WED 2:30 PM Parallel Session: Diffusion Dynamics
Full Report: The session on Diffusion Dynamics was attended by approximately 25 participants and chaired by George Papachristos. The first paper related to a generic model of the development of a network of product distributors. The authors of the second paper developed a simulator for an oil company in which different stages of organisational change were modelled, and the final paper used a combination of methods in order to assist a utility company in developing a plan for the deployment of smart electricity meters. In the first case, the diffusion was related to the diffusion of products, in the second case to the organisational change, and in the third case to the adoption of the electricity meters.
The first paper, entitled A System Dynamics Model for Studying the Structure of Network Marketing Organization, was presented by Joan Cruz (see photo) and co-written by Camilo Olaya.
It concerned a system dynamics model for studying development of network marketing organizations, such as Amway. The objective was to generate a network typology model to analyse the way network organisations are formed. These networks consist of distributors who buy, sell, and find other distributors (downlines). Although rapid growth can be seen in such organisations, many people within such a network have failed. Scale-free networks were used to represent the system in which nodes that are well connected are expanded. System dynamics was used to represent the network and Mathematica to visualise the network. Further steps will include modelling the diffusion process (instead of this being random) in order to understand network marketing failure factors. A question was asked relating to the purpose of Mathematica. In response, Joan indicated that initially the purpose was to visualise the model, as a network structure can be shown with Mathematica whereas Ithink shows arrays or histograms. They are currently carrying out increased assessments in Mathematica.
A participant asked if the profitability was assessed related to the length of the chain. The longer the chain the higher the markup has to be, which could cause a collapse. In response to this, Joan indicated that this is indeed a next step. The final question related to losses at the lower end of the chain. The response was that this is part of the tipping point that will be investigated.
Following this, Felicjan Rydzak (see photo) presented the paper Building Understanding of Organisational Change,which was co-authored by Paul Monus.
The presentation concerned part of a project being carried out for an oil company. The company is conducting a process of organisational change in order to achieve personal safety, process safety, environmental management and operational excellence. Kotter’s eight stage process for organisational change was used as the basis of a model and simulator which have been developed by the authors. The stages are establishing a sense of urgency, creating the guiding coalition, developing a vision and strategy, communicating the change vision, empowering employees, generating short term wins, consolidating gains, and anchoring new approaches. However, a dilemma for managers is whether they should concentrate on current performance or on the transformation process. The simulator shows that a focus on daily production leads to unsustainable change and in a case of focus on transformation the ‘worse before better’ effect is experienced. By trying to focus on both and also by taking the systemic insights, the company tries to get out of the capability trap. Specially designed tools help with transformation. One question was related to the fact that oil company employees change jobs every two years, which makes it difficult to tolerate a ‘worse before better’ effect, and continuous improvement is therefore necessary. This was supported by the presenter. Another problem is willingness to work on improvements. Large projects are often very discouraging. Thus, it is necessary to start with small improvements in order to reinforce ownership and attention to defects elimination.
One of the participants asked how the authors found reality in their simulation. Felicjan indicated that the model was based on a previous project, which led to sustainable change. Another participant stressed the importance of different cultures and characters in companies. The presenter responded that the authors are aware of company culture, but the previous project was also carried out at the same company. The last question was how the impact of the proposed measures can be estimated or validated. Felicjan answered that they try to apply social network analysis tools.
The final presentation was entitled Roadmap for Adopting New Technology in the Utility Industry. It was presented by Lianjun An (see photo). The co-writers were Dharmashankar Subramanian and Jayant Kalagnanam.
The project was carried out by IBM for an electricity company. A model was constructed to assist the electricity company in managing the deployment of smart electricity meters. Given that government requires implementation of these meters, the question is how a company can adapt the deployment. The challenge lies in assessing the profitability for a utility company which involves different uncertainties, such as the adoption rate, resource constraints, and price elasticity. The model that was developed combines system dynamics with an econometric model and linear programming. The system dynamics model was used for the adoption rate, parametrised by marketing spend effectiveness and a viral effect of word-of-mouth. It also includes system delays for time to maturity and an adoption lag. The econometric model estimates the demand response benefits. The information from these models leads to adaptation of the deployment plan to maximise benefits versus costs. During the course of actual deployment of these meters, new information becomes available to the model which leads to continuous updating of the system dynamics model, as well as of the deployment plan.
In response to a question about the actual use of the model, Lianjun responded that it is currently being used by a utility company.
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