“I do what I want, I have the control of my life”. How true is it?

We are all different, right? Each person has its educational, contextual background, history, personal characteristics, hence a particular way to see the world and then, to act in our lives. You can decide to study mathematics, your friend could choose to go on holidays to Paris, and your neighbor could enjoy staying home the whole weekend watching TV. We are different. 

However, have you noticed that many of your problems are the same as your friends’ ones? 

• Have you ever been on traffic jam on a highway and asked yourself: why are we stopped as if there were a traffic light when actually there is no one? 
• If you ever had the chance to see the market penetration ratio for a new product, didn´t you wonder why you get always the same penetrations curve no matter who deploys the marketing strategy? 
• Why all the countries have inflation? Why all the big cities have traffic problem? 
• Are you dealing with problems originated by a solution implemented some time ago? A solution that brought more problems instead of real solutions?

Here you have some cases of common problems; they happen all the time, everywhere and generally they are quite similar. But then, why do they still happen and we are unable to solve them definitely?

It turns out to be extremely hard to understand the systems in which we are involved in. And actually, you are part of the traffic system of your city, a member of the market that decides whether a new product will succeed or not, part of the economic system in your country, and part of a hundred of other systems. “System Dynamics” is a discipline focused on understanding the inter-relations among the different components of the system, identifying loops, letting you understand the originally unexpected results: political interventions that do not more than increasing poverty or business strategies aimed to gain new clients that lead to losing the old ones and eventually reducing the company’s opportunities to keep on growing.

“System Dynamics” focuses its attention on STRUCTURES. Structures end up conditioning the individual behaviors and the inter-relations among them, then defining the global results and behaviors. That is the reason why, no matter the people involved in the system, the results always are qualitatively equal.  And by structures I refer to the laws, rules of the system, the available information, the control mechanisms, the carrying capacities, the way of connecting the parts, etc. Structures lead the way you understand reality, and then, the way you act and react. 

Life is somehow like a large and a little bit more complex game. In a game, you have clear rules that say what you can do or do not, the cases that you will be rewarded and the cases you will be punished, the information you will have available at the time of making a decision, and also, the time when you will be able to act. The game's creator cannot anticipate which gamer will win, but he definitely knows the number of resulting winners, the ending conditions of the other participants, and also an idea of the possible evolutions and alternatives that could arise from the game. And why? Because he understands the structures behing it.

But don’t panic, you can still consider yourself a free person! "System Dynamics" do not look at individual behaviors and his particular way of acting. It studies the masses’ behavior, the global results. You are free and you will decide differently from others, but at the end the global results will be quite predictable by understanding the structures of the system you are part from,

In the book “Foundation” by Isaac Asimov, threre is an interesting dialogue between Hari Seldom and Gaal Dornick: 

HS: - “What of psychohistory?”

GD: -“I haven't thought of applying it to the problem.”

HS:- “Before you are done with me, young man, you will learn to apply psychohistory to all problems as a matter of course”

Without making comparison, and without going so extreme, I would say these last words to you but regarding "System Dynamics". Once you start digging in the world of System Dynamics, you will see how useful it will be to understand a great part of the problems we face today. And remember that understanding the problem, you have 75% of the path to the solution completed!

“You will learn to apply System Dynamics to all problems as a matter of course”

Suggested bibliography: 

- "Business Dynamics" – by John D. Sterman.

- "The Fitth Discipline" – by Peter Senge.

- See other posts in our blog, related with structures: 

"Predator-Prey - Migration Adapted" & "Keep calm and win again"

Music!

At our office we spend many hours a day. Some of us more, some less, but it is common to have people around all day long. So, the problem since its beginings is how to maintain (us) entertained for such a long time.

The simplest answer? Music.

Music is known worldwide as a means to exchange tastes, and share with other people. It can even be considered a means of communication and identification.

The problem is, how do you share music in an office, without disturbing the people who work there? And, having fix this, how can you agree among so many people?

In our case, we have multiple music options, as explained below.

Jango

It is an easily accessible page which performs a first search according to a favorite artist, and then generates a list of tracks from similar artists, which can be rated as good or bad, according to the preferences of the user. Thus, selected artists lists are generated, and some unknown musics are discovered.

Grooveshark

In case of not wanting to explore new music, Grooveshark may be one of the best options. On this page you can find a variety of artists, songs and choose those you like best, assembling personal lists to your liking. In general, if you do not have a good internet connection is not recommended. However, being without video songs, is a good choice to put background music, without the risk of ending up listening to an artist who is not of your taste.

Youtube

It may happen that the connection to YouTube (since it is a page more developed than the previous ones) works better loading videos. In that case, you can create a list of your own, or use the suggested lists from the page.

Streema

If you are not convinced to listen to a particular artist, an interesting option is to connect to any online radio. Here, our favorite page is Streema, a platform that includes numerous radios from around the world, easy to use and very effective.

Server music

If we are not convinced with all of the above, or if the connection is working very slow, we have music on our servers, which are connected to the speakers of the office and we can access from our own computers. Thus, anyone in the office can change the music if it is not of its liking, or just prefer a change.

All previous cases follow a very particular dynamic that is generated and mutating over time. Sometimes the music is directly censored, and sometimes it is celebrated by most of the office. Also, there are times when it generates some discussion about what music to listen, while in other cases there are fights between two or more people entering the servers to simultaneously choose music, being favored in that case the fastest one with the cursor.

But, of course, the office always has music that entertains our work!

Sharing Knowledge With Our Partners

Continente Siete (C7) is not only a consulting firm, but also a partner for its clients, seeking high impact interventions (in quality and time duration) that would lead them to an upgraded level of performance.

Among all the projects and business areas where C7 has been working on, it can be mentioned the consulting service on S&OP process, Demand Planning and Forecasting. Based on the principle exposed before, the training and knowledge transferring to the client are part of the service given. This allows C7 develop methodologies and tools for specific use according to each particular case and the clients get not only the solutions but also the knowledge of how to obtain the best use from them.

The “Advanced Forecasting Course” developed for Unilever Brazil is a case of the relationship of knowledge sharing. The course had the aim of providing the participants with all the required know-how and techniques that would allow them to improve the demand planning and forecasting in Unilever. After two years of consulting relation with them, Continente Siete knew the opportunities and necessities that Unilever had, and the course was then designed to cover those gaps, also in alignment to the company’s objectives.

The course starts with some basic modules where issues regarding S&OP process and supply chain area are discussed, in order to let participants understand the context and impact of demand forecasting in business results. There are also modules regarding times series models where logics, strengths and weaknesses for each model are evaluated. Do you know when to use a weighted moving average model or the Holt’s method? Can you use the Winter’s method when the historical series shows a trend component?

The following modules include more complex issues, like the understanding and use of Key Performance Indicators (KPIs) and Key Behavior Indicators (KBIs) –a C7’s development of new kind of indicators-, to evaluate the forecasting performance and mainly to understand the type of series the user is dealing with: does they show trend? What about seasonality or volatility?. All these concepts then put together in a C7’s methodology development for forecasting, named: MAP (Model Assignment Process).

The final modules include more advanced issues like: methodologies to include price impact on the forecasting process, the impact of investments in different (type of) events, innovation forecast, range forecasting, Montecarlo Simulation, alternatives for “history cleaning process”, regressions and cannibalization effects. During the training days, C7 also introduces other possible approaches, such as Data Mining, Neural Networks, System Dynamics, Simulation and Artificial Intelligence. The course is complemented with a forecasting contest where participants compete in making the best forecast based on the knowledge brought during the training course.

Finally, it is sought a real application for all those trained issues by the participants on their day-to-day activities. To do that, they carry out an application project during three months where they study, define, develop, evaluate and suggest changes in the processes.

During 2012, C7 started, together with Unilever, the 2nd “Advanced Forecasting” Training Course that finished last January with great success. All Demand Planners have gone through the training allowing them count with technical and business knowledge that led to a significant improvement of the forecasting accuracy results for the company. At the same time, the application projects showed a great level of advance in methodology to be implemented in the Forecasting process.

C7’s objective is to be the client’s partner and to generate high leverage interventions. And the Advanced Forecasting Course for Unilever is a success case in that sense.

"Never regard study as a duty, but as an enviable opportunity to enter the wonderful and beautiful world of knowledge". Albert Einstein.

Predator-Prey - Migration Adapted

click image to open the model

Predator-prey models are argubly the building blocks of the bio- and ecosystems as biomasses are grown out of their resource masses. Species compete, evolve and disperse simply for the purpose of seeking resources to sustain their struggle for their very existence. Depending on their specific settings of applications, they can take the forms of resource-consumer, plant-herbivore, parasite-host, tumor cells (virus)-immune system, susceptible-infectious interactions, etc. They deal with the general loss-win interactions and hence may have applications outside of ecosystems. When seemingly competitive interactions are carefully examined, they are often in fact some forms of predator-prey interaction in disguise.

Typical predator-prey models consist of 2 populations, where the predator affects the prey (through killing) and viceverse (no prey, no food). These dynamics can be represented with mathematical equations and run through simulation models (mainly System Dynamics).

In this adapted model, the predator does not die if there is not enough prey, they just migrate outside of the system. If there's a lot of prey, they migrate into the system. This very small adaptation to the dynamics may lead to more structural possible outcomes.

Run the model with me and I'll show you what I'm talking about!

When you first run the model, you get a transitional behavior, and a permanent, cyclic one, in which both populations have alternating peaks and valleys.

Overshoot and Collapse

Now what happens when you increase the Birth Rate (of prey)? You end with nothing! Why is this? Delays... You see that due to a high birth rate, prey population increases greatly, bringing a huge amount of predators into the system. This increase in predators makes the killing increase over births, reducing greatly the prey population. But by the time the predators realize that their food is depleting and leave the system... it is already too late.

Reduced Delays

Let's try another thing now, let's reduce the delay. Start the model over, and set the Migration Delay to the far left (0.01). You'll immediately see that oscillations cease and equilibrium is found. Now try to increase birth rate, and see what happens. A new equilibrium is found, no collapse!

Play Around

There is another key behavior (the damped oscillator) which you can achieve by slightly reducing the delay. Anyhow, you can try out different scenarios, I'll explain the controls. We already covered birth rate and migration delay. 

• Desired Level of Attraction: is the amount of prey the predators see as "comfortable". More than this, they inmigrate, less than this and they will emigrate.
• Death Rate: is the natural death rate for prey (unaffected by predators).
• Hunt Rate: is the rate at which predators "kill" prey.
• Predator Perception Sensitivity: is an indication of how quickly or slowly predators are wanting to enter or leave the system. It is lightly different to Migration Delay. The first is the intention to migrate, the latter is the actual migration.

Outside Predator-Prey

Predator-prey structures can easily be extrapolated to other areas of application. The concept that delays make for oscillations and can potentially lead to overshoot-and-collapse behaviors has nothing to do with the predator-prey system. We can see the effect of delays, for example, in supply chain behaviors, where small shifts in consumer demand usually lead to huge shifts upstream. 

Whenever there is an action to be made, usually this action is based on some kind of input (which may take the form of gut-feeling, metrics, symptoms, etc... you name it). The thing is that there is a delay between the fact, and the moment in which we receive information for this input. How big or small the delay is depends on numerous factors, but for sure, there is a delay. 

After reading this, I hope that next time you take an action, you stop to think on delays and avoid over-reactions. 

The Market Behavior:

What if you are a company competing in a challenging market. You would have to make decisions in order to increase your profit and the amount of sales.

You might consider that consumers will choose the company that brings them more benefit taking into account certain factors.

The questions would be: what decisions do I make as a company? Which factors are more relevant for consumers? How do I get an advantage from my competition? How do I react to my competitor´s moves?

So to answer these questions we developed a model that is a simplified representation of a dynamic market, with the following assumptions:

• There is one product sold by multiple companies that are price-setters ( 0.1≤ Price≤1 ).
• Each company produces according to demand, they don’t stock product.
• Each company decides to produce the product with a certain level of quality (1≤ Quality ≤10  ).
• A company´s initial price and quality is randomly assigned according to a uniform distribution within the range.
• The company´s variable cost increases with the square of the quality it produces.
• All companies have the same fixed costs.
• All companies have a target market share according to:

                                   Target Mkt.Sh.= 1.15×(∑ consumer)/(∑company)

• A company’s state is discretely defined by two variables: profit and market share.
• There are four possible states for a company:
• Star: Profit > 0 and Mkt. Sh. > Target Mkt. Sh.
• Cash-Cow: Profit < 0 and Mkt. Sh. > Target Mkt. Sh.
• Question Mark: Profit > 0 and Mkt. Sh. < Target Mkt. Sh.
• Dog: Profit < 0 and Mkt. Sh. < Target Mkt. Sh.
• Each company will follow one of two set strategies: price-driven competition and quality-driven competition.
• Each user agent consumes only one product.
• The product a user consumes is chosen to maximize his utility function.
• The utility function for each consumer is:
• U(P,Q)=P^α Q^(1-α)            P: price, Q: quality
• Users’ α parameter are distributed according to a uniform distribution between [0,1]
• Users continually reevaluate the utility of all products in the market and adjust their consumption decision.
• In the model you may choose the amount of companies that are competing on the market. 

While proving the model you might notice that:

• Under the specified assumptions, the price strategy trumps the quality strategy.
• There is a better chance of higher consumption diversity when the market has fewer companies.
• The higher the competition the lower the profits.

You can try the model we developed here: http://www.runthemodel.com/models/934/

Keep calm and win again

"No, success is something I don´t wish on anybody. It´s like what happens to mountain climbers; they kill themselves to get to the top and when they get there, what do they do? Climb down, or try to do so, discreetly, with as much dignity as possible." - Gabriel García Márquez

The Formula 1 Grand Prix in Abu Dhabi was held on Sunday November 4. The final podium was conformed by Kimi Raikkonen, Fernando Alonso and Sebastian Vettel. If we look at the drivers' championship to this date, this result is not surprising. However, if we look at the career development, the final positions could seem bewildering. How could such a result have occurred? Only these drivers seem to be able to accomplish a feat of this magnitude: the first one of them, winning with a less developed Lotus vehicle, the second starting sixth with a F2012 which in recent competitions does not meet his demands and the third, with all the opponents in front of him.

But is this really surprising? Honestly, no.

The reason for this deduction is based on the existence of an archetypal behavior which explains how a success can explain a new future success: the success of the successful.

Success to the Successful archetype

In this archetype there is competition between two or more actors who share a given limited resource among themselves, from the results achieved in the first instance, and then reuse this resource to generate a new competitive advantage with a direct result on the next competition. Thus, one who achieved the first victory has an advantage that may favor him in the next instance, with a forecast in his favor that, if carried out, will then extend his advantage, gaining momentum advantage at the expense of the other competitors.

To better understand this behavior we can rely on the following article which lists ten reasons justifying it, carried to the field of sports. Listed are some aspects such as the morale and self-determination, more difficult to quantify; but are also other factors, such as the press, the continuity and the invitation to best practices, reinforcing the theory of success.

Is this always the case? Clearly, not. In response, there is another article which warns of the possibility of falling into the obsession of success. In short, the author stresses the importance of not evaluating success by the success in itself, but to find ways to measure not only focused on the outcome. If so, would pose a possible solution to this archetype, avoiding entering the success to the successful behavior (and the consequent failure of failure).

What other options exist to overcome this vicious circle?
The best response is to always stay one step ahead: be proactive and take the initiative to carry out all necessary action to achieve a significant advantage over the competition. This means acting big.
Finally, the definitive way to avoid entering a bond of this type is to leverage on oneself: in order to have control over the desired success, and to escape from result-determining performances, it is necessary to start with a good attitude, and work in this internal communication, as described in this latter publication.

As a final conclusion, we can say that this type of behavior can be expected in any circumstances in which you compete for a common resource and that, if sustained, can be very detrimental to any of those affected and, ultimately, for the overall system. It is your own responsability to depart from this model with  cooperation and a global goal as the best solution in the long run.

C7 reads

Since its beginnings, there were very few requirements for each new C7 employee. As time went by, some basic conditions were added, each of them with its corresponding learning system, to carry out in the first months of activity.
However there is a first condition that survived from those early days and that remains valid today: reading.
An old rumour, which has already become myth, says that Hari Seldon himself predicted C7's foundation, while working in his theory about the Galactic Empire decline. In his honor, The Foundation (I. Asimov) is the first non-theoretical book recommended for anyone who wants to understand what is done within Continente Siete.
In contrast, in The Fifth Discipline (P. Senge) is where one can find better answers in terms of operational and theoretical aspects. These help you understand the mindset and approach taken in most problems, and the subsequent resolution.
The last member of the founding triad is The Black Swan (N. Taleb). This book serves as a constant reminder that those premises which are assumed as valid are not always so, thereby driving a constant review of every working paradigm.
Numerous literary works were added to these three books, such as Statistical Inference and Design of Experiments (R. García), Six Pixels of Separation (M. Joel), Pride and Prejudice (J. Austen), The Courage of Truth (M. Foucault), The Tipping Point (M. Gladwell). Each one of them has an owner who lends it so that anyone interested can read it, scoring on a sheet that serves as a record and control, to avoid  losing anything on the way.
Together, these books foster the habit of reading, both as educational and for the simple pleasure of reading. In fact, our library is near the arm chairs, inviting anyone who has some time off to visit at any point.
So the next time you come, we invite you to look through all these books. I am sure you'll find one that catches your eye, allowing you to pause your activities, have a coffee and read, read, read.

Leer, leer, leer, vivir la vida

que otros soñaron.

Leer, leer, leer, el alma olvida

las cosas que pasaron.

Se quedan las que quedan, las ficciones,

las flores de la pluma,

las solas, las humanas creaciones,

el poso de la espuma.

Leer, leer, leer; ¿seré lectura

mañana también yo?

¿Seré mi creador, mi criatura,

seré lo que pasó?

- Miguel de Unamuno -