Systems Thinking Progression in SD & BD Course

1. Systems ThinkingProgressionBob LandelOctober 28, 2008Systems Design and Business DynamicsClass #3

2. Systems Thinking Progression in SD & BD Course • Step 1 Identify Performance Pattern • (Past or New -Behavior over Time Graphs) Why the observed path? What is preferred? What do you fear? • Step 2 Draw an Causal Map (CLD or Stock-Flow) What are the factors, interrelationships and delays? What are the key stocks? What are the inflows/outflows? What are the decision policies influencing the rates? • Step 3 Test Hypothesis Map Face Validity Pattern Validity • Step 4 Identify Leverage Points to Change Structure • Step 5 Communicate and Build Understanding

3. Step 1 – Identify Performance Patterns Start with the behavior over time performance patterns that reveal a problem or an opportunity. (BOT –historical or creation of future) Assemble key parties to talk about views of performance, the issues and settle on a focus for the systems study and design activities. Begin to open up people to thinking about where the organization will be headed with the current decision policies and delays that govern the actions in the system. Goal: to build dynamic familiarity

4. Where is it going if we carry on as we are? • How can we design resource decision policies to radically improve this performance into the future? The Business Dynamics of Performance - Key Questions • Why is our performance following its current path? Source: Kim Warren, Strategy Dynamics

5. The logic of stock and flows that create performance dynamics • Resources drive performance • … so must be built and retained over time • … and how they work together is critical Source: Kim Warren, Strategy Dynamics

6. Step 2 – Build Hypothesis Map Next, develop a map, usually very simple, of the stocks (accumulations) and flow rates which capture the essence of how the business works and what could drive the performance patterns. We sometimes call this the “physics of the business”. One can also begin with an archetype or CLD hypothesis Use Team meetings to gather views on key resources, rates and explanations of interdependencies and decision policies (rate influencers). • Use stocks and flows to represent how things might really work! Get others to validate • Talk to others about what influences actions that govern the inflows and outflows • Talk about the ways that decisions are actually made and get others to validate • FACE VALIDITY

7. Key Stocks…..(Accumulations in the BathTub) --Resources Items that we need in order to generate the performance we seek … that we own or to which we have access … that we seek to collect and keep hold of … those that characterize ourselves and/or others … and that range from tangible to intangible. Source: Kim Warren, Strategy Dynamics

8. tangible attributes [‘qualities’ of tangible items] intangibles customers capacity staff products cash customer-size staff experience product functionality staff morale market-reputation investor support Resource stock types and examples • This is not exactly a check-list, though these are very common resources. Other items arise in specific cases, e.g. • Airlines [routes] • Retail [stores] • Media [advertisers vs. viewers/readers] • Demand Forecasts [installed-base] • Professions [staff are capacity] Source: Kim Warren, Strategy Dynamics

9. Step 3 – Test Hypothesis Map Ask experts or very experienced managers—is this how you see things? • mix of tangible and intangible resources • architecture of stocks and flows and interrelationship • FACE VALIDITY of physics and decisions? Be ready to cycle back through Steps 1 and 2; then Step 4: Design (May chose to move to develop simulation model) Turn the map into a simulation model with defining equation representing how the rates are changes Business system parameters are estimated Test model configurations of your map to see if the performance patterns of interest are developed (Pattern Validity)

10. Step 4 – Identify Leverage Points: Systems Design Look for ways to improve performance by developing possible scenarios* posing new strategies and system redesigns process flows delays information flows decision policies that govern the quantity and timing values of the inflows and outflows to core resources. * Each new scenario consideration is linked to the performance pattern in Step 1; thus it should be evaluated on a set of metrics that are meaningful to the performance pattern situation.

11. Step 5 – Communicate and Build Understanding Start with the belief that many other stakeholders will have a different mental model of the past system structure and future preferences/fears. Always reveal the views of performance, the business issues and clearly identify the focus for the systems design activities. Develop a Story –including the performance patterns your will use as your “reference” and how the CLD or stock flow map could be causing the patterns. Reveal the current decision policies of various stakeholders and delays that govern the actions in the system. Unfold a structure –one chunk at a time Create a Decision-focused Control Panel supported by a simulation model Goal: to build stakeholder familiarity