How System Dynamics Model

may Help Public Policy

SBM ITB

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What is System?

2
 Mental model
Overview
Knowledge
Experience
Systems Thinking Value and culture
Reality
(R)

Perspective ={R1,R2,R3,…}

intervention Formalisasi

Formal Model
structure
Causal loops diagram
Conceptual Model
(CLD)
(Modelling)

behaviour Stock and Flow Diagram Simulation Model 3

(SFD)
 Structure influence behaviour
e2

Things hood= {e1,e2,e3,….} e3

e1

Systems
structure
Tingkat
e4
kemacetan
Reality/Issue/Problem e6

Measurement
e5 variable

Behavioural Over Time

(BOT)

Systems hood= f(e1,e2,e3,….)

Systems waktu
4
behaviour
 Structure influence behaviour
e2
Issue productivity (coal) decrease
Coal productivity
e3
e1
present
desire
data I want this!
e4
e2
e6 2000 2020
time
e1

e3
e1
simulation
future
No intervention

e4

e1 e6 Change the
Sensitivity current structure
e5 analysis
 Level of Thinking
Event Reactive action

Pattern Prevention action

Deeper
Understanding

Structure Design action

Mental Model 6
 Do we always see something as a
system?

A Child An Electrical Engineer

So Beautiful

Water Fall Turbine

Generator

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Electricity
 What is a System?

Definition:
A group of interacting, interrelated or
interdependent components that form a
complex and unified whole.

A System = An Organization

8
 Example of Systems

In Your Body (Circulatory System)

• System made up of the heart, veins &
arteries, blood & a host of supporting
element.
• All component interact to carry out their
purpose within the large system.

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What is Systems Thinking?

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Linier Thinking

Cut staff
costs

Profitability
increases

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 Systems Thinking
4. Internal focus

5. Declining
3.Political in fighting customer service

2.People try to protect 6.Loss in sales

departments and jobs

1 .Cut staff costs

7.Need for more cost-

cutting

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 The Problem of Levels of Thinking
Once upon a 911 ? Housing
time in a small
village

House House
House House
What can I
The only do ?
action ever
taken

Help ! The house is

on fire!

House

House House

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 The Problem of Levels of Understanding
(Cont.)
After several 911 ?
hours

House House
House House
What can I
The only do ?
We have put action ever
out the fire taken

Help ! The House is

on Fire!

House

House House

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 The Problem of Levels of Understanding
(Cont.)
After several 911 ?
months

House House
House House
What can I
The only do ?
action ever
taken

Help ! The House is

on Fire !

House

House House

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 The Problem of Levels of Understanding
(Cont.)
After several 911 ?
hours

House House
House House
What can I
The only do ?
action ever
taken

Help ! The House is

on Fire !

House

We have put
out the fire
Is it the only action
House
we can do? House

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 Thinking only Event
Is it the only action
ever taken?
Why?

House

It is inadequate
from a systems
thinking
perspective Because it has solved the
immediate problem but hasn’t
changed the underlying
structure that caused the fire.

We only look at a
picture of a single
moment in time.
EVENT !

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 Thinking about Patterns

Where or when do
the fires most
likely to occur ?
House

• Detecting a pattern helps you put the most

recent event in the context of other, similar
events.
• The spotlight is then taken off the specific
event, and you can focus on exploring how
the series of events are related and begin
thinking about what caused them. 18
Thinking about Structure
Pattern

What does a
structure cause to
House the pattern?

• Are smoke detectors being

used?
• What kinds of building
materials are least flammable?
• What safety features reduce
fatalities?
• What relationship among
factors influence the behavior?

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 Structure Influences Behavior
• Look at those parts :

• So what? :

A smiling doll A sad doll

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 Principle of System Thinking

Thinking of the ‘Big Picture’

Balancing short term and Long

Term Perspective
Recognizing the dynamic,
complex and interdependent
nature of systems
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 Dealing with complexity
mind
Dynamic Complexity  delay
mechanism
mind
social
mind mind systems
systems Emergent Complexity
mind
mind mind
systems

organism

Social Complexity human

purposive
purposeful
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unhuman
 Holistic View
- The systems thinking guides us to a bigger picture.

- Thinking in circular causality

Action
Result
Information about problem

- Creates the understanding necessary for better long-term

solutions.

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Benefits of Systems Thinking

You understand
You have better
the situation
decisions.
better.

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Uncovering Systemic
Structures
Feedback and Causal Loop
Diagrams

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Filling a Glass of Water
How can I uncover the structure
governing the water level in the
glass?

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 Filling a Glass of Water (Cont.)

Tell the story

If the faucet is
opened
further

Faucet Position
Desired Water Level- “Water Flow“ increases
Water Level
Gap Water Flow

Water Level
The “Water Level" in the
glass will increase

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 Filling a Glass of Water (Cont.)

Filling a glass of water is not merely a matter of water flowing into the
glass.

There is a control of how much water.

That control is the feedback loop from water level to eye to hand to
faucet and water flow.

Such closed loops control all action everywhere.

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 What is Causal Loop Diagrams?
A graphical notation for representing system structure
If the faucet is
opened further
Faucet Position

Desired Water Level-Water

Level “Water Flow“ increases
Gap
Water Flow

Water Level
The “Water Level" in the
glass will increase

in order

To better understand the system structure which cause the patterns of

behavior

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Filling a Glass of Water

Performance
Goal

Time

Pattern of Behavior

System Structure

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 A Learning Approach to
Dynamic Strategy Design
Mental Models
Discover

Different
conclusions, Lower risk
systemic impacts allows public
explored mapping of
views
Outcomes and Strategy and
Evaluation Decision Making
Reflect Simulation Invent
Ambiguous,
imperfect
information Delays
Delays
Real World
Implementation and Confounding Factors
Action
Produce 31
 Learning: Policy design
Strategy proposal

Simulation Simulation
Intuition of model analysis
management
Understanding of
Opinions system behaviour

Revisions Opinions

Debate and discussion Revisions

Evaluation of strategy proposal

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 Strategy-Driven Organizational Change
Realised
direction
Real World
Desired
Unintended
Organisational
direction
consequences change
Logical World
Realised
Mission/Vision
strategy

Behavioural
responses Articulated
Unanticipated direction
events
Objectives

Deliberate
strategy (Targets)
Performance
Measures
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O’Brien , F.A., R.G. Dyson, Supporting Strategy, John Wiley & Sons, Ltd, 2007)
 Why Rehearsing Business Strategy?
Realised
direction
Real World
Desired
Unintended
Organisational
direction
consequences change
Logical World
Realised
Mission/Vision
strategy

Behavioural
responses Articulated
Unanticipated direction
events INPUT
Objectives

Deliberate
strategy (Targets)
Performance
Measures
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 Why Rehearsing Business Strategy?
Realised Generated by Simulation
Unintended direction
Real World
consequences
Implemented Desired
Organisational
direction
Strategy change
Logical World
Unanticipated Mission/Vision
events

Organization
Model Articulated
direction
INPUT
Objectives

Strategy
Initiatives (Targets)
Performance
Measures
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 The Strategy Rehearsal
Process
Exploring
internal and
external
environments
Setting Creating MODELS OF THE
strategic strategic ORGANISATION
direction initiatives REHEARSING
and goals Assessing
STRATEGY
strategic ideas
Learning from
virtual and
current
performance

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Models in Strategy Rehearsal

Models are for rehearsal - to

test strategic initiatives for
their future impact before
rolling them out in the
organisation.

Models can be used to anticipate

what might go wrong and fix
hidden inconsistencies in strategy
– rather than passively awaiting
feedback signals that
implementation has gone wrong

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 The Strategic Development
Process Model (SDPM)
Uncontrolled
Resources inputs

Implementing
Managing the
strategic
change organisation
ENACTING
STRATEGY Exploring
internal and
external
Setting environments
Creating
strategic MODELS OF THE
strategic ORGANISATION
direction initiatives REHEARSING Assessing
and goals
STRATEGY strategic ideas
Learning from
virtual and
current
performance

Visioning Learning from

current
performance 38
measurement
 Characteristics of a decision being
labeled as ‘strategic
Breadth of scope and therefore of implications right across and beyond the
organisations.
Complexity and inter-relatedness of decision-making context, demanding integrated
treatment.
Enduring effects, possibly of an irreversible nature, with little or no scope for trial and
error.
Significant time lag before impact, with widening uncertainty over the timescale
involved.
Disagreement about the motivation for, and the direction and nature of,
development.

Challenging the status quo, creating a politicised setting where change is contested.

Need for Model of Complex System 39

 Essential Elements
• Setting strategic direction – encompassing a vision, mission,
strategic objectives and goals.
• Designing a performance measurement system aligned to the
strategic direction.
• Sense-making – exploring the internal and external environments
and assessing the uncertainties.
• Creating strategic initiatives informed by strategic direction, strategic
goals, the internal and external environments and learning from
virtual performance.
• Evaluating strategic options using models of the organisations,
taking account of future uncertainties.
• Rehearsing strategy in a virtual feedback process that incorporates
learning from virtual performance.
• Selecting and enacting strategy in a real feedback process that
incorporates learning from virtual and/or current performance
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Mapping systems modeling into SDP--1

Evaluating
Setting Rehearsing Performance
Creating
Direction Strategy Decision
Strategic and risk
Visionin Systems
Initiatives analysis
g
Resourc
dynamic Performanc Combinin
Drama s
e-based e g
theory Agent- measureme
view of nt Approach
Problem based
strategy Financial
-
SWOT/T
modellin evaluation es
structuri g Robustness
OWS Scenario
ng analysis
analysis planning and Real
methods
options

O’Brien , F.A., R.G. Dyson, Supporting Strategy, John Wiley & Sons, Ltd, 2007) 41
 Mapping systems modeling into SDP--2
Direction Creation Rehearsal Evaluation Choice
Visioning X X
Stakeholder analysis X X
Drama theory X X
Problem structuring X X X X
methods
Resource-based view X
SWOT analysis X
Five forces X
Product portfolio X
matrices
PIMS (Profit Impact X X X
for Market Strategy)
System dynamics X X
Agent-based models X X
Scenario planning X X X
Decision/risk analysis X X
Balanced scorecard X X X X
Financial summary X X
measures
Robustness analysis X X X
Real options X X X
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THANKS

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