BUSINESS DYNAMICS

CHAPTER ILEARNING IN AND ABOUT

COMPLEX SYSTEMS S T A R T

ACCELERATING CHANGESARE TRANSFORMING OUR WORLD

Changes in:TECHNOLOGY POPULATION ECONOMIC ACTIVITY

FROM THE PROSAIC…

TO THE PROFOUND

Traditional Institutions Practices

Beliefs

ALL CHANGES CHALLENGE

MOST OF THE CHANGES ARISES AS CONSEQUENCES OF HUMANITY ITSELF

Well-intentioned efforts to solve pressing problems lead to

POLICY RESISTANCE

Many times our best efforts to solve a problem actually MAKE IT WORSE

LAW OF ACCELERATION

INTERCONNECTED WORLD

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 ?

WE MUST NOT ONLY FLY BUT REDESIGN IN FLIGHT

WE ARE ALL PASSENGERS ON AN AIRCRAFT

System Dynamics is a method to enhance learning in

complex systems ”

“

SYSTEM DYNAMICSWhat is it?

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

INTERDISCIPLINARYSystem 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    

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

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”    

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.  

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.  

EXAMPLES

0102 03

BIRTH  RATE  IN  ROMANIA

FIGHT  AGAINST  INFLATION

ANTIBIOTICS  VS  DRUG-­‐RESISTANCE  

CAUSES OF POLICY RESISTANCE

EFFECT

CAUSE

WHAT DEFINES OUR PROBLEM

0,0

1,3

2,5

3,8

5,0

0 1 2 3 4

DESIRED

PERCEIVED

GAP

FEEDBACK

vMuch of the art of system dynamics modeling is discovering and representing the feedback processes.

vThe most complex behaviors usually arise from the interactions (feedbacks) among the components of the system, not from the complexity of the components themselves

FEEDBACK

POSITIVE FEEDBACK

SELF-REINFORCING

NEGATIVE FEEDBACK

SELF-CORRECTING

The dynamics of all systems arise from the INTERACTIONS of these networks of

FEEDBACKS

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  

X

DYNAMIC COMPLEXITYSystem  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  

TIME DELAYSTime delays between taking a decision and its effects on the state of the system are common and particularly troublesome.

01

02

03Dynamic 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.

DYNAMIC COMPLEXITY

SYSTEMS ARE

DYNAMIC

TIGHTLY COUPLED

GOVERNED BY FEEDBACK

NONLINEAR

HISTORY-DEPENDENTSELF-

ORGANIZING

COUNTERINTUITIVEPOLICY

RESISTANT

TRADE-OFFS

Why dynamic complexity arises?

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:

LEARNING REMAINS

SLOWAs the rate of change accelerates throughout society, learning remains slow, uneven, and inadequate

BARRIERS TO LEARNING

DYNAMIC COMPLEXITYLIMITED INFORMATION

CONFOUNDING VARIABLES AND AMBIGUITY

BOUNDED RATIONALITY AND THE MISPERCEPTIONS OF FEEDBACK

ERRONEOUS INFERENCES ABOUT DYNAMICS

FLAWED COGNITIVE MAPS

UNSCIENTIFIC REASONING: JUDGMENTAL ERRORS AND BIASES

IMPLEMENTATION FAILURE

DEFENSIVE ROUTINES AND INTERPERSONAL IMPEDIMENTS TO LEARNING

REQUIREMENTS FOR SUCCESSFUL LEARNING IN COMPLEX SYSTEMS

Improving the Learning Process: Virtues of Virtual Worlds

Pitfalls of Virtual Worlds

Why Simulation Is Essential

T H A N K S F O R W A T C H I N G

You can't do just one thing