Introduction to the "Business Dynamics (Sterman)" - Chapter 1 --- Lecture notes for the "MB-411 Introdução a Dinâmica de Sistemas" of the Instituto Tecnológico de Aeronáutica - ITA.

1. BUSINESS DYNAMICS

2. CHAPTER I
LEARNING IN AND ABOUT
COMPLEX SYSTEMS
S T A R T

3. ACCELERATING CHANGES
ARE TRANSFORMING OUR WORLD
Changes in:
TECHNOLOGY
POPULATION
ECONOMIC ACTIVITY

4. FROM THE PROSAIC…
TO THE PROFOUND

5. Traditional Institutions
Practices
Beliefs
ALL CHANGES CHALLENGE

6. MOST OF THE CHANGES ARISES AS
CONSEQUENCES OF HUMANITY ITSELF

7. Well-intentioned efforts to solve pressing problems lead to
POLICY RESISTANCE
Many times our best efforts to solve a problem actually
MAKE IT WORSE

8. LAW OF ACCELERATION

9. INTERCONNECTED
WORLD

10. TOOLS AND PROCESSES
How to move from
generalizations about
accelerating learning and systems
thinking to tools and processes
that help us understand
complexity, design better
operating policies, and guide
change in systems from the
smallest business to the planet as
a whole ?

11. WE MUST NOT ONLY FLY BUT
REDESIGN IN FLIGHT
WE ARE ALL
PASSENGERS ON
AN AIRCRAFT

12. System Dynamics is a method
to enhance learning in
complex systems”
“
SYSTEM DYNAMICS
What is it?

13. Dinâmica dos sistemas é uma área de conhecimento que
busca disponibilizar mecanismos para nos auxiliar no
melhor entendimento das consequências resultantes das
diversas interações cíclicas (informações de feedback)
existentes entre os nós /eventos de um sistema.
D E F I N I Ç Ã O D A D U P L A

14. INTERDISCIPLINARY
System dynamics is fundamentally
interdisciplinary
BEHAVIOR OF COMPLEX SYSTEMS
Theory
of
nonlinear
dynamics
and
feedback
control
SYSTEM DYNAMICS
BEHAVIOR OF HUMAN
Cogni6ve
and
social
psychology,
economics,
and
other
social
sciences

15. POLICY
RESISTANCE,
THE
LAW
OF
UNINTENDED
CONSEQUENCES,
AND
THE
COUNTERINTUITIVE
BEHAVIOR
OF
SOCIAL
SYSTEMS

16. And
it
will
fall
out
as
in
a
complica1on
of
diseases,
that
by
applying
a
remedy
to
one
sore,
you
will
provoke
another;
and
that
which
removes
the
one
ill
symptom
produces
others
..
.
.
-­‐
Sir
Thomas
More
Anything
that
can
go
wrong
WILL
go
wrong.
-­‐“Murphy”

17. People
seeking
to
solve
a
problem
o;en
make
it
worse.
Our
decisions
may
provoke
reac6ons
by
others
seeking
to
restore
the
balance.
Our
policies
may
create
unan6cipated
side
effects.
Our
aAempts
to
stabilize
the
system
may
destabilize
it.

18. COUNTERINTUITIVE BEHAVIOR OF
SOCIAL SYSTEMS
Unexpected
dynamics
o;en
lead
to
policy
resistance,
the
tendency
for
interven6ons
to
be
delayed,
diluted,
or
defeated
by
the
response
of
t h e
s y s t e m
t o
t h e
interven6on
itself.

19. EXAMPLES
01
02
03
BIRTH
RATE
IN
ROMANIA
FIGHT
AGAINST
INFLATION
ANTIBIOTICS
VS
DRUG-­‐
RESISTANCE

20. CAUSES OF POLICY RESISTANCE

21. EFFECT
CAUSE

22. WHAT DEFINES OUR PROBLEM
0,0
1,3
2,5
3,8
5,0
0 1 2 3 4
DESIRED
PERCEIVED
GAP

25. FEEDBACK
vMuch of the art of system dynamics modeling is
discovering and representing the feedback
processes.
vThe most complex behaviors usually arise from the
interactions (feedbacks) among the components of
the system, not from the complexity of the
components themselves

26. FEEDBACK
POSITIVE FEEDBACK
SELF-REINFORCING
NEGATIVE FEEDBACK
SELF-CORRECTING

27. The dynamics of all systems arise from the
INTERACTIONS of these networks of
FEEDBACKS

28. LEARNING IS A FEEDBACK PROCESS
As dynamics arise from
feedback, all learning
depends on feedback
WE MAKE DECISIONS THAT
ALTER THE REAL WORLD
WE GATHER INFORMATION
FEEDBACK ABOUT THE REAL
WORLD
W E R E V I S E O U R
UNDERSTANDING OF THE
WORLD

29. X

30. DYNAMIC COMPLEXITY
System
dynamics
emphasized
the
mul6loop,
mul6-­‐
state,
nonlinear
character
of
the
feedback
systems
in
which
we
live
These
loops
react
to
the
decision
maker’s
ac6ons
in
ways
both
an6cipated
and
unan6cipated
Dynamic complexity
can arise even in simple
systems with low
combinatorial
complexity.
Dynamic Complexity arises
from the interactions
among the agents over
time.
There
may
be
posi6ve
as
well
as
nega6ve
feedback
loops
These
loops
will
contain
many
stocks
(state
variables)
and
many
nonlineari6es
Natural
and
human
systems
have
high
levels
of
dynamic
complexity

31. TIME DELAYS
Time delays between taking a decision and its effects on the state
of the system are common and particularly troublesome.
01
02
03
Dynamic complexity not only slows the
learning loop; it also reduces the
learning gained on each cycle
Delays reduce the number of times one
can cycle around the learning loop,
slowing the ability to accumulate
experience, test hypotheses, and
improve.

32. DYNAMIC COMPLEXITY
SYSTEMS ARE
DYNAMIC
TIGHTLY COUPLED
GOVERNED BY
FEEDBACK
NONLINEAR
HISTORY-
DEPENDENTSELF-
ORGANIZING
COUNTERINTUITIVE
POLICY
RESISTANT
TRADE-OFFS
Why dynamic complexity arises?

34. 01 Each link in the two feedback
loops must work effectively
02 We must be able to cycle
around the loops quickly
FOR LEARNING TO OCCUR:

35. LEARNING REMAINS
SLOW
As the rate of change
accelerates throughout
society, learning remains
slow, uneven, and
inadequate

36. BARRIERS TO LEARNING
DYNAMIC COMPLEXITY
LIMITED INFORMATION
CONFOUNDING
VARIABLES
AND AMBIGUITY
BOUNDED RATIONALITY AND
THE MISPERCEPTIONS OF
FEEDBACK

37. ERRONEOUS INFERENCES
ABOUT DYNAMICS
FLAWED
COGNITIVE
MAPS
UNSCIENTIFIC
REASONING:
JUDGMENTAL
ERRORS AND
BIASES

38. IMPLEMENTATION
FAILURE
DEFENSIVE
ROUTINES AND
INTERPERSONAL
IMPEDIMENTS TO
LEARNING

39. REQUIREMENTS FOR SUCCESSFUL LEARNING IN
COMPLEX SYSTEMS
Improving the Learning Process:
Virtues of Virtual Worlds
Pitfalls of Virtual Worlds
Why Simulation Is Essential

40. T H A N K S F O R W A T C H I N G
You can't do just one thing