System Dynamics – 1ZM65/1ZS24

Lecture 2

September 8, 2014

Dr.ir. Bob Walrave

Agenda

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• Recap of Lecture 1 • Structure and behavior of dynamic systems (chapter 4)• Causal loop diagramming (chapter 5)

Recap of Lecture 1

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• Dilbert contemplating policy resistance. “The behavior of a system arises from its structure!”

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Recap of this lecture (take-aways)

• System Dynamics is:• About understanding why and how things usually work out

differently than you expected (policy resistance)• About counterintuitive behavior of systems• Looking at the world differently: Feedback view• Seeing the bigger picture (bird’s-eye view)• A methodology to analyze problems

• Learning System Dynamics requires a lot of practice!• 5 ECTS = 140 hours• 18 weeks until due date 7.8 hrs/wk

Reference: Business Dynamics

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Recap of Lecture 1

• Characteristics of dynamic complex systems:

• The modeling process:

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your decisions

your goals

situation

unintendedside effects

goals ofothers

decisionsby others

1. Problem Articulation(Boundary Selection)

2. DynamicHypothesis

3. Formulation4. Testing

5. Policy Formulation& Evaluation

Policy resistance

Example of Test Question (Lecture 1)

• This figure describes the learning cycle. However, there are many barriers to learning that cause this cycle to fail.

• Which of the following examples is NOT a way to break this cycle? (which is NOT a barrier to learning) A) Time delayB) Dynamic complexityC) Misperception of feedbackD) Policy formulation

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Agenda

• Recap of Lecture 1 • Structure and behavior of dynamic systems• Causal loop diagramming

Sterman, Chapter 4

Interactions of Structure and Behavior

• The behavior of a system arises from its structure.• Behavior = output of a simulation model• Structure = input of a simulation model, consisting

of• Feedback loops (causal loop diagram)

• Stocks and flows

• Time delays

• Nonlinearities

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SimulationModelstructure of the

systembehavior of the

system

Interactions of structure and behavior

• Structure

• Behavior over time

PAGE 1018-04-23

chickeneggs roadcrossings

+

+

+

-

time

chickens

= ???

time

chickens

time

chickens

+

Reinfo

rcin

g Loop

Balan

cing L

oop

Fundamental modes of behavior of dynamic systems

• Basis modes of dynamic behavior• Exponential growth• Goal seeking• Oscillation

• Interactions of basic modes• S-shaped growth• Growth & overshoot• Overshoot & collapse

• Other forms of behavior• Equilibrium• Random• Chaos

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Exponential growth

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Behavior Structure

money on bank account

interest per year

Besides growth, we can also have exponential decline!

Goal-seeking

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Behavior Structure

desired number of customers of

a product

attract more customers by advertising in

supermarket

actual number of customers

This system is characterized by exponential decay (i.e., a half-life).

Oscillation

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Behavior Structure

desired temperature in

the room is 20ºC

actual temperature in the room is 15 ºC

increase heater

S-shaped growth

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Behavior Structure

actual number of people in a bar

people allowed in the bar

is there still room in the bar?

The interaction between positive and negative loops is non-linear.

Growth & Overshoot

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Behavior Structure

number of rabbits in a

meadow

Food available

Overshoot & Collapse

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Behavior Structureactual number of people infected with a certain

type of flu

number of people that may

be infected

The more infected people, the less people may be infected

in the future

Model these fundamental modes of behavior in VENSIM PLE

Vensim illustration

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• State of the system Stock• Net increase rate Flow

Systems archetypes

• Use these fundamental modes – by combining them – when you are modeling!

• Besides these fundamental modes there are generic templates that can be used to … • Interpret a Causal Loop Diagram’s overall nature

• Refine a preliminary CLD

• See the leverage in the CLD’s structure

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Four well-known archetypes are:

1. Fixes that fail

2. Shifting the burden

3. Limits to growth

4. Tragedy of the commons

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For more information on archetypes, see: Wolstenholme, E.F., 2003, Towards the definition and use of a core set of archetypal structures in system dynamics, System Dynamics Review, 19(1): 7-26

“Fixes that fail”

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Problemsymptom

Fix

UnintendedConsequence

+

+

-

+delay

Recruitment of police to reduce reported crime

Increase of crime

Shortage of prison cells, leading to shortening

prison sentences

“Shifting the burden”

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Problemsymptom

FundamentalSolution

Side Effect

+

-

delay

Quick Fix

+ -

+

-

Expediting orders for important customersLead time is too

long in a production plant

Lead time of all other orders

becomes even longer.

“Limits to growth”

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Effort Performance LimitingAction

Constraint

+ + +

-+

Increase of sales effort leads to

increase of orders

Production capacity cannot keep up with increased demand, leading to longer production delays

Customers are unsatisfied with

long delays, leading to decrease of future orders

“Tragedy of the Commons”

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delay

A's Activity Net gain for A

Total Activity

B's Activity Net gain for B

Gain perindividual activity

Resource limit

+

+

+

+

+

+

+

+

+

-

Increase number of visitors to a national park,

which increases profit, but also increases the damage to the park (disturb

wildlife)

Hoarding or bank-run

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Agenda

• Recap of Lecture 1 • Structure and behavior of dynamic systems• Causal loop diagramming

Sterman, Chapter 55.1-5.4

Causal Loop Diagrams (CLDs)

• Capture hypotheses about the causes of dynamics• Elicit and capture mental models• Communicate the important feedbacks that are

responsible for a problem• See a CLD as a illustration of a story; a narrative that

explain how a certain problem came to be

• The loops within a CLD a characterized by ‘loop dominance’, which facilitate your story

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Elements of a Causal Loop Diagram

• Basic elements: • Variables• Arrows (causal link)• Link polarity (+ or -)• Loop identifiers

• Additional elements: • Loop Polarity:

− Balancing− Reinforcing

• System Delays

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actual workpressure

perceived workpressure

quality of workhiring newemployees

total numberof productiveemployees

delay

delay

delay

coaching effortby experienced

employees

+

-

-

+

-

+

+

Link polarity: definitions and examples

• Positive link:The higher the actual work pressure, the higher the perceived work pressure will be, after a certain (time) delayor: lower actual work pressure leads to lower perceived work pressure

• Negative link:The higher the perceived work pressure, the lower the quality of work (more errors are made)or: lower perceived work pressure leads to higher quality of work

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perceived workpressure

actual workpressure

+

perceived workpressure

quality of work-

CLD Represent causation, not correlation

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Figure 5-2, Sterman: Causal diagrams must include only (what you believe to be) genuine causal relationships.

AverageTemperature

MurderRate

Ice CreamSales

+ +MurderRate

Ice CreamSales

+

CorrectIncorrect

AverageTemperature

MurderRate

Ice CreamSales

+ +MurderRate

Ice CreamSales

+

CorrectIncorrect

Label link and loop polarities

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R BCustomerLoss Rate

CustomerBase

Sales fromWord ofMouth

CustomerLoss Rate

CustomerBase

Sales fromWord ofMouth

-

++

+

Incorrect

Correct

Figure 5-3, Sterman

? ?

“Challenge” p.143: assign polarity, add loops

• Consider the attractiveness of a product to customers as it depends on various attributes of the product.

• Assign link polarities.

• What feedback loops might be created as product attractiveness changes the demand for the firm’s product?

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Figure 5-4, Sterman: The attractiveness of a product as it depends on various attributes.

ProductAttractiveness

Quality

Price

DeliveryDelay

Functionality

+

+

-

-

Demand

++

Challenge p.145: Identify and label the polarity of links and loops

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ProfitsNumber of

Competitors

Attractiveness of Market

Price

Bank CashReserves

PerceivedSolvency of

Bank

NetWithdrawals

+

-+

++

-

-

Three ways to determine loop polarity

• The fast way: count the number of negative links

• A better way: trace the effect of change around a loop

• The formal way: do the mathematics

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ProfitsNumber of

Competitors

Attractiveness of Market

Price

+

-+

+

Assign unambiguous polarities

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Figure 5-7, Sterman: Causal links must have unambiguous polarity

? (+ or -)

RevenuePrice

CorrectIncorrect

+

RevenuePrice

Sales+

-

?

Name and number your loops

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Haste MakesWaste

R2

CornerCutting

B2

Burnout

R1

MidnightOil

B1

Error Rate

Time perTask

SchedulePressure

Overtime

Fatigue

Productivity

CompletionRate

TimeRemaining

WorkRemaining

-- -

-

+

-

+

-

+

+

-

+

Delay

Delay

Figure 5-9, Sterman: Name and number your loops to increase diagram clarity and provide labels.

Indicate important delays in links

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Figure 5-10 Representing delays in causal diagrams

Price Supply

+Delay

Variable names should be nouns or noun phrases

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Figure 5-12: Sterman

Costs Price

++

CorrectIncorrect

Costs Rise Price Rises?

Variable names should have a clear sense of direction

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Figure 5-13, Sterman

MentalAttitude

+Feedbackfrom the

Boss

Praise fromthe Boss

Morale

+

CorrectIncorrect

?

Choose variables whose normal sense of direction is positive

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Figure 5-14, Sterman

Costs Profit

-

Costs Losses

+

Criticism Unhappiness

+

Criticism Happiness

-

CorrectIncorrect

Make intermediate links explicit

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Figure 5-15, Sterman: Make intermediate links explicit to clarify a causal relationship.

MarketShare

UnitCosts

-

MarketShare

UnitCosts

ProductionVolume -

++ CumulativeProductionExperience

If your audience was confused by

you might make the intermediate concepts explicit as follows:

Make goals of negative loops explicit

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Figure 5-16, Sterman: Make the goals of negative loops explicit.

B

QualityImprovement

Programs

ProductQuality

-

+

B QualityShortfall

+

+

+-

DesiredProductQuality

ProductQuality

QualityImprovement

Programs

CorrectIncorrect

B

Cooling Rate +

CoffeeTemperature

B TemperatureDifference

+

-+

CoffeeTemperature

CoolingRate

RoomTemperature-

-

Distinguish between actual and perceived conditions

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Figure 5-17, Sterman

Bias inReporting

System

ManagementBias TowardHigh Quality

ManagementPerception of

Product Quality

ReportedProductQuality

B

QualityImprovement

Programs

QualityShortfall

DesiredProductQuality

ProductQuality

+

-

++

+

++

+

Delay

DelayDelay

Delay

Using Causal Diagrams to Model an Issue

examples

Using Causal Diagrams to Model an Issue

• The majority of our problems can be captured by a combination of two loops: balancing & reinforcing

• The balancing loop describes what our goal is, what we try to accomplish

• The reinforcing loop describes what our main obstacle is or could be

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18-04-23PAGE 45

Structure & Behavior

- First the balancing loop is driving the behavior, because the actual weight is always close to the desired weight

- Around week 46 something happens, because the actual weight is not going back to its desired value

- The reinforcing loop is now dominant

Dominant loop: reinforcing

Dominant loop: balancing

week desired weight

actual weight

deviation

propensity to eat

food intake

-

+

-+

+

B

moodpropensity to snack(between meals)

need for comfortfood

-

-+

+

R

What do the loops tell us?

Balancing loop:• The loop is self-

stabilizing• The manager’s

primary role is to monitor

• Act only when there is an exception or likelihood of one, i.e., gap between desired & actual weight

Reinforcing loop: •The loop is not self-stabilizing•The manager’s primary role is to act•If the cycle is vicious, find a way to break it

18-04-23PAGE 46

Guest Satisfaction Index in a hotel

• The GSI in the hotel is measured on a monthly basis• When the GSI is above 8.2, the customers are happy,

as well as the hotel staff• However, the GSI recently dropped below 8.2, and

now management is worried • During a staff meeting, hotel management tells

everyone that customer focus should be increased• It is expected that after a while customer happiness

returns and that the GSI will rise accordingly

18-04-23PAGE 47

Where to start?

• Start with a narrative, a story• Underlying a specific problem

• What is the goal that you try to reach• What happens when you deviate from the goal

18-04-23PAGE 48

Drawing the first loop

Identify the goal seeking behavior in question

•Goal: desired GSI

Starting point: indication of drift from goal

•GSI Shortfall(desired – actual GSI)

Decision: focus on customer

•Effects: customer happiness, GSI

Link variables & qualify links, insert delays

Determine type of loop – balancing or reinforcing

18-04-23PAGE 49

GOAL: desired GSI

actual GSI

BGSI shortfall

focus oncustomer

customerhappiness

+-

++

+

The problem is not as easy as it looks

• The increased focus on the customer leads to extra work for most of the team

• After a while, the extra work starts to exhaust the team

• As a result of this exhaustion, some team members start making mistakes

• Although the customer is still happy with the increased focus, the mistakes made by the staff have a negative effect on the GSI

18-04-23PAGE 50

Drawing the second loop

Starting point: what could be another (side-) effect of increasing the focus on customers

Other variables: • More focus on customer can lead to extra work • Doing more work can lead to exhaustion • Exhaustion can lead to making mistakes, which reduces GSI

Link variables & qualify links, include delays

Determine type of loop – balancing or reinforcing 18-04-23PAGE 51

mistakes

+

R

-actual GSI

focus oncustomer

customerhappiness

+

B

GOAL: desired GSI

GSI shortfall

+-

++ +

exhaustion

+ extra work

What can we learn from the loops?

• As long as GSI increases while the focus on customer increases, the BALANCING loop is in charge

• Apparently the hotel staff can handle the extra work

• When GSI decreases while the focus increases, you are in danger. The REINFORCING loop takes over

• Act now!

18-04-23PAGE 52

mistakes

+

R

-actual GSI

focus oncustomer

customerhappiness

+

B

GOAL: desired GSI

GSI shortfall

+-

++ +

exhaustion

+ extra work

Using Causal Diagrams to Model an Issue

• But CLDs can become far more complex!

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Causal loop diagramming (NRC 28 April 2010)

18-04-23PAGE 54

What is the problem with

this figure?

Using Causal Diagrams to Model an Issue

• Problem definition: managing workload• Identifying key variables:

• Assignment rate

• Work completion rate

• Assignment backlog

• Grades/Performance

• Workweek

• Energy level

• Developing the reference mode (next slide)• Developing the causal diagrams

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Reference mode- example -

• When a person manages his workload according to the “grasshopper strategy”, work will not be done until the deadline is very near.

• As a consequence the assignment backlog builds up

• And when the deadline is near, working overtime (or even at night) is no exception.

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Figure 5-20, Sterman: Reference mode for the grasshopper strategy

.

Time (weeks of the semester)0 13

Assignment Rate

Work Completion Rate

Tas

ks

pe

r w

ee

k

Time (weeks of the semester)0 13

Assignment Backlog

Tas

ks

Time (weeks of the semester)0 13

Workweek

Energy Level

Grades

100

0

Wo

rkw

ee

k (

ho

urs

/we

ek

)100

0

En

erg

y L

ev

el

(0-1

00

%)

Gra

de

s (

0-1

00

)

Develop causal diagrams – managing workload

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Figure 5-21: Sterman: Basic control loops for the assignment backlog

AssignmentBacklog

AssignmentRate

WorkCompletion

Rate

Effort Devotedto Assignments

TimeRemaining

DueDate

Workweek

Productivity

B2

CornerCutting+

-

-+

+

+

+

-

-

-+

CalendarTime

WorkPressure

B1

MidnightOil

Adding the burnout-loop

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Figure 5-22: Sterman: The burnout loop

AssignmentBacklog

AssignmentRate

WorkCompletion

Rate

Effort Devotedto Assignments

TimeRemaining

DueDate

Workweek

Productivity

B2

CornerCutting

R1

Burnout

+

-

-+

+

-+

+

+

-

-

-+

CalendarTime

Delay

WorkPressure

EnergyLevel

B1

MidnightOil

Adding the “too tired to think”-loop

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Figure 5-23: Sterman: The “too tired to think” loop

AssignmentBacklog

AssignmentRate

WorkCompletion

Rate

Effort Devotedto Assignments

TimeRemaining

DueDate

Workweek

Productivity

Quality ofWork

Grades

B2

CornerCutting

R1

Burnout

R2

Too Tiredto Think

B3

QualityControl

-

+

-

-+

++

+

+

-+

+

+

-

-

-+

CalendarTime

Delay

WorkPressure

EnergyLevel

B1

MidnightOil

Adding “my dog ate my homework”-loop

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Figure 5-24: Sterman: My dog ate my homework—Parkinson’s Law

AssignmentBacklog

AssignmentRate

WorkCompletion

Rate

Effort Devotedto Assignments

TimeRemaining

DueDate

Workweek

Productivity

Quality ofWork

Grades

B2

CornerCutting

B1

MidnightOil

R1

Burnout

R2

Too Tiredto Think

B3

QualityControl

-

+

-

-+

++

+

+

-+

+

+

-

-

-+

Requests forExtensions +

+

B4

My Dog AteMy Homework

CalendarTime

Delay

WorkPressure

EnergyLevel

From practice: what is the best team size?

• Linear view of the world:

Small teams low communication overhead high efficiency

But is this true?

• Lets examine the feedback view of the world

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From practice: what is the best team size?

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vulnerability todisturbances/deviations

-

+

interruptions,complications, etc.

+

+

increase focus

++

fatigue+-

knowledge sharing

-

dependency ontacit knowledge

-

+

overtime

++

priority change +

Info/resources notavailable

-

+

So, what is better: a large or a small team?

team size

communicationoverhead

efficiency

delays

need to increaseprogress

+-

+

+

progress

+

-

By the way: what is wrong with this CLD?

The beer game

• https://www.youtube.com/watch?v=qxpgM8paegQ• https://www.youtube.com/watch?v=Aqi5-KzQZWc

• Play the game here:• (http://www.beergame.lim.ethz.ch)

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The beer game

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Example of test question (Lecture 2)

• In the Netherlands, in the spring, when the sun is shining for the first time since months and the temperature is rising, many people want to go out and enjoy the lovely weather, instead of staying at the office. As a consequence, as soon as the temperature starts rising, many people take a day off (or a short holiday). Below, a causal structure of this phenomenon is given.

• What is the polarity of the links?A) Link 1 is positive, Link 2 is negativeB) Link 1 is positive, Link 2 is positiveC) Link 1 is negative, Link 2 is negativeD) Link 1 is negative, Link 2 is positive

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Example of test question (Lecture 2)

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• When people go on holiday, their colleagues have to take over some of their work. So, the workload for these colleagues is increasing. Most likely, these colleagues have to work overtime to get all the work done. Working overtime has a positive effect, because it increases productivity and reduces the remaining workload. But, it also has a negative effect, because it reduces motivation. The causal loops below describe this behavior.

• What is the polarity of the loops?A) Loop 1 is positive, Loop 2 is negativeB) Loop 1 is positive, Loop 2 is positiveC) Loop 1 is negative, Loop 2 is negativeD) Loop 1 is negative, Loop 2 is positive

Questions?

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