SYSTEM DYNAMICS

While this age seems like endless opportunities and innovations, there are also
challenges that arise from “solutions.” One good example is the rise of the internet and
the myriad of potential that it brings – connectivity with people, an e-commerce platform
for convenience, and increased accessibility of information. But at the same time, the
continuous rise of the internet created loneliness and isolation, and proliferation of
propaganda and fake news.

This may seem like a bleak background of a subject. But the point of the matter is,
decisions will have inevitable consequences. It is the responsibility of the
individuals/policymakers/ strategic thinkers to design solutions for increasingly complex
problems for the benefit of the self/ public institutions and businesses.
 OUR APPROACH -- SHIFT OF MIND

01 To Think in Systems
Problems don’t tend to happen in isolation. They tend to be part of
complex dynamic webs of interconnected elements and events.

02 To appreciate the interconnectedness with the individual (self-

mastery), business, and public institutions
Decisions start with individuals. Individuals with ‘clear minds’ are good
decision-makers and designers. They can forecast and pre-empt
externalities; make difficult decisions; understand the consequences of
actions; and be flexible at the same time firm in reaching the goals.
 OUR APPROACH -- SHIFT OF MIND

03 To Develop the following qualities

 OUR APPROACH – SHIFT OF MIND

1. Compassionate decision-maker.
2. Committed to personal mastery.
3. More curious.
4. Conscious and mindful leader
5. Have fun.
 OUR APPROACH – SHIFT OF MIND

1.Compassionate decision-maker. There is a big responsibility whenever you

decide especially when others are affected. Remember, not all decisions with the
right intentions are good decisions.

2.Committed to personal mastery. To become a better decision-maker, you need to

get to know yourself, your strengths, your limitations, and your blockages – what
obstructs or hinder your movement

3.More curious. There are more things to learn than what is offered informal
education, stay curious, and open to opportunities.

4.Conscious and mindful leader. Leadership doesn’t always come with a title and
with a team. Self-leadership is already good, and if we can master ourselves, we will
be conscious of the externalities and the effect of your doings.

5.Have fun.
 MODULES
1 2 3
DECISION SYSTEM LEARNING
MAKING DYNAMICS ORGANIZATION
4 5 6
LEARNING & TYPES OF SYSTEM
UNLEARNING THINKING ARCHETYPES

7 6

PERSONAL MASTERY VISION

MENTAL MODELS TEAM LEARNING
 1

DECISION
DECISIONS ARE LARGELY
EMOTIONAL
 DECISIONS ARE LARGELY
EMOTIONAL

• Conscious level of awareness is what

we obviously know, think or intend to act
on at any given moment.

• Subconscious contains may uears of

experiences, memories and principles that
guide and influence us.
• Moral Compass
• World view
• Conscience and full
knowledge of the
consequences of decisions
and actions
Business is about making decision amid
ambiguity.

—GERALDINE LAYBOURNE
 BUSINESS DECISION AND
BUSINESS OBJECTIVES
OBJECTIVES
• Attainment of financial objective: increasing profits or
DECISIONS net income in relation to sales
• Expanding market presence: increase sales volume,
increase market share, market penetration
• Exploiting • Satisfying customer: quality products and services,
Opportunities right quantities at the right time, selling at acceptable
• Solving Problems price
• Strategizing and • Attending to the needs of various stakeholders:
Operationalizing employees, stockholders, external community
• Ensure that operations run smoothly at full capacity
• Ascertain the store inventory
• Validate and implement new technology
• Working capital utilization is optimized
• Manpower and talent decisions
 NATURE AND INTENT
OF DECISION MAKING

NEED FOR
STRONG
PROPONENTS
• Demand Clear Performance
• Involve Trade- Offs
1. Champion • Consideration of level of acceptance and
2. Beneficiaries delays
3. Supporters • Risks
4. Implementors • Gap between the vision and the
5. Controllers implementation
6. Opposition • Interpretation and misinterprentation of
7. Neutrals decision
PROBLEMS: SYMPTOMS VS ROOT CAUSE
PROBLEMS: SYMPTOMS VS ROOT CAUSE

Employee doing
other gigs

Low pay not

enough
CASE STUDY: PERSONAL FINANCE
 SYSTEM
2
 SYSTEM DYNAMICS

• The field of System Dynamics was created in MIT in 1950s by Jay

Forrester.

• Designed to help us learn about the structure and dynamics of the

complex system in which we are embedded, design high-leverage
policies for sustained improvement, and catalyze successful
implementation and change (John Sterman)

• The main goal is to help people make better decisions when

confronted with complex, dynamics systems.
 SYSTEM DYNAMICS

• Uses simulation modeling based on feedback system theory that

complements systems thinking approaches.

• It applies to dynamic problems arising in complex social, managerial,

economic or ecological systems such as climate change, pandemic,
housing, food security, business, among others.
 “Systems thinking is a discipline for
seeing wholes. It is a framework for
seeing interrelationships rather than
things, for seeing ‘patterns of change’
rather than static ‘snapshots.”

—PETER SENGE
SYSTEM AND BOUNDERIES
 STATIC VS DYNAMIC ENVIRONMENT

STATIC
• The output of the system depends only on
the current input.
• The output does not change with the time
if the input is held constant (time- invariant)

DYNAMIC
• The output of the system depends on the
current and the previous input.
• The output changes with the time even if
the input is constant (time varying).
WHY STUDY?

Used to solve real world problems

Ø pressing business/process issues
Systems Thinking
Ø the ability to see the world as a complex system
Ø Systems thinking is a way to describe and understand the
causality and interrelations between variables within a
system. System Dynamics quantifies the impact of those
interactions
System Dynamics
Ø helps understand complexity
Ø exponential growth of technology and complexity
Ø design better operating policies
Ø guide changes in systems
Seeking to solve a problem often makes it worse
Ø Policies create unanticipated side effects
Ø Attempts to stabilize systems may destabilize them further
Ø Decisions may provoke reactions by others seeking to
restore the balance upset
 TRADITIONAL THINKING VS
SYSTEMS THINKING
Goals

Problem Decision Results

Situation

Events view of the world

In the static thinking point of view, there is only one direction on how we solve
problems. We start with identifying our goals, solving our problems and coming
up with a result.

This is very simplistic and decision makers tend to blame an event or a person
when things go differently. It now becomes a never-ending blame game.
TRADITIONAL THINKING VS
SYSTEMS THINKING
Systems Thinking

The reality is, solutions to problems are more systemic

(more confusing, crazier) and it is a series of small decisions
that would dictate the outcome.

Moreover, when we have decided on a particular option, it

doesn’t end there. There are implications in our decisions.
Some call it after effect or good and bad externalities.

We also have to count the side effects, delayed reactions,

changes in goals, response rate, and intervention by the
people involved. These feedbacks may lead to results that
are either anticipated or unanticipated which leads to
ineffective or effective policies.
Traditional Thinking vs
Systems thinking
Systems Mapping
 FROM SYSTEMS THINKING TO SYSTEM DYNAMICS

• Systems thinking is a way to describe and understand the causality

and interrelations between variables within a system.

• System Dynamics quantifies the impact of those interactions

• Systems thinking is a causality-driven, holistic approach to describing

the interactive relationships between components inside a system as
well as influences from outside the system.

• System Dynamics complements systems thinking by quantifying

interactions and develops a time-dependent view of how the system
behaves.
 SYSTEM DYNAMICS APPROACH

• System Dynamics is a computer-aided approach for strategy and

policy design.

• The main goal is to help people make better decisions when

confronted with complex, dynamic systems

• It uses simulation modeling based on feedback systems theory that

complements systems thinking approaches.
 SYSTEM DYNAMICS APPROACH

Source: https://systemdynamics.org/what-is-system-dynamics/#the-system-dynamics-approach
 MODELLING AND SIMULATION

Examples:
1. Balance in your bank account (increase in deposit but decreases
when you spend)
2. Workforce (increases via hiring but decreases via resignation,
lay-offs, retirements)
3. Inventory (increase via production but decreases due to spoilage,
shrinkage)

STOCKS are represented by rectangles (suggesting a container holding the contents of the stock).
Stocks are altered by inflows and outflows. Failure to understand the stocks and flows lead to
underestimation of time delays, short term focus, policy resistance
 MODELLING AND SIMULATION

• OUTFLOWS are represented by

• INFLOWS are
pipes pointing out of
represented by a pipe
(subtracting from) the stock.
(arrow) pointing into
(adding to) the stock.

Video: https://www.youtube.com/watch?v=IenySRdkRu8
 MODELLING AND SIMULATION

• VALVES control the flows.

• CLOUDS represent the sources and sinks for the flows. A source represents the
stock from which a flow originating outside the boundary of the model arises; sinks
represent the stocks into which flows leaving the model boundary drain.

Example:
Covid-19
Scenario
35