19th MIT-UAlbany-WPI System Dynamics Ph.D. Colloquium
Friday, October 30, 2009
University at Albany - State University of New York
Room: Milne Hall 215

Organizers: Andy Whitmore (UAlbany) and Kawika Pierson (MIT)

Time Presentation Speaker
10:00 AM Prerequisite for successful FTA: Case of FTA between Korea and the U.S. Junesoo Lee, UAlbany
10:45 AM How and under what conditions clients learn in system dynamics consulting engagements James Thompson, WPI

11:30 AM Sustainable transition rate: an incentive cost schedule for the US electric power sector Ken Parsons, WPI
12:15 PM Lunch .
1:00 PM Platform Technologies and Multi-sided Markets: The Case of Electric Vehicles David Keith, MIT
1:45 PM Dynamics of the Adoption of Identification Standards in the U.S Healthcare Supply Chain Angelica Burbano, University of Arkansas
2:30 PM Break .
2:45 PM Building a system dynamics model of body weight regulation and obesity Özge Karanfil, Simon Fraser University
3:30 PM Strategy, Human Resource and Sustainability: the case of a clean tech startup Joe Hsueh, MIT
4:15 PM Teaching sustainability at UAlbany Business School Linda Krzykowski, UAlbany
5:00 PM Closing Remarks, Potluck dinner at George Richardson’s .

Abstracts

Prerequisite for successful FTA: Case of FTA between Korea and the U.S.
Junesoo Lee, UAlbany

In 2008, there broke out so many riots against Free Trade Agreement (FTA) between Korean and the US. Such public demonstrations aimed to protest against the trade condition of the imported beef from the US, and eventually led to renegotiation between two countries. Although imported beef was the core issue of the incidence, more fundamental causes of the public disturbance in Korea could be identified by several system archetypes of System dynamics.

First, the traditional respect for farming that does not regard the agricultural sector as an industry made the politicians and the government officials addict themselves to the near-sighted solutions to reform the stock farming. Therefore the improvement of competitiveness has been retarded in the aspect of economy of scale and the farmers’ adaptability to global market.

Second, the high rate of support to the new administration entailed the overconfidence of the Presidential leadership. Much-empowered administration was easy to neglect the prerequisite for market opening, and paced up the trade negotiation for beef importation. And such accelerated negotiation was connected to the lowered sanitation standard level of imported beef.

How and under what conditions clients learn in system dynamics consulting engagements
James Thompson, WPI

The practical application of system dynamics methodology has relied on consultative intervention since the field began fifty years ago. This research gives voice to individual consultants and clients in identifying intervention conditions of learning and how solutions are constructed by clients with system dynamics techniques. Confronted with an often ill-defined and confounding problem, the client is guided by a consultant engaged to conduct

a process of problem identification, system conceptualisation, simulation model building, hypothesis testing, and problem resolution. The study concludes with implications for the practice of system dynamics and other model-based consulting interventions, including pre- and post-engagement assessments, socialisation of engagement results, differing roles for and effects of measured data, consultant-client relationships, and the special case of transformative learning.

Sustainable transition rate: an incentive cost schedule for the US electric power sector
Ken Parsons, WPI

This presentation will highlight proposed research to estimate an incentive cost schedule necessary to achieve accelerated large-scale adoption of low emissions electric power generation technologies by US Independent Power Producers. Exploration of dynamic costs of physical and financial capital as a function of the rate of technology investment required to satisfy prospective GHG emissions regulations will be central to the research question. Dynamic costs will be combined with traditional levelized costs to establish an emissions incentive rate schedule. H.R. 2454; The American Clean Energy and Security Act of 2009 will serve as the provisional regulatory blueprint and target emissions schedule albeit absent a dynamic ‘Cap and Trade’ mechanism. A principal goal for this research is to illuminate potential points of policy resistance as might manifest in the form of agents’ reaction to unexpected cost dynamics, or transition cost ‘speed bump’, which could undermine the efficacy and or increase the cost of climate mitigation policy in the US electric power sector.

Platform Technologies and Multi-sided Markets: The Case of Electric Vehicles
David Keith, MIT

Efforts to introduce alternative fuel vehicles have been steadily building in recent years, motivated by concerns about greenhouse gas emissions, particulate air pollution and dependence on foreign oil. Despite these efforts, adoption of AFVs has been slow, tempered by barriers such as high costs, lack of refueling infrastructure and consumer perceptions. The AFV pathway of vehicle powertrain electrification is currently receiving enormous attention. All major automobile manufacturers have plans to develop plug-in or all-electric vehicles in coming years and various new players such as Tesla and Better Place are entering the market. However, if this technology is to scale-up successfully, the barriers identified above must be overcome. Co-ordination must be achieved between multiple parties including vehicle manufacturers, battery manufacturers, electricity companies and consumers, using a new and ubiquitous battery recharging infrastructure. In this presentation I will consider how the emerging literature on multi-sided markets can contribute to our understanding of the market for electric vehicles . Multi-sided markets are those where two or more groups of customers have complementary interests but rely on a moderating platform to facilitate transactions between them. Commonly cited examples of multi-sided markets include: computer operating systems, eBay, credit cards, newspapers and nightclubs. In addition to the key lessons, I will discuss the limitations of the existing literature on multi-sided markets and the potential to address these limitations using System Dynamics.

Dynamics of the Adoption of Identification Standards in the U.S Healthcare Supply Chain
Angelica Burbano, University of Arkansas

This research topic emerged as a way to approach a problem I observed during my work as a graduate research assistant at the Center for Innovation on Healthcare Logistics (CIHL). Data standards also referred to as identification standards have been around since 1974 when the Universal Product Code (UPC) was developed within the grocery industry. Since then other industries have tried to adopt similar standards in order to realize the benefits achieved by the grocery industry with the UPC adoption, which according to [4] have been estimated on 17 billion dollars.

Currently the healthcare supply chain lacks of identification standards for the products that flow

through the chain and for the locations associated with this product flow. Several benefits regarding identification standards adoption associated to supply chain process efficiency and patient safety improvements have been identified in many studies.

The broad benefits of adopting identification standards include:

Efficient traceability [7]
Improved order, invoice and receiving processes [3]
Reduced data cleansing efforts [1]
Increased contract compliance with Group Purchasing Organizations GPO/distributors and the ability to monitor rebates [6]
Ability to better monitor product recalls, track expiration dates and product authentication [2]
Reduction on medication administration errors [5]

Despite the estimated benefits of identification standards adoption the healthcare industry is moving at a slow pace. As reported by [8] the main contributors for the slow adoption include market drivers and technology issues. There is a major "chicken versus egg" problem on unit of use bar coding (i.e printing a barcode label at the smallest unit of use on every pharmaceutical and medical supply), initially manufacturers were unwilling to barcode their products since they knew the hospitals did not have the scanners to read them; and hospitals were reluctant to invest in barcode scanning technology if the products did not come labeled with barcodes. In the technology side, major healthcare information systems vendors have lagged behind in providing robust barcode enabled applications to support supply chain processes.

This research project will investigate the identification standards adoption process within health- care supply chain and develop a theoretical model based on the discussion of innovations theory; a system dynamics modeling approach will be used to model this process. The model will allow the identification of the barriers that are preventing the adoption of identification standards, facilitate understanding of the system behavior and allow the design and test of policies to move the system forward.

Building a system dynamics model of body weight regulation and obesity
Özge Karanfil, Simon Fraser University

The incidence of overweight is increasing across the world, and its adverse effects on health and economy have made obesity a major public health issue. Factors influencing the regulation of body weight have been under intensive investigation. The growing interest in body weight regulation has also culminated in the growth of simulation models that are employed as a tool to investigate this complex system, and as a means for evaluating hypotheses concerning the induction and maintenance of obesity.

The purpose of this modeling study is to develop a dynamic representation of our body weight regulatory system in normal and obese states, and to examine the interactions between the body composition and food intake regulation to see their effects on body weight maintenance. Considering the feedback complexity of the underlying structure and the different levels of factors involved (genetic, dietary, life-style, socio-economic), body weight regulation constitutes a suitable area for system dynamics simulation modeling. It is of considerable interest to identify the potential environmental and metabolic leverage points which determine our body weight trajectory and the adiposity at which our body weight is maintained. We aim to explore how these leverage points operate and to explain their potential role in explaining increasing rates of obesity.

Strategy, Human Resource and Sustainability: the case of a clean tech startup
Joe Hsueh, MIT

Having an innovative technology is necessary but not sufficient to the success of a clean tech company, one also needs to understand the strategies that enable a startup to grow successfully under various market conditions. Based on the literature in strategic human resource management (SHRM), finance and entrepreneurship, I build a system dynamics model of a clean tech startup company with a particular focus on its human resource management (HRM) structure. How HRM systems influence firm performance is a central question in the field of SHRM, the empirical findings show a positive relationship between high performance work system and firm performance, and call for a more explicit causal mechanism of how HRM drives performance.

I offer a dynamic causal feedback model of how various HRM policies (hiring, selection, compensation, stock grants, stock options and profit sharing) could drive employee attitude and behaviors (financial compensation, psychological ownership, burnout, job satisfaction, employee quality, turnover, experience, learning, productivity, work effort); how employee behaviors could drive business processes (product development, customer service, sales, marketing); and how business processes interact with market conditions (market size, prospect chain, sales cycle, carben tax) to generate firm performance (sales, revenue, cost, profit, market capitalization, stock price, earnings per share, ownerships of founders, employees and VCs).

I will present preliminary simulation results of the effects of individual and combined HRM policies on firm performance, and discuss how the simulation insights could help address some unresolved issues in SHRM. Further work is needed in case identification, calibration and model analysis. Going forward, I hope the model could help increase the odds of success for a clean tech startup as we understand more the dynamic effects of its strategic choices.

Teaching sustainability at UAlbany Business School
Linda Krzykowski*, Paul Miesing, Eliot Rich (* Primary presenter)

Sustainability goes beyond prudent use of scarce resources; it requires the use of business models that are themselves sustainable over time. Our "Going Green Globally" course brings first year MBA students and business clients together to create sustainable green practices. The intensive student experience uses systems thinking and feedback to frame strategic decisions with a holistic, rather than firm-centric, view. Students self-evaluate their own perspectives on environmental citizenry, study with environmental scientists and engineers, and collaborate with industry experts around the country to craft green practices for live clients. This cornerstone course addresses the recognized need to grow student capability to apply knowledge and successfully innovate in complex situations as well as developing sound green businesses for their future.

Last edited by NG 11/30/09