Introduction to System Dynamics

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What do I mean by System?
• A System is an interconnected series of pieces that work together to
achieve some objective.
Competitors
Economy
Growth
Customer Satisfaction
Culture
Price Wars R&D Spending
Employee Satisfaction
Profit Margin
Install Cycle Time
Morale Staff Skillset
Market Share 2
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What is System Dynamics?
• System dynamics is an approach to understanding the behavior of complex
systems over time. It deals with internal feedback loops and time delays that affect
the behavior of the entire system.
• Developed in the 1950s at MIT and used across disciplines: notably business, the
urban planning, then the environment, etc.
• The Study of:
• Complex Cause and Effect relationships over time
• Understanding the future consequences of today’s actions
• Death Spirals & Virtuous Circles
• Business irony:
– Things get worse before they get better
– Success begets success / Success to the Successful / The Rich get Richer
– The Law of unintended consequences
– Fixes that backfire
– The harder you push, the harder they push back
– Improves in the short-term, gets worse in the long term.
– Tipping Points
• Advanced Version: Building Management Flight Simulators
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Hierarchy of Behavior

Events East Hospital has a

bug in release 4.0

Increasing
Leverage as You
Patterns Release 4.0 was understand and
released too soon solve the deeper
(like many releases) problem

Bringing in revenue
Systems pressures teams to
release early (perhaps
causing problems and
reducing revenue in the
future) 4
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Seeing the World in Loops

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An Interchange after a Team Leadership Class
Senior Leader: “We were debating as a team whether we win
because we are cohesive or are we cohesive because we win”
CEO: “Which is it?”
Senior Leader: “We decided that we win because we are
cohesive”

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Which Causes Which?

Team Success Team Cohesion

Team Success Team Cohesion

Could it be both??

Team Success Team Cohesion

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A Feedback Loop

Team Success Team Cohesion

Can be written as

Team Team
Success Cohesion

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Interchange at CEO Staff Meeting
Regional Leader: “We are missing our numbers because NPIs are
late”

Late NPIs Missing Numbers

Any other relation you can think of?

Late NPIs Missing Numbers

NPI = New Product Introduction

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Another Feedback Loop

Late NPIs Missing Numbers

Missing
Numbers
Late NPIs

Limited Hiring or
Backfilling

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