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1. Management Science Decision Making Trough System Thinking Chapter 04 Problem Situation From Book “Management Science Decision Making Trough System Thinking” Daellenbach , Hans, Donald McNickle , and Shane Dye.  Management science: decision-making through systems thinking . Palgrave Macmillan, 2012. Presented By: Rio Aurachman , MT

2. Overview CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

3. 1.The problem situation and what is a ‘problem’? CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

4. What Is Problem The problem situation is the context within which the problem occurs . It is the complex of relationships and conflicts Picture Resources:

5. Problem Owner is dissatisfied with the current state of affairs within a real-life context — does not like what is happening, or has some unsatisfied present or future needs, i.e. has some goals or objectives to be achieved or targets to be met; is capable of judging when these goals, objectives, or targets have been met to a satisfactory degree; and has control over some aspects of the problem situation that affect the extent to which goals, objectives, or targets can be achieved Picture Resources:

6. Six Problem Element (1) the decision maker ( 2) the decision maker’s objectives and ( 3) the associated decision criterion (4 ) the performance measure (5 ) the control inputs or alternative courses of action, and ( 6) the context Picture Resources:

7. Level of resolution in system description Picture Resources::

8. Picture Resources::

9. So.. An alternative decision criterion The context of the problem Picture Resources:

10. Distinction between objective and decision criterion Webster’s Collegiate Dictionary defines objective as ‘the end towards which effort is directed, an aim, goal or end of action’. Examples are: achieving the highest profit gaining a 40 % share of the market finding the shortest distance between two locations in a road network a water purity that safeguards the survival of flora and fauna in a river or estuary equity between various interest groups, and so on Criterion , however, is defined as ‘the principle or standard on which a judgment or decision is based.’ Both ‘principle’ and ‘standard’ imply a rule. So a criterion isthe rule used for judging whether or how well the objective has been achieved Picture Resources:: www.dreamstime.com

11. Complexities of problem definition The dissatisfaction felt may just be a vague feeling that things could be better problem structuring methods, discussed in J. Rosenhead and J. Mingers [2000 ], Many projects are also initiated by interested parties other than the decision maker(s ) In most real-life applications, problem definition will not be achieved in a single pass . Picture Resources:

12. 2.Stakeholders or roles of people in systems CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

13. Stakeholder stake-holders The problem owners , who are the persons exercising control over certain aspects of the problem situation, in particular over the choice of action to be taken. Most often , they are also the decision makers The problem users , who use the solution and/or execute the decisions approved by the problem owners or decision makers The problem customers , who are the beneficiaries or victims of the consequences of using the solution The problem analysts or solvers , who analyse the problem and develop a solution for approval by the problem owners For many situations, the same individual may act in different roles . Note again that the terms problem owner, user , customer , and analyst refer to the roles that people assume and not to the people themselves Picture Resources: : ehs.illinoisstate.edu

14. Importance of clear role definition Firstly, any one of these roles can in fact be the initiator of an MS project If initiated by the decision maker, the project will usually be of a substantive nature, leading to real change, The relevant world view is the one held by the decision maker Unless the problem analyst is fairly clear about the roles of the various partici -pants in the problem situation to be studied, the project may head off in the wrong direction from the very start Consider the breast cancer study of Chapter 1 a problem customer group, the relevant world view would be achieving the greatest reduction in breast cancer mortality Similarly, identification of the problem users is essential for effective implementa-tion of any recommendations Problem: the existing assignment of ‘stakeholder roles’ is inappropriate For effective decision making it may first be necessary to change the organization’s structure and to reassign decision-making roles So organization be conducive to embarking Picture Resources: : www.dispatch.com

15. 3. Problem situation summary — mind maps CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

16. MindMap Acquiring a sufficiently complete and detailed understanding of the problem situation is a necessary condition for a successful system intervention. The analyst must get a thorough‘feel ’ for anything that may impact on the outcome . Mind maps, rich picture diagrams and cognitive maps are highly effective diagrammatic aids to capture these aspects Mind maps can easily be used for capturing and consolidating the thoughts and ideas of several people, borrowing rules of brainstorming . a mind map shows the situation in much of its complexity at a glance Picture Resources:

17. 4. Rich picture diagrams CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

18. rich Picture Rather than show the various aspects in words or short sentences, P. Checkland [1993/99 ] suggests drawing a cartoon-like pictorial summary of everything (or almost everything !) In some sense, a rich picture is never finished . you do not want to commit the analysis unwittingly to a given direction before you have gained a full understanding of its complexity and crucial interrelationships We all have a natural tendency to classify problem situations and give them a name. It gives the illusion ‘ of having the situation under control ’ Most importantly, as is the case for a mind map, a rich picture — the diagram or the concept — is not a system description In some instances, it may be instructive to capture certain aspects with other diagrams, such as a flow chart of either material, documents, or information Picture Resources:

19. example Rich Picture Picture Resources:

20. example Symbol of Rich Picture Picture Resources:

21. 5. Guidelines for mind maps and rich pictures CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

22. Guideline Three major components are represented in mind maps and rich pictures: 1. Elements of structure 2. Elements of process 3. Relationship between structure and process and between processes For human activity systems, a mind map or rich picture should include not only ‘hard’ facts, but also ‘soft’ facts . All known areas of concern and actual or potential issues or problems should also be shown . The rich picture should also be annotated to define symbols that are not self-explanatory However, excessive use of connections may in-advertently impose a system structure If your map or picture looks like a flow chart Picture Resources:

23. 6. Uses and strengths of rich pictures and mind maps CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

24. Uses and Strength The main use of rich pictures and mind maps is for communicating with other people about complex and problematic situations . Interconnections, relationships, and direct and indirect consequences become more clearly visible; is considerably enhanced. It allows identification of the people who own the problematic situation, the people in positions of power, such as the decision makers, the people who will execute any decisions taken, the people who will enjoy the benefits or suffer the consequences of the results Picture Resources:

25. 7. Cognitive mapping CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

26. Cognitive Mapping Cognitive mapping is a tool that C.L. Eden [1983] adapted from G.A. Kelly’s ( 1955) personal construct theory . It takes the form of a network of statements, expressing con- cepts — ideas, goals, concerns, preferences, actions — and their contrasts or op- posites . Cognitive maps have some similarity to mind maps that capture means–end or cause-and-effect relationships never describe reality in an interpretation-free or objective way . constructs . Constructs are usually composed of two poles . Both poles should be expressed in the individual’s own words, Picture Resources:

27. 8. Cognitive map for NuWave Shoes CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

28. Elly Schuhmacher’s nightmare A little more than a year ago Elly jumped at the opportunity to go into business on her own With a i 90,000 overdraft from a sympathetic bank and her own savings of a little more than i 40,000, plus a loan from her parents, her funky shoes were an instant success rather than a flop [1 ], as some sceptics predicted, with sales only restricted by limited production capacity rather than demand [ 2]. However , her cash position was tight and not as good as expected [ 3], due mainly to two reasons: a three-fold rise in raw material stocks [ 4], locking up cash [ 5], and the slow rate of collections from the retailers, the latter taking an average of 50 days to pay, rather than the 30 days netasked for by NuWave [6] Elly knows that she can easily double sales with little additional effort [7] if she gets new machinery more suitable for her style of goods [8]. How to raise the 140,000 needed for that is her immediate dilemma [9]. The bank turned down her loan application unless she injects more equity capital [10]. She has no other funds, and neither can she raise more from her parents [11]. A priori, her only option seems to be to take a financial partner [12]. But NuWave is her baby, and she wants to keep complete control rather than share it [14] Picture Resources:

29. Elly Schuhmacher’s nightmare (2) Last night she had a nightmare that somebody else was sitting at her desk and giving her orders. She looks again over her options: Do nothing, i.e. continue with the current mode of operation [7]. Another few years of deprivation on a measly i 400 a week for slaving 60 to 70 hours a week? It would take her three to four years to build up enough retained earnings to up-grade the machinery [8]. Can she wait that long? Competition may grab the opportunity and step in to fill her potential market [15] Get a business partner to inject i 70,000 [12]. Together with an equal-size bankloan this would cover the new equipment cost and provide the additional workingcapital needed, but would reduce her equity share to 50% — her nightmare come true [13] Picture Resources:

30. Elly Schuhmacher’s nightmare (3) Could she perhaps make better use of her current funds [16 ]? For instance, offer a discount for prompt payment [17 ] to speed up collections from retailers. It will reduce her margin and hence profit [18], but if it frees half of the current i 150,000 tied up in accounts receivable [19 ] She again studies the latest balance sheet. Her gaze is caught by the investment in raw materials (RM). ‘Do we really need over i 90,000 dollars of RM stocks? Could we not operate efficiently with less?’ she asks herself [20]. The current stocks are 4 to 5 months’ worth of usage! Admittedly, when they started out with only i 30,000, a few deliveries had to be delayed [21]. In the long run that will give NuWave a reputation of unreliability — something she wants to avoid [22] since it will ultimately have a negative impact on sales and hence profits [23] Picture Resources:

31. A cognitive map for Elly’s dilemma A problem owner can develop such a map on his or her own, expressing the per- sonal train of thought. Note that for many real-life problem situations the number of constructs in a map may go into the hundreds . C. L. Eden (the inventor of the problem structuring method SODA) and his associates at the University of Strathclyde have developed ‘Decision Explorer’, a PC software package, as an aid in drawing and analysing cognitive maps interactively. Picture Resources:

32. A cognitive map for Elly’s dilemma Picture Resources: Peta awal

33. A cognitive map for Elly’s dilemma Picture Resources: Peta awal

34. Analysing the map the map should be analysed along a number of lines [1] The aim is to make sure that the various paths from information, via actions, to goals are correct and complete . [2] Another line of analysis checks for feedback loops and, in particular, for destabilizing (positive) feedback loops (see Section 3.11 ) [3] The third type of analysis looks for so-called core constructs and emerging themes Picture Resources:

35. Picture Resources: Peta usulan

36. Picture Resources: Peta usulan

37. Some sobering comments on cognitive mapping the links between constructs in a cognitive map imply a definite logical predecessor–successor relationship . faced with real-life situations, we have often found that the direction of the relationship may be far from clear and could go either way Furthermore, analysts must be constantly on guard not to distort the problem owner’s account with their own perceptions If the aim is mainly to get a good grip on a problem situation which will help to select the right issue, identify the stakeholders, and justify boundary choices, we findmind maps and rich pictures easier to use The strength of cognitive maps is that they are more than simply a summary of the problem situation Picture Resources:

38. 9. Problem definition and boundary selection CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

39. Problem definition and boundary selection understanding of a problem situation is to delineate the problem to be analysed identifying the correct issue of concern Scope Form level of detail or depth part of this involves a critical evaluation of which aspects of the problem situation should be included in the analysis which aspects can be Ignored part of the narrow system of interest or Its Environment select the boundaries for both the narrow system of interest and its relevant environment Critical systems heuristics, developed by W. Ulrich in 1983 [Ulrich, 1996], is currently the mostcomprehensive and systematic framework for subjecting boundary selection Several problem-structuring methods [Rosenberg and Mingers , 2000 ] Boundary selection will largely fix the scope direction , and focus of all subsequent analysis determines which inputs are considered controllable, but also whose benefits and costs are included in the performance measure, and in particular which potential stakeholders are reduced to problem customers, pos-sibly mere victims without any say or recourse Selecting the wrong boundaries may result in solving the wrong problem. Picture Resources:

40. Critical Problem element Decision maker: Elly Schuhmacher . Objective : Generate enough funds to purchase the new equipment. Decision criterion: Funds generated are at least equal to i 140,000. Performance measure: Amount of funds freed. Alternative courses of action: The combination of: size of discount offered to customers ; form of just-in-time procurement policy; imaginative model designs to absorb excess RM stock from previous seasons; express in-freighting to avoid shortages ; no safety stocks for just-in-case second production runs. Boundaries for narrow system of interest (as indicated by major system inputs ): Old and new production output capacity and cost structure; potential demand and shoe wholesale prices. Boundaries for wider system of interest: no countermove by competition within the near future; bank amenable to making up shortfall (e.g. in the form of a mort-gage on equipment) if sufficiently small . Picture Resources:

41. 10. Some conclusions CHAPTER 4 Problem Situation 1.The problem situation and what is a ‘problem ’? 2.Stakeholders or roles of people in systems 3. Problem situation summary — mind maps 4. Rich picture diagrams 5. Guidelines for mind maps and rich pictures 6. Uses and strengths of rich pictures and mind maps 7 . Cognitive mapping 8. Cognitive map for NuWave Shoes 9. Problem definition and boundary selection 10. Some conclusions

42. Some conclusions It is strongly affected by the purpose of the analysis , the world views of the analysts and/or problem owners, and the resources ( time, funds , people) available for the job a problem situation summary should not be in the form of a systems description, since this may impose a given structure that may again bias the analysis Picture Resources:

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44. Review and Mindmap Picture Resources:

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