QUERY Future Development Directions (SD6247)

[System Dynamics Mailing List]

Posted by  Richard Stevenson <rstevenson at valculus.com>

Jay Forrester comments that “system dynamics is now on a plateau.”

So, on a plateau after 50 years, is this not an ideal juncture SD to  
consider its future options seriously? Much of the recent discussion  
about the future of SD in these pages has been fairly defensive or  
obscure - although on balance, mostly supportive of my original  
propositions.

We now wish to suggest a much more positive vision of the future. By  
illustration we can extend Jay’s moon mission analogy.

The Moon Mission Analogy

When President John F Kennedy made his promise of ‘of landing a man  
on the moon and returning him safely to the earth’ in the early 60’s,  
NASA did not have too much of an idea as to how this would be  
achieved. The rocket science design and engineering professional  
disciplines simply did not exist.  NASA did, however, have a range of  
‘products’ in mind in the form of Saturn V rockets, Lunar Excursion  
Modules etc. They needed to produce at least 15 Apollo ‘products’ to  
repeatable, quality assured standards in order to deliver JFK’s target.

Professional engineering disciplines such as rocket design and build,  
zero defect manufacturing, large scale multidisciplinary project  
management etc were, however, quickly conceptualised, assimilated,  
documented and implemented. The rest is history as they say. Even in  
the case of Apollo 13, the engineers had the fix to ‘return them  
safely to earth’.

The key factor that galvanised the rocket science engineering  
fraternity was the specific challenge of getting to the moon (and  
back) within a decade.  Their success did NOT mean that they then  
knew everything there is to know about physics and about the universe  
– but it was still sensational – and it vastly increased their  
knowledge in the process.

How Deep is the “Systems Jungle”?  The SD Paradox.

Jay’s further argument is that “Those who have only been exposed to  
the loose talk of "systems thinking" find it sufficiently helpful  
that they think they have arrived, when actually they are probably  
only about one per cent of the way into systems. Likewise, the  
majority of those who have achieved the present average level of  
skill in system dynamics find it so powerful that they feel they have  
learned it all, when actually they have gone only a few percent of  
the way into the unknown of nonlinear feedback systems.”

This appears to be an argument for cautious, incremental development  
that should be led only by a tiny number of “expert” practitioners  
who know all there is to know about nonlinear feedback systems – i.e.  
almost by definition, academics and a very few consultants.  The  
problem with this view is that learning is very slow - and a real  
issue is that success stories rarely get published, because of  
confidentiality.  (We need to "dig up the bodies" of successful SD  
projects - remember that medical science progressed on the back of  
grave robbers!)

So our (contrary) view is that developments in SD must be led from  
(and by) the business community - and from a specific needs  
perspective.  Only by using SD successfully and continuously on  
serious, widely recognised problems will the wider world ever get 
to  hear about SD!

Having said that, it is unquestionably true that in the hands of  
novices, SD tools and methods can be dangerous.  There is a paradox  
here.  We can’t do SD in anger until we are good enough.  But we  
can’t become competent without doing serious SD. And when we're  
successful, often we can't talk about it.

We need to break the circle.

Certain fundamental (and certainly non-trivial) systemic insights are  
already well established and indeed repeatable and useable across a  
wide range of industries. We need the confidence to lean on these  
insights to build “success stories” – and proclaim them from the  
rooftops.  And just as to the point, we need the confidence to focus  
on specific markets - and to integrate SD with tools that managers  
already use!

Extending the Moon Analogy to SD in Capital Industries

For example, and in particular, ‘capital industries’ having long  
investment cycles (such as utilities, oil and gas and  
pharmaceuticals) all have common issues and problems that require  
systemic solutions.

Consider for example:

§       Asset life cycle management in utility industries
§       Balanced portfolio planning in pharmaceuticals
§       Capacity planning in heavy capital industries

….where there is already a well developed knowledge bank of SD  
'solutions'.

The common glue between all these long life cycle capital industries  
is the management of future value. In particular, managers must  
balance short-term performance with long-term value creation, also  
balancing the interests of multiple stakeholders. Mostly, ‘capital’  
managers are prisoners of previous management generations, and  
likewise won’t be around to see the outcomes of their own decisions.

It’s an SD feeding ground, surely!

In the same manner that the Apollo programme galvanised ‘rocket  
science’ into a sustainable, professional engineering profession, we  
believe that the introduction of widely available, customisable, 
 strategic planning toolsets or products – in capital industries in  
 particular - will do the same for the SD ‘profession’.

New web-based simulation toolsets that support SD integration with  
other toolsets - for example with DCF valuation and balanced  
scorecards -  will support this objective.

This route will represent the next stage of SD’s development from its  ‘
current plateau’. This (dare we say) ‘commoditisation’ approach is a  
natural progressive step in the evolution of any new ‘technology’, be  
it rocket science, SD or penicillin or silicon chips or microwave  
technology - or looking to the future, nanotechnology.

Let’s ground this proposition in some hard market feedback….

The market need

Consider a very recent quote in a book from a thought leader in the  
corporate finance - Chief Financial Officer (CFO) - space.

‘In the next five years the systems used for developing, resourcing  
and managing strategic and operational plans will change beyond all  
recognition. They’ll be focussed on supporting strategy; be dynamic  
and continuous in operation; show cause and effect of one KPI on  
another, and the impact of one end user’s activity on another.’   
Nov  2006: CC Read ‘Creating Value in a Regulated World’

The script could hardly be written better!  The corporate market  
place is desperate for credible solutions to its strategic planning  
problems to solve such problems as:

§       Balancing short-term performance with long-term value creation
§       Integrating strategy across different management groups and  
        perspectives
§       Testing alternative strategies without risk and before  
        implementation
§       Understanding how tangible and intangible resources interact  
        to create value, over time
§       Communicating strategy internally and externally, to  
        different stakeholder groups.

The use of ‘one off’ SD interventions will of course always have a  
home. (Only yesterday we were discussing the use of SD in the re- 
nuclearisation of the UK electricity supply industry).

However, our company Valculus sees a huge opportunity for SD to gain  
a major foothold in the business market place by providing   
repeatable and customisable toolsets to support strategic decision- 
making in strategic value management. This route represents a heaven  
sent opportunity for the SD community to ‘come of age’.

In conclusion, whereas we believe we have a strong vision at Valculus  
we are not arrogant (or foolish) enough to think we can do it alone.  
We therefore welcome comments and expression of interest from  
experienced SD practitioners.

Richard W Stevenson
John F King
February 2007
Valculus Ltd
UK
Posted by  Richard Stevenson <rstevenson at valculus.com>
posting date  Thu, 8 Feb 2007 17:33:38 +0000