system archetype - 3 limits and overcome -...
Post on 13-Aug-2020
2 Views
Preview:
TRANSCRIPT
System Archetype - 3
Limits and Overcome
忠北大學校 金 相 郁 敎授 sierra@cbnu.ac.kr
Topic-11
System Dynamics
Spring, 2015
1. Limits to Growth
2. Growth and Investment
Contents
순 서
2
1. Limit to Growth
3
SK Telecom made a desperate efforts to attract new subscribers for the expansion of market-based
power. Aggressive promotions in Newspapers, TV, and Internet, and a number of customer
attraction policy such as handset subsidies proved successful. As a result, many new customers
subscribed to the SK services and SK came to believe that it could remain a market leader and
maintain a sustainable growth. (Figure a)
However, as the era of one person one cell-phone came in and the market was getting more
saturated, the number of potential customers was gradually running out. (Figure b)
In addition, paying much attention to securing subscribers at the initial stage, SK Telecom failed
to notice in advance that subscribers exceeding its service capacity would create several problems.
In fact SK Telecom was facing the service quality deterioration, and thus customer satisfaction
decline, no extra capacity to invest in research and developments, and what’s more, departure of
existing customers to other companies due to the service rate increases to make up for the
promotion costs. (Figure c).
+ + =
가입자 수
시간 (a) (b) (c)
(a) (b) (c)
1. Limit to Growth
4
Limits to Growth was introduced by Donella Meadows, Dennis Meadows, Jørgen Randers
and William Behrens in 1972 in their book of the same name. The book has spawned a
generation of “World” models that critically examine the policies that deplete natural
resources over long periods of time, arguing that we are sowing the seeds of our own
future destruction.
The theory is not without is challengers and detractors. Nevertheless, it does put forth the
premise that growth cannot continue unabated in an unrestricted reinforcing dynamic.
In simple terms, the lesson from Limits to Growth is that something always pushes back.
There is no such thing as unrestricted positive reinforcing behavior. There are always limits
that eventually make themselves known and felt.
Efforts Performance Limiting Action
+
+
+
-
Constraints
+
1. Limit to Growth
5
Dynamic Theory
This archetype states that a reinforcing process of accelerating growth (or expansion) will
encounter a balancing process as the limit of that system is approached. It hypothesizes that
continuing efforts will produce diminishing returns as one approaches the limits.
Behavior Over Time
Efforts to grow an effect are successful in
initial stages, perhaps exponentially so.
However, as the limits to growth are
approached, the growth engine begins to
lose its effectiveness and the rate of growth
begins to flatten. In the end, despite
continued pressure from the growth
engine, the rate of growth stops and then
reverses.
Story Line(1) - Imagephone’s Sales over time
Once Imagephone(IP)’s first video telephone model is available at an acceptable price
and can transmit a recognizable image, the company is off and running. Miriam and
Joe, engineering school buddies and IP’s founding partners are convinced that the
secret to bringing in sales is to maintain investment in R&D.
As long as they keep developing technological refinements and innovations to their
product line, they will have a steady stream of new products and product
enhancements, they believe, will bring in both new and old customers.
Techies and gadget lovers snap up IP products. The company acquire the reputation
for producing high quality products, and customers discover an increasing range of
uses for them, from business conferences to remote product displays to family visits.
As IP adds computer interfaces and wireless technology, sales boom.
In the beginning, Miriam had handled marketing and finance, and Joe had worked
with manufacturing and shipping. They decided to bring in Scott to manage product
innovation. Otherwise, to keep cost down and maintain a focus on R&D, the partners
use well educated staff and contractors and avoid building a large organization
structure.
6
1. Limit to Growth
However, as sales increase and the number of products grows, the pressure to restructure
the company mounts. The partners are running themselves ragged trying to manage
strategic and financial planning, marketing, sales force development, retail relationships,
purchasing, human resources, and half dozen other functions. The R&D technical staff
can no longer field customer inquiries. Product instruction booklets are either late or
inaccurate, and accessories, such as cords, plugs, and mounts, are sometimes missing
from product boxes. New products begin to reach retailer late, sometimes by a week or
more.
With outside help, Miriam, Joe, Scott lay out a design for the company and go out to
look for more managers and staff. Unfortunately, they underestimated the delays in
finding and training people as well as in communicating their expectations to suppliers
and contractors. Several retail outlets cut back on their orders and stop featuring IP
products in their promotions. Products move more slowly. With sales slumping, the
management team has no choice but to reduce investment. The company falls behind
the competition and eventually goes out of business.
7
1. Limit to Growth
Applying Structure to Story
R3 B4 Sales
New Products and
Accessories
R&D Investment Pressure in
Management
Customer Service
Quality
Customer
Satisfaction
Management
Capacity
+
+
+
+
+
-
+
+
- In a causal loop diagram of the ImagePhone story, management capacity is the constraint that
puts a limit on the quality of customer services.
- As we saw in the story, as sales go up, investment in R&D also rises, leading to new products and
accessories, which in turn boost sales(R3).
- But as sales go up, the growth also increases pressure on management, which reduces the quality
of customer services. As customer service worsens, customer satisfaction decreases, and so do
sales (B4).
Sales
8
1. Limit to Growth
The Storyline (2): Limits to Empowerment
This is a story of empowerment in the hotel industry. As we saw, hotels have cut back on the size of their management teams to contain costs. As a result, direct service staff handling reservations, check in, luggage, meal service, and other guest services have been given authority to offer extras and even compensation in response to guest requests or complaints. The overriding goal is to create the customer royalty.
How far can hotels go with this efforts? Image the scenario. Management believes that empowering staff members to exercise local authority to satisfy customers will increase customer royalty. More royal customers means more guests and more revenue. The success of this empowerment emphasis leads managers to encourage staff to take even more initiative at the local level.
As staffs has more authority to satisfy customers, they gain more experience about what customers really want. This knowledge leads them to recommend other changes in what services are provided and how. They might even begin to insist on more of a voice in how the hotels are run. But what happens when they reach the limits of what hotel management is willing to empower them to do?
Frustration sets in. Staff begins discourages and resentful. Some of them care less about using their authority to satisfy guests; others leave for positions where they can continue to exercise their new found authority. Returning guests notice the difference first and stop recommending hotel to their friends and colleagues. New customers find nothing to differentiate one hotel from any other. And make next reservation where they can get a good room rate.
9
1. Limit to Growth
Limit Reached
Responsiveness
To Guests
Customer Royalty
Responsiveness
to Guests
Customer
Royalty
Revenues
Mgmt's Emphasis
on Empowerment
Ability to Exercise
local Authority
Staff's Expectation
for Involvement in
Higher Decisions
Mgmt's Willingness to
Expand Involvement
Staff Cynicism about
Empowerment
Mgmt's Limit on
Staff Involvement
+
+
+
+
+
+
-
-
-
+
R5 B6
10
Applying Structure to Story
1. Limit to Growth
R&D
Budget
New
Products
Revenues
Size of Engineer's
Staff
Management Burden to Senior
Engineers
Product Development
Time Senior Engineer's Ability to Manage
R B
Growth
Promotion
Opportunities
Morale
Motivation and
Productivity
Saturation of
Market Niche
Size of Market
Niche
R B
Similar Cases
For the two CLDs tell the stories and discuss
the limits of growth.
11
1. Limit to Growth
The Systemic Structure behind “Limits to Success”
- The “Limits to Growth” archetype has a structure characterized by a reinforcing process(which
serves as the initial growth engine) and balancing process (which constrains the limits that
eventually cause growth to level off).
- As efforts increase, so does performance, which encourages even more efforts (R1). But the
performance (or growth) itself is linked to a limiting factor or action such that, as performance
increases, so do the forces slowing the success. The limiting factor then comes back around to
decrease performance (B2).
- The key thing to realize with this dynamic is that the reinforcing process dominates during the
growth period, until the balancing process becomes dominant as it cuts off further growth potential.
12
1. Limit to Growth
Plateauing Performance : Behavior over time in “Limits to Growth”
이 아키타입의 행태는 지수함수적 성장임, 그 지수함수적 성장은 결국 수준이
떨어지거나 쇠퇴하게 됨. 이 수준하락이나 쇠퇴는 심지어 성과를 재창출하기 위하여
노력을 더 많이 증가시켜도 S자 모양의 커브를 보임
13
1. Limit to Growth
Efforts
Time
①
②
Performance
강화루프(R) : 선순환
균형루프(B) : 한계 수렴
강화루프(R) : 악순환
A deeper look at the “limits to success” structure
One way of looking at it is as a structure in which the accelerator is attached to the
brakes. Another way of seeing it is as a gardener who sows the ‘seeds of destruction’
while tending to the growth of the plants. Third way is to set it as similar to stuffing
an empty trash bag.
Doing the Two steps.
The first step is the reinforcing process, which produces the growth phase.
The second step is the mounting – but delayed – impact of the limiting factor: the
brakes or the seeds of destruction. One reason the second step often goes unnoticed
for a while is that it do not take effects until time has gone.
The second step has another common aspect: It often is connected with some part of
the enterprise that is remote from the engine of growth.
14
1. Limit to Growth
Managing “Limits to Success”
The highest leverage in managing a “Limits to Success” situation lies in acting early to address
limit before it starts undermining your efforts. Here are some guidelines.
Use the archetype before you hit the limit
• This archetype is most useful when used before you hit a limit.
• By tracing the implications of the pressures from growth through the causal loop diagram of the
system, identifying the limits, and working to remove them before the limit is reached.
Assume that you will hit various limits, and try to clarify which ones they might be.
• As you make plans for growth, automatically assume that something will eventually limit the growth,
and then go looking for those limits. Study other companies or groups who have embarked on similar
ventures to see what limits they may have encountered on their journey of growth.
Avoid the temptation to push the system harder once you reach a limit
• Once limits kick in and you encounter the balancing forces that are working against your engine of
growth, avoid the knee- jerk reaction of just applying more of what initially worked .
• Remind of the adage, "The harder we push, the harder the system push back”.
• The real leverage in this “Limit to Growth” situation does not lie in pushing harder on the engine of
growth, but in finding and managing the factor or factors that are limiting success while there still time
and money to do so.
• This strategy may involve taking politically difficult steps, such as investing in new capacity.
15
1. Limit to Growth
Activity
- National Courier, a package expediting company, implements a quality initiative. After
the management speeches and team meetings, both line workers and managers begin to
initiate some quality improvement projects and then an increase in actual quality of
services, especially tracking and on-time pick-ups. These improvements highlight the
importance of the quality initiative and generate motivation to do even more. The
company sets up additional quality improvement projects.
- As people get involved with the projects they realize they need more skills related to
the issues they are surfacing; for example, financial accounting concepts and
operations management. The training department goes into overdrive to find, create,
and deliver training, but their staff and their budget are too limited to meet the growing
needs for training. As a result, staff keeps falling behind in their skills.
- Eventually, people become discouraged by their inability to implement or pursue the
improvement they want to make. The number of quality improvement projects tapers
off, and enthusiasm for the whole idea just fizzles away.
16
1. Limit to Growth
- National Courier는 품질 향상을 위한 프로젝트를 시작하여 서비스의 실질적인 질이 향상되었고, 특히 제시간에 픽업 서비스를 할 수 있었다. 이러한 향상은 품질 향상의 중요성을
강조하고 동기부여를 더 추진한 결과이다. 회사는 추가적인 품질 향상 프로젝트를 수행하였다.
그러나 표면적으로 느꼈던 것들 보다 더 많은 기술들이 연관되어 있다는 것을 깨닫고 훈련이 필요하다는 것을 알았다. 그러나 예산이 훈련하기 위해 필요한 것보다 매우 부족했고
그 결과로 직원들의 기술은 감소하게 되었다. 마침내 사람들은 권한을 수행하지 못한 무능력과 이룩하고자 하는 목표추구로 인해 용기를 잃어 품질 향상 프로젝트의 수는 점점 줄어들었고 전체 아이디어는 실패하게 되었다.
17
1. Limit to Growth
1. Summarize the “Limits to Growth” theme in this story in two or three sentences.
2. Identify the key variables in the story.
- The growth engine is when ( ) begin. As a result, ( )
increases, so ( ) goes up, ( ) then increases, which
reinforces the increase in the original factor. After a while, the ( ) begins to
grow, but it is constrained by ( ), which reduces the ( ).
- As a result, people do not develop the ( ) the projects, which undermines
further growth in improvement projects.
18
1. Limit to Growth
3. Graph the behavior over time and draw CLD for National courier’s quality initiatives.
Quality of
Services
Importance of
Quality Initiative
Quality
Improvement
Projects
Need for
New Skills
Adequacy of
Training
Ability to
Implement
Training
Capacity
+
+ -
+ + +
+
Motivation
+ +
①
②
Performance
2. Growth and Investment
19
The Growth and Underinvestment archetype builds upon Limits to Growth by explicitly
addressing a firm’s need to invest in its own resources, capabilities and core competencies. A growing
action seeks to stimulate and reinforce demand while the firm’s current
performance level may behave as the limit to its growth. Similar to Limits to Growth, if current
performance is adversely affecting demand, no amount of growing action will overcome customers’
reluctance to reward the organization with sales. Unique to Growth and Underinvestment is the long-
term requirement to continue to keep its capabilities and core competencies at a level that ensures its
competitive advantage. There are several characteristics of the investment balancing loop that are
critical from a managerial decision making point of view.
First, although performance standards are presented as a constant (no causal influences are
working on it), they themselves may be subject to the Eroding Goals archetype. This may be
situational or it may be a trend that has developed over long periods of time, as the organization loses
confidence in its own ability to perform at the level of customer needs and expectations.
Second, when coupled with the firm’s current performance, performance standards combine to exert a
corrosive influence on the perceived need for investment. At any given performance standard
(regardless of any declining trend it may be exhibiting over time), if current performance is falling
short, the adage, “why throw good money after bad” can gain a hearing within the organization.
Third, as confidence declines, so too may investment itself. Additionally, declining performance leads
to declining revenue which in turn reduces cash available for investment.
Fourth, even if the organization makes an investment, if it has not anticipated the delay in
bringing the increased capacity and capability on line, it may turn out to be a long run for a short
slide.
2. Growth and Investment
20
Dynamic Theory
This archetype applies when growth approaches a limit that can be overcome if capacity
investments are made. If a system is stretched beyond its limit, it will compensate by lowering
performance standards, which reduces the perceived need for investment. It also leads to lower
performance, which further justifies underinvestment over time.
Behavior Over Time
Data that shows declining performance and
growth at the same time that the rate of
investment is slowing or falling may signal
that this archetype is at work.
Correspondingly, it is not uncommon for
performance standards to erode as the
degree of difficulty in reaching performance
standards increases.
※ System Archetype
2. Growth and Investment
21
Growth approaches a limit that could be
eliminated or postponed if capacity
investment is made.
Instead, as a result of policies or delays
in the system, demand or performance
degrades, limiting further growth.
The declining demand leads to further
withholding of investment or even
reduction in capacity, causing even
worse performance
Growth Effort Demand
(Performance)
Impact of Limiting Factor
Perceived Need to invest
Performance Standard
Investment in Capacity
Capacity
S
S
S
O
R B1
B2
O
S
S
S
O
Capacity
Demand
Perceived needs
to invest
Capacity
Investment
Capacity Reductions
A B C D E
In Competitive environment, a company is not likely to be able to keep drawing customers
back each time they expand capacity to meet customer’s needs. When the demand does not
recover after time D, it cuts capacity below the demand level (time E), so demand falls even
lower, which triggers another round of capacity cuts. Downward spiral of adjustment
Practice Performance or Capability
Adequacy by Equipment
Equipment Quality Standard
Perceived need to invest in better
equipment
Investment in New Equipment
2. Growth and Investment
22
“Growth and Underinvestment “ in Electric House
2. Growth and Investment
Demand for Electric House Products
Efforts to grow the Business
Order Backlog
Customer Frustration
Perceived Need to invest in Production capacity
Investment in Production Capacity
Production Capacity
Electric House Backlog Standard
+
-
+
+
-
+
+
+
- +
23
미국내 저가 항공사로 큰 인기를 얻고 있는 제트블루 항공사가 한 승객을 화장실에 앉혔
다가 12일 소송을 당했다. 지난 2월 샌디에이고에서 뉴욕으로 가는 제트블루 항공을 이
용했던 코캄 무틀루라는 승객은 약 90분 동안 자신이 앉은 자리를 승무원에게 빼앗겼으
며(?) 자신은 화장실에 앉혀졌다는 이유로 이 항공사를 상대로 이날 200만 달러의 소송
을 제기했다.
무틀루는 제트블루 항공사가 직원들에게 친지들 등에 선물, 이용할 수 있도록 하는 무료
좌석티킷을 이용해 여행을 하던 중이었는데, 갑자기 기장이 나타나 그에게 "자리를 양보
하고 화장실에서 한 시간 반 동안 머물다 오라"고 요구했다고. 기장은 승무원 좌석에 앉
아있던 한 승무원이 자기의 "자리가 불편하다"고 하자 무틀루에게 다가가 자리를 양보하
라고 지시하는가 하면, 무틀루에게는 승무원좌석은 승무원만 앉아야 한다는 이유로 이용
하지 못하게 해 그는 할 수 없이 화장실 좌석을 이용할 수 밖에 없었다는 것이다.
무틀루는 소장에서 자신이 화장실 좌석을 어떻게 앉아있냐고 항변하자 "나는 기장인데
이 비행기는 내 명령에 의해 움직인다. 당신은 이 비행기에 탄 것만도 고마와해야 한다"
고 으름장을 놓았다고 주장했다. 항공기에서는 운항시 갑작스런 난기류를 우려, 항시 좌
석벨트를 메도록 하고 있음에도 불구하고 무틀루는 좌석벨트도 없는 화장실에 승객을 앉
혀놓은 것은 승객의 안전을 포기하도록 한 것이라고 주장했다.
뉴욕주 대법원은 이날 제트 블루 항공사가 고의적으로 승객의 안전을 방조하고 안전벨트
로 없는 자리에 앉히도록 함으로써 연방법을 위반했다고 소송을 접수했다.이에대해 제트
블루 항공사측은 아무런 해명이나 논평을 하지 않았다. 【워싱턴=뉴시스】
2. Growth and Investment
24
25
2. Growth and Investment
People Express Airlines Revenue
Profit
Service Quality
Fleet
Service Capacity
26
2. Growth and Investment
PE Fleet and scheduled Flight
Number of Passengers
PE Revenue PE Service Quality
PE Reputation
Service Quality Standard
Addition to Service Quality
PE Service Capacity
Limits to Growth and Shift to Burden Archetype
Growth and Underinvestment = Growth to limit + Shifting the Burden
Revenue
Size of Sales Force
Number of Orders
+
+ + Size of Backlog
Delivery Time
Sales Difficulty
+ +
+
-
Perceived Need to Improve Delivery Time
Planned Additions to Capacity
Production Capacity
+ +
+ -
Delivery Time Standard
-
27
2. Growth and Investment
A deeper look at “Growth and Underinvestment”
To determine whether this structure is at work, look for oscillating trends in
demand (whether it is for products, time, resources, capital) and capacity
investments to meet that demand.
If the company pursue a growth strategy, consider whether the company is
planning for enough investment to sustain the eventual growth. When discussion
comes up about cost cutting, layoffs or reduced investment in response to a change
in the market or a drop in demand, explore the possible impacts of these policies
on growth.
The two balancing loops can be challenging to untangle. We can see that as the
growth encounters a limit, a healthy system would operate to anticipate that limit
and reduce its impact by adding capacity. However, many companies fail to
perceive the limit in time. Worse, as the limit begins to slow growth, the business
may respond by cutting investment even further, which pushes the overall business
downward.
28
2. Growth and Investment
Managing “Growth and Underinvestment”
To avoid “growth and underinvestment” trap, you need to develop the ability to
anticipate and choose limits rather than letting the system do it. The ability to find
ways to remove limits by investing in needed capacity in a timely manner.
Accompanying this is made difficult because this structure contains two sources of
significant delay, perception delay and capacity acquisition delay, either of which
can derail your efforts.
How to manage the two sources of delays: Perception delay and capacity acquisition delay
Capacity Acquisition delay
Once a decision is made to invest, a second delay - in capacity acquisition - means
that additional time is required for the decision to translate into tangible increases
in capacity. In many cases, things may even get worse before they get better.
Underestimating this delay may lead you to take premature countermeasures that
may only aggravate the situation.
29
2. Growth and Investment
Perception delay
• Take time early in the growth phase to identify potential limits to growth, especially capacity limits.
- Ask yourself, “ If we succeed in growing our sales, what will happen? How much production, customer service, or delivery capacity will we need to respond to higher sales? What will be the impact if we have lower sales? Studying the market responses and the characteristics of target customers during an upswing can help you anticipate these future capacity need.
• Make sure that internal systems are set to respond to growth
- if you have an aggressive strategy and a sluggish internal system for responding to performance shortfalls, you may have created a structural inability to handle continued growth. For example, how much lead time does your manufacturing team to beef up production? If your salespeople increase sales by 40% in a quarter and your plant can expand production at the rate of 20%, you can expect a backlog to build up quickly.
• Explore the assumptions driving capacity investment decisions
- past performance may be a consideration but should not dominate decision. Instead, identify the market factors that drive growth. Otherwise, you may make investment decision that are too dependent on past experience and not sufficiently linked to present or future desires and needs.
• Ensure that everyone involved has a well informed set of assumptions (mental model) about the size of the total potential market.
30
2. Growth and Investment
Summary
Growth and underinvestment is a relatively complex, composite archetype. This
contains a number of dynamics, including an engine of growth, a constraint, and a
balancing process with a goal. In essence, we can see it as a coupling of the “limit
to success” structure with the “drifting goals” structure.
It is relevant for many areas of an organization from sales to marketing to
production, because it graphically shows the interrelationship between their
individual growth efforts and investment decisions.
31
2. Growth and Investment
ExpressTech
• This company has taken the lead in the US mail-order PC business by combining low
production costs with a customer base of small businesses and technically knowledgeable
users.
• Low taxes and cheap labor at its midwest headquarters, plus a ‘no frills’ corporate style,
have allowed ExpressTech to keep its production costs low relative to competitors.
• Consequently, the company can offer its customers a low-cost, high quality product with
dependable customer service. With all these advantages in place, ExpressTech has
experienced phenomenal growth.
• One day ET reaches a critical point at which it has to keep its revenues growing strongly
while maintaining quality and service and not losing control of costs. For the first time the
company experiences a drop in sales. The CEO attribiutes the decline to a backlog of
orders from the previous year that have inflated first-quarter results. Continuing sales
drops indicate a larger problem-declining customer-service quality.
• But finding and training technical and assembly-line workers in the company’s rural
setting quickly enough to keep up with customer demand is difficult and time-consuming.
Staff shortage increase customer complaints about delayed deliveries and lead to long
waits on customer service lines.
Activity
32
2. Growth and Investment
Customer Base Promotion
Revenue 지각품질 (Percieved Quality)
기대품질 (Expected Quality)
Q = E - P
서비스 개선 투자
(Investement
in Service)
서비스 능력 (Service Capacity)
S
S
S
O S
O S
S S
S
R B1
B2
33
고객서비스
(Customer Services)
대 고객 서비스 투자 (Investment in Services)
매출(Revenue)
Time
Inflection points
2. Growth and Investment
3. Graph the behavior over time and draw CLD for the story.
34
2. Growth and Investment
Let’s go back to slide 4. And draw CLD.
+ + =
가입자 수
시간 (a) (b) (c)
(a) (b) (c)
top related