Ventana software support forum

We have seen a diversity of views on how to use and even whether or not to
use "soft" variables in system dynamics models.

Guenther Ossimitz wrote," SD works best were actual stocks and flows are
involved, as in production lines, delivery chains, stocks of workforce,
capital or whatever. In these fields quantification is quite natural."

Geoff Coyle added, " By persisting in quantifying what cannot be quantified
we risk producing models which are misleading and maybe even fundamentally
wrong."

And on the other side, George Richardson replied, "if such "soft" variables
are indeed crucial to the policy choices management faces, then management
WILL make their best guesses about them, no matter what we do. ... to
explore model sensitivities to such approximations, management is much
better off making quantitative stabs at "what cannot be quantified" than
charging ahead with only intuition to ground the policy choices."

I believe that the maximum reward from system dynamics comes from working
on the most serious problems facing an organization. Seldom does the
difference between corporate success and corporate failure depend on how
inventories are managed. Even when inventories are the critical issue, the
solution is not to be found in flow of parts into and out of inventories
but rather in the upper level decision making that determines adequacy of
inventories, purchasing of capital plant, and finance.

In my own modeling experience, very often only ten percent of the variables
are of the hard variety like inventories and employees and the other ninety
percent are such matters as pressures from the finance people on holding
down inventories, or the marketing people exerting influence to lower
prices until there are not sufficient resources to provide the quality and
prompt delivery that customers want.

Even in the area of so-called "hard" variables like inventories, one will
still be using soft concepts. As I look at Coyles book, "System Dynamics
Modeling," on page 212, in a diagram about inventories, I see some assumed
constants that are actually semi-soft variables behind which, in real
systems, are an array of soft variables--averaging period for order rate,
weeks of average orders, and time to correct order backlog. Where do such
parameters come from? They are usually influenced by managerial pressures
from outside the inventory system, are subject to pressures from finances,
and complaints from marketing and customers.

Are there any concepts that can not be quantified? Anything that can be
discussed in a better or worse, or a more or less, sense can be quantified.
Consider the integrity of a person or organization. Integrity is
considered very important in many situations. I assume it lies in what
most people would consider soft variables. If it is important to the
problem at hand, then to leave it out because it is soft is to say that it
has no influence, which would be the worst possible assumption. If one
lists ten people or corporations that are well known to a dozen people, I
expect that there will be a rather similar ranking of the ten by the dozen
judges. Not identical, but similar. Choose an arbitrary scale, like zero
to ten. Then assign a low integrity candidate at three and a high
integrity example as eight. Now there is a scale. The challenge then
becomes deciding how to use integrity in decision making on such matters as
bidding on contracts, which is soft but important. Taking these steps into
soft variables always sharpens peoples thinking, and the resulting model
usually reveals important but surprising behavior.

---------------------------------------------------------
From: "Jay W. Forrester" <jforestr@MIT.EDU>
Jay W. Forrester
Professor of Management
Sloan School
Massachusetts Institute of Technology
Room E60-389
Cambridge, MA 02139