Lecture 9 James R. Burns Fall 2010

Rate Equations– EMPLOYEE SECTOR growth rate = growth norm * Junior professionals Mature rate = Junior professionals/mature time Grow rate = growth norm * Senior professionals Retire rate = Senior professionals / work time Death rate = retired / ret life

Rate Equations– APARTMENT SECTOR Apt const rate = (Apts desired – Apartments)/const time Apt obs rate = Apartments / lifetime

Rate EquationsHOMES SECTOR Home const rate = (Homes desired – Homes) / const time Home obs rate = Homes / lifetime

Rate EquationsRETIREMENT SECTOR Ret const rate = (Retire units desired – Retire units) / const time Ret obs rate = Retire units / lifetime

Auxiliary equations Apts desired = Apts required * Junior professionals Homes desired = Homes reqd * Senior professionals Retire units desired = Ret reqd * Retired

To do this right… You had to recognize sectors Sectorall the structure associated with a single flow Apartments cannot flow into homes Homes cannot flow into retirement units You had to recognize the exponential smoothing structure A desired condition An actual condition

What about the stock equations?

Natural Gas problem

Equations Birth rate = population * Birth rate norm Death rate = population * Death rate norm Gas usage rate = gas usage normal * population * gas reserves remaining / initial gas reserves

Dimensionless ratios Doesnt change the dimensionality of the equation, but does allow for effects to be entered

Another dimensionless ratio Rabbit populations grow rapidly with a reproduction fraction of.125 per month When the population reaches the carrying capacity of 1000, the net growth rate falls back to zero, and the population stabilizes Starting with two rabbits, run for 100 months with a time step of 1 month (This model has two loops, an exponential growth loop (also called a reinforcing loop) and a balancing loop)

Shifting loop Dominance Assumes the following relation for Effect of Resources Effect of Resources = (carrying capacity - Rabbits)/carrying capacity This is a multiplier Multipliers are always dimless (dimensionless) When rabbits are near zero, this is near 1 When rabbits are near carrying capacity, this is near zero This will shut down the net rabbit birth rate

Dimensionality Considerations VENSIM will check for dimensional consistency if you enter dimensions Rigorously, all models must be dimensionally consistent What ever units you use for stocks, the associated rates must have those units divided by TIME As we have seen before

VENSIMthe view MENU ITEM

VENSIM New Open Save Print Cut Copy Paste Set {define dataset name} Run Synthesim Run Reality check Build windows Build output windows Control Panel

Variables Time axis Scaling Datasets Graphs

The new leadership involves… Managing the COMMONS DESIGN Purpose Story Articulate…. the goal, the standard, the vision The ground-truth reality Use the gap to produce CREATIVE TENSION

What must leaders design? Policies, strategies, systems, organizations, specifically Selection policies Vision strategies Value systems Culture systems Measurement systems Rewards systems Criteria by which excellence will be determined

Gives rise to a new discipline: Business Design Must loose focus on the P&L statement Look at the long term, instead Have to get away from piecemeal reactions to problems Have to integrate the five component technologies Must integrate vision, values, purpose, systems thinking, and mental models The synergy of the disciplines can propel an organization to major breakthroughs

First tasks of Business Design Design the governing ideas--purpose, vision, and core values Building shared vision is important because it fosters a longer-term orientation and an imperative for learning Get the systems thinking going early on Get the concept of mental models and surfacing underlying assumptions going early as well

Subsequent tasks of Business Design Design the learning processes Get personal mastery going

The Leader as Steward Leaders have a purpose story This is an overarching explanation of why they do what they do how their organizations need to evolve how that evolution is part of something larger Most gifted leaders have a larger story

The Leader as Teacher First job of leader is to define reality Leader must help people achieve more accurate, more insightful and more empowering views of reality Must view reality at four levels: events, patterns, structures and ultimately a purpose story