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We begin our process by working with member organizations to understand the structure of the system. We use system dynamics modeling techniques to recreate the structure and to look for key leverage points in the system. This approach distinguishes us from other business simulations that cover only superficial aspects of how the system works.
While we are modeling the structure of the system we are also looking for the key decision points and the interactions between people. Often the performance of the system is greatly impacted by the way people communicate and come to decisions. While we have created both electronic and physical simulations, our strong preference is for the latter. Our experience has shown that:
- By allowing people to interact in a simulation in much the same way they would in the real world, they better understand how their collective decisions and behaviors create the performance.
- When people can see all of the dynamics in front of them in a physical way they gain a much more intuitive feel for the way the system works. In computer based simulations, the reaction is often: "This was a black box and I am not sure how it works."
- Physical games are much better at building a "shared vision" because a group of people work together to discover an answer.
- Electronic games are much better for follow-up, once the dynamics are clear. Electronic simulations are better for what-if analysis and multiple scenarios.
Structure in this case refers to the interrelationships of the key components of a system--in other words, how the system actually works. In system dynamics the structure of a system is represented by a combination of balancing and reinforcing feedback loops. The example below is a classic system dynamics structure called shifting the burden.
The causal loop diagram on the left shows the relationship between variables and the reference mode on the right shows the expected behavior. We experience this structure over and over again in our business and personal lives. When you hire consultants to come in a make up for a deficiency in your organization (symptomatic solution), in the short term they will typically help resolve the immediate need (problem symptom). However, the side-effect is that no one in your organization has built the skills necessary to deal with like problems in the future and so your base skill set erodes (fundamental solution) and you become more dependent on consultants. This level of understanding of the system makes it possible to focus your efforts on the key leverage points.
System Dynamics is the application of feedback control system principles and techniques to managerial, organizational and socioeconomical problems. Instead of relying on a simple linear definition of cause and effect, System Dynamics attempts to explain the behavior of systems through the interaction of several feedback loops that can either be balancing or self reinforcing.
The System Dynamics philosophy rests on a belief that the behavior of an organization is principally caused by its structure. Structure includes the tangible assets and formal procedures but more importantly it includes the policies and traditions, both formal and informal that dominate decision making in the organization. This structure creates amplification, time delays, and informational feedbacks that can create complicated response patterns to simple inputs. By modeling these structures, one can gain insight into how it behaves and how to influence that behavior.
A second philosophy of System Dynamics is that the structure of a system can best be understood in terms of their common underlying stocks and flows instead of in terms of separate functions. The flows of people, money, materials, orders and equipment and the integrating flows of information can be identified in all organizations. The flow structure forces the viewer or creator of the model to cross organizational boundaries.
Once a system's structure is well understood, there are typically a few areas where a little change in input will create a dramatic change in system performance. Finding these leverage points and determining what to do about them often requires thinking outside of the box because they often occur at the boundaries of functions, and what people generally believe is in their control.
The quality revolution in Japan and the United States, when done right, is a great example of leverage. Traditional thinking had always been that high levels of quality were possible but only at ever higher costs. Quality was also seen as the responsibility of a department (Quality Assurance). This type of thinking failed to see that quality was actually a major source of cost in terms of waste, rework, and customer satisfaction. If quality were controlled at the source, a better product could be created at a lower overall cost. The leverage came from having quality be the responsibility of those doing the work and eliminating the costs associated with poor quality.
In the "shifting the burden" example given in the structure section, the key leverage point is to work on the fundamental solution and look for ways to minimize the delay in implementing the fundamental solution.
These simulations, also called management flight simulators, give the users a control panel from which they can see and read critical information about the performance of the system. Users can then put in their decisions in the form of policy parameters to change in the underlying model.
The interaction is typically a single user or a group of users who together come up with a unified answer. By its nature there is little chance for life like interactions or role reversals. Typically more assumptions must be made about how other actors in the system will respond since only one role is allowed to input decisions. The dynamics are usually represented by "state of the system" numbers or graphs of performance over time.
Electronic simulations seem to be most effective if the dynamics are already well understood and the issue to be examined is "what-if" analysis or scenario planning.
These simulations attempt to depict the core structure of the system in a physical way. The most popular example of this technique is the "Beer Game" (see the Organizational Learning site in Related Links for details). Physical games typically use a game board to represent the structure of the system (e.g. feedback, time delays. etc.) and they use artifacts like poker chips and dice to represent the stocks and flows through the structure. These simulations allow participants to play different roles and they can see how their functional perspective, overlapping policies and decision making can create the poor behavior that they are trying to improve. Also, physical games seem to give most people a much more intuitive feel for how the system works.
Our approach to physical simulations includes a facilitation style that lets people self discover the key leverage points and witness the dramatic change in performance that can come from small changes in inputs. Participants get both a snapshot of what excellent performance looks like and their own view of the roadmap to get there.
While physical games have been a better teaching tool for us, we have found that they are not effective for policy analysis or scenario planning because they tend to take hours versus seconds to run and they are more prone to errors of execution.
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