Introduction to Systems Thinking and Causal Loops

Todd Little

LEARNING ORGANIZATIONS
THE FIVE DISCIPLINES
Personal Mastery

Shared Vision

Systems Thinking

Mental Models

Team Learning

MECHANISTIC VIEW
Universe is a machine Analytic method leads to reductionism Very effective when change is slow CAUSE EFFECT
Management intervention for Cause-Effect
Mitigate the Effect (Fire-Fight) Eliminate the Cause (Better not happen again) Run Away (and hide)

MECHANISTIC EXTRAPOLATION
700 600 500
Revenue

400 300 200 100 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

SYSTEMS VIEW
Focusing on principle of organization, particularly interdependent relationships Dealing with detail complexity and dynamic complexity

Seeing processes of change rather than snapshots

WHAT IS A SYSTEM?
A collection of people and/or parts which interact with each other to function as a whole

SYSTEM INTEGRITY

Dividing a cow in half does not give you two smaller cows

WHY A SYSTEMS PERSPECTIVE?

Facilitates leadership by leveraged action
integrating competing priorities acknowledging and handling unintended consequences Problems facing us are more complex due to increase in information flow interdependencies rate of change

The significant problems we face today

cannot be solved at the same level of

thinking at which they were created.

- Albert Einstein

WHAT IS SYSTEMS THINKING?

Examining how

WE CREATE OUR OWN PROBLEMS

Seeing the BIG PICTURE Recognizing that STRUCTURE INFLUENCES PERFORMANCE

ASPECTS OF STRUCTURE
Fire-fighting
Crises
Tasks

Events

Anticipating

Trends

Patterns

Designing
Unwritten Rules Reward Systems

Structure

Peoples Mental Models

EVENTS, PATTERNS, AND STRUCTURE

Action Mode Time Way of Orientation Perceiving Questions to Ask

Events

React!

Present

Witness event Measure or track patterns of events Systems Thinking

Patterns

Adapt!

What's the fastest way to react? What trends seem to be recurring? What structures are in place causing these patterns?

Structure Create Future Change!

SYSTEMS THINKING TOOLS

Causal Loop Diagrams - a useful way to represent dynamic interrelationships
Provide a visual representation with which to communicate that understanding Make explicit one's understanding of a system structure - Capture the mental model

REINFORCING LOOP
Structure
Employee Performance
S S

Behavior Over Time

Supportive Behavior

Perf. Level

Supervisors Supportive Behavior

Unsupportive Behavior Time

BALANCING LOOP
Structure
Desired Inventory
S

Behavior Over Time

Discrepancy
O
100 ++

Actual Inventory

Actual Inventory
S

Desired Inventory

Inventory Adjustment

100 100 - -

Time

SYSTEMS ARCHETYPES
A class of tools that capture the "common stories in systems thinking
Powerful tools for diagnosing problems and identifying high leverage interventions that creates fundamental change

SYSTEMS ARCHETYPES
Drifting Goals

Escalation

Fixes that Fail / Backfire

Growth and Underinvestment Limits to Success Shifting the Burden / Addiction Success to the Successful Tragedy of the Commons

FIXES THAT FAIL / BACKFIRE

S

Behavior Over Time

Fix

Problem Symptom

Delay
S

Time Unintended Consequences

Dilbert Learns Causal Loops

THE SOFTWARE BUG FIX

S

Number of Bugs in Software

Reward for Fixing Software Bugs

O S

Incentive to Write Software with Bugs

Fixes that Fail

Breaking a Fixes that Fail cycle usually requires two actions: acknowledging that the fix is merely alleviating a symptom, and making a commitment to solve the real problem now. A two pronged attack of applying the fix and planning out the fundamental solution will help ensure that you dont get caught in a perpetual cycle of solving yesterdays solutions

Drifting Goals
O

Goal

Pressure to Lower Goal

S S

Goal

Gap

Time
S

Actual
S

Corrective Action

Delay

THE BOILED FROG

If you put a frog in boiling water, it will hop out immediately If you put a frog in cold water and slowly bring the water to boil, the frog will unwittingly enjoy its last blissful warm bath

THE BOILED FROG

S

Perceived Desired Temperature

O S

Tolerance for Temperature

Temp

Temperature Gap

Time
S O

Hop Out

Drifting Goals
Drifting performance figures are indicators that the Drifting Goals archetype is at work and that real corrective actions are not being taken. Understand how goals are set

Success to the Successful

Success of A
S S S S

Success of B A

Allocation to A Instead of B Resources to A

S S

Time

Resources to B

Time

Success to the Successful

Look for reasons why the system was set up to create just one winner Find ways to make teams collaborators rather than competitors

Success to the Successful NIH Syndrome

S S S S

Desire to redo vs. desire to reuse Amount of redo

S S

Redo

Confidence in Ability to redo

Success of reuse

Time Reuse

Amount of reuse

Time

Limits to Success
Structure
S

Behavior Over Time

Burnout

Energy Level
O

Employee Performance
S S

Perf. Level
Positive Reinforcement

Diminishing Returns

Hours Worked
S

Supervisors Supportive Behavior

Time

Limits to Sales Success

S

Market Size
S S

Market Exposure to Potential Customers

Potential Customers Sales

Systems Dynamics Models

non customer contacts SALES FRACTION
CONTACT RATE Potential Customers Customers sales INITIAL CUSTOMERS total market

customer with non customer contacts

customer prevalence

Legal Disclaimer
The following is fiction. Any resemblance to any leading oil & gas software development company is purely coincidental.

New Sales

1980

1985

1990

1995

2000

2005

2010

Total Customers

1980

1985

1990

1995

2000

2005

2010

Revenue

1980

1985

1990

1995

2000

2005

2010

Systems Dynamics Models

non customer contacts SALES FRACTION
CONTACT RATE Potential Customers Customers sales INITIAL CUSTOMERS total market

customer with non customer contacts

customer prevalence

Ex-Customers

#Customers #Active Customers

1980

1985

1990

1995

2000

2005

2010

Total Pot Rev Actual Revenue #Customers #Active Customers

1980

1985

1990

1995

2000

2005

2010

Tragedy of the Commons

Tragedy of the Commons

S

Net Gains for A

S S

As Activity
S

Resource Limit
S

Total Activity
S S

Gain per Individual Activity

Time

B
S

Bs Activity
S

Net Gains for B

Time

Tragedy of Integration
Fixed Budget
S

Investment in features
S

Success from Product Investment

S

Investment in Integration

DELAY
Investment in Integration
S

Perceived Success from Integration

Time

B
O

Success from Product Investment

S

Time

Fixed Budget

Investment in features

Tragedy of the Commons

Solutions for a Tragedy of the Commons never lie at the individual level (The Libertarian Nightmare) What are the incentives for individuals to persist in their actions? Can the long-term collective loss be made more real? Find ways to reconcile short-term individual rewards with long-term cumulative consequences

Software Integration
S O

Landmark Marketing Vision

S

Customer demand for Integration

S S

ISG Interest in Integration

S S

Level of Integration

ISG push of Integration

Investment in Integration

IPG Interest in Integration

S

Software Integration
Interest in Integration S Investment in Integration O

Limits to Growth
Success to the Successful

Success from Integration S Frustration with Dependencies and Legacy Integration

O
Investment in features

Success from Features