04.problem situation

Management Science
Decision Making Trough System Thinking
Chapter 04 Problem Situation
From Book “Management Science
Decision Making Trough System Thinking”
Daellenbach, Hans, Donald McNickle, and Shane Dye. Management
science: decision-making through systems thinking. Palgrave
Macmillan, 2012.
Presented By:
Rio Aurachman, MT

OVERVIEW
CHAPTER 4
Problem Situation
1.The problem situation and what is a ‘problem’?
2.Stakeholders or roles of people in systems
3. Problem situation summary — mind maps
4. Rich picture diagrams
5. Guidelines for mind maps and rich pictures
6. Uses and strengths of rich pictures and mind maps
7. Cognitive mapping
8. Cognitive map for NuWave Shoes
9. Problem definition and boundary selection
10. Some conclusions

1.THE PROBLEM SITUATION AND
WHAT IS A ‘PROBLEM’?
CHAPTER 4
Problem Situation

What Is Problem
• The problem situation is the context within
which the problem occurs.
• It is the complex of relationships and
conflicts
Picture Resources:

Problem Owner
• is dissatisfied with the current state of affairs
within a real-life context — does not like what
is happening, or has some unsatisfied present
or future needs, i.e. has some goals or
objectives to be achieved or targets to be met;
• is capable of judging when these goals,
objectives, or targets have been met to a
satisfactory degree; and
• has control over some aspects of the problem
situation that affect the extent to which goals,
objectives, or targets can be achieved
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Six Problem Element
• (1) the decision maker
• (2) the decision maker’s objectives and
• (3) the associated decision criterion
• (4) the performance measure
• (5) the control inputs or alternative courses
of action, and
• (6) the context
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Level of resolution in system
description
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So..
• An alternative decision criterion
• The context of the problem
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Distinction between objective and
decision criterion
• Webster’s Collegiate Dictionary defines
objective as ‘the end towards which effort
is directed, an aim, goal or end of action’.
Examples are:
– achieving the highest profit
– gaining a 40% share of the market
– finding the shortest distance between two
locations in a road network
– a water purity that safeguards the survival of
flora and fauna in a river or estuary
– equity between various interest groups, and so
on
• Criterion , however, is defined as ‘the
principle or standard on which a judgment
or decision is based.’
– Both ‘principle’ and ‘standard’ imply a rule.
– So a criterion isthe rule used for judging
whether or how well the objective has been
achieved
Picture Resources:: www.dreamstime.com

Complexities of problem definition
• The dissatisfaction felt may just
be a vague feeling that things
could be better
• problem structuring methods,
discussed in J. Rosenhead and J.
Mingers [2000],
• Many projects are also initiated
by interested parties other than
the decision maker(s)
• In most real-life applications,
problem definition will not be
achieved in a single pass.
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2.STAKEHOLDERS OR ROLES OF
PEOPLE IN SYSTEMS
CHAPTER 4
Problem Situation

Stakeholder
• stake-holders
– The problem owners , who are the persons
exercising control over certain aspects of the
problem situation, in particular over the choice of
action to be taken. Most often, they are also the
decision makers
– The problem users, who use the solution and/or
execute the decisions approved by the problem
owners or decision makers
– The problem customers, who are the beneficiaries
or victims of the consequences of using the
solution
– The problem analysts or solvers, who analyse the
problem and develop a solution for approval by the
problem owners
• For many situations, the same individual may
act in different roles.
• Note again that the terms problem owner,
user , customer , and analyst refer to the roles
that people assume and not to the people
themselves
Picture Resources: : ehs.illinoisstate.edu

Importance of clear role definition
• Firstly, any one of these roles can in fact be the
initiator of an MS project
• If initiated by the decision maker, the project will
usually be of a substantive nature, leading to real
change,
• The relevant world view is the one held by the
decision maker
• Unless the problem analyst is fairly clear about the
roles of the various partici-pants in the problem
situation to be studied, the project may head off in
the wrong direction from the very start
• Consider the breast cancer study of Chapter 1
• a problem customer group, the relevant world view
would be achieving the greatest reduction in breast
cancer mortality
• Similarly, identification of the problem users is
essential for effective implementa-tion of any
recommendations
• Problem: the existing assignment of ‘stakeholder
roles’ is inappropriate
• For effective decision making it may first be
necessary to change the organization’s structure
and to reassign decision-making roles
• So organization be conducive to embarking
Picture Resources: : www.dispatch.com

3. PROBLEM SITUATION SUMMARY
— MIND MAPS
CHAPTER 4
Problem Situation

MindMap
• Acquiring a sufficiently complete and
detailed understanding of the problem
situation is a necessary condition for a
successful system intervention.
• The analyst must get a thorough‘feel’ for
anything that may impact on the
outcome.
• Mind maps, rich picture diagrams and
cognitive maps are highly effective
diagrammatic aids to capture these
aspects
• Mind maps can easily be used for
capturing and consolidating the thoughts
and ideas of several people, borrowing
rules of brainstorming.
• a mind map shows the situation in much
of its complexity at a glance
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4. RICH PICTURE DIAGRAMS
CHAPTER 4
Problem Situation

rich Picture
• Rather than show the various aspects in words or short sentences,
P. Checkland [1993/99] suggests drawing a cartoon-like pictorial
summary of everything (or almost everything!)
• In some sense, a rich picture is never finished.
• you do not want to commit the analysis unwittingly to a given
direction before you have gained a full understanding of its
complexity and crucial interrelationships
• We all have a natural tendency to classify problem situations and
give them a name. It gives the illusion ‘of having the situation
under control’
• Most importantly, as is the case for a mind map, a rich picture —
the diagram or the concept — is not a system description
• In some instances, it may be instructive to capture certain aspects
with other diagrams, such as a flow chart of either material,
documents, or information
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example Rich Picture
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example Symbol of Rich Picture
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5. GUIDELINES FOR MIND MAPS
AND RICH PICTURES
CHAPTER 4
Problem Situation

Guideline
• Three major components are represented in mind maps and rich
pictures:
– 1. Elements of structure
– 2. Elements of process
– 3. Relationship between structure and process and between processes
• For human activity systems, a mind map or rich picture should include
not only ‘hard’ facts, but also ‘soft’ facts .
• All known areas of concern and actual or potential issues or problems
should also be shown.
• The rich picture should also be annotated to define symbols that are
not self-explanatory
• However, excessive use of connections may in-advertently impose a
system structure
• If your map or picture looks like a flow chart
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6. USES AND STRENGTHS OF RICH
PICTURES AND MIND MAPS
CHAPTER 4
Problem Situation

Uses and Strength
• The main use of rich pictures and mind maps is for
communicating with other people about complex and
problematic situations.
• Interconnections, relationships, and direct and indirect
consequences become more clearly visible;
• is considerably enhanced.
• It allows identification of
– the people who own the problematic situation,
– the people in positions of power, such as the decision
makers,
– the people who will execute any decisions taken,
– the people who will enjoy the benefits or suffer the
consequences of the results
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7. COGNITIVE MAPPING
CHAPTER 4
Problem Situation

Cognitive Mapping
• Cognitive mapping is a tool that C.L. Eden
[1983] adapted from G.A. Kelly’s (1955)
personal construct theory.
• It takes the form of a network of
statements, expressing con-cepts —
ideas, goals, concerns, preferences,
actions — and their contrasts or op-
posites.
• Cognitive maps have some similarity to
mind maps that capture means–end or
cause-and-effect relationships
• never describe reality in an
interpretation-free or objective way.
• constructs .
• Constructs are usually composed of two
poles.
• Both poles should be expressed in the
individual’s own words,
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8. COGNITIVE MAP FOR NUWAVE
SHOES
CHAPTER 4
Problem Situation

Elly Schuhmacher’s nightmare
• A little more than a year ago Elly jumped at
the opportunity to go into business on her
own
• With a i 90,000 overdraft from a sympathetic
bank and her own savings of a little
• more than i 40,000, plus a loan from her
parents, her funky shoes were an instant
• success rather than a flop [1],
• as some sceptics predicted, with sales only
restricted by limited production capacity
rather than demand [2].
• However, her cash position was tight and not
as good as expected [3],
• due mainly to two reasons: a three-fold rise
in raw material stocks [4],
• locking up cash [5],
• and the slow rate of collections from the
retailers, the latter taking an average of 50
days to pay, rather than the 30 days netasked
for by NuWave [6]
• Elly knows that she can easily double sales
with little additional effort [7]
• if she gets new machinery more suitable for
her style of goods [8].
• How to raise the 140,000 needed for that is
her immediate dilemma [9].
• The bank turned down her loan application
unless she injects more equity capital [10].
• She has no other funds, and neither can she
raise more from her parents [11].
• A priori, her only option seems to be to take
a financial partner [12].
• But NuWave is her baby, and she wants to
keep
• complete control rather than share it [14]
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Elly Schuhmacher’s nightmare (2)
• Last night she had a nightmare that
somebody else was sitting at her
desk and giving her orders.
• She looks again over her options:
• Do nothing, i.e. continue with the
current mode of operation [7].
• Another few years of deprivation on
a measly i 400 a week for slaving 60
to 70 hours a week? It would take her
three to four years to build up
enough retained earnings to up-
grade the machinery [8].
• Can she wait that long? Competition
may grab the opportunity and step in
to fill her potential market [15]
• Get a business partner to inject i
70,000 [12].
• Together with an equal-size bankloan
this would cover the new equipment
cost and provide the additional
workingcapital needed, but would
reduce her equity share to 50% —
her nightmare come true [13]
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Elly Schuhmacher’s nightmare (3)
• Could she perhaps make better use
of her current funds [16]?
• For instance, offer a discount for
prompt payment [17]
• to speed up collections from
retailers. It will reduce her margin
and hence profit [18], but if it frees
half of the current i 150,000 tied up
in accounts receivable [19]
• She again studies the latest balance
sheet. Her gaze is caught by the
investment in raw materials (RM).
‘Do we really need over i 90,000
dollars of RM stocks? Could we not
operate efficiently with less?’ she
asks herself [20].
• The current stocks are 4 to 5 months’
worth of usage! Admittedly, when
they started out with only i 30,000, a
few deliveries had to be delayed [21].
• In the long run that will give NuWave
a reputation of unreliability —
something she wants to avoid [22]
• since it will ultimately have a
negative impact on sales and hence
profits [23]
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A cognitive map for Elly’s dilemma
• A problem owner can develop such a map on his or
her own, expressing the per-sonal train of thought.
• Note that for many real-life problem situations the
number of constructs in a map may go into the
hundreds.
• C. L. Eden (the inventor of the problem structuring
method SODA) and his associates at the University
of Strathclyde have developed ‘Decision Explorer’, a
PC software package, as an aid in drawing and
analysing cognitive maps interactively.
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A cognitive map for Elly’s dilemma
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Peta awal

Analysing the map
• the map should be analysed along a number of
lines
• [1] The aim is to make sure that the various
paths from information, via actions, to goals
are correct and complete.
• [2] Another line of analysis checks for feedback
loops and, in particular, for destabilizing
(positive) feedback loops (see Section 3.11)
• [3] The third type of analysis looks for so-called
core constructs and emerging themes
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Some sobering comments on
cognitive mapping
• the links between constructs in a cognitive map imply a definite
logical predecessor–successor relationship.
• faced with real-life situations, we have often found that the
direction of the relationship may be far from clear and could go
either way
• Furthermore, analysts must be constantly on guard not to distort
the problem owner’s account with their own perceptions
• If the aim is mainly to get a good grip on a problem situation
which will help to select the right issue, identify the
stakeholders, and justify boundary choices, we findmind maps
and rich pictures easier to use
• The strength of cognitive maps is that they are more than simply
a summary of the problem situation
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9. PROBLEM DEFINITION AND
BOUNDARY SELECTION
CHAPTER 4
Problem Situation

Problem definition and boundary
selection
• understanding of a problem situation is to
delineate the problem to be analysed
• identifying the
– correct issue of concern
– Scope
– Form
– level of detail or depth
• part of this involves a critical evaluation of
– which aspects of the problem situation should
be included in the analysis
– which aspects can be Ignored
• part of the
– narrow system of interest or
– Its Environment
• select the boundaries for both
– the narrow system of interest and
– its relevant environment
• Critical systems heuristics, developed by W.
Ulrich in 1983 [Ulrich, 1996], is currently the
mostcomprehensive and systematic
framework for subjecting boundary selection
• Several problem-structuring methods
[Rosenberg and Mingers, 2000]
• Boundary selection will largely fix
– the scope
– direction, and
– focus of all subsequent analysis
• determines
– which inputs are considered controllable,
– but also whose benefits and
– costs are included in the performance
measure,
– and in particular which potential stakeholders
are reduced to problem customers, pos-sibly
mere victims without any say or recourse
• Selecting the wrong boundaries may result in
solving the wrong problem.
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Critical Problem element
• Decision maker: Elly Schuhmacher.
• Objective: Generate enough funds to purchase the new equipment.
• Decision criterion: Funds generated are at least equal to i 140,000.
• Performance measure: Amount of funds freed.
• Alternative courses of action:
– The combination of: size of discount offered to customers;
– form of just-in-time procurement policy;
– imaginative model designs to absorb excess RM stock from previous seasons;
– express in-freighting to avoid shortages;
– no safety stocks for just-in-case second production runs.
• Boundaries for narrow system of interest (as indicated by major system
inputs):
– Old and new production output capacity and cost structure;
– potential demand and shoe wholesale prices.
• Boundaries for wider system of interest:
– no countermove by competition within the near future;
– bank amenable to making up shortfall (e.g. in the form of a mort-gage on equipment) if
sufficiently small.
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10. SOME CONCLUSIONS
CHAPTER 4
Problem Situation

Some conclusions
• It is strongly affected by
– the purpose of the analysis,
– the world views of the analysts and/or problem
owners,
– and the resources (time, funds, people) available
for the job
• a problem situation summary should not be in
the form of a systems description, since this
may impose a given structure that may again
bias the analysis
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Review and Mindmap
Introduction
Problem
1.The problem situation and
what is a ‘problem’?
2.Stakeholders or roles of
people in systems
3. Problem situation
summary — mind maps
Diagram and Method
5. Guidelines for mind maps
and rich pictures
6. Uses and strengths of rich
pictures and mind maps
8. Cognitive map for
NuWave Shoes
9. Problem definition and
boundary selection
Picture Resources:

04.problem situation

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