods that embrace the
whole range of activities or phases from symptom and environment analysis, problem
identification and representation, the setting of appropriate objectives, generation and
evaluation of altemmatives, through to implementation. Using the constructs of the
original M-B framework, we recognise the additional value of TOC and the
associated tools and methods of SD as further complements to broaden or heighten,
for example, the appreciation phase of intervention, or to complement assessment and
evaluation with a stronger action/implementation phase. When the fuller sets of TOC
and SD tools and methods discussed in this paper are mapped to the M-B framework
(Appendices 1 & 4), we note how they may comprise a multi-method approach.
Nevertheless, it has been necessary and instructive to surface and clarify the
philosophical assumptions, ontological and epistemological, that underpin the various
methods that make up TOC and SD (Appendices 2 & 3). Consequently, we not only
see TOC and SD as offering a complementarity which mirrors what others have
sought through the development of multi-method and multi-methodological
approaches, but also as having a theoretical basis and justification for such
complementary use. Our use of a seemingly recurring problematic situation has
provided opportunity to demonstrate that that multi-methodological approaches
embracing TOC and other systems methodologies could be beneficial in complex
problems and applications.

The promotion and/or pragmatic adoption of a multi-method or multi-methodological
approach, that our experience, here and elsewhere, suggests would be worthwhile,
accords with the views of Burrell and Morgan (1979) and Brocklesby (1993) in their
discussion and acceptance of the efficacy of multi-paradigm and multi-methodology
development. We have sought to demonstrate how TOC may be aligned with SD and
its associated methodologies and methods on practical and philosophical grounds.
We have done so through use of an illustrative case and by application of the
classificatory frameworks of Mingers and Brocklesby (1997) and Mingers (2003a) to
facilitate identification of communalities in purpose, and the nature of the
assumptions underpinning their seemingly different tools, techniques and methods.
Additionally, we state that much may be gained from further exploring how TOC
methods and methodologies may be combined with SD and its associated systems
methods and methodologies.

In summary, we have demonstrated that that the tools, techniques and methods of
TOC and SD can be viewed as a methodological set of complementary hard and soft
tools and methods that contribute to all phases of activity and across all three social,
personal and material dimensions of the Mingers and Brocklesby (M-B) framework.
Using Mingers' framework, we have also demonstrated that TOC methods, as a
methodological set, share unifying ontological, epistemological and axiological
characteristics and assumptions with each other, with other extant OR/MS
methodologies (Mabin et al. 2003) and here, with the methods and methodology of
SD.

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Mabin, V., S. Forgeson, and L. Green, Harnessing resistance: using the theory of
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Mabin, V J. and S.J. Balderstone, The World of the Theory of Constraints: A Review
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TOC_SD_2004 Amended Submission June 10 2004
21
Appendix 1

Appendix 1.1: Mapping Methodologies - SSM Mingers' (2000) decomposition of SSM*

Appreciation Analysis Assessment Action
of... of of ... to...

; Social practices, Distortions, | Ways of challenging Generate

Social ‘power relations conflicts of & altering power ‘empowerment
interests structures and enlightenment

Individuals’ Different Altemative erate
Personal beliefs, perceptions and | conceptualizations | accommodations
meanings, ‘Weltanschauung and constructions and consensus

emotions

. Physical Underlying causal] Altemative physical Select and
Material | circumstances structure and structural implement best

arrangements alternatives

Appendix 1.2: Mapping Methodologies - Cognitive Mapping

‘Appreciation Analysis Assessment Action
is of of ... 10's
; Social practices, Distortions, || Ways of challenging Generate
Social power relations conflicts of & altering power ‘empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptionsand } conceptualizations | accommodations
‘meanings, Weltanschauung | and constructions and consensus
emotions
. Physical Underlying causal | Altemative physical Select and
Material J circumstances structure and structural implement best
arrangements alternatives

Appendix 1.3: Mapping Methodologies - Systems Dynamics

Appreciation Analysis Assessment Action
of... OF ssi of... to...
5 Social practices, Distortions, || Ways of challenging Generate
Social power relations conflicts of & altering power ‘empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and conceptualizations accommodations
meanings, Weltanschauung J} and constructions and consensus
emotions
. Physical Underlying causal || Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements altematives

* A convention of shading is used to show whether, and to what extent, a methodology, method or activity supports a phase of

intervention represented by a particular grid cell. The stronger the shading, the more support a methodology may offer through
appropriate method or activities in that area.

TOC_SD_2004 Amended Submission June 10 2004
22
Appendix 2.: Mingers' Framework for Characterising the Philosophical Assumptions underlying Systems Methodologies

Methodology/ What it does Ontology Epistemology Epistemology Epistemology Axiology Axiology
Technique A Systemto... | What it assumes | Representation Necessary Source of Users Purpose
to exist by modelling... Information Information inorder to...
Soft Systems ... explore different | Real-world problem; ‘Systems concepts; ‘Hard and soft Concepts, language, Analyst, .-. leam about and
Mett ity worldviews relevant conceptual human rich pictures; information logic and participation researcher, improve a
to areal-world activity systems; analyses 1, 2 & 3; conceming structure, | by concemed actors facilitator, problenntic situation
SSM / situation and to worldviews. logical relations process, climate and participant by gaining agreement
Rich Pictures contrast them in a. relevant worldviews on feasible and
process of debate desirable changes
SODA & .+- Tepresent Individual beliefs Psychological Personal constructs | Interviews, workshops Researcher, ... Surface and
itive explicitly an about particular constructs and their and their inter. ‘with groups of facilitator, understand.
grit individual's views | issues expressible in | mutual influences in relationships participants participant individual beliefs,
Mapping about a particular | terms of interrelated | the formof amap; and and generate
issue or event in their constructs using software for consensus about:
own language representing, possible strategic
analysing and merging actions
maps
Systems .-. Simulate the Material and Influence diagrams, ‘Structure of causal Observation and. Analyst .-. explore the
ai behaviour of immaterial stocks and SD diagrams, relations between, measurement of the operation of a
Dynami physical and social flows, and their software-generated | flows, with quantifies | real world, together complex real-world
Causal Loop stocks, flows and causal feedback icon diagrams deta and mathematical | with judgement and system to aid
Diagrams and processes, and their | relations, information relationships opinion understanding and
Influence causal relationships | and decision that link “control!
Diagrams tm
Strategic .+. Surface a variety Groups with Seemingly Options, individual ‘Formations of Facilitator, ... Synthesise
A ion of contrasting competing views, and | diametically opposed characteristics and different groups to participants, competing
ia strategic options and | the assumptions that viewpoints, viewpoints, ‘present and debate stakeholders viewpoints about
Surfacing & achieve consensus underly these views underlying stakeholders and their | different viewpoints complex interactive
Testing - SAST through debate from different assumptions and interests messes
viewpoints
TOC_SD_2004 Amended Submission June 10 2004

Appendix 3; Framework for Characterising the Philosophical Assumptions underlying TOC Methods

Methodology/ What it does Ontology Epistemology Epistemology Epistemology Axiology Axiology
Technique A Systemto... ‘What it assumes Representation Necessary Source of Users Purpose
to exist by modelling... Information Information in order to...
TOC / Current -. search forroot | Problems, symptoms, | Cause-effect / logic Objective facts, Observation and Decision-maker, +» disoover root
Reality Trees causes, andexplain | cause-effect relations relationships subjective opinions, | measurementof real | analyst, consultant, | causes to problems
how these lead to logic relations, ‘world, logic relations, | facilitator, participant
problem symptoms perceptions, judgement and
judgements, pattems opinion
of behaviour
TOC/ _ represent Individual beliefs Seemingly Options, stakeholder Interviews, Analyst, participant +» Surface and
Bvaporeting explicitly one or about competing | diametrically opposed | viewpoints, their | discussion, argument, understand
more persons’ or views and the viewpoints, interests and common debate with individual beliefs,
Clouds function's conflicting assumptions underlying objective participants, analyst's synthesise competing
views underlying these assumptions of reasoning, storylines viewpoints, explain
views of different | relevant stakeholders how these lead to
stakeholders conflict, generate
actions to resolve
conflict
TOC/Future | --- determineeffects | Problems, actions, Cause-effect/ logic Objective facts, Observation and Decision-makers, --» Show how actions
Redlity Trees and outcomes desired outcomes, relationships subjective opinions, | measurement of real | analyst, consultant, lead to desired
following from outcomes, cause- logic relations, world, judgement | facilitator, participant outcomes
proposed actions and effect relations judgements
solutions
TOC /NBRs ..-identify possible Existence of Cause-effect / logic Objective facts, Observation and Participants, decision |... identify causal
side-effects and undesirable side- relations and side- subjective opinions, | measurement of real makers and actions required to
actions to prevent effects of proposed | effects fromactions, logic relations, ‘world, judgement and implementers, prevent undesirable
them action. inthe fom of amap judgements, side- opinion stakeholders side-effects
effects and actions to
overcome them
TOC/ .. Surface and list. | Existence of implicit | Necessity relations Obstacles, and actions | Viewpoints, intuition, | Participants, decision | ... map the necessary
Prerequisite Trees obstacles and obstacles to between necessary to overcome them, judgement makers and ‘sequence of actions
necessary convective | achieving desired | actions to overcome logic relations implementers, required to achieve
actions to achieving outcomes obstacles in the fom stakeholders desired outcomes or
desired outcomes of amap target
TOC / TrTrees .-identify required | Problems, actions, Cause-effect / logic Objective facts, .+. toqreate an,
actions to generate desired outcomes, rdations inthe form | subjective opinions, action plan to achieve
desired outcomes and | outcomes, cause- of ammp, actions, logic relations, desired outcomes
results effect relations desired outcomes judgements, desired
‘outcomes, actions to
achieve them
TOC / 5FS + identify and Constrained Process of identifying Objective facts, Observation and Participants, decision | ... to improve global
manage constraints | performance, barriers and examining opinions, logic measurement of real makers and performance long-
‘on on-going to improved constraints on relations, judgements, | world, judgement and implementers, tem
improvement performance performance desired outcomes, opinion stakeholders
actions to achieve
them

TOC_SD_2004

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14/06/2004 14:43

TOC_SD_2004

Appendix 4.1: Mapping Methodologies - TOC CRTs

Appreciation Analysis Assessment Action
of ... of. of... to...
; Social practices, Distortions, | Ways of challenging Generate
Social power relations conflicts of & altering power ‘empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations [| accommodations
meanings, Weltanschauung and constructions and consensus
emotions
j Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements altematives

Appendix 4.2: Mapping Methodologies - Evaporating Clouds

Appreciation Analysis Assessment Action
of... of... of... to...
: Social practices, Distortions, Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, peroeptions and | conceptualizations | accommodations
meanings, Weltanschauung | and constructions and consensus
emotions
. Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements altematives
Appendix 4.3: Mapping Methodologies - TOC FRTs
Appreciation Analysis Assessment, Action
of... of of... to
F Social practices, Distortions, Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations [| accommodations
meanings, Weltanschauung | and constructions and consensus
emotions
jl Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements altematives
Appendix 4.4: Mapping Methodologies - TOC NBRs
Appreciation Analysis Assessment, Action
of... of... of... to...
r Social practices, Distortions, Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations ) accommodations
meanings, Weltanschauung |} and constructions ‘and consensus
emotions
jl Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements alternatives

25

TOC_SD_2004

Appendix 4.5: Mapping Methodologies - TOC Prerequisite Trees

Appreciation Analysis Assessment Action
of ... of of... to...
A Social practices, Distortions, | Ways of challenging Generate
Social ‘power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations | accommodations
meanings, Weltanschauung and constructions ‘and consensus
emotions
: Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements alternatives

Appendix 4.6: Mapping Methodologies

- TOC Transition Trees

Appreciation Analysis Assessment. Action
of... of of... to...
. Social practices, Distortions, Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations J accommodations
meanings, Weltanschauung | and constructions and consensus
emotions
‘ Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements alternatives
Appendix 4.7: Mapping Methodologies - TOC 5FS
Appreciation Analysis Assessment Action
of. of of... to
jl Social practices, Distortions, Ways of challenging Generate
Social power relations conflicts of & altering power empowerment
interests structures and enlightenment
Individuals’ Different Altemative Generate
Personal beliefs, perceptions and | conceptualizations | accommodations
meanings, Weltanschauung | and constructions and consensus
emotions
P Physical Underlying causal | Altemative physical Select and
Material | circumstances structure and structural implement best
arrangements altematives

26

Appendix 5
The Power Generation Dilemma: Using CLDs & TOC Frames
Power Options Need Balance

Government faces dilemma of whether to intervene or not, and if so, how

“Confronted with the second power crisis in three years, the Government has been grappling
with the problem of how to ensure security of electricity supply.

New Zealand is estimated to need about 800MW of “firming capacity”* to cover the risk of a
dry year in the hydro system.

This is thermal generation capacity which would normally be surplus to requirements but
which could be called on when inflows to the hydro lakes dwindle to a tiny trickle.

There are two ends to this problem.
At one end, the aim is to ensure that efficient modem generation plant is built.

But it is also desirable to ensure that doing that does not entirely dislodge older, more
expensive capacity from the system so that it cannot be called upon in emergencies.

The risk the Government faces is that intervening to ensure that older capacity is available as
reserve capacity could distort the market in a way that has a chilling effect on new
investment in generation, especially by the private sector.

The aim is to provide a degree of insurance against the sort of supply/demand imbalances
that send spot prices on the wholesale electricity market through the roof, and trigger a loss
of production by firms exposed to the spot price.

The less risk there is of high spot prices, the less incentive there is for firms to hedge against
them by signing fixed-price contracts.

But the more demand is hedged, the more comfort that anyone building a new power station
would have.

The danger is that providing too much insurance against dry years would leave too little
incentive, for the private sector at least, to build new generation.

The price signals from the spot market may sometimes be shrill and piercing, but policy
makers muffle them at their peril.

So the Government intervention - to ensure that older capacity is available - which could
encourage more people on to spot prices, might have to be complemented by some
mandatory hedging arrangement of the kind contemplated in the mid-1990s - a requirement
that electricity retailers and major users cover at least a large percentage of their expected
demand in hedge contracts.”

“Firming capacity should not be thought of in terms of whole power stations ... It is
capacity that comes on progressively depending on how dry it is ... Some plants, however,
might be exclusively held in reserve ... and never be used.”

Fallow, B., Weekend Herald, May 17-18 2003, p.C5

A non-exhaustive list of variables that you may wish to take into account include:
The (demand - supply) gap; use of thermal supply; use of hydro supply; hydro-
generation capacity; hydro fuel - inflow to lakes; drought conditions; private thermal
generation capacity; confidence amongst builders of power stations; mothballed
thermal reserve capacity brought into use; tendency to to add new generation capacity;
save old plant; security of supply in short term;
security of supply in long term; likely capping of wholesale electricity prices;
Government intervention; incentives for firms to hedge demand/prices as insurance;
volume of demand hedged by firms as long-term fixed price contracts.

TOC SD_2004 27

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