Teaching Cause and Effect: Systems Thinking

1. George R. Widmeyer Teaching Cause and Effect:Systems Thinking

2. Instructional Objectives • Understand the concept of System • Understand Systems Modelling • Apply System Dynamics Modelling

3. Outline • The Systems Concept • Causal Loop Diagram • Guidelines for Drawing Causal Loop Diagrams • Example Problems

4. A Block Diagram of a System Goals Process Input Output Feedback

5. A More Complicated System External Environment Boundary Process 1 Process 2 Process 3

6. Properties of Systems • A system is a set of interrelated parts separated from the environment by a boundary • A system has a purpose or goal within a larger system (it plays a role in the larger system) • A system's parts must be arranged in a specific way for the system to carry out its purpose • Systems maintain their stability through adjustments in their processes • Systems have feedback

7. Causal Loop Diagrams • Block diagrams show structural arrangement • Block diagrams show flows • Causal loop diagrams show feedback relationships • Causal loop diagrams help us understand the dynamic behavior over time of a system

8. Example Causal Loop Diagram Achievement of Learning Objectives by the Student S S R1 Teacher Satisfaction Positive Feedback to the Student S Reinforcing Loop – Vicious / Virtuous Cycle

9. Links: Same or Opposite Balance in Savings Account Stress Level O S B2 R1 Coping Strategies Interest Payments S S As your savings account balance increases, the interest earned increase, further adding to your balance. When your stress level rises, then the use of coping strategies also rises, ultimately reducing the stress level.

10. Reinforcing / Balancing Loops • Each link in the diagram has a direction and polarity • Lable with + or - • Label with S (same) or O (opposite) • A feedback loop is positive, Reinforcing, if it contains an even number of negative, Opposite, causal links • A feedback loop is negative, Balancing, if it contains an odd number of negative, Opposite, causal links

11. A Balancing Loop O Service Reputation Service Standard S Customer Demand B1 Gap S O Service Quality O Negative Feedback with Delay: Service Quality

12. Pattern of Behavior Customer Demand Time

13. Guidelines for Drawing CLDs • Use nouns or noun phrases for elements rather than verbs, because action is conveyed in the loop's arrows • Use variables that represent quantities that can vary over time so that “more” or “less” is understandable • It is generally clearer to use a positive sense • For balancing loops there generally is a goal; it is usually clearer if this goal is shown along with the “gap” that is driving the loop • Read the diagram to see that it tells the story

14. First Problem The Case of the Collapsing Banks Throughout its history, the United States has suffered periodic rashes of bank failures. During these episodes, depositors seemed to lose confidence in a bank and began withdrawing their funds. If word of this worry got around, more and more depositors lost confidence and more funds were withdrawn from banks. Eventually, the volume of these withdrawals threatened the solvency of the bank, and when the bank funds fell too low, the bank failed. Worse yet, the failure of one bank could trigger a rash of other bank failures. Over the course of several months, depositors at other banks got nervous when they heard about the failure of the first bank, whether they had any reason to worry about their own bank or not. So they withdrew their funds from their banks, and, if fund got low enough, these banks, too, lost solvency and failed. (taken from Anderson and Johnson, Systems Thinking Basics, Pegasus Communication, 1997, pages 59-61)

15. Fixes that Fail Archetype Dangers of Downsizing A large, high-tech company began to experience financial pressure. Revenues are dropping and profits are down. After much discussion in the executive committee it was decided to reduce costs by having a layoff. Reducing the number of service and administrative staff will reduce the overhead of personnel costs, which in turn will increase profits. When the executives spot yet another, slightly larger drop in profits, they decide to cut personnel costs again. The executives later discover that with fewer service and administrative staff, customer inquiries, billing and fulfillment materials are being handled more slowly. Service quality has declined, and with it, customer's overall satisfaction with the company. As a result, customers are reluctant to buy, and sales and service revenue have decreased. (adapted from Kim and Anderson, Systems Archetype Basics, Pegasus Communication, 1998, pages 16-17 and 151-152.)

16. Shifting the Burden Archetype Addicted to Oil In an effort to ease periods of energy shortages, Americans since the mid-1980s have imported more and more barrels of oil to ensure their daily “fix”. Unwilling as a country to restrict use of our cars and other luxuries, we have grown addicted to foreign oil supplies. The U.S. Government has taken several actions to secure various short-term sources of oil. At the same time, American scientists and engineers have tried to develop options for alternate energy sources. Switching from an oil-based economy to one based on multiple energy sources poses quite a challenge and requires a long-term commitment to the strategy. It is difficult to focus on developing alternative solutions when, every day, the country hungers for more and more oil. As more attention is turned toward obtaining new sources of oil-based energy for short-term satisfaction, less is invested in developing alternative energy sources. (taken from Anderson and Johnson, Systems Thinking Basics, Pegasus Communication, 1997, pages 98-99 and 114-115.)

17. Archetypes S Symptomatic Solution S Problem Symptom Fix B1 S S B1 O O Problem Symptom Side Effect R3 O R2 B2 Unintended Consequences Fundamental Solution S S O Fixes That Fail Shifting the Burden

18. Laws of the Fifth Discipline • Today's problems come from yesterday's “solutions” • The harder you push, the harder the system pushes back • Behavior grows better before it grows worse • The cure can be worse than the disease • There is no one to blame From Peter Senge, The Fifth Discipline, Doubleday, 1990.

19. Additional Resources • http://www.thesystemsthinker.com/tstcld.html • http://www.public.asu.edu/~kirkwood/sysdyn/SDIntro/ch-1.pdf • http://en.wikipedia.org/wiki/System_Dynamics

20. Conclusions • Many different diagrams are used in information systems analysis and design • Systems exhibit a pattern of behavior over time • Causal loop diagrams are a way to better understand the system structures which cause the patterns of behavior • This type of diagram can be used to create computer simulation models (which we did not discuss today)