bdsm-ch3 modeling process

8/14/2019 BDSM-CH3 Modeling Process

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Business Dynamics and System

ModelingChapter 3: Modeling

Process

Pard Teekasap

Southern New HampshireUniversity


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Outline

1.Purpose of modeling

2.The client and the modeler

3.Steps of the modeling process4.Modeling is iterative

5.Overview of the modeling process


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Purpose of modeling

Who are the most important peoplein the safe operation of an aircraft?

Designer OR Pilot

Too many managers spend far toomuch time acting as pilots ratherthan creating an organizational

structure consistent with theirvision and values


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Small or Big Problem

Solutions to small problems yieldsmall rewards

Focus your model on the importantissues, on the problems where yourwork can have lasting benefit, onthe problems you care most deeply

about


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Client and Modeler

Clients = people you must influencefor your work to have impact

Purpose is to help the clients solvetheir problem. If the clientsperceive your model does notaddress their concerns or lose

confidence in it, youll have littleimpact


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Clients are not always right

Modelers have a responsibility torequire their clients to justify theiropinions, ground their views in

data, and consider new viewpoints

When the clients ask for somethingyou think is unnecessary or

misguided, you must work withthem to resolve the issue


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Steps of the modelingprocess

1. Problem Articulation(Boundary Selection)

3. Formulation4. Testing

5. PolicyFormulation& Evaluation

2. DynamicHypothesis


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Iterative with real world

MentalModelsof Real

World

Strategy,Structure,Decision

Rules

RealWorld

Information

Feedback

Decisions(Organizational

Experiments) 1. Problem Articulation(Boundary Selection)

3. Formulation4. Testing

5. PolicyFormulation& Evaluation

2. DynamicHypothesis


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Problem articulation

What is the issue the clients are mostconcerned with?

What problem are they trying toaddress?

What is the real problem, not just thesymptom of difficulty?

What is the purpose of the model?


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Can I model the wholeworld?

Is it useful to have the map asdetailed as the territory?

To be useful, model must address a

specific problem and simplify Usefulness of models lies in the fact

that they simplify reality, creating a

representation of it we cancomprehend

The model should be simple enoughso the assumptions could be

examined


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Methods for articulate theproblem

References Modes

Time Horizon


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Reference Modes

Set of graphs and other descriptivedata showing the development ofthe problem over time

You and the clients must identify thetime horizon and define variablesand concepts you consider to be

important for understanding theproblem and designing policies tosolve it


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Time Horizon

How long should I collect the data?

It should far enough back in historyto show how the problem emergedand describe its symptom

How far should I simulate to?

It should far enough into the future tocapture the delayed and indirecteffects of potential policies


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US Energy market is stable

0

6

12

18

1986 1988 1990 1992 1994 1996

MillionBarrels/Day

Alaska

Production,Lower 48 States

Consumption

Imports

0

5

10

15

20

25

30

1986 1988 1990 1992 1994 1996

1990$/bbl


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Are you sure it is stable?

0

6

12

18

1870 1890 1910 1930 1950 1970 1990

MillionBarrels/Day

Alaska

Production,

Lower 48 States

Consumption

Imports

0

10

20

30

40

50

1870 1890 1910 1930 1950 1970 1990

1990$/bbl


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Or it is stable?

-10000 -5000 0 5000

F

ossilEnergyP

roduction

Year

IronAge First Oil

ShockIndustrial

Revolution


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So how long should Isimulate

A good rule of thumb is to set thetime horizon several times as longas the longest time delays in the

system, and then some


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Formulating a dynamichypothesis

Develop a theory to account for theproblematic behavior

Dynamic because it must provide an

explanation of the dynamicscharacterizing the problem in term ofunderlying feedback and stock andflow structure of the system

Hypothesis because its provisional,subject to revision or abandonment

Goal is to help the client develop anendogenous explanation for theproblematic dynamics


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Endogenous Explanation

An endogenous theory = thedynamics of a system through theinteraction of the variables and

agents represented in the model A exogenous variables theory

explains the dynamics of variables

in term of other variables whosebehavior youve assumed

From the beer game, who generates

the system behavior


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Exogenous is still important

Focusing on endogenousexplanations does not mean neverinclude any exogenous variables in

the model. But the number ofexogenous inputs should be smalland carefully scrutinized

If there are any important feedbacksfrom endogenous elements to thatexogenous input, the model shouldexpand and that input must be

modeled endogenously


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Tools for mapping systemstructure

Model boundary chart

Subsystem diagram

Causal Loop Diagram (CLD) Stock and flow maps

Policy structure diagrams


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Model boundary chart

Endogenous Exogenous Excluded

GNP Population Inventories

Consumption Technological change International trade

Investment Tax rates Environmental

constraintsSavings Energy Policies Non-energy resourcesPrices Interfuel substitution

Wages Distributional equity

Inflation rate

Labor forceparticipationEmployment

Interest rate

Energy production


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Benefits of model boundarychart

Alert the clients to a questionableassumption so they could evaluatewhat the effect of the missing

feedback might be Without a clear understanding of the

boundary and assumptions, models

constructed for one purpose arefrequently used for another forwhich they are ill-suited,

sometimes producing absurd


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Subsystem diagram

Convey information on the boundaryand level of aggregation in themodel by showing the number and

type of different organizations oragents represented

Should not contain too much detail

Multiple subsystem diagrams can beused to convey the hierarchicalstructure of large models


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Subsystem diagram forcorporate growth model

Company Market

Mkt. Response to Quality

Mkt. Response to Suitability

Mkt. Response to Delivery Delay

Mkt. Response to PriceOrders

Payment

Delivery of ProductPrice

Quality

Delivery Delay

Product SuitabilitySales Effort


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CLD, Stock & Flow, Policystructure diagram

CLDs are useful for diagramming thefeedback structure of systems

Stock and flow diagrams emphasize

their underlying physical structureand track accumulations of material,money, and information as they movethrough a system

Policy structure diagrams focus on theinformation cues the modelerassumes decision makers use togovern the rate of flow in the system


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Formulating a simulationmodel

Transfer from conceptual model toformal model

Formalization helps to you to

recognize vague concepts andresolve contradictions that wentunnoticed or undiscussed during

the conceptual phase


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Testing

Not only to replicate historicalbehavior, every variable mustcorrespond to a meaningful

concept in the real world Every equation must be checked for

dimensional consistency

Sensitivity of model behavior andpolicy recommendations must beassess in light of uncertainty inassumptions

Test for extreme conditions


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Policy design and evaluation

Policy design is more than justchanging the value of parameters.It includes the creation of entire

new strategies, structures, anddecision rules

The robustness of policies and theirsensitivity to uncertainties in model

parameters and structures must beassessed, including theirperformance under a wide range ofalternative scenarios

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