MODULE 1A: MANAGEMENT SCIENCE - Identify the constraints by representing them using the appropriate Systems Thinking

Management mathematical equations ● A specialized branch of holistic thinking

- the attainment of organizational goals in an effective and efficient 3. Solve the Model ● How individual pieces interact with each other
manner through planning, organizing, leading, and controlling - Done usually with the help of computer programs ● Models reality from a holistic perspective
organizational resources 4. Generate the Optimal Solution ● Why?
○ See the bigger picture
When you want to make sure that your company becomes successful, you need to The solution generated by solving the model may not always be the best one. ○ See less obvious, indirect, unintended consequences of
achieve specific goals. Finding the perfect solution is impossible, as there will always be factors that actions; patterns
To reach those goals, you need a certain amount of resources, which may be we cannot fully account for. ○ Elements in a system don’t act in isolation
limited in nature. OR helps us find a solution that is not perfect but good enough. ○ View a problem from diff perspectives
In doing this allocation of resources, you need some tools and methodology to
help you make the most efficient and effective decision. Models in Management Science Two Fundamental Paradigms in Science
Because of our evolving society, decision-making is becoming more complex. ● Building and solving models - two fundamental activities of MS 1. Analysis
● Model - approximate representation of something - Foundation of traditional thinking
Management Science ● Mathematical model - model represented and quantified w/ - traditional method of reasoning where we try to gain an understanding
- operations research mathematical expressions of a system by breaking it down to constituent elements
- a method of decision-making which utilizes mathematical models to - Works well with low interconnectivity and low interdependence within
formulate optimal data-driven decisions Models in Management Science the system
- adapts the scientific approach for problem solving to managerial or Parameters 2. Synthesis
executive decision making in order to accomplish the goal of 'doing ● Givens and assumptions of the scenario - The combination of components or elements to form a connected
the best you can with what you’ve got.' ● Configuration settings whole
- For non-trivial decisions, starts w/ empirical data Objectives - Foundation of systems thinking
● Outcomes you are trying to achieve - tries to gain an understanding of an entity through the context of its
Limitations ● Dependent variables relations
- MS aims to optimize decisions by formulating them as mathematical ● Measure effectiveness of system - For systems with high interconnectivity and high interdependency
models, which entails quantifying certain variables of the situation. Decisions (ecosystems, social systems, computer networks)
- In real life, not everything can be directly and accurately ● Choices made by decision maker
quantified e.g. human behavior ● Independent variables Reductionism
- Reliant on technology, not cost-effective Constraints - Process of reasoning used in analysis
● Limit decisions that can be made - Breaking down systems to constituent parts and describing the
5 Characteristics of MS ○ Cannot be decided upon system as a sum of these parts
1. Systems Overview ● Can also be parameters
- There is a need to identify all interactions which are important to the ● System limitations Reductionist methods cannot help solve problems that arise as a result of the
problem complexity of components in a system
2. Interdisciplinary Approach Levels of functionality Because we understand systems by breaking parts down and isolating them, the
- MS looks at a problem from multiple angles and approaches from ● Descriptive models - describe only what is happening reductionist paradigm “depromotes” the relationships between these
multiple directions ● Predictive - predicting based on historical data - trends components
- This allows the decision maker to solve multiple problems ● Prescriptive - determine what should be done Synthesis and analysis are complementary. They should both be a part of any
3. Uncovers Other Problems well-developed model, but each will have particular relevance based on the part
- Because multiple disciplines are involved, other problems may surface Levels of scale of the system.
while solving one problem ● Microscopic - individual units, small groups
4. Modeling Process Approach ○ What will make someone choose a product over another System
- MS uses a modeling process approach (a mathematical model) to solve ● Macroscopic - larger scale ● Interconnected set of elements organized in a way that achieves
problems ○ Zooming out to assess entire systems something
5. Application of Science to Decision Making ○ Based on many micro models ● Its behavior depends on the total structure
- In business, decisions are complex based on the different ● Change the structure and the behavior changes
departments, models, and situations involved Levels of abstraction
● Deterministic models Parts of a System
The Management Science Process ○ Simpler, assume parameters are all known ● Elements - individual units, building blocks
MS follows a certain framework, called the operations research ● Stochastic models ● Connections - how elements interact with one another
process. ○ Take into account randomness and statistics ○ Flow of activities, resources, info
1. Identify the Problem ○ Very complex, too much time, computational power ● Function - ultimate goal of the system
- You need to identify the right problem to come up with the right ○ Determines of system’s behavior
solutions MODULE 1B: SYSTEMS THINKING
2. Model the Problem Traditional Analysis/Thinking Elements are interdependent, arranged in a particular way to perform a
- Identify the parameters of the situation ● Focuses on individual pieces of what’s being studied collective function to define the system as a whole.
- Define the objectives ● Narrow, fragmented perspective
- Determine our decisions Set
 - A collection of elements with no shared function Going beyond the crust of the doughnut is a space of ecological overshoot - Enabling local cluster development is a concept not necessarily
- It is nothing more than a sum of its elements where humanity puts pressure on the planet (causing climate change, pollution, specified in the frameworks, but can still be integrated into any
- The parts are not connected and can function separately massive loss of biodiversity) business utilizing the discussed sustainability strategies.
The goal is to get people out of deprivation and poverty while protecting the Sustainability is not all or nothing. It is a process that takes time to strategize
Characteristics of a System Earth. and implement
● More than the sum of its parts - 5 distinct stages of change that businesses go through in their quest
● Find a way to function even with elements removed Sustainability frameworks/strategies for sustainability
● Evolve and adapt over time Triple Bottom Line examines the ff:
- People - impact an organization has on its most important
Limitations of Systems Thinking stakeholders (staff, customers, suppliers)
● Reality is too complex to fully map out - Profit - impact on the economy
● Diminishing returns to make them fully accurate - Planet - impact on the environment
ESG Reporting
Correlation vs Causation - Aspects considered that are quantified:
● Correlation
○ Interdependence of variable quantities
○ Correlation does not necessarily imply causation
○ E.g. More sales -> More murders
● Causation
○ Causal correlation
○ Causation implies correlation Circular Economy
○ E.g. More sales -> More revenue - focuses on the environmental aspect of products. It takes inspiration
from how the planet is able to sustain itself (without human
intervention)
Causal Loop
- Keeping resources as long as possible, extract maximum value from
● Representation of how two elements have causal relationships w/ each
them, recover and regenerate products at the end of product life
other
cycle
● Causal Loop Diagram
Creating Shared Value
○ Shows causal relationships from a systems perspective
proposes three ways for businesses to create societal value that in turn creates
● Reinforcing Loop
economic value:
○ Action encourages more of the same action (more growth
- Reconceiving products and markets: meeting the greatest unmet
or decline)
global needs such as nutrition, financial security, housing, and other
issues outlined by the United Nations' Sustainable Development Goals
(SDGs)
- Redefining productivity in the value chain: improving resources
(environmental, human) utilized in the end-to-end process of
○ producing and delivering a product or service to consumers
● Balancing Loop - Enabling local cluster development: developing symbiotic
○ Discourages more of the same action (leads to relationships with institutions who have similar interests and can help
homeostasis) and be helped by the business
Most sustainability frameworks overlap with one another and simply differ in
terms of usage or focus.
- Reconceiving products and markets is simply about creating products
or services that address real needs and/or targeting needs that are
persisting issues in our world today. In the triple bottom line, which
○ is a relatively broader framework, one of the ways it could be framed
MODULE 1C: SUSTAINABLE DEVELOPMENT is that businesses who really think of the people's needs and create
Sustainable development fitting solutions can be profitable.
- Is development that meets the needs of the present without - Redefining productivity in the value chain touches on all aspects in
compromising the ability of future generations to meet their own the triple bottom line -- considering the people/communities and
needs environmental resources involved in production to minimize costs, thus
increasing profits. This also touches on all aspects of ESG reporting
Everything that we use to live today is simply borrowed from future generations. in a similar manner, with ESG reporting delving further into the
internal management of human resources. As for the circular
Doughnut Economics economy, it zeroes in on every step or aspect of the value chain and
The hole in the middle is a space of deprivation/shortfall where people don’t how it can be made more productive by ensuring zero waste in the
have the resources to meet the essentials of life process.
MODULE 1A: MANAGEMENT SCIENCE
Why do we need Management Science?
- It is because the world is becoming increasingly complex.
- It’s a lot easier to do things nowadays because of this.
- A good example would be the invention of delivery services such as
Grab, FoodPanda, etc.
- A driving factor of this would be how there are so much decisions to be made
and how decision-making is now much more complex than before.
- In the managerial context, a better, more structured way of making decisions
is necessary. This is because, as compared to your daily-life context, managerial
decisions that will be made today will matter in the long run.
Definition of Management Science
- a.k.a. Operations Research
- It is a method of quantitative decision-making which utilizes mathematical
models to optimize decisions.
- The discipline that adapts the scientific approach for problem solving to
managerial or executive decision making in order to accomplish the goal of “doing
the best you can with what you’ve got.”
- Adapting the scientific approach for problem solving
- We start by making empirical observations and these observations
come from our senses, our surroundings. After that, we analyze,
conduct experiments, and see what we can do.
- We should remember that our analysis should not be dependent on our
feelings or emotions, but rather, the data and observations.
- What differentiates this approach from any other approach is how we
rely on hard facts rather than intuitions.
- Managerial or executive decision-making
- This implies that we don’t apply this strategy to trivial and small
decisions because it takes too much time especially in a business
setting.
- This is why, in this approach, we need to prioritize the more important
and more impactful decisions.
- To accomplish the goal of “doing the best with what you’ve got”
- With this, we mean that we have to maximize what we’ve got with
limited resources because in a business, we can only do so much
because of constraints and limitations.
Characteristics of Management Science
- Focuses on managerial decision-making.
- Applies the scientific method to decision-making.
- Examines the situation from a broad perspective using a systems approach.
- Most businesses compartmentalize their people (Finance, HR, etc.).
You have to remember that these departments do not work in
isolation. All of them are dependent on each other and the decision
and action of one department affects the possible decisions and
outcomes of the other departments. This is why it is important to
have a broad perspective as opposed to a narrow one.
- Relies on mathematical and quantitative methods.
- Uses methods and knowledge from several disciplines.
- Combines techniques and knowledge from math, computer science,
management, etc.
Limitations of Management Science
- MS aims to optimize decisions by formulating them as mathematical models,
which entails quantifying certain variables of the situation.
- In real life, not everything can be directly and accurately quantified e.g. human
behavior. They are also often developed under idealized conditions that may not
reflect the real-world constraints that organizations face. For example, limited - Macroscopic models model situations on a larger scale, zooming out to assess
resources, time constraints, and political considerations. This can be seen in transportation entire systems. (based on many microscopic models)
logistics. (they want to determine the most efficient route to minimize costs and time, however the model doesn’t Levels of Abstraction
take into account real-world constraints such as traffic congestions, road closures, and unexpected detours)
- Deterministic models assume that all parameters are known constants.
- Stochastic models take into account the random and probabilistic nature of
Models in Management Science
real world events. (not that feasible because it takes too much time to develop)
- At the heart of management science are models, or what we formulate and
solve to optimize business processes.
The Management Science Process
- Building and solving models are the two fundamental activities of management
Problem → modelling
science.
- It is important to start with the problem first and not the solution.
- You need to come up with the right problem to come up with the right solution.
Model
Model → solving
- A model is an approximate representation of something real.We say it’s
- We model the problem by identifying the parameters of the situation, defining
approximate because there are margins of error and reality is too complex. No
our objectives, determining our decisions, and identifying the constraints by
matter how hard you try, you can never fully represent reality.
representing them with mathematical equations that are appropriate.
- A mathematical model is a model which is represented and quantified using
Solution → analysis
mathematical expressions.
- We solve the model, usually with the help of computer programs, to generate
- In management science, we aim to formulate scenarios as mathematical models.
the optimal solution.
- It is important to remember that the solution generated may not always be the
Components of a Model
best one because the limitation of mathematical models is that they cannot take
Parameters
into account non-quantifiable factors that affect the situation. Because of this,
- The givens and assumptions of the scenario.
it is important to analyze the solution first before making the final decision.
- Parameter values are approximated from data and adjusted in order to produce
Decision → assessment
an accurate model.
- After the decision is done, we are then going to assess the effectiveness of it.
- Examples of parameters: budget, resources, prices, costs
- These are equivalent to your configuration settings. In essence, you’re
MODULE 1B: SYSTEMS THINKING
configuring the model to solve something based on the parameters you give.
Principles of Systems Thinking
Objectives
Traditional Analysis
- The outcomes you are trying to achieve are affected by the decisions made.
- It focuses on the individual pieces of what is being studied.
- Measures the effectiveness of the system and decisions made.
- A problem here arises because it looks at things from a narrow, fragmented
- Examples of objectives: profit maximization, minimizing costs, investment
perspective. It is because you do not tie everything together. When you break
returns
things down per piece, you don’t do anything to integrate or synthesize things.
- These are represented by your dependent variables. You want to maximize the
Systems Thinking
value of the dependent variable by manipulating your independent variables.
- Focuses on how the individual pieces interact with and affect each other.
Decisions
- Similar to model building, it attempts to explain and model reality from a
- The elements in the problem where a choice must be made by the decision-
holistic perspective.
maker.
- It is an approach to problem solving that views organizations and their
- Examples of decisions: number of goods you produce, budget to allocate
problems as complex systems, rather than as isolated events or simple cause-
- These are represented by your independent variables. By definition, decisions
and-effect relationships. In contrast to traditional analysis, it emphasizes the
are things you can manipulate or change. These are what you manipulate in order
importance of considering the interrelationships between different parts of the
to maximize or minimize, or optimize, your objective target variables.
system and the long-term impacts of decisions. An example of how Systems Thinking differs
Constraints from the traditional approach to problem-solving can be seen in the context of traffic congestion. A traditional
- Conditions that limit the possible decisions that can be made by the decision- approach to addressing traffic congestion might focus on increasing the capacity of roads by adding more lanes,
without considering the impacts of this solution on other parts of the system, such as the environment, land use
maker.
patterns, and transportation costs. In contrast, a Systems Thinking approach to addressing traffic congestion
- They are also parameters, but they also necessarily limit the decisions you would consider the entire transportation system and its interrelationships, including factors such as population
make. growth, land use patterns, transportation costs, and environmental impacts. This approach might result in
solutions that address the root causes of traffic congestion, such as reducing the need for single-occupancy
- While budget may be a parameter, it can also be considered as a vehicle trips through the promotion of alternative modes of transportation, and that have long-term benefits for
constraint given how it limits the decisions you make because you can’t the environment and quality of life.
spend more than your budget.
Two Fundamental Paradigms in Science
- These are equivalent to your system limitations.
Systems Thinking
- A worldview underlining the theory and methodology of a particular subject
Levels of Functionality
- A foundation that shapes our way of seeing the world
- Descriptive models describe what is happening.
- Predictive models predict what will happen. - Analysis: foundation of traditional thinking. Traditional method of reasoning
where we try to gain an understanding of a system by breaking it down to
- Prescriptive models determine what the best course of action should be.
constituent elements
Levels of Scale
- Microscopic models model situations on a smaller scale, zooming in on individual
units and small groups.
- Synthesis: foundation of systems thinking. It is the combination of components
or elements to form a connected whole. It tries to gain an understanding of an
entity through the context of its relations.
Reductionism
- Process of reasoning used in analysis
- Breaking down systems to constituent parts and describing the system as a sum
of these parts
- Reductionist methods cannot help solve problems that arise as a result of the
complexity of components in a system
- Because we understand systems by breaking parts down and isolating them, the
reductionist paradigm “depromotes” the relationships between these
components
Synthesis and analysis are complementary. They should both be a part of any
well-developed model, but each will have particular relevance based on the part
of the system.
Why Use Systems Thinking?
- Because elements of a system do not act in isolation.
- For example, when you look at a budget of a company, this affects all
other parts of the company because it limits what each department
can do.
- To see things as a system rather than focusing on the individual pieces or in
other words, to better see the bigger picture.
- To notice and better make sense of events and patterns.
- To view a problem from a variety of different perspectives.
- Say for example you are in the sales team and your goal is to raise
revenue. You might think of just raising prices and in isolation, that
makes sense because you make more revenue. However, raising prices
will negatively impact your number of sales.
- To see the less obvious, indirect, and unintended consequences of our actions.
What is a System?
- An interconnected set of elements that is coherently organized in a way that
achieves something.
- Composed of its elements, connections, and function.
Elements of a System
- The individual units of a system and the basic building blocks of systems.
- Elements of a system, most of the time, can be a system in itself.
Connections of a System
- How the elements of a system interact with one another and this often involves
the flow of activities, resources, and information.
Function of a System
- The ultimate goal of the system and the determinant of the system’s behavior.
- For example, businesses want to make money so the ultimate goal of this
business is to make money and this is what determines how the elements of the
business, or the departments, interact with each other. They interact with each
other to make sure they are efficient and maximize their revenue, while at the
same time, minimizing the costs that they incur.
Characteristics of a System
- A system is more than the sum of its parts
- Systems will find a way to function even if some of its elements are taken out.
- This shows how order in a system is important.
- Systems evolve and adapt over time. Ex. restructuring internally
Limitations of Systems Thinking
- Reality is too complex to fully map out.
- Models are also at the heart of systems thinking, so the same limitation of - Governance: how transparent the company’s activities are and how much they
being unable to fully represent reality applies as well. adhere to laws and regulations
- When you are mapping out a certain system you want to analyze, you need to
know when your representation is already adequate and going further would yield
diminishing returns that are no longer worth it.
Causal Loop Diagrams
Correlation vs Causation Circular Economy
- Correlation is the interdependence of variable quantities - Grounded on the fact that our resources are limited.
- Correlation does not necessarily imply causation. Ex. Sales → + Murders - We need to switch from the linear economy (make, use, dispose) to the circular
– Causation is a causal correlation between an antecedent and a consequence economy, which strives to: keep resources in use for as long as possible, extract
- Causation necessarily implies correlation. Ex. Sales → + Revenue the maximum value from them whilst in use, recover and regenerate products and
materials at the end of the product/service life cycle.
Causal Loop - Downcycling: recycles materials to make a new product that is lower in quality
- A representation of how two interrelated elements display two-way causal and allows companies to participate in the circular economy at a minimal cost. Ex.
relationships with each other. The North Face “Clothes the Loop”
- Reinforcing Loop is a - Upcycling: recycles materials to make a new product with an improvement in
causal loop wherein an quality and allows companies to participate in the circular economy while at the
action encourages more same time producing premium products. Ex. Adidas x Parley for the Oceans
of the same action, - Industrial Symbiosis: applies the principles of biological symbiosis in an
resulting in growth or industrial setting. The waste generated by one process is used as the input of
decline. another. Ex. Shanghai Chemical Industrial Park (waste byproducts from certain
- processes are used as input material for other processes)
- Balancing Loop is a Creating Shared Value
causal loop wherein an - A management strategy where companies find business opportunities in social
action discourages more problems
of the same action, - It proposes three ways for businesses to create societal value that in turn
resulting in creates economic value:
homeostasis. - Reconceiving Products and Markets: meeting social needs by coming up with and
- providing the appropriate services and products
Causal Loop Diagrams - Redefining Productivity in the Value Chain: refining processes to be more
- A diagram that shows the causal relationships between elements, events, and efficient and environmentally sustainable
happenings, from a systems perspective. - Enabling Local Cluster Development: meeting social needs by strengthening the
infrastructure that supports their operations
MODULE 1C: SUSTAINABLE DEVELOPMENT
Sustainable Development Is progress always a good thing?
- We can’t deny that growth is a good thing since our lives today are a lot easier and more convenient than that of
- is development that meets the needs of the present without compromising the our ancestors. There are so many developments that make our lives so much better and comfortable. However,
ability of future generations to meet their own needs. Sustainable development is needed it’s not always a good thing. Although progress may be a good thing most of the time, there are a few
because traditional models of development, growth, and progress have often resulted in negative consequences circumstances in which these are not. While it is primarily good, there are also negative side effects. Growth is
for the environment and for human well-being. For example, many countries have pursued economic growth at the the mechanism that allows poverty to flourish. Rapid growth leads to a widening of the gap between the rich and
expense of the environment, leading to resource depletion, pollution, and climate change. In addition, traditional the poor.
models of development have often neglected the needs and perspectives of local communities and have resulted in A Dying World
inequalities and social tensions.
- Depletion of Resources: The dwindling supply of resources cannot keep up with
its growing demand.
Doughnut Economics
- Environmental Collapse: As production and consumption exponentially increase,
The hole in the middle is a space of deprivation/shortfall where people don’t
so does pollution.
have the resources to meet the essentials of life. Going beyond the crust of the
Sustainable Development Goals
doughnut is a space of ecological overshoot where humanity puts pressure on the
As Students: donate what you don’t use, avoid throwing away food, avoid wasting
planet (causing climate change, pollution, massive loss of biodiversity). The goal
water
is to get people out of deprivation and poverty while protecting the Earth.
As Future Business Leaders: buy from green companies that are equal
opportunity employers, think of innovative new ways to repurpose old materials,
Sustainability Frameworks/Strategies
recycle materials
Triple Bottom Line
As Future Parents: vaccinate your family to protect them and improve public
- People: how the company contributes to equity and social development
health, use only energy efficient appliances and light bulbs, educate young people
- Planet: how environmentally sustainable the company’s operations are
on climate change to put them on a sustainable path early on
- Profit: the economic benefit enjoyed by both the company and its environment
Management Science can provide a starting point for addressing the problem of rapid growth by providing
Social Investment Criteria or ESG Reporting quantitative data and analytical tools that can be used to assess the potential consequences of different
decisions. For example, MS models can be used to analyze the resource consumption and environmental impacts of
- Environmental: the environmental impact generated by the company’s activities
different business practices and to evaluate the potential benefits and trade-offs of different sustainability
- Societal: the social impact created by the company’s activities and projects initiatives.
What are the limitations and challenges faced when
handling problems using a management science
approach? Give a brief example to illustrate your
argument.
-
What is the Systems Thinking approach and how does it
differ from the traditional approach when it comes to
problem solving? Give a brief example to illustrate your
argument.
-
What is sustainable development and how does it differ
from the traditional concepts of development, growth,
and progress? Why is it needed?

How would Systems Thinking approach explain the

problem of rapid growth and how can we use
Management Science as a starting point towards
sustainable development?