Showing papers in "System Dynamics Review in 2002"

All models are wrong: reflections on becoming a systems scientist†

Abstract: Thoughtful leaders increasingly recognize that we are not only failing to solve the persistent problems we face, but are in fact causing them. System dynamics is designed to help avoid such policy resistance and identify high-leverage policies for sustained improvement. What does it take to be an effective systems thinker, and to teach system dynamics fruitfully? Understanding complex systems requires mastery of concepts such as feedback, stocks and flows, time delays, and nonlinearity. Research shows that these concepts are highly counterintuitive and poorly understood. It also shows how they can be taught and learned. Doing so requires the use of formal models and simulations to test our mental models and develop our intuition about complex systems. Yet, though essential, these concepts and tools are not sufficient. Becoming an effective systems thinker also requires the rigorous and disciplined use of scientific inquiry skills so that we can uncover our hidden assumptions and biases. It requires respect and empathy for others and other viewpoints. Most important, and most difficult to learn, systems thinking requires understanding that all models are wrong and humility about the limitations of our knowledge. Such humility is essential in creating an environment in which we can learn about the complex systems in which we are embedded and work effectively to create the world we truly desire. The paper is based on the talk the author delivered at the 2002 International System Dynamics Conference upon presentation of the Jay W. Forrester Award. Copyright  2002 John Wiley & Sons,

Group model building effectiveness: a review of assessment studies †

Abstract: Over the last decades system dynamicists have experimented with approaches to achieve more involvement of their clients in the model building process. As a result the number of reports in the literature on the use of system dynamics as an organizational intervention tool has increased dramatically. From the literature we have identified 107 cases that provide details on the modeling process and the assessment of results. The cases show a wide variety in the way the interventions are reported and assessed. From a research point of view this is clearly an undesirable state of affairs. This article reports on a meta analysis of findings of these studies and tries to provide an overview of outcome studies on system dynamics interventions. It attempts to draw some preliminary conclusions on the effectiveness of system dynamics modeling interventions, to clarify differences in definitions of outcomes, and to provide guidelines for more standardized assessments and reports. Rather than remaining in the stage of single case descriptions, the latter will enable the accumulation of research results in the future, a prerequisite for institutional learning within the system dynamics community. Copyright © 2002 John Wiley & Sons, Ltd.

Using system dynamics to improve public participation in environmental decisions

Abstract: Dana Meadows believed that computer simulation models and systems thinking could be powerful tools for democracy, helping make social decisions and the assumptions on which they are based more transparent and open to public debate. She also believed that people should be more involved in making conscious and informed choices about their future. In the environmental arena, pressure to increase public participation in decision-making is growing. Not only is public involvement seen as a cornerstone of democratic ideals, it is increasingly seen by decision-makers as a practical means of putting decisions into effect. Involving the public in decision-making helps avoid public obstruction of decisions and garners public resources for their implementation. However, traditional approaches to public involvement, which rely heavily on information campaigns, facilitated discussions, and public hearings for conveying information and capturing stakeholder input, frequently leave participants dissatisfied. They are often perceived as one-way communication from agency experts to stakeholders or as a mechanism for powerful special interest groups to serve their own ends. System dynamics has the potential to improve public participation in environmental decisions by providing a framework for structured deliberation when stakeholders are involved in making decisions and a more transparent and participatory educational framework to persuade stakeholders to help implement decisions. This article describes a case study using group model building to support a stakeholder advisory group examining transportation and related air quality problems. One of the most valuable effects of the approach was the information feedback it added to the advisory process. Copyright  2002 John Wiley & Sons, Ltd.

Cloudy skies: assessing public understanding of global warming

Abstract: Surveys show that most Americans believe global warming is real. But many advocate delaying action until there is more evidence that warming is harmful. The stock and flow structure of the climate, however, means ‘‘wait and see’’ policies guarantee further warming. Atmospheric CO2 concentration is now higher than any time in the last 420,000 years, and growing faster than any time in the past 20,000 years. The high concentration of CO2 and other greenhouse gases (GHGs) generates significant radiative forcing that contributes to warming. To reduce radiative forcing and the human contribution to warming, GHG concentrations must fall. To reduce GHG concentrations, emissions must fall below the rate at which GHGs are removed from the atmosphere. Anthropogenic CO2 emissions are now roughly double the removal rate, and the removal rate is projected to fall as natural carbon sinks saturate. Emissions must therefore fall by more than half even to stabilize CO2 at present record levels. Such reductions greatly exceed the Kyoto targets, while the Bush administration’s Clear Skies Initiative calls for continued emissions growth. Does the public understand these physical facts? We report experiments assessing people’s intuitive understanding of climate change. We presented highly educated graduate students with descriptions of greenhouse warming drawn from the IPCC’s nontechnical reports. Subjects were then asked to identify the likely response to various scenarios for CO2 emissions or concentrations. The tasks require no mathematics, only an understanding of stocks and flows and basic facts about climate change. Overall performance was poor. Subjects often select trajectories that violate conservation of matter. Many believe temperature responds immediately to changes in CO2 emissions or concentrations. Still more believe that stabilizing emissions near current rates would stabilize the climate, when in fact emissions would continue to exceed removal, increasing GHG concentrations and radiative forcing. Such beliefs support ‘‘wait and see’’ policies, but violate basic laws of physics. We discuss implications for education and public policy. Copyright  2002 John Wiley & Sons, Ltd.

Exploring policy options with a behavioral climate–economy model

Abstract: Many integrated energy–economy–climate models have been developed to address climate change policy. While these models are quite varied in scope, most share a common core of economic optimization and equilibrium assumptions. By contrast, system dynamics models of energy–economy interactions focus on disequilibrium dynamics, with behavioral decision rules and explicit stocks and flows of capital, labor, resources and money. This article tests climate policies using a system dynamics model that includes many features missing from economic models. Among these are endogenous technological change and boundedly rational decision making. Energy requirements are embodied in capital, and energy production capacity depends on explicit capital stocks. The search for optimal policies is decoupled from other decisions, and uses criteria that are fair across generations. Earlier experiments with the model, briefly reported here, indicate that these features greatly alter policy outcomes. The model is used to test a family of emissions permit and tax policies like the Kyoto Protocol under a range of assumptions. Uncertainty is included in the analysis through Monte Carlo simulation. Results suggest that nearly all policy options are a net benefit, and that the landscape for policy choice is more forgiving than generally supposed. However, implementation remains a critical issue, and the viability of tradeable permits is questionable. Carbon tax policies are found to outperform fixed emissions permits in nearly all circumstances. The model used in this article is available at http://www.sd3.info. Copyright © 2002 John Wiley & Sons, Ltd.

Understanding and managing innovation processes

Abstract: The lecture was delivered at the Prize ceremony during the 19th International Conference of the System Dynamics Society in Atlanta, Georgia. It summarizes the Award winning article, published in the 1996 issue of System Dynamics Review, and discusses subsequent work. Comprehensive citations and quotations are found in the original publications. Shortened product life cycles, tight competition, and resource intensive research and development are some of the parameters that make innovation management a highly challenging endeavor. To succeed in such an environment, a solid understanding of the observed and the expected behavior is indispensable and can effectively be supported by modeling the object under investigation. The article analyzes strategies for new products, especially price strategies, and includes the processes of research and development in a comprehensive model, which then is disaggregated to explicitly take into consideration the actions of different competitors. Finally, a multi-person gaming version is presented. The article concludes with some thoughts about complexity, its dimensions and its challenges for system dynamics. Copyright © 2002 John Wiley & Sons, Ltd.

Introducing SD modelling into planning and control systems to manage SMEs' growth: a learning-oriented perspective

Abstract: This article emphasises the need for a learning-oriented approach to planning and control as a prerequisite for SMEs’ survival and growth. Such a perspective can be effectively pursued through the development of interactive learning environments linking system dynamics (SD) and accounting models, which provide two complementary views of business phenomena. In order to properly support the drawing up of business plans and the evaluation of results associated with their implementation, the use of financial SD models embodying the accounting perspective is recommended. This is likely to enhance a shift in SME key actors’ minds, as they will be able to analyse under the feedback view financial variables they are used to frame only through the accounting ‘lens’. The article remarks how the specific features that sharply differentiate SMEs from larger firms discourage any systematic replication of the approaches commonly adopted in bigger companies practice, where SD has been more widely utilised. Copyright  2002 John Wiley & Sons, Ltd. Syst. Dyn. Rev.18, 315–338, (2002)

Modeling the dynamics of human energy regulation and its implications for obesity treatment

Abstract: Obesity has reached epidemic proportions in the United States and is threatening to become a global epidemic. Even more concerning, the incidence of overweight continues to increase. The health consequences and economic costs to individuals and to society are considerable. Obesity is associated with many serious health complications, including coronary heart disease, type 2 diabetes mellitus, hypertension, selected cancers, and musculoskeletal disorders. In the U.S., direct and indirect medical costs attributable to obesity are estimated to approach $100 billion yearly. Obesity develops when a chronic imbalance exists between energy intake, in the form of food and drink, and energy expenditure. To date, the emphasis of treatment has been on the energy intake side of the energy balance equation. This, in part, is because it has been difficult to demonstrate the efficacy of exercise as a treatment strategy. This paper attempts to demonstrate the utility of system dynamics modeling to study and gain insight into the physiology related to weight gain and loss. A simulation model is presented that integrates nutrition, metabolism, hormonal regulation, body composition, and physical activity. These processes are typically fragmented between many different disciplines and conceptual frameworks. This work seeks to bring these ideas together highlighting the interdependence of the various aspects of the complex human weight regulation system. The model was used as an experimentation vehicle to investigate the impacts of physical activity on body weight and composition. The results replicate the “mix” of results reported in the literature, as well as providing causal explanation for their variability. In one experiment, weight loss from a moderate level of daily exercise was comparable to the loss from dieting (when both produced equivalent energy deficits). Perhaps of greater significance, the exercise intervention protected against the loss of fat-free mass, which occurs when weight loss is achieved through dieting alone, and thus promoted favorable changes in body composition. In a second experiment, exercise regimens of moderate to high level of intensity proved counter-productive as weight-reducing strategies for an obese sedentary subject. This was due to the limited energy reserves (specifically, muscle glycogen) available to such individuals. However, when the diet was changed from a balanced composition to one that was highly loaded with carbohydrates, it became possible to sustain the intense exercise regimen over the experimental period, and achieve a significant drop in body weight. The results underscore the significant interaction effects between diet composition and physical activity, and emphasize the critical role that diet composition can have in exercise-based treatment interventions. Copyright © 2002 John Wiley & Sons, Ltd.

Opportunities and pitfalls related to e-commerce strategies in small–medium firms: a system dynamics approach

Abstract: E-commerce is often perceived as a powerful lever to foster growth of SMEs. However, both the literature and empirical evidence have shown the perils hidden in superficial decision making by SME entrepreneurs. A system dynamics (SD) approach is used in this article to demonstrate how managing processes of accumulation and depletion of strategic assets, detecting inertial effects of decisions made in the past, and selectively acting on policy levers are likely to help entrepreneurs in understanding opportunities and pitfalls related to e-commerce strategies. A feedback analysis of three case studies selected from the literature and the main findings from a survey conducted by the authors on SMEs pursuing e-commerce strategies are discussed. Based on the insights developed through this analysis, the last section of the article shows a generic SD model aimed to help entrepreneurs to better understand processes of accumulation and depletion of strategic assets, in SMEs’ e-ventures. Copyright  2002 John Wiley & Sons, Ltd. Syst. Dyn. Rev.18, 403–429, (2002)

Resource sustainability in commodity systems: the sawmill industry in the Northern Forest

Abstract: Many natural resource-based commodity systems exhibit a trio of undesirable behaviors—price instability, resource unsustainability, and inequity among people along the commodity chain. In this article we share findings from a modeling project that focuses primarily on the second problem, unsustainability, in the forest products economy and forest ecosystem of the Northeastern United States. The model shows the structural potential for lumber industry capacity to overshoot the timber resource of the regional forest. Many of the policies commonly advocated in response to resource shortage, such as boosting mill efficiencies and eliminating log exports, appear unlikely to solve the problem. We identify several policies with the potential to help sustain both the industry and resource base. We also share insights on how to design a modeling and intervention process when addressing policy problems for which no single organization has direct responsibility. Finally, we consider ways to navigate through three prevalent “defensive routines”—denial, resignation, and despair—that are often barriers to constructive discussion on how to address potential limits to growth. Copyright © 2002 John Wiley & Sons, Ltd.

The control of goods transportation growth by modal share re-planning: the role of a carbon tax

Abstract: A simple model is proposed, at the macrolevel of variables aggregation, as a support for policy choice making in the control of goods transportation growth by possible alternative modes. The impact of feasible changes in the levying of “carbon tax” can be investigated with the proposed model, as well as the effects of investments in infrastructure and of the coverage of operational costs. Based on some transport externalities, various cost indices are identified and suitably minimized using optimization techniques, so that a quantitative definition of public policies can be derived. As an example, the model is used to evaluate application of alternative policies in Germany. This case study shows that the model system of goods transportation has a slight sensitivity to the public interventions considered. The application of the carbon tax shows significant effects on the increase of fiscal revenues rather than on the reduction of carbon dioxide emissions and on the share of road transportation. Reductions in carbon dioxide emissions and in transportation by road are best achieved by higher investment in the infrastructures of alternative modes of transport, together with a reduction in fuel taxation. Copyright © 2002 John Wiley & Sons, Ltd.

Combining system dynamics and conjoint analysis for strategic decision making with an automotive high‐tech SME

Abstract: An erratum has been published for this article in System Dynamics Review 18:4 2002, p. 533. This article describes the use of system dynamics in combination with conjoint analysis to assist a high-tech SME explore robust strategic policies in a context where customer preferences were critical to strategic decision making. Conjoint analysis served an important role in eliciting customers' underlying choice preferences and had a significant impact on the structure and parameterization of the final simulation model. The combination of methods was quite powerful in this case, and the authors feel it could be successfully applied to a broad class of problems where behavioral policies of decision makers include tradeoffs among multiple attributes. Methods developed to address the multi-attribute choice problem (e.g., conjoint analysis) add needed precision to model formulation and validation. The alternative is to employ formulations that are not empirically derived or grounded in the extensive choice theory literature, and it is suggested that this alternative is not viable when model behavior is sensitive to choice preferences. Copyright © 2002 John Wiley & Sons, Ltd.

User-parameterised generic models: a solution to the conundrum of modelling access for SMEs?

Abstract: System dynamics (SD) has been shown to be a powerful strategic analysis approach, but it can also be a costly one. If there is an insistence that to have any validity and value, all models have to be constructed largely from scratch, then the time, expertise and costs involved appear, effectively, to preclude their widespread use in small–medium enterprise (SME) applications. This article describes “proof-of-concept” trials with a simulator based on a user-parameterised generic model that could offer affordable and manageable access to SD modelling for SMEs. While not pretending to provide quantitative predictions, the simulator does provide managers with a vehicle to challenge the validity of their mental models as their firm undergoes major change, to gain insights into the future challenges, and maybe enhance their confidence through “pre-experiencing” future scenarios. The trials concluded that user-parameterised generic models do have potential value in this kind of usage, and may therefore be the only viable option for many smaller firms to benefit from system dynamics modelling and scenario planning. Copyright © 2002 John Wiley & Sons, Ltd.

The Global 2000 Report to the President and the Threshold 21 model: influences of Dana Meadows and system dynamics

Abstract: Dr Gerald O. Barney is the president of the Millennium Institute, which he founded in 1983 to promote long-term integrated global thinking in national governments, universities, foundations, and the faith traditions of the world. He and his colleagues have assisted over 45 countries to prepare strategic studies for Abstract The author first met Dana Meadows and her colleagues in the Limits to Growth project during a postdoctoral year at MIT, setting the author on a new career and life path. The first major step was directing the Global 2000 Report for President Jimmy Carter. In the Global 2000 project, we improved the connections and consistency among the sector-specific elements of the Government's Global Model. The results of the projections were generally consistent with the Limits study, but analysis showed that the Government's models were biased optimistically because of omitted feedbacks. Another major step was the establishment of Millennium Institute (MI) and the development of the Threshold 21 (T21) integrated national development model. There are no global decision makers who can address the global issues of Limits; humanity's global decisions are largely the combined consequences of national level decisions. MI's T21 model provides an analytical tool for ministers of finance and planning that produces the same financial and monetary outputs as the models used by the World Bank and IMF, but that also address the social and environmental aspects of national sustainability issues. After more than a decade of work, T21 has gained much respect and has been customized to more than a dozen countries, industrialized as well as developing. In addition to describing the influence of Dana and system dynamics on the author's life, the article sketches out work needed for the future. Copyright  2002 John Wiley & Sons, Ltd.

Transforming an agricultural trade organization: a system-dynamics-based intervention

Abstract: The management of agricultural trade organizations in Switzerland is characterized by completely new entrepreneurial challenges due to a progressive opening of agricultural markets and a corresponding reform in the state’s agricultural policy. The need for well-suited strategic management tools has suddenly become manifest. Given this background, the intervention described in this article took place in a division of a union of cooperatives in the Swiss agribusiness, which is a typical example of a small to medium-sized enterprise (SME). The aim of the project was to search for possible ways to sustain the viability of the division in the future. The intervention started with the development of an overall descriptive network-type model of the strategically relevant issues faced by the division. A system dynamics (SD) model was built as a decision support tool for one of two crucial strategic issues: the organization of the distribution system. Based on the insights derived from model-building and simulation, the management team changed its shared mental model of the issue at hand, achieving a deeper understanding of the situation faced, the options available and their implications. Thereupon, they have started to reorganize the whole distribution system. In sum, the modeling and simulation activities undertaken had a powerful trigger function in the process by inducing organizational learning at a very fast pace. Copyright  2002 John Wiley & Sons, Ltd. Syst. Dyn. Rev.18, 381‐401, (2002)

Dana Meadows: thinking globally, acting locally

Abstract: This article introduces the special issue of System Dynamics Review dedicated to the memory of Dana Meadows. It reviews her role as a leader in the fields of environmental journalism, system dynamics, and systems analysis, and summarizes the articles in the special issue. Copyright © 2002 John Wiley & Sons, Ltd.

A distributed computing approach to system dynamics

Abstract: This article describes ongoing research into the application of distributed computing technologies to system dynamics. To date, a distributed modelling environment has been constructed. This is designed to support geographically dispersed decision makers—for example, participants in a virtual organisation who may wish to examine scenarios for their interconnected value chain. The implementation is based on distributed object technology and is tested using a negative feedback model of a business supply chain. Copyright © 2002 John Wiley & Sons, Ltd.

A dynamic model of work quality in a government oversight organization

Abstract: Management of a government organization responsible for the oversight of contractor work is a sensitive and challenging task. One such organization is the Supervisor of Shipbuilding (SUPSHIP), Groton, a unit of the U.S. Navy, whose engineering department is responsible for oversight of submarine designs from General Dynamics' Electric Boat Division. Management of the SUPSHIP Engineering Department is further complicated by a high cost of mistakes and a significant lag between the time a mistake is made and when it is discovered in production. Recent defense cutbacks led to a reorganization of the department with significantly fewer personnel and periodic variations in workload have raised questions about the department's ability to maintain a desired level of quality in its design reviews. Quality in this context refers to work done without errors—errors that could affect the final product if they are not caught by supervisors or higher up the chain of command. To understand and explore these issues better, a system dynamics model that integrates the structural elements of the engineering department's workload and workforce was developed. Using the model to analyze expected performance during future peaks and valleys in the workload, as well as expected retirements and new hiring, allowed management to develop policies that keep quality at acceptable levels. Copyright © 2002 John Wiley & Sons, Ltd.

Dana Meadows: asking hard questions, speaking simple truths

Abstract: This paper was presented at the annual meeting of the System Dynamics Society, Atlanta, Georgia; 25 July 2001, in a special session in memory of Dana Meadows. In this talk, Dennis Meadows reviews Dana's career, the fundamental contributions she made to the field of system dynamics, and the continuing relevance of her work to the issues facing us today. Copyright © 2002 John Wiley & Sons, Ltd.