Creating a flexible strategy using causal diagrams
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This document discusses causal loop diagrams and how they can help create flexible strategies. Causal loop diagrams use nodes and arrows to represent relationships between variables in a system. They help visualize how a system works and identify reinforcing and balancing feedback loops. Examples are given of how causal loop diagrams helped clients improve strategies by recognizing unintended consequences of initiatives and better understanding how changing one part of a system impacts others.
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Creating a flexible strategy using causal diagrams
- 1. Creating a Flexible Strategy Using Causal Diagrams www.luxoft.com
- 3. Agenda What is Causal Loop Diagram ? How it can help you ? How to construct CLD ? Examples of how it helped to improve strategy ? Simulation tool www.luxoft.com
- 4. What is Causal Loop Diagram www.luxoft.com
- 5. History The use of nodes and arrows to construct directed graph models of cause and effect dates back to the invention of path analysis by Sewall Wright in 1918 Popularized in System Dynamics. Methodology and mathematical modeling technique for framing, understanding, and discussing complex issues and problems. The first formal use of Causal Loop Diagrams was explained by Dr. Dennis Meadows at a conference for educators www.luxoft.com
- 6. Why to use that ? www.luxoft.com
- 7. Helps to see the whole www.luxoft.com How our system is working so that we have drop in productivity ? My concern is productivity ? How to fix that ? YOUR CLIENT YOU
- 8. Measure your concerns qualitatively www.luxoft.com Productivity drop? Is it subjective ? I see drops in rate of # completed tasks and # labor costs are growing YOUR CLIENT YOU
- 9. Align understanding of systems www.luxoft.com In general I see that system is working this way I would add some more variables to that YOUR CLIENT YOU
- 10. Empathize www.luxoft.com Yes, we can. Let’s think how we can improve your strategy to minimize risks Unfortunately we have to cut salaries YOUR CLIENT YOU
- 11. Discover self-reinforcement loops www.luxoft.com My fear is that by cutting salaries you will balance total costs for short time Thanks, I see that potential staff turnover will increase total cost again YOUR CLIENT YOU
- 12. Pro-actively improve your system www.luxoft.com My fear is that by cutting salaries you will balance total costs for short time Thanks, I see that potential staff turnover will increase total cost again YOUR CLIENT YOU
- 14. Capture potential variables We have to increase number of cost cutting initiatives because some budget pressures YOUR CLIENT www.luxoft.com Cost cutting initiatives Total Costs (budget) Salary rate
- 15. Find relation between concerns www.luxoft.com Cost cutting initiatives Total Costs (budget) Salary rate
- 16. Polarity in relations www.luxoft.com Cost cutting initiatives Total Costs (budget) - Salary rate + +
- 17. Balanced loops www.luxoft.com Cost cutting initiatives Total Costs (budget) - Salary rate + + B Reduce Total Costs
- 18. Further elaboration www.luxoft.com YOU Cost cutting initiatives Total Costs (budget) - Salary rate + + B Reduce Total Costs I feel something wrong with that
- 19. Self-reinforcement loops www.luxoft.com Cost cutting initiatives Total Costs (budget) - Salary rate + + B Reduce Total Costs Motivation to change R job - Stuff turnover + - Workforce Knowledge Productivity + -
- 20. Delayed effect www.luxoft.com Cost cutting initiatives Total Costs (budget) - Salary rate + + B Reduce Total Costs Motivation to change R job - Stuff turnover + - Workforce Knowledge Productivity + -
- 21. Update you strategy www.luxoft.com Cost cutting initiatives Total Costs (budget) - Salary rate + + B Reduce Total Costs Motivation to change job - R Stuff turnover + - Workforce Knowledge Productivity + - Launch motivational program Test Knowledgebase Reduce load
- 23. Example #1 Helped Project Manger to show stakeholders many side-effects of selected strategy Client abandoned strategy with reducing salary Client changed development strategy to focus only on critical business www.luxoft.com
- 24. Example #2 Helped Agile Consultant to show an importance of slack time for learning Client updated marketing strategy to less aggressive www.luxoft.com
- 25. Example #3 Helped to show how new marketing initiative would influence company performance Client improved annual strategy to focus on service quality, not number of subscribers www.luxoft.com
- 28. www.luxoft.com Vyacheslav Moskalenko Luxoft Agile Practice Luxoft Agile Coach Kiev, Ukraine Member of Scrum Alliance, Certified Scrum Master Certified Scrum Professional Member of ICAgile, Certified ICAgile Coach Member of scrum.org, Professional Scrum Master
Editor's Notes
- How using different salary initiatives influencing worker performance and costs. When strategy is to control labour costs by forcing down pay rates. We can a imagine an initial period in which costs were drifting slowly upwards for some reason. This motivated a wish to make intervention in order to contain costs; as indicated in the figure, cutting pay rates has a rapid and direct controlling effect on labour costs. This initiative has balanced total costs. However, longer term effects are also seen to arise. For example, low pay can increase staff turnover as workers are increasingly motivated to look for - and take - other employment opportunities. This reduces the stock of knowledge that the workforce has to draw on to achieve its tasks and therefore also has the potential to reduce productivity (loop R1). Similarly, low pay rates can reduce the quality of staff that a company can attract and recruit. This reduces the quality of the work done, increases the need to re-work poorly executed tasks and so increases labour costs (Loop R2). Finally, undiscovered poor quality work can increase costs, either because customers return poor quality goods for reimbursement or because there are health and safety consequences resulting in financial compensation (to take a high profile example of the latter, the use of cheaper labour may well be complicit in the safety questions being asked about the UK rail infrastructure). The result of all of these effects is that cutting pay rates can backfire, producing a response that is qualitatively the opposite of that expected as one or more of the reinforcing loops dominates the system behaviour.
- This can be done in telephone mode and paper This can be done on whiteboard with your client and collegues
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