Feedback Systems Thinking and SSM Some Reflections on

Feedback Systems Thinking and SSM Some Reflections on Problem Structuring Presentation for OR 49 Edinburgh John Morecroft London Business School

Outline Worldviews and the learning cycle in SSM Worldviews and the learning cycle in FST – the global oil industry Reflections on hard and soft systems stances Using simulation to illustrate the interplay of worldviews John Morecroft London Business School 2

Characteristics of Human Situations Source: Checkland P 2007. Lecture Notes John Morecroft London Business School 3

SSM’s Learning Cycle John Morecroft London Business School Source: Checkland Poulter J 2006. Learning for Action, Wiley 4

Five Activities in an SSM Study John Morecroft London Business School Source: Checkland Poulter J 2006. Learning for Action, Wiley 5

The Oil Producers’ Project Brief history – ‘modelling for learning’ with Royal Dutch/Shell Finding out about the situation Exploring the situation via models based on different worldviews Discussing and debating the situation seeing the big picture using simulation to illustrate the interplay of worldviews Defining/taking action to improve the situation John Morecroft London Business School 6

Finding Out, Part 1: Historical Oil Price John Morecroft London Business School 7

Finding Out Part 2: A Sector Map (a kind of rich picture) Swing producer Swing quota Independents’ production OPEC quota setting Opportunists’ production John Morecroft London Business School Opportunists’ quota The market: price and demand Swing producer’s production 8

Worldview 1: Independents’ Capacity Expansion Independents’ capacity and production Tax Hurdle rate Independent producers change in capacity Independents’ development cost Expected future oil price Market oil price John Morecroft London Business School Capex investment optimism 9

Worldview 2: OPEC Quota Setting Agreed quota Change In Agreed Quota Call on OPEC Demand for Oil Cartel quota bias Independents’ production John Morecroft London Business School 10

Worldview 3 a: Swing Producer in Swing Mode Swing producer production Market oil price Swing producer change in production Intended price Swing producer’s allocated quota John Morecroft London Business School 11

Worldview 4: Opportunists’ capacity and production Opportunists Change In Capacity Opportunists’ capacity bias Opportunists’ allocated quota John Morecroft London Business School 13

Discussing and Debating – Seeing the ‘Big Picture’ Oil price Swing producer Swing quota Swing producer’s production Commercial production OPEC quota setting Opportunists quota Opportunists’ production John Morecroft London Business School Oil price Oil demand Independents’ production The market: price and demand Note: strictly speaking this figure is not ‘the’ big picture of the industry but rather ‘a’ big picture, agreed by the team, that helped them make sense of the industry 14

The Oil Producers’ Microworld – The Interplay of Worldviews John Morecroft London Business School 15

Using Simulation to Explore Dynamics from Interacting Sectors and Worldviews Swing producer Independents OPEC quota setting Opportunists John Morecroft London Business School The market: price and demand 16

Hard and Soft Systems Stances Source: Checkland P 1999. SSM - A Thirty Year Retrospective, Wiley John Morecroft London Business School 17

Conclusions Feedback systems thinking FST and system dynamics are fundamentally hard system views – ‘structure gives rise to dynamic behaviour’ The process of discovering ‘hidden’ feedback loops is organised as a learning process Problem situations involving puzzling dynamics result from the interaction of sectors and functions in which different worldviews coexist Simulation is a good way to illustrate the abstract concept of worldviews and to demonstrate their interaction John Morecroft London Business School 18