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Today I read an interesting article in the March issue of Systems Thinker. It is titled A Systemic Path to Lean Management by Thomas Johnson. He exposes the heart of Toyota’s Lean thinking and why so many have failed to follow their example.  Businesses have achieved temporary improvements, but the long term average for most of them has not been satisfying. Toyota on the other hand has managed to continuously improve their performance over a long time.

Go deeper

What is the difference? The reason for failure is, according to Johnson, that the Lean practitioners do not go deep enough and change their underlying thinking. The followers emulate, but does not see the system change needed. Most managers believe that to increase output they can manipulate the separate parts of the business operation independently. The prevalent idea is that the financial results is an linear addition of the contribution of the parts. A company could almost be condensed to, expressed in and controlled by a spreadsheet of financial results. The company is viewed as a machine.

When the management try to improve financial results, they will probably destroy relationships; the core of true business. They might have short term improvements, but the results will be devastating in the long run. This way of thinking of a company is influenced by the old concepts of Physics about mechanical processes and has been erroneously transferred to social systems.

A living social system

This is not the Toyota way, according to Johnson. They build their business as a system that itself naturally produces results. Business is most of all a human living social system, a system of relationships and improvement lies in nurturing and reinforcing the system of relationships that produces the desired results, ultimately for the customers.

Accounting

Johnson challenges the usual management accounting practises, by saying that one-dimensional quantities can only describe a living system. They cannot successfully be used to explain what is going on or used to control multidimensional interactions going on in the business. Toyota dispenses with the usual production control and accounting control for daily operation. They do it differently. Johnson says:

The prevalence of management accounting control systems in American business probably contributes more than any single thing to the confusion of levels that causes managers to believe they can run operations mechanically by chasing financial targets, not by nurturing and improving the underlying system of human relationships from which such results emerge.

This is very interesting stuff, isn’t it? Lean thinking and systems thinking, hand in hand. It deserves a closer look, especially how Toyota implements it. Does Johnson have a too idealistic view of Toyota? He continues to discuss this subject in Profit beyond Measure. This book ended up in my wish list at Amazon immediately.

Trust in a relationship

When we got married some 26 years ago, someone gave us the advice to say “I love you” every day. It was a simple recipe and we started doing that; saying positive, encouraging and loving words to each other every day. This formed a habit, which our children eventually got into also. Sometimes we don’t feel a thing, but we keep on saying it anyway. It gets easier and is more powerful when trust has been built up for some years. It is like investing in the future. We have had our ups and downs, but this simple habit has been a cornerstone in building a warm and lasting relationship which means a lot to me. Nowadays when I come home after a troublesome day, I just need a couple of minutes cooking dinner together to get on the right side again. We have trust and the words of my wife have deep effect.

Structure

This simple story could be expressed in system dynamics (SD) concepts. A habit is a pattern, consisting of reoccurring similar events and resulting consequences. The consequences feeds back and affect the type of event that caused it. These patterns form a dynamic structure, intangible in this case but none the less very real. This structure was formed over some time and as established it now has almost a life of its own. It affects the surrounding environment.

System dynamics is a way to describe behaviour that change over time. It is like an abstract language, with a terminology that naturally explains what is happening around us. Abstractions and models of the real world can be more or less fitting. In system terminology the above could be described as below.

A simple model

Encouraging, positive Words affects Change of trust which makes Trust increase. Trust is like a bathtub and Change of trust is like the faucet controlling the flow of water. The arrow going out from Trust symbolizes that negative words drain Trust. With positive words, Trust accumulates over time. In the model there is also a relationship between Trust back to Change of trust, meaning that as Trust increases, Words have bigger effect. This feedback reinforces the increase of Trust.

Remember that this is a simple model to illustrate the concepts of system dynamics.

Different perspective

What difference does it make to describe the situation this way? We are typically not trained to see patterns over time, feedbacks or accumulations and this lack of perspective brings us into trouble. We try to change a situation and and are surprised as it becomes worse. When something goes wrong we look for someone to blame, but the truth is that we together have created a structure that produces the behaviour, good and bad. Our thinking, deeply affected by media, is short-sighted and focuses on simple event-cause relationships and details.

Smarter navigation

What difference does it make to know about dynamics? If we are conscious of these principles we can purposely design or redesign structures around us for the better. If we cannot manage the system, we can at least navigate in a smarter way. If we realize the above structure in a relationship, we understand that it takes time to build trust and that we have to be patient. Trust is a stock and is very valuable. It shouldn’t easily be thrown away.

Have you ever been to a cheap hotel and experienced the difficulties of getting a comfortable temperature in the shower? I have. Did it occur to you when battling with the tap, that you might not be the only shower-taker?

Inspired by a chapter in Morecrofts book, I made a model of the shower problem in Vensim software. The model (part of it shown below) simulates the experience of taking a shower and adjusting the tap to get a comfortable temperature. The setup is like a game. You start the simulation,  and in the diagram you see the shower head temperature changing “live” as you adjust the tap with the slider in the upper left corner. You compete with the computer that manages a hidden shower and your goal is to have as little temperature difference as possible for 120 seconds. The hidden shower shares the same hot water pipe as you use. It means that you are affected by the other person fiddling on his tap.

Below you can see one of my simulations (click on it to enlarge). it is very tricky to reach your goal, when someone else competes for the same resources; a very good metaphor for situations in real life.

Each shower-taker has an adjustment strategy appropriate for a single shower. His mindset is that of a local world. His good intention to stabilize temperature gives surprising effects and sometimes even increases instability. He gets frustrated and upset, because he does not understand how things work together. It is a confusing world, difficult to manage. A world of dependencies and feedback loops.

A central concept in system dynamics is feedback loops. We are surrounded by feedback loops that generate and control change through time. Delay is another key concept; the result of our actions does not appear at once. To successfully manage the world around us, we need to understand these concepts. Feedback loops and delays work together and builds structure gives rise to the dynamic behaviour of a system. Sometimes we can manage or control our environment, but most of the time all we can do is try to navigate the best we can in the world.

The thought of teaching the dynamic behaviour of systems by gaming is a very interesting thought. I would like to go deeper into that. Anyone out there with the same interest?

I have been busy studying system dynamics during the last few months and I have invested almost every spare hour into modelling scenarios of different characters. The course at UNESCO have come to an end. I have only good words to say about it and the head of the course, Juan Garcia.

The course started with a short theory part followed by a number of modelling exercises. I put some extra work into the practical modelling and policy testing to really digest it. The exercises consisted of descriptive text and a careful guide how to go about modelling it in Vensim. There were also a number of questions to be answered to deepen your understanding. I found it very challenging and rewarding to work from the text and I tried to do as much modelling as possible before following the guide. I had many interesting conversations with the professor why things behave as they do.

I strongly believe that in order to really understand systems thinking you have to study system dynamics. It is not enough to read about archetypes and general systems solutions. I also believe that in order to understand system dynamics you have to do practical modelling on your own. Not until you have wrestled with trying to express real situations or textual descriptions in a dynamic model you will begin to understand with the meaning that you see things in a new way. It is like learning a new, richer language.

I continue my system dynamics studies by working my way through the Jay Forrester DVD seminar and it is very rewarding. I highly recommend it.

My top resources among those listed here for system dynamics so far are:

Sterman, Business Dynamics – Systems Thinking and Modeling for a Complex World

Morecroft, Strategic Modelling and Business Dynamics

Meadows, Thinking in Systems

Universitat Politecnica de Catalunya and practical work with Vensim

Jay Forrester PhD Seminar in System Dynamics, DVD, 11 disc set

Other posts about this subject you might want to read:
System Dynamics Video course
Update on the system dynamics course
Me, a student