QUERY Future Development Directions

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Richard Stevenson <rstevenson
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QUERY Future Development Directions

Post by Richard Stevenson <rstevenson »

Posted by Richard Stevenson <rstevenson@valculus.com>

Jay Forrester comments that “system dynamics is now on a plateau.”

So, on a plateau after 50 years, is this not an ideal juncture SD to consider its future options seriously? Much of the recent discussion about the future of SD in these pages has been fairly defensive or obscure - although on balance, mostly supportive of my original propositions.

We now wish to suggest a much more positive vision of the future. By illustration we can extend Jay’s moon mission analogy.

The Moon Mission Analogy

When President John F Kennedy made his promise of ‘of landing a man on the moon and returning him safely to the earth’ in the early 60’s, NASA did not have too much of an idea as to how this would be achieved. The rocket science design and engineering professional disciplines simply did not exist. NASA did, however, have a range of ‘products’ in mind in the form of Saturn V rockets, Lunar Excursion Modules etc. They needed to produce at least 15 Apollo ‘products’ to repeatable, quality assured standards in order to deliver JFK’s target.

Professional engineering disciplines such as rocket design and build, zero defect manufacturing, large scale multidisciplinary project management etc were, however, quickly conceptualised, assimilated, documented and implemented. The rest is history as they say. Even in the case of Apollo 13, the engineers had the fix to ‘return them safely to earth’.

The key factor that galvanised the rocket science engineering fraternity was the specific challenge of getting to the moon (and
back) within a decade. Their success did NOT mean that they then knew everything there is to know about physics and about the universe – but it was still sensational – and it vastly increased their knowledge in the process.

How Deep is the “Systems Jungle”? The SD Paradox.

Jay’s further argument is that “Those who have only been exposed to the loose talk of ""systems thinking"" find it sufficiently helpful that they think they have arrived, when actually they are probably only about one per cent of the way into systems. Likewise, the majority of those who have achieved the present average level of skill in system dynamics find it so powerful that they feel they have learned it all, when actually they have gone only a few percent of the way into the unknown of nonlinear feedback systems.”

This appears to be an argument for cautious, incremental development that should be led only by a tiny number of “expert” practitioners who know all there is to know about nonlinear feedback systems – i.e.
almost by definition, academics and a very few consultants. The problem with this view is that learning is very slow - and a real issue is that success stories rarely get published, because of confidentiality. (We need to ""dig up the bodies"" of successful SD projects - remember that medical science progressed on the back of grave robbers!)

So our (contrary) view is that developments in SD must be led from (and by) the business community - and from a specific needs perspective. Only by using SD successfully and continuously on serious, widely recognised problems will the wider world ever get to hear about SD!

Having said that, it is unquestionably true that in the hands of novices, SD tools and methods can be dangerous. There is a paradox here. We can’t do SD in anger until we are good enough. But we can’t become competent without doing serious SD. And when we're successful, often we can't talk about it.

We need to break the circle.

Certain fundamental (and certainly non-trivial) systemic insights are already well established and indeed repeatable and useable across a wide range of industries. We need the confidence to lean on these insights to build “success stories” – and proclaim them from the rooftops. And just as to the point, we need the confidence to focus on specific markets - and to integrate SD with tools that managers already use!

Extending the Moon Analogy to SD in Capital Industries

For example, and in particular, ‘capital industries’ having long investment cycles (such as utilities, oil and gas and
pharmaceuticals) all have common issues and problems that require systemic solutions.

Consider for example:

§ Asset life cycle management in utility industries
§ Balanced portfolio planning in pharmaceuticals
§ Capacity planning in heavy capital industries

….where there is already a well developed knowledge bank of SD 'solutions'.

The common glue between all these long life cycle capital industries is the management of future value. In particular, managers must balance short-term performance with long-term value creation, also balancing the interests of multiple stakeholders. Mostly, ‘capital’
managers are prisoners of previous management generations, and likewise won’t be around to see the outcomes of their own decisions.

It’s an SD feeding ground, surely!

In the same manner that the Apollo programme galvanised ‘rocket science’ into a sustainable, professional engineering profession, we believe that the introduction of widely available, customisable, strategic planning toolsets or products – in capital industries in particular - will do the same for the SD ‘profession’.

New web-based simulation toolsets that support SD integration with other toolsets - for example with DCF valuation and balanced scorecards - will support this objective.

This route will represent the next stage of SD’s development from its ‘ current plateau’. This (dare we say) ‘commoditisation’ approach is a natural progressive step in the evolution of any new ‘technology’, be it rocket science, SD or penicillin or silicon chips or microwave technology - or looking to the future, nanotechnology.

Let’s ground this proposition in some hard market feedback….

The market need

Consider a very recent quote in a book from a thought leader in the corporate finance - Chief Financial Officer (CFO) - space.

‘In the next five years the systems used for developing, resourcing and managing strategic and operational plans will change beyond all recognition. They’ll be focussed on supporting strategy; be dynamic and continuous in operation; show cause and effect of one KPI on
another, and the impact of one end user’s activity on another.’
Nov 2006: CC Read ‘Creating Value in a Regulated World’

The script could hardly be written better! The corporate market place is desperate for credible solutions to its strategic planning problems to solve such problems as:

§ Balancing short-term performance with long-term value creation
§ Integrating strategy across different management groups and
perspectives
§ Testing alternative strategies without risk and before
implementation
§ Understanding how tangible and intangible resources interact
to create value, over time
§ Communicating strategy internally and externally, to
different stakeholder groups.

The use of ‘one off’ SD interventions will of course always have a home. (Only yesterday we were discussing the use of SD in the re- nuclearisation of the UK electricity supply industry).

However, our company Valculus sees a huge opportunity for SD to gain
a major foothold in the business market place by providing
repeatable and customisable toolsets to support strategic decision- making in strategic value management. This route represents a heaven sent opportunity for the SD community to ‘come of age’.

In conclusion, whereas we believe we have a strong vision at Valculus we are not arrogant (or foolish) enough to think we can do it alone.
We therefore welcome comments and expression of interest from experienced SD practitioners.

Richard W Stevenson
John F King
February 2007
Valculus Ltd
UK
Posted by Richard Stevenson <rstevenson@valculus.com> posting date Thu, 8 Feb 2007 17:33:38 +0000 _______________________________________________
Bob Eberlein <bob@vensim.com&
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QUERY Future Development Directions

Post by Bob Eberlein <bob@vensim.com& »

Posted by Bob Eberlein <bob@vensim.com>

Hi Everyone,

Jay Forrester, as only he can, sometimes talks about what it would be like if people from ancient Greece were transported to today.
He points out that while they might find our technology baffling, if we were to take them to the US Senate to observe a debate, they would feel perfectly at home. The same could be said of any corporate boardroom.

We have made amazing bounds in engineering and science, and yet our social institutions have changed very little in thousands of years.
Jay's vision, as I interpret it, is to get the same progress evident all around us into the human species ability to manage itself.

I do not believe that the direction Mr. Stevenson suggests really moves us toward Jay's vision. Fundamentally, good system dynamics is simply good science and there is very little about business practice that embraces good science. I can think of only two examples of solid science in business practice. One is accounting, which I think all would agree on. The second is process/quality control (Time Management, TQM, Six Sigma..) and there are probably differing opinions on that.

The future development of the field needs to focus on breathtaking applications that either solve huge visible problems or make comparative corporate performance look like the difference between companies with, and without, accounting. This is a bold statement, but it is in boldness and not meekly fitting ourselves in with other tools and techniques that we can make a difference.

Of course, muddling along through life as we are, we do need to keep our jobs, get tenure, find clients and basically fit in. And many of Mr. Stevenson's suggestions make sense from this perspective. Just keep the bigger picture in mind.

Bob Eberlein
Posted by Bob Eberlein <bob@vensim.com> posting date Fri, 09 Feb 2007 07:46:26 -0500 _______________________________________________
Monte Kietpawpan <kietpawpan@
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QUERY Future Development Directions

Post by Monte Kietpawpan <kietpawpan@ »

Posted by Monte Kietpawpan <kietpawpan@yahoo.com>

I strongly agree with Bob that, fundamentally, good system dynamics is simply good science.

Reproducibility is vital to good science. What is the scientific method in SD? We know how to predict the implication of a given policy, but this is still uncertain whether independent modelers will always obtain the same predictions when following the SD modeling process. SD can be good science only if we have something to ensure that any person who models the same problem will obtain
the same model boundary and equations.

Monte Kietpawpan
Posted by Monte Kietpawpan <kietpawpan@yahoo.com> posting date Sat, 10 Feb 2007 10:29:47 -0800 (PST) _______________________________________________
""alex"" <leusa@tds.net>
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QUERY Future Development Directions

Post by ""alex"" <leusa@tds.net> »

Posted by ""alex"" <leusa@tds.net>

I am in agreement with Bob's comments, except for accounting. Accounting can become a little creative at times. Since Enron etc., I am sure
everybody is behaving. I am a retired Electrical Engineer and my last 10
years in a Power Utility Company was applying dynamic modeling (iThink), TQM, Six-Sigma etc. to improve business processes. In my opinion these approaches where utilized for the excuse to cut people. Management wanted
to utilize the scientific approach as an excuse to do it! Remember that
power companies pretend to be competitive, but they still are monopolies.
Beware of the hidden agendas.

Do not misuderstand me I am a firm believer of SD. I am trying to implement the approach in our local high school math and science classes.

Sincerely,
Alex
Posted by ""alex"" <leusa@tds.net>
posting date Sat, 10 Feb 2007 09:43:15 -0600 _______________________________________________
Richard Stevenson <rstevenson
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QUERY Future Development Directions

Post by Richard Stevenson <rstevenson »

Posted by Richard Stevenson <rstevenson@valculus.com>

Bob Eberlein says that ""good system dynamics is simply good science and there is very little about business practice that embraces good
science."" Also, "" it is in boldness and not meekly fitting
ourselves in with other tools and techniques that we can make a difference.""

I seem to recall that Jay Forrester's original book was titled ""Industrial Dynamics"".

1961 ""Management is on the verge of a major breakthrough in understanding how industrial company success depends on the interaction between the flows of information, materials, money, manpower and capital equipment"" (Jay Forrester Industrial Dynamics)

1992 ""It seems clear we are asking for a paradigm transition"" (and) such a transition tends to be strongly resisted both because it contradicts past assumptions and because it is difficult to understand from within the prior perspective"" (Jay Forrester
>From the Ranch to System Dynamics; An Autobiography)

2003 ""I remain mystified why these essentially simple mechanisms have remained largely ignored for four decades"" (Kim Warren - Competitive Strategy Dynamics)

It is this paradox that we must address.

Mr Eberlein's description and vision of business and science is narrow and, with respect - simply wrong.

Firstly, ""accounting"" is certainly not a science. Sure, the old fashioned view of accounting is numbers and bean counting. But today, corporate finance is about much more than sums. It's about looking forward, not counting back. And Enron, Worldcom, etc. prove what happens when accountants are left to run corporations. System dynamics has a great deal to contribute to open up corporate finance and to make it more ""scientific"".

Second, ""process/quality control"" is a vastly narrow view of management science. I can't even begin to describe how narrow.

Third, modern business boardrooms are mostly populated with highly educated and intelligent managers - many of them scientists.

Mr Eberlein apparently feels that business strategy is completely outside of the scientific method - and that business managers are anchored in ancient Greece ( I just can't speak for the US Senate, but I could concede that Mr Eberlein might have a point there - the
UK parliament also!). But business isn't about politics,
ultimately, and we should not confuse the two. Having been in a boardroom or three, I know that good managers fundamentally want better strategic decision-making tools.

Jay Forrester's original vision remains valid and unfulfilled.
SD practitioners should ask why - and not shelter in vague academic generalisations and outdated criticisms of business people. SD needs to get more engaged with business people - and SD practitioners need the courage to put their heads above the parapet, rather than criticising from a distance. I know very few (but there are a few) SD practitioners who have the courage, experience, skills and gravitas to practise SD in a corporate boardroom.

Oh, and just one more thing before I retire to my bunker to await the shelling!

Bob Eberlein's email exhibits another great fault in the SD community - I call it ""Jay-itiss"".

Nobody who knows anything about SD could possibly under-rate Jay Forrester's contribution. He is one of the intellectual giants of the 20th century.

BUT....
Jay wrote (mostly) half a century ago. Since his writings there have been many great contributions to SD - mostly academic, some populist, but all overshadowed by and deferential to Jay's work. It seems to me that SD is almost afraid to venture outside Jay's protective shell.

Applaud, of course. Gratitude, certainly. Deference, I don't think so. We are mostly guilty of thinking we must defer to the MIT ""summit"" of SD. Whereas, as far as I can see, much original work is now coming from anywhere else but East coast USA.

Richard Stevenson
Valculus Ltd
UK
Posted by Richard Stevenson <rstevenson@valculus.com> posting date Sat, 10 Feb 2007 18:03:00 +0000 _______________________________________________
Bob Eberlein <bob@vensim.com&
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Post by Bob Eberlein <bob@vensim.com& »

Posted by Bob Eberlein <bob@vensim.com>

Thanks Monte for pointing out the importance of reproducibility. The notion that two people faced with the same problem would create the same model and come to the same conclusion is, however, much stronger than that. An experiemnt is reproducible if other people can repeat it and (usually) get the same results. Reproducibility does not really apply to theories, except to the extent that logic or mathematics of the theory should be clear and verifiable. Most modeling excercises are more like thoeries than experiements, what needs to be reproducible are the model results. That may seem trivial, but suprisingly many published results based on computation are not.


Thanks Alex, for taking a more cynical view of management than even I do. I may have underestimated just how many people would disagree with my assertion that accounting is part of the science of business.

And thanks Richard for starting this whole line of discussion. I absolutely love your quotes - to me they prove what an optimistic bunch we are (or at least Jay and Kim are). The good stuff is always just around the corner it seems.

I did not intend to denigrate the work in management science, just claim that little, if any, of it makes its way to the real decision making. I personally have not spent much time in board rooms, but I know many who have and your description is contrary to all the descriptions I have heard.
If you have found a board that uses fact based management and invests and manages accordingly then stick with them - they will be running the world in a decade or two.

As far as the field of strategy goes, this is something I would love to hear Kim Warren's comments on. I personally have never been able to see past the magic that the big guns bring to the game.

And finally, you have diagnosed me as having Jay-itis - well I can think of lots worse maladies. Still, it is not an appropriate characterization of the people active in the field, or posting to this list. Nor is it true that there is a failure to recognize work originiating from outside a small circle. Lots of people have worked very hard within the Society, and the field in general, to increase interaction with people from other geographies and backgrounds.

Bob Eberlein
Posted by Bob Eberlein <bob@vensim.com> posting date Sun, 11 Feb 2007 19:19:08 -0500 _______________________________________________
""John Gunkler"" <jgunkler@sp
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Post by ""John Gunkler"" <jgunkler@sp »

Posted by ""John Gunkler"" <jgunkler@sprintmail.com>

Richard Stevenson says, ""But business isn't about politics, ultimately, and we should not confuse the two."" Having been in a boardroom (or two hundred
plus) myself, with respect I say that is simply wrong.

Just one example: Several years ago a major study was undertaken to discern the factors underlying the decision about where to put (the geographical location of) corporate HQ's. The result? One factor overwhelmed all others
-- it was, where the CEO lived.

Please don't try to tell me that business decision making is not about politics. If only it were not so, if only corporate decision making were rationally based (and data based) we would not be having these discussions about why SD is not more used.


John Gunkler
(in 30 years, consultant to more than 25% of the Fortune 500 and to other businesses in Japan, China, Central America, Europe, Canada, and the U.S.) Posted by ""John Gunkler"" <jgunkler@sprintmail.com> posting date Sun, 11 Feb 2007 11:53:56 -0500 _______________________________________________
""Kim Warren"" <Kim@strategyd
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Post by ""Kim Warren"" <Kim@strategyd »

Posted by ""Kim Warren"" <Kim@strategydynamics.com>

I can recommend a few managerial articles about the need for rigour in strategy ..

Kevin P. Coyne and Somu Subramaniam, ""Bringing discipline to strategy,""
The McKinsey Quarterly, Volume 4 (1996), 14-25.

Clayton Christensen and Michael Raynor. ""Why Hard-Nosed Executive Should Care About Management Theory"", Harvard Business Review, Volume 81, No.9, (September 2003), 66-75.

Thomas H Davenport, ""Competing on Analytics'"" Harvard Business Review, Volume 84, No.1, (January 2006), 98-107. [Includes some cases of organisations that actually do this, e.g. Capital-One in credit cards and the Boston Red-Sox].

In short, there does seem to be a sentiment to move away from gut-based decision-making and do some fact-finding and working-out of what might be best .. I would hope that SD is well placed to help.
I also like a quote from Jeff Bezos - ex Wall St star-analyst and founder of Amazon .. ""When it comes to the important decisions, data beats intuition every time"". He is also known to stop management meetings when they start debating options, saying 'until we have the facts and analysed them there is no point discussing this'.

Kim
Posted by ""Kim Warren"" <Kim@strategydynamics.com> posting date Mon, 12 Feb 2007 12:52:44 -0000 _______________________________________________
Richard Stevenson <rstevenson
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Post by Richard Stevenson <rstevenson »

Posted by Richard Stevenson <rstevenson@valculus.com>

John Gunkler says, ""Please don't try to tell me that business decision making is not about politics.""

Actually I didn't say that it wasn't. I said that business and politics are not the same.

I too have been involved in some extremely ""political"" boardroom debates, including one that ignored months of simulation-based analysis to build (what was then) the biggest cement plant in the world in entirely the wrong location and based on the wrong
technology. By the time it was constructed it was already obsolete!
But that was in the early 1970's.

I have also been involved in some extremely constructive and valuable boardroom debates. One study for a major oil company was acted upon and retrospectively is estimated to have added over $500 million value to an oilfield - needless we we not paid a share of the benefit! We have also recently worked with a major pharmaceutical company, during which an SD-supported boardroom discussion totally changed the company's future R&D strategy - away from internal development towards alliance-based external development.

You can never take the politics completely out of business - after all, managers are human beings and companies are social, as well as financial machines.

But ultimately companies have to do one thing - create value for all their stakeholders. Companies that don't go broke. And managers that don't get fired - or jailed (see Enron). This is a wake up call for all managers - the regulator's gonna get you!

Increasing regulation (both forward and retrospective) is placing huge new burdens on managers to create REAL value - not just ""shareholder value"" - a euphemism for managers' stock options - and making it less likely that ""politics"" can be the only decision tool in any significant organisation in the future.

Managers are increasingly aware that value-influencing decisions now need to be rational, and that the audit trail needs to be solid.
Big investment decisions need to be justified.

So I don't totally share John Gunckler's cynicism - although I know what he means!

The use of better tools to support rational value management is, I suggest, now a significant new opportunity for SD.

Richard Stevenson
Valculus Ltd
Posted by Richard Stevenson <rstevenson@valculus.com> posting date Mon, 12 Feb 2007 12:44:58 +0000 _______________________________________________
""John Gunkler"" <jgunkler@sp
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Post by ""John Gunkler"" <jgunkler@sp »

Posted by ""John Gunkler"" <jgunkler@sprintmail.com>

Richard Stevenson writes, ""The use of better tools to support rational value management is, I suggest, now a significant new opportunity for SD.""

I hope so, too. And I'm basing my current consulting efforts on this very idea.


John Gunkler
Posted by ""John Gunkler"" <jgunkler@sprintmail.com> posting date Tue, 13 Feb 2007 09:25:55 -0500 _______________________________________________
j-d <jaideep@optimlator.com&g
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Post by j-d <jaideep@optimlator.com&g »

Posted by j-d <jaideep@optimlator.com>

Kim writes:
""I also like a quote from Jeff Bezos - ex Wall St star-analyst and founder of Amazon .. ""When it comes to the important decisions, data beats intuition every time"".""

This quote reminded me of one of the major reasons I had moved away from system dynamics (SD). I will try to keep it short because I have mentioned this in the past, but since we are talking about future directions, hopefully it is still relevant. I strongly feel that SD got stuck with, and enamored by, its ability to create unexpected simulation-based insights. For anyone working with nonlinear systems, this should not have been a surprise, especially with all the research after Lorenz found the unpredictable behavior from only three innocuous nonlinear equations. My dose of humility came after working with the World3 model and realizing that it has hundreds of relationships (and if I remember correctly 26 nonlinear ODE) that are not based on econometric studies or strong theory of structure (for example, economics, flawed as it may be, has axioms and builds a theory/structure of human economic behavior, but all that is usually made up, along with the data, as we build SD models). So that is a very slippery slope to start with. No strong structure (by that I mean equations/relations/tables/graphs in the SD models are not based on any theory), no data (we say data is not that important, as the insights can come without data) and we want to promote SD to hard-nosed people in the corporations!! I am not denying that there are domain experts and deep thinkers/consultants (many on this list) who can create great models out of fuzzy data and structures. Personally I couldn't do it and I suspect many cannot, so they move away from SD, or keep it as only one of their closet tools.

The way SD is practiced sometimes reminds me of what people say about video games and its effect on children. Some claim (and I agree) that actually these games make children smarter. So practice of SD, understanding the intricacies of simulations, and of different subject areas, of course all that makes us smarter. But we smart at why we are not recognized as being so smart (sorry for the pun!!). The problem with depending on video games only to make one smarter is that everything then is seen through the filter of these games. So the users are smart in their own make-believe worlds of distorted realities (coming out of distorted structures, distorted data of games and hence possibly indulging in distorted behavior - enacting violent fantasies/acts in the real world?).

Personally I think that the task of creating theories is a lifetime one and SD wants to compress it into a few modeling sessions or so.

I agree with Dr. Forrester that maybe the time for SD has not come yet. If I may, I may also suggest that time has not come yet for single and multi-player dynamic game optimizations (my pet subject), and ""optimlations""
(even more pet subject (""optim""ized simu""lations"")). This is the the idea that for complex systems we will never know everything, so simulations are important to know possible different futures; and because our resources are limited so optimization is necessary; and because we live in a world of competing (sometimes randomly behaving) actors over time, so dynamic (possibly stochastic) games are needed. These ""optimlations"" build on tested SD modules.

If I were to look at the future, a hundred years from now, I see this:

There are domain experts (in economics, biotechnology, psychology, nanotechnology, robotics) who work with SD modelers to build very sound (structurally and data-wise) tested (i.e., they work in the real-world unlike in distorted realities of video games) plug-in modules. The only outward-facing interface is specifications of some parameters and relations.
Like classes in OOP, non-domain experts and non-SD modelers can't mess with the internals of these modules. These modules must be tested and clean, otherwise every SD modeler is going to be re-inventing the wheel, as seems to be the case right now.

Depending on a given problem (precise specs of this are VERY important), these modules can be selected and defined and connected together (for example the population, resources, agriculture etc. modules in World3 model).

Depending on the problem, dynamic game (sometimes randomly acting) actors are chosen (scientists vs. politicians in a climate model, neocons and deciders vs. everybody else for promoting democracies, etc.) and so on.

Based on these tested modules and specified actors, simulations are done with different objectives in mind (you are always trying to optimize one or more objective functions); through these ""optimlations"" you create mental models of possible futures that are more reality-based, taking into account the deep needs of actors, and hopefully then make the best ""gut"" decisions.

Since any of the above topics can turn your hair gray, it is extremely important to use the best teaching tools/software for teaching and learning purposes. The task of software development and model-building can be simplified much, much more so that instead of patting oneself on the back that one can build and understand software and models no one can understand, the focus and value shifts more toward analysis and understanding. Unless in 100 years we have implantable chips in our heads that make us smarter, we need to make the software and tools smarter.

Until the above happens, we work with what we have and that includes even Excel spreadsheets, econometrics, whatever - the future of SD/optimlations for me lies in SDers/optimizers linking with domain experts in different areas and creating well-tested modules that can form the foundation for work as I outlined above. And not to forget what Bezos said ""When it comes to the important decisions, data beats intuition every time"".

Thanks for listening to the viewpoints of an outsider - I truly appreciate how much I have learnt from the brilliant minds on this list.

Best regards

Jaideep

Jaideep Mukherjee, Ph. D.
Posted by j-d <jaideep@optimlator.com>
posting date Tue, 13 Feb 2007 11:36:11 -0600 _______________________________________________
Jean-Jacques Laublé <jean-jac
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Post by Jean-Jacques Laublé <jean-jac »

Posted by Jean-Jacques Laublé <jean-jacques.lauble@wanadoo.fr>

John Gunkler writes :

> But business isn't about politics, ultimately, and we should not
> confuse the two."" Having been in a boardroom (or two hundred
> plus) myself, with respect I say that is simply wrong.

To me very simply, business is about maximizing the net revenue from the capital invested and preferably maintaining at least this revenue above zero.

Politics is about being elected.
This makes the business game and the political one completely different.

Bob Eberlein writes:
>I personally have not spent much time in board rooms, but I know many
>who have and your description is contrary to all the descriptions I have heard.

It is sure that people in board rooms do not behave in a very 'scientific'
way but they still behave. And this behaviour has its own rationality, even if apparently SD people seem to have difficulty understanding it. This behaviour does not come from the people but from their positions and the context in which they are in.

And to my opinion this behaviour is not as complicate as it appears at first.

Regards to everybody.
Jean-Jacques Laublé
Posted by Jean-Jacques Laublé <jean-jacques.lauble@wanadoo.fr> posting date Tue, 13 Feb 2007 13:15:30 +0100 _______________________________________________
Bill Braun <bbraun@hlthsys.co
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Post by Bill Braun <bbraun@hlthsys.co »

Posted by Bill Braun <bbraun@hlthsys.com>

Richard Stevenson wrote, in part:

> But ultimately companies have to do one thing - create value for all
> their stakeholders.

This is the oft repeated mantra. I suspect, from both observation and experience, that creating value for senior managers by senior managers frequently trumps other shareholders. I am not assuming every organization is Enron bound; quite the contrary, the desire to reward one's-self is much more subtle, and pernicious.

I speculate it is that to which John Gunkler refers.

Bill Braun
Posted by Bill Braun <bbraun@hlthsys.com> posting date Tue, 13 Feb 2007 06:51:27 -0500 _______________________________________________
""Jim Thompson"" <james.thomp
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Post by ""Jim Thompson"" <james.thomp »

Posted by ""Jim Thompson"" <james.thompson@strath.ac.uk>

Jaideep Mukherjee writes: ""I strongly feel that SD got stuck with, and enamored by, its ability to create unexpected simulation-based insights."" I interpret the rest of that posting to be an argument for trying to solve dynamic problems with other methodologies and in lieu of SD.

My thesis research reviews several consulting engagements in which SD was the prominent problem-solving methodology. Each engagement involved one or more SD practitioners working for more than 250 hours within an organization, usually with a team of three to thirty individuals.

The principal benefits from SD were (1) identifying cause(s) that previously had gone unnoticed and (2) suggesting nontraditional solutions for the identified problems. However, the causes and solutions suggested by SD did not make immediate sense to the persons charged with solving the problem.

Extraordinary claims require extraordinary evidence. In some engagements this observation was respected by making ever more detailed SD models, for the most part producing disappointment and disillusionment with the methodology. In those engagements in which the SD-generated insight was supported by other analytics, organizational satisfaction with results and the likelihood of implementing an SD-generated solution was much higher.

Jim Thompson
Posted by ""Jim Thompson"" <james.thompson@strath.ac.uk> posting date Wed, 14 Feb 2007 10:34:07 -0500 _______________________________________________
Bill Braun <bbraun@hlthsys.co
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Post by Bill Braun <bbraun@hlthsys.co »

Posted by Bill Braun <bbraun@hlthsys.com>

System Dynamics Mailing List wrote:

> Posted by Jean-Jacques Laublé <jean-jacques.lauble@wanadoo.fr>
> To me very simply, business is about maximizing the net revenue from
> the capital invested and preferably maintaining at least this revenue above zero.
>
> Politics is about being elected.
> This makes the business game and the political one completely different.
>

It may be useful to distinguish between politics and the political process, the latter being how we sort out a consensus on problem identification, setting goals, determining expected results, and on allocating resources within an organization, amongst other things (ref. Pfeffer and Salancik more or less) .

I am now in the middle of an SD project at work, and one of the people on the modeling team has openly (in the spirit of advocacy and candor) expressed his skepticism that modeling will work. Notwithstanding, he is very supportive of giving it a try.

He has come right out and said that his degree of support and interest has a lot to do with his perception of the model's (or models') ability to provide meaningful insights that advance common goals, and, consequently, his ability (and willingness) to take this forward to his boss (the CEO).

I find this pretty normal, and I understand that relationships, trust, and confidence are as critical to the project as a valid model using real data producing results (Kim Warren's recent post being the poster child for valid models using real data).

None of this is politics; all of this is the political process.

Bill Braun
Posted by Bill Braun <bbraun@hlthsys.com> posting date Thu, 15 Feb 2007 07:02:46 -0500 _______________________________________________
Richard Stevenson <rstevenson
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Post by Richard Stevenson <rstevenson »

Posted by Richard Stevenson <rstevenson@valculus.com>

Bill Braun writes ""I suspect, from both observation and experience, that creating value for senior managers by senior managers frequently trumps other shareholders. ""

It is not our role, as (hopefully independent) advisors, to assume the morality of business leaders. it's our job to help them make better decisions - by helping them to see clearly the implications of the various options in front of them.

Frankly, in my experience, the only times that rational advice is completely ignored are when either

(a) The specific strategic issue is not clearly defined and recognised as being important by all the key players involved in making a decision.

(b) The key players are not engaged, however distantly, in the analytical process.

(c) The analytical process is flawed.

These are not ""method"" issues - they are ""process"" issues. And this is where, it appears, many SD initiatives fall down in business. The issue and the key players are inadequately engaged or inadequately managed.

It appears to be the case that (mostly) SD practitioners are not
adequately equipped to deal with senior managers in the Boardroom.
In practical terms, SD ""competence"" in business is about much more than just technical competence - it requires business experience, political awareness and good process skills.

Perhaps this is the main barrier to SD in business. The very strengths that support good technical skills may militate against developing the much broader range of skills required to practise at senior levels in business.

Physician, heal thyself.

Richard Stevenson
Valculus Ltd
Posted by Richard Stevenson <rstevenson@valculus.com> posting date Wed, 14 Feb 2007 12:43:48 +0000 _______________________________________________
""John Gunkler"" <jgunkler@sp
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Post by ""John Gunkler"" <jgunkler@sp »

Posted by ""John Gunkler"" <jgunkler@sprintmail.com>

Jean-Jacques writes, ""To me very simply, business is about maximizing the net revenue from the capital invested and preferably maintaining at least this revenue above zero. Politics is about being elected. This makes the business game and the political one completely different.""

I won't keep beating a dead horse, but your description about what business is about does not match my experience.

For top executives, business is about keeping your job -- just like politics is. It's even ""worse"" now, post-Enron, because boards of directors are really on notice to watch the executives more closely. That means they are more prepared to fire them at the first hint of suspicion. So top executives have to keep their constituents (i.e., board members and
stockholders) happy, whatever that takes. There is probably (one would
hope) something related to generating value, and cash, involved in keeping the board happy; but often it's more about keeping the board feeling safe and their pockets stuffed with perks. Why don't businesses invest for the longer term? It's obviously in their own best interests. Because of politics -- the demands of the board and the stockholders -- that's why.
And are these demands based on maximizing net revenue from the capital invested and maintaining positive cash flow over the long haul (long meaning ""anything longer than the next quarter"")? Seldom. It's about the price of the stock next quarter.

I'm not saying this is what business is ""supposed to be about."" But then, politics is also not ""supposed to be about"" getting re-elected, either.

Finally, one of the definitions of politics is ""Intrigue or maneuvering within a ... group in order to gain control or power."" This is the meaning I have in mind when I talk about business decisions and politics. It's too often all about control and power.


John Gunkler
Posted by ""John Gunkler"" <jgunkler@sprintmail.com> posting date Wed, 14 Feb 2007 10:12:47 -0500 _______________________________________________
Edward Anderson {andersone} <
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Post by Edward Anderson {andersone} < »

Posted by Edward Anderson {andersone} <Edward.Anderson@mccombs.utexas.edu>


In response to the argument about politics should play a role in business decisions, and its implications for the future development of SD:

In principle, we can agree that business (at least publicly-held ones) should be about maximizing profit returned to the shareholders. However, publicly-held firms are managed by individual agents (managers), each with his or her own interests. Some of these agents' interests are a desire to maximize their individual profits, in which case agency theory applies; some of these agents' interests are a desire to maximize indvidual status or ""build empires"" or even take care of their own ""people,"" in which case what organizational theorists term ""institutional theory"" (e.g. Meyer and Rowan 1977 AJS or Dimaggio and Powell 1983 ASR) applies. (We won't even start with the complicating factor of these agents' cognitive limitations both individually and collectively.) However, in either case, uncountable studies in the organization management literature--including a number by SD researchers--have shown that these interests very often do not result in decisions that completely coincide with the best interests of the stockholders.

Furthermore, the shifting relationships among these agents (essentially
managers) that result in decisions for the firm (as is documented by researchers in corporate governance) have the look and smell of what most people term politics, which after all is by definition the ""process by which groups make decisions"" (Wikipedia). While politics in a firm setting may not be precisely the same as that governing sovereign states, it resembles it enough that the study of business governance primarily relies upon techniques borrowed from sociology, which is also the mother discipline of political science. Hence, the idea of separating politics, in the sense of the process by which self-interested individual agents interact to make decisions, from businesses, which are run by such self-interested agents, is absurd.

So what does all this have to do with the future development of system
dynamics? In essence, it simply means that we can't rely on the self-evident
usefulness of our models to guarantee their acceptance in the board room.
Jay Forrester always said that his arguments worked well at DEC, not because he had SD models to back them, but rather because he was the only person present who could tell a coherent story for at least 20 minutes without logically tripping himself up. So we have two choices as a field: (1) Accept the fact that SD-inspired policies have to compete in a political environment filled by actors with numerous cognitive limitations whose primary interests will differ somewhat from those of the firm that the SD model or policy were designed for; or (2) Wait for Jay Forrester's K-12 program (or similar initiatives at higher levels of education) to create a large number of SD-literate managers. Fortunately, there is no reason we can't pursue both avenues simultaneously.

Edward G. Anderson Jr., Ph.D.
Associate Professor of Operations Management - IC2 RGK Centennial Fellow University of Texas McCombs School of Business Posted by Edward Anderson {andersone} <Edward.Anderson@mccombs.utexas.edu>
posting date Wed, 14 Feb 2007 15:51:00 -0600 _______________________________________________
Jean-Jacques Laublé <jean-jac
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Post by Jean-Jacques Laublé <jean-jac »

Posted by Jean-Jacques Laublé <jean-jacques.lauble@wanadoo.fr>

Hi Bill

Large companies are more public than private and their boards have generally only a small percentage of the shares.
They function more like political systems.
Being egoistic like everybody, they will find their advantage elsewhere than adding value to the shares and their objective is to keep being elected at their position.

In a state, politics should too provide something to their fellow-citizens and often do not.

In medium family owned business where the board may have 90% of the shares, the objective is to add value to the shares. They are not better of worse than the others and still egoistic.

I think too that in smaller private companies, boards will be more sensible to the long term and more accessible to system thinking ideas.
In big companies, boards have no interest in taking unconventional decisions and using unconventional (at least not yet conventional) tools like SD.
They will act as the conventional analysts want them to act, eventually taking drastic decisions, but still conventional like firing massively etc.

If I had to sell SD I would privilege boards that have a consequent percentage of shares in the business they manage.
I have been in boards and Chairman of family businesses and too in boards and Chairman of companies whose objective is to satisfy a larger audience that makes them look like public one's.

Regards.
Jean-Jacques Laublé
Posted by Jean-Jacques Laublé <jean-jacques.lauble@wanadoo.fr> posting date Wed, 14 Feb 2007 16:46:51 +0100 _______________________________________________
""Christina Spencer"" <Christ
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Post by ""Christina Spencer"" <Christ »

Posted by ""Christina Spencer"" <Christina@strategydynamics.com>

Responding to the current thread initiated by Richard Stevenson...

As a accountant by training I understand the Accounting frameworks developed over the years to be a set of guidelines that are intended to assist presenting business activities in a ""true and fair"" light and where possible to enable comparability between businesses. Now that is undoubtedly a higher aim which is not always realistic or achievable BUT to say ""... And Enron, Worldcom, etc. prove what happens when accountants are left to run corporations...."" is really to miss the point. Anything can be abused - objects as lowly as a screwdriver in the wrong hands can do untold damage. It is not the framework that is wrong in these cases it is the hands / motivations of the people using it. But without the frameworks the Accounting profession would either be nonexistent or in a state of disarray.

Richard also says ""Having been in a boardroom or three, I know that good managers fundamentally want better strategic decision-making tools.""
Yes, and with a sound framework, where results can be reproduced (thanks Monte), structures are clear and unambiguous these people will use SD if presented to them appropriately. So the challenge of those in the SD community is, alongside the other skills they bring to such situations, to bring clarity to business issues. Additionally they need to develop frameworks usable by the managers of tomorrow and enable education in the use of them. Then there is a chance that standards can be established, better recognition in the business community developed ..and so on.

Christina Spencer
Posted by ""Christina Spencer"" <Christina@strategydynamics.com> posting date Thu, 15 Feb 2007 09:45:22 -0000 _______________________________________________
Anupam Saraph <anupamsaraph@g
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Post by Anupam Saraph <anupamsaraph@g »

Posted by Anupam Saraph <anupamsaraph@gmail.com>

System Dynamics is a **methodology** for studying and managing complex **feedback** systems [www.systemdynamics.org].

Ever since I learnt SD from Dana Meadows in the mid 80's I looked for feedbacks driving nonlinear dynamics in every ""system"" I encountered.
I found tremendous insight looking at macro systems; often disappointment when looking at micro systems. Somehow the feedback in the eyes of the beholder seemed to change faster than my understanding of it.

The more my journey took me across organizations, cultures, nations
and pushed my encounters from the front-desk to supervisors, managers, senior executives to boardrooms and cabinets, the more clear it was that there was less and less time to agree on the feedback let alone see it; less and less did feedbacks last; less and less did they form the ""system"". After all the system should have continuity over the time of interest!

How are feedbacks formed? Where do they reside? How long do they last? What is the dynamics of feedbacks themselves? Around 1990 in an effort to develop tools for organizations in Europe and Asia I found to my surprise I was addressing just these questions.

I shared with Dana Meadows and about a dozen remarkable modelers across the globe the startling questions- together we ran a few workshops to share the insights we had in addressing these questions.
I have been a practitioner and so moved on to practice my insights. I have since used the insights to ignite understanding, evolve public policy, advise business and government and focus on sustainable solutions.

What creates a system is amazingly simple; it is the actors, those who engage in some relationship. In a market system it is buyers and sellers. In a banking system it is borrowers and lenders. In an ecosystem it is predators and prey. The business organization and the government can now have greater clarity on feedback and its dynamics.
We are focusing on something they see, something that lasts as long as they do and somewhere where **they** can act.

When the actors of a system recognize they make up the ""system"" that is responsible for the the events that they encounter, they realize they are in it together. They can then focus their energies on exploring what **they** can do to drive sustained change in the events they encounter. They can deal with something that lasts as long as they do. They can co-design the system they are a part of, focus on **design**, not analysis- something that Jay Forrester has hinted all along in his writings.

A methodology is a system of **methods** used in a particular area of study. We need more methods which address different questions of systems. Or like mathematics we look at SD as a the abstract science of feedback and evolve different theories and methods to address its domain.

Anupam

Anupam Saraph, Ph.D,
Clinical Professor,
Rensselaer Polytechnic Institute
P.S. I am happy to respond to individual requests for a copy of the ""principles of systems"" and Dana Meadows commentary on it.
Posted by Anupam Saraph <anupamsaraph@gmail.com> posting date Thu, 15 Feb 2007 10:17:31 -0500 _______________________________________________
""Bill Braun"" <bbraun@hlthsy
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Post by ""Bill Braun"" <bbraun@hlthsy »

Posted by ""Bill Braun"" <bbraun@hlthsys.com>

Richard Stevenson writes, ""It is not our role, as (hopefully independent) advisors, to assume the morality of business leaders. it's our job to help them make better decisions - ""

The point is well taken, and I hope it does not preclude us from making moral judgments (distinct from being morally judgmental, that is, assuming to know the intent or motives of the actors). There are senior managers who routinely operate in their own self-interest; that observation can be made without impugning them personally.

Inclusive of that, if, as Richard points out, the key players are ""not engaged, however distantly, in the analytical process"", I would want to know, in what are they engaged?

If they are not engaged in the rational, what other lines of thinking remain, and if SD is the focal point, where is the point of entry for a conversation on the merits of the data and a systemic view of the system?

Bill Braun
Posted by ""Bill Braun"" <bbraun@hlthsys.com> posting date Thu, 15 Feb 2007 10:57:35 -0500 (EST) _______________________________________________
""Paul Martin"" <paul_m@profi
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Post by ""Paul Martin"" <paul_m@profi »

Posted by ""Paul Martin"" <paul_m@profitfoundation.com.au>

SD has the capacity to provide nuanced understanding of complex systems where there are non- linear dynamics at work. So why is the conversation about SD itself taking the direction it seems to be - towards the idea of 'right' and 'wrong' and bald comments about whether business is or is not poitical or is or is not rational etc.

SD is both a tool and a culture. It is both rational and political. Acceptance or not is both rational and political. The world is complex.

What is important in the discussion is trying to decipher how to make the tool more useful to more people, not because SD has any intrinsic worth but because we need more better tools all the time.
I use SD logic but not the modelling because I found that I got the thinking value out of doing so, and found myself not able to see the return on effort from going deeper. However I have commissioned quite in-depth and complex models in the healthcare arena, primarily to achieve a pollitical goal of drawing attention to some of the key relationships and trying to reframe the debate towards cause/effect. In the end result the approach worked and made a material difference to the national politics around the health issues we were dealing with.

The model had to be credible and 'readable' in terms of the key relationships. It did not have to be 'accurate' (and indeed it did throw up some counter-intuitive and I suspect incorrect predictive outcomes.

So the dimensions that I see as important are 1. better support in using the tools to understand causal relationships 2. Easier to use modelling at a base level, but more complex and sophisticated tools for the in-
depth uss; and
3. Really solid ways of exposing for discussion and critique the relationships that are embedded.

As yet none of the tools that I have seen really do all three - they do bits of each.
Hope this helps


Paul Martin
Posted by ""Paul Martin"" <paul_m@profitfoundation.com.au> posting date Fri, 16 Feb 2007 06:29:35 +1000 _______________________________________________
Bill Harris <bill_harris@faci
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Post by Bill Harris <bill_harris@faci »

Posted by Bill Harris <bill_harris@facilitatedsystems.com>

>> Posted by ""Jim Thompson"" <james.thompson@strath.ac.uk> Each
>> engagement involved one or more SD practitioners working for more
>> than 250 hours within an organization, usually with a team of three
>> to thirty individuals.


That's one ""fact of life"" that seems pertinent. When you can, for example, run through a Kepner-Tregoe decision analysis or do some CLD work in a few hours, 250+ hours adds delay and costs money. That's not saying simulation won't be worth it; it is pointing out that the time creates a barrier to its application. (It also seems to support Jay's contention that you might as well work on the big problems.)


>> In those engagements in which the SD-generated insight was supported
>> by other analytics, organizational satisfaction with results and the
>> likelihood of implementing an SD-generated solution was much higher.

I'm not sure if by ""analytics"" you mean people or methodologies. In the first case, you have more ""political"" support. In either case, you have a good example of the perceived (and likely real) utility of triangulation -- more below.


>> Posted by Edward Anderson {andersone}
>> <Edward.Anderson@mccombs.utexas.edu>
>> have two choices as a field: (1) Accept the fact that SD-inspired
>> policies have to compete or (2) Wait for Jay Forrester's K-12 program
>> (or


Perhaps we have a third choice. I seem to recall James Lyneis having written something to the effect that a model isn't a purveyor of truth; it's another discussant in the room (triangulation again). When I've seen highly effective statisticians working with management, they haven't necessarily led the effort; they've tended to mix their time between educating, reseaching particular problems, and collaborating with management. Sometimes I sense a slightly different emphasis, as if SD folk sometimes want to bring SD into play, while those statisticians I'm thinking of clearly wanted to help management make better decisions.

As for the model aiding discussion, see

http://facilitatedsystems.com/weblog/20 ... iness.html

for an example of how training a team helped change the course of their business conversations.

Bill
-- Bill Harris
Facilitated Systems
Posted by Bill Harris <bill_harris@facilitatedsystems.com>
posting date Thu, 15 Feb 2007 14:46:03 -0800 _______________________________________________
Bill Braun <bbraun@hlthsys.co
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Post by Bill Braun <bbraun@hlthsys.co »

Posted by Bill Braun <bbraun@hlthsys.com>

Paul Martin writes, ""So why is the conversation about SD itself taking the direction it seems to be - towards the idea of 'right' and 'wrong'
and bald comments about whether business is or is not political or is or is not rational etc.""

Is not modeling, at its heart, the process of encouraging the expression of multiple mental models? If all of us had a complete and accurate read of reality, and the ability to track the interaction of every variable of that reality in our heads, I wonder if Jay would have perceived any need or value for SD in the first place.

This conversation is itself a group modeling effort (whether or not a model is actually being constructed). Our individual advocacies for a particular view of the topic at hand does not render any one of us polarized by definition.

I met with an internal SD client yesterday, and he said, almost in passing, ""I can see how the conversation has changed since you started the modeling process - I wonder if a model will actually be needed?""

I find this conversation (and many others on this list) wonderful opportunities for synthesizing a broad array of divergent points of view.

Bill Braun
Posted by Bill Braun <bbraun@hlthsys.com> posting date Fri, 16 Feb 2007 07:42:54 -0500 _______________________________________________
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