Ithink6 Tutorial

Getting Started with ithink® v 6.0

© MM High Performance Systems, Inc.The Systems Thinking Company TM

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Table of Contents

Welcome

The Basics: A Tutorial for New Users 4

Appendix: Basic Software Operations & Features 34

RenderingIllustration 1: Depositing, Naming & Re-positioning Stocks, Converters 34 and Nameplates

Illustration 2: Hooking-up Flows 35

Illustration 3: Re-positioning, “Bending” and Reversing Flows 36

Illustration 4: Hooking-up and Re-positioning Connectors 37

Illustration 5: Defining a Graphical Function 38

SimulatingIllustration 6: Creating a Graph or Table Pad 39

Illustration 7: Defining a Graph or Table Pad Page 40

CommunicatingIllustration 8: Using the Text Tool 41


WelcomeWelcome to the ithink® software “Getting Started” Tutorial! This tutorial provides an experientialintroduction to the basic operations and features of the ithink software for new users.

The ithink Electronic Help Files that accompany the software describe software operation andfeatures in much greater detail. The approach here is selective (not all features are illustrated), andcontext-rich. Through a case study involving a “.com” start-up, you’ll learn how to perform basicoperations with the software, and to use the basic features, associated with: (1) rendering a mentalmodel, (2) simulating the model to yield dynamic outputs, (3) analyzing the outputs to understandwhat’s causing them, and what you might do to change them, and finally (4) communicating yourunderstanding by making the insights derived from the model available for “discovery” by others.

This tutorial is designed for users of both the ithink Strategy and Analyst versions of the software.The Analyst version was used to develop the tutorial. If you own the Strategy version, some of thescreens you encounter may therefore look slightly different than some of the screen shots appearingin the tutorial. Differences between the two versions will be identified as they arise.

The Basics will take you about an hour to complete. The tutorial is divided into sections. So, ifyou choose to “take a break” and return later to complete the tutorial, no problemo. Have fun. Becool (it would be hard not to be, after mastering the basics of this software!). Stay systemic.


The Basics: A Tutorial for New Users

The ithink software is designed for increasing the effectiveness of the set of processes by which werender, simulate, analyze and communicate our mental models. Mental models are the things we allnecessarily carry around in our heads that help us to: (1) make meaning out of what we experience, (2)share and evolve that meaning by communicating with others, and (3) evaluate and decide-uponappropriate courses of action. So, as you can see, mental models are extremely important things.Learning to construct mental models that better reflect the realities within which we operate, andlearning to simulate them more reliably, are vital to making your world, and our world, work moreeffectively. The aim of the ithink software is to accelerate and enrich these learning processes!

The context for mastering the basics of the software will be the rendering, simulating, analyzing andcommunicating of a mental model of a “.com” start-up. Because we are seeking to build your basicexpertise as quickly as possible, we will keep the illustration simple. By the time you complete thetutorial, you should see many ways you might extend the illustration to capture more aspects of “.com”start-up reality. Please feel free to have at it!

The approach we will take in this tutorial is to show you a picture and then ask you to perform thesoftware operations, or use the software features, needed to produce the picture. The operations/features,themselves, are illustrated using a progression of screen-shot diagrams that depict the processes ofrendering, simulating, analyzing and communicating. This progression of diagrams appears in anAppendix that begins on p 34.

The Context

“.com” start-ups have found many interesting ways to generate revenue. One of the most important ofthese is charging subscribers a monthly fee for the services provided. Some also charge an initiationfee, and/or charge advertisers a fee for displaying ads on the site. In this illustration, we’ll focus on thefirst two approaches for generating revenue, though including advertising would be easy (and you’reencouraged to do it upon completing the tutorial—extra credit is available, we have lots of it and wouldbe happy to share some with you).

Imagine you are considering embarking upon your own “.com” adventure. You’re wondering…Can Ireally cash in on this crazy IPO boom? Am I the next instant millionaire? Will I be able to pay nextmonth’s rent? Will my spouse leave me before I hit it big? We’ll use the ithink software to illustratehow you could take a shot at answering some of these questions…

Step 1. Rendering a Mental Model: MappingThis step consists of two sub-steps: mapping and numerating (transforming the map into a computer-simulatable model).

Launch the ithink software. Your screen should look like this…


If you have the Strategy version of the software, the header will say “ithink Strategy 6.0” ratherthan “ithink Analyst 6.0.”

Overview of the environment:

You are looking at one of the three “levels” that define the operating environment of the ithinksoftware. This is the Map/Model “level.” It is here that you will perform your rendering andnumerating of mental models. You may also simulate and do some communicating on this level.The two other levels are accessed by clicking the up and down arrows located near the top of theleft vertical window frame. Don’t click them yet.

The up-arrow will take you to the Interface level, or “communication” view. The tools availablethere will enable you to quickly construct an interface for your models so as to turn them into“discovery oriented,” experiential vehicles for people who may not have been involved in therendering process. We’ll visit this level later in the tutorial and construct a “Flight Simulator”interface for your “.com” model. This will enable you to let potential financiers of your start-upshare in the exhilaration of your meteoric, virtual stock price run-up! The down-arrow takes youto the “basement.” It’s dark down there. It’s where the equations live. If you like equations,you’ll love this level. If you don’t, no sweat. You never have to go down there because any


equations you may need can be created from within dialogs that appear in the Map/Model level.We will travel to the basement later in the tutorial. For now, hang with us in the Map/Model level.

Producing a first map:

It’s almost always a good idea to render a mental model, or collective mental model (if you aredoing this in a group), one little chunk at a time, rather than seeking to map the whole thing atonce. You spit out a little chunk, thinking about what you see as you go. You then numerate,simulate, and ruminate on the results. Next, you spit out another little chunk and repeat.Following this iterative, bite-sized approach will keep you in control of the process. It is easy forthe process to spin out of control because the software makes it so easy to do the rendering. In thispart of the process, the ithink software is functioning as a kind of “word-processor for the mind.”Word processors make it easy to generate lots of words. Writing a coherent memo, short story, ornovel is quite another thing altogether! The same is true with the ithink software. Think qualitynot quantity. Go slow, not fast. The goal is to “write” clear, simple mental models.

All of your “writing”/rendering will be done with only four iconic building blocks. One of thebeauties of the ithink software is its very sparse, yet very powerful language set. The “buildingblock icons” are the first four icons on the left end of the horizontal palette that adorns the topframe of the software…

The first of these building blocks, the rectangle, is called a “Stock.” Stocks are used to representthings that accumulate. Customers accumulate. So does money in a bank balance, and widgets ina widget inventory. Fatigue, frustration, and stress also accumulate. It is the first of theseaccumulations, Customers, that is relevant in rendering the initial portion of our “.com” mentalmodel. Let’s begin by rendering a stock of Subscription Customers, as this stock will become theprincipal basis for generating revenue.

To do so, follow the directions in Illustration 1, which appear in the Appendix that follows thistutorial (see p. 34). When you’ve successfully completed this operation, your ithink software“page” should look like what you see here…


Next, we are going to use the stock of Subscription Customers to generate a “flow” of monthlyrevenue (it’s the anticipation of this flow growing into a large volume that makes bothentrepreneurs and financiers salivate!). Revenue will be represented by the second building block,the “flow.” Before rendering the revenue flow, deposit another stock above and to the right of theSubscription Customers stock. Call it Cash. Then, hook-up a flow to the Cash stock (follow thedirections in Illustration 2 in the Appendix). When you complete this set of operations, your mapshould look like this…


The arrowhead on the flow “pipe” points the direction of flow. In this case, it points into the stock(because revenue is an inflow to Cash). The “circle with spigot” in the center of the flow pipe iscalled a “flow regulator.” The circle ultimately will contain the “logic,” or “decision rule” thatadjusts the volume of the flow (i.e., directs the spigot to open wide, or shut itself down). Note thatthe flow, in this case, emanates out of a “cloud.” Sometimes, as you’ll see, flows empty intoclouds. Clouds denote a boundary point for the model. The cloud out of which the revenue flow isemanating means that we are not going to include within the boundary of the model the source ofthe flow. That source is the stock that is being drained by the flow; namely, customers’ cashreserves.

Let’s pause briefly here to savor the important distinction between stocks and flows—the “nouns”and “verbs” of the ithink software language. Stocks represent conditions, “how things are.” Flowsrepresent actions, “how things are going.” To see the distinction, imagine that you could suddenlyfreeze all of the action going on within a system. When all actions cease, all flows go to zero. Butnotice that the conditions—i.e., the magnitude of the stocks—would remain wherever they were atthe instant the “freeze” took effect! So, for example, if you stop putting food in your mouth—that’s right, freeze that chip in mid-air—your stomach will reflect the cumulative amount of chipsyou have deposited before the freeze occurs. OK, resume gorging.

Recognizing the distinction between stocks and flows is absolutely critical to accurately capturingthe dynamic behaviors a system generates. We don’t have time here to provide a full explanation,but to catch a glimmer for why this is true, think about the revenue flow and the cash stock youhave just rendered. Can you see that it’s possible for the flow of revenue to be increasing, yet thestock of cash to be decreasing—at the same time [Hint: Consider that the stock of cash also has anoutflow—expenses! We’ll be adding this flow to the map soon]? Without recognizing thedistinction between stocks and flows, the dynamic in which the volume of a flow moves in onedirection, and the magnitude of the associated stock moves in the opposite direction, could not becaptured.

As a final way to solidify the distinction, remember that the units-of-measure of flows will be thesame as those of the stocks to which they are attached, except for the addition of “per time.” Thus,for example, the units we’ll use to denominate Cash will be $ (we’re assuming a US-based“.com”), while the units of the revenue inflow will be $/month.

By the way, notice (in looking at the map) that it is our convention in naming variables, to employfirst-letter caps when naming stocks, and all lower case when naming flows. Doing so helps tomake more visual the distinction between these two types of variables—particularly when theyappear in lists (within dialog boxes), where it may not be possible to see the difference iconically.

Distinction noted, we now are ready to employ the two remaining building blocks, the connectorand converter, to “complete the logic” of the subscription revenue generation piece of the model.Follow the directions in Illustrations 1 (for converters) and 4 (for connectors) in the Appendix toimplement this logic so as to produce a map that looks like this…


You may have noticed that the nameplates of several of the building blocks that appear in thescreen shots have been re-positioned relative to their default locations. We’ve done this, andadvocate strongly that you do same, when needed, in order to prevent wires (connectors) fromviolating nameplates. (See Illustration 1, Step 6 for help). Because an explicit purpose of anyithink map is to paint a clear picture, you should avoid violating nameplates whenever possible. Infact, it’s worth paying a lot of attention to the neatness of map layout. It will be hard for people tounderstand “your story” if it’s written using sloppy penmanship.

Before we simulate this chunk of the model, let’s add an expense outflow (see Illustration 2 in theAppendix if you need help) from Cash to arrive at a final first map that looks like this…

Step 1. Rendering a Mental Model: Numerating

Once a first chunk of the map is rendered, the second step in the rendering process, numerating,can unfold. Numerating readies the model for computer simulation.

But before we embark upon the numeration process, let’s take a peek at “the basement.” Thus far,we have been mapping out the “plumbing” of this simple “.com” business system. However,beneath the surface of our simple little picture, the software has been at work inferring an equationinfrastructure. We will need it in order to ultimately simulate the system. Let’s take a look atwhat’s been going on. To do so, click the down-arrow located on the top left frame of theMap/Model window, just above the Globe icon. Here’s what you should see…


Focus on the first equation, the one for Cash. It says: The magnitude of Cash at time “t” (meaningthe current instant in time; i.e., right now) is equal to the magnitude of Cash at time “t-dt”(meaning the previous instant in time, one dt ago; dt stands for “delta time”) plus the volume ofrevenue that flowed in over the instant, minus the volume of expense that flowed out over theinstant. Flows, which are defined as occurring over a unit of time (e.g., over a month), aremultiplied by the “length of the instant” (i.e., dt), which usually is less than a full time unit, so thatonly the “instant’s worth” of the flow is added to/subtracted from the stock.

The software automatically sets up this generic “bathtub accounting” equation every time youcreate a stock. Note, for example, that the beginning of a “bathtub accounting” equation has beenset up for the other stock in the system (Subscription Customers), even though that stock has, asyet, no flows attached. The generic equation simply totes up the flows into and out of a givenstock during each time period over the course of a simulation. The equation reports out theresulting current magnitude of the stock at each point in time. You don’t have to worry aboutwriting this accounting equation because the software does it for you. It figures out whether to addor subtract associated flow values based on the direction in which the arrowheads on the pipespoint (i.e., do they point into, or out of, the stock?).

Note all of the “?’s” in the equation listing. They appear because we will need to provide somenumerical information before a computer simulation can be conducted. We will get to that soon.For now, click the up-arrow located in the upper part of the left frame of the window to exit theEquations level and return to the Map/Model level.

Now click the “Globe” icon located near the top left frame of the Map/Model window. Note theicon changes to an “X2.” Your screen should now look like this…


By the way, we recommend that you save your work every now and again. Choose Save from theFile menu and type in a name for your model. The program automatically attaches the necessary.itm suffix for Windows users.

The globe indicates you are in “mapping” mode. The “X2” indicates you are in “Numerating/Equation-writing” mode. Note the “?’s” that now appear on each element in your map. Theyindicate the need for numerical or equation information. Your model is not in computer-simulatable condition until all “?’s” have been extinguished through the provision of the requiredinformation. Let’s see how this process works…

Double-click on the Cash stock. The following dialog box should appear…


The first thing to note is that if you have the Strategy version of the ithink software, the radiobuttons for creating a Queue or Oven do not appear at the top of your dialog box. No worries,mate. These elements are useful primarily in specialized, technical applications.

Moving down in the dialog box, ignore the “Allowable Inputs” list for now. It becomes useful inmore advanced applications when you wish to construct an “initial value” equation rather thanusing a number to initialize your stock. The calculator keypad, to the right of the list, is useful forclicking in numerical values. We’ll use it in a moment.

Another “point of interest” in the dialog is the “Units…” button, located on the right just above theinitial value box. “Units” are explained in further detail in the Electronic Help Files. Along thebottom of the dialog are four buttons. The last two—Cancel and OK—should require noexplanation. The Document button, when clicked, pops up a box into which you can type text thatdescribes your assumptions, documents the source of your numerical information, etc. Finally, theMessage… button is clicked when you wish to have the variable “post” some sort of a message(e.g., play a movie or sound, navigate to a graphic, pop-up a text description, etc). We’ll examinethis feature in the “Communicating” section of the tutorial.

Back to that keypad…Use it, or your keyboard, to enter the value 10000 into the equation box. Bydoing so, we’re assuming you are seeding your “.com” venture with $10,000 in cash. This value,as the dialog indicates, is only an initial value for Cash. Be sure to un-check “Non-negative” in thestock dialog for “Cash” (otherwise the stock will not be able to take on negative values). Once thesimulation starts, new values for the stock will be calculated for each instant in time (i.e., each“dt”; in this model, dt is left at its default value of 0.25, meaning that the simulation will make


calculations each ¼ of a time period—which, in this model, is a month). Once you enter 10000,click OK to exit the dialog.

Next, we’ll define the revenue flow. Double-click the revenue flow regulator. Here’s what youshould see…

At the top of the dialog, you have the option to make the flow a uniflow or a biflow. Biflows allowflow to occur in either direction (both into, or out of, the stock). Uniflows allow flow only in thedirection in which they point. Revenues clearly only flow into cash, and so uniflow is the choice(also the default). The Required Inputs list contains only one variable, subscription revenue. Thevariable is in the list because we drew a connector from it into the revenue flow regulator. Thedialog box is now telling us that we’re required to use it in defining the revenue equation. Supposewe didn’t use “subscription revenue” in the equation?

Try it. Type (or click) in a number, then click OK. You should receive the alert: “Unused input:subscription_revenue.” While you can exit the dialog sans including required inputs in theequation, the “?” on the surface of the element will not extinguish until you do. The software thusenforces a one-to-one correspondence between what you see on the diagram and what appears inthe underlying equation. This is something you’d never get with, say, a spreadsheet, becausespreadsheet logic is invisible, lying underneath the associated numbers—the mirror image of howthe ithink software operates!

Click once on subscription_revenue to enter it into the equation. Now suppose we decided we alsowanted to include a second kind of revenue in the equation—say, initiation fee revenue. Type (orclick) “+.” Then, type initiation_revenue to add it to the equation. Click OK.


You should receive the message: “Not the name of any object on the Diagram.” The software thusnot only ensures that “what you see is what you get,” it also ensures that “what you don’t see, youdon’t get it!” If you wish to include a variable in an equation, you must include it in the map.Delete “+initiation_revenue” from the equation and OK the dialog. Note that the ? on the revenueflow regulator is now extinguished.

Enter the remaining equations and numerical inputs using the following information:

Subscription Customers = 100 (this is the initial number of customers)subscription revenue = Subscription Customers * monthly subscription feemonthly subscription fee = 30 ($/month)expense = 0 (for now)

Your model should now be ready to simulate—there should be no “?’s” remaining in the map.

Step 2. Simulating

The ithink software provides several options for displaying simulation output. Here, we’ll use agraph and table. Use Illustration 6 to create a Graph Pad on the Map/Model level (just plop the paddown anywhere and don’t “pushpin” or “lock” it). Then use Illustration 7 to enter Cash as thevariable to be plotted. Choose Run from the Run Menu. Your graph page should look like this…

Actually, it won’t look exactly like this. And that’s because the numerical scale for Cash (on the Yaxis) has been re-formatted to remove the two decimal places that appear in the default scale. Tore-format the scaling (if you wish), double-click “Cash” on the top of the graph page to pop-up theformatting dialog. Then, choose “0.” By the way, you may also use the Paintbrush (located on thetool palette next to the Hand), to color either the graph pad page, or the variables being displayed.Just click-and-hold on the Paintbrush, and then select a color from the paint palette that appears.Next, click on the page, or variable, to color it.


One other nice feature of the Graph Pad page is that by click-and-holding on any point of anycurve/line that’s on the page, the associated numerical value at that point in time for each variablebeing graphed will be displayed underneath the variable name. Try it, you’ll like it!

Let’s now look at two other ways to display simulation output. Click the close box to put away thegraph pad. Then choose Model Prefs… from the Model Menu. The dialog box shown below willappear. Note, in the dialog, that the three building block icons under the word “Animate” haveboxes around them. By clicking each icon in the dialog, you too, can make these boxes appear,which then will enable your simulation results to be displayed as an animation of your diagram.

OK the dialog. Then, click the “forward” button on your run controller and watch the animationunfold. Did you feel your pulse quicken? OK, not a terribly exciting simulation result…at leastnot yet! Thus far, only Cash is changing over time. The other stock and all of the flows areconstant at this point. Their time will come.

Next, use Illustrations 6 and 7 to create a Table Pad. Enter Cash (and other variables if you wish).Then, run another simulation and watch the results. They should look something like this…

(Only the first 6 months are shown in the illustration; scroll to view the rest) Once again, yourresults probably don’t look exactly like what’s shown here. That’s because we availed ourselves ofsome formatting options that we didn’t tell you about yet. First, within the Table dialog box, weun-checked “Vertical” as the Orientation option—that’s why our results run, you guessed it—horizontally. We also checked “Use month names.” Doing so causes Jan, Feb, etc. to appear in


the time boxes (running across the top in horizontal orientation). Finally, we formatted “Cash” toinclude $ and to drop the two-digit precision (After all, what “.com” entrepreneur worries aboutcents? If they had any, they never would have gone into one of these businesses! Joke. Justkidding. We love “.com” entrepreneurs… especially rich ones!). To format Cash, we first OK’edthe Table dialog to return to the Table itself. We then double-clicked on Cash (in the Table) to popup a Formatting dialog, and we formatted away. Please feel free.

Rather than move on to the next step in the process, “Analyzing,” let’s return for another round ofrendering and simulating. Our model is not yet interesting enough to justify doing much analyzing.In using the software, you should expect to iterate through the rendering and simulating stepsmultiple times. As we said before, render a little chunk, simulate. Render another little chunk,simulate. This will keep you in control of the process.

Round 2. Rendering and Simulating

Let’s generate some expenses. They’re no fun, but they are real! Make your map look like this…

As you can see, the model now includes three categories of expense: fixed, variable and payroll.One good use of the converter is for “breaking out” the details of such logic. We could have wiredall of the expense calculations directly into the expense flow regulator. But then the resultingequation would be pretty hairy looking! The way we’ve done it, the logic will be easier to follow.In addition, when we analyze simulation results, we’ll be able to break out the detail aroundcosts—something that often proves useful to do.

Something else to note…In incorporating the new “logic” into the map, we again did somerearranging of nameplates, re-positioning of structure, etc. We did this in order to ensure that theevolving map remains as readable as possible. To reiterate, your map is supposed to tell a story—the story of the logic of your mental model. If you want others to understand the story, and to be


able to contribute effectively to improving it, it is essential that your maps be as readable aspossible. Take the time to tell your story clearly!

OK, open the entities with ?’s and fill in the required equation logic or numerical information. Thelogic should be straight-forward. If you have trouble, open and refer to the “dotcom” model in theGetting Started Folder in your software. For numbers, use:

expense\subscriber = 8Employees = 5avg cost\employee = 5000 (monthly, fully-loaded cost)fixed expenses = 1000 (monthly, for rent, electricity, etc)

Now, simulate…then, weep! How quickly the picture changes! With these numbers you arebankrupt faster than you can say “Holy IPO!”

“But wait a minute,” you say. “We’re not yet generating any new customers. And, we’re notcharging an initiation fee, either.” You’re right! Let’s include these, and see if things go anybetter.

Make your map look like this…

We’ve added an inflow, “gaining,” of new Subscription Customers. The activity of gaining newcustomers is represented as a “word-of-mouth” process in which existing customers attract acertain number of new customers each month. The rate at which this “compounding process”occurs is captured by the variable named “wom multiplier.” Adding the inflow to SubscriptionCustomers inspired thinking about an outflow. One of the great values of making a mental modelexplicit using the ithink software is that as the picture unfolds, it often suggests elements and


relationships that were not in the not-yet-pictured mental model. The “losing” flow provides oneexample of this. The fraction of the existing customer base that your “.com” loses each month isrepresented by the “loss fraction.” Finally, we included an initiation fee revenue stream.

Here, again, the “equation logic” you need to click-in should be pretty obvious. If you havequestions, or want to check your thinking, open the “dotcom” model that is located in the GettingStarted Folder. Here’s a first set of numbers:

initiation fee = 25 (a one-time charge for new subscribers)wom = 0.2loss fraction = .025

Before simulating on the computer, run a mental simulation. How do you think things will go forthe “.com” now that it has the additional revenue options at its disposal? Check your intuitionusing a computer simulation.

Step 3. Analyzing

How’d you do? We’re reaching a level of model complexity at which most people, who have notspecifically worked at developing their mental simulation capabilities, will have difficultyaccurately intuiting dynamics. One good use of the ithink software is for exercising your mentalsimulation muscles. Let’s work those muscles by using some of the software’s analytical features.

As you discovered if you did the simulation, the “.com” is still not a viable venture. This, despitethe fact that its customer base is burgeoning (graph Subscription Customers, run a simulation, andwatch how this stock is literally “exploding”)! The company makes $22/month profit on eachcustomer (a subscription fee of $30 minus an expense\subscriber of $8/month). So why can’t itmake money when its customer base is exploding as it is?! Maybe it just isn’t exploding fastenough. Let’s use the ithink software’s Sensitivity Analysis feature to see if this is the case. Thequestion is: At what “wom” growth rate (if any) will the business turn profitable?

Choose Sensi Specs… from the Run Menu. The following dialog will appear…


Double-click wom_multiplier in the Allowable list to enter it into the Selected list. Then, click toselect it in the Selected list. Selecting any variable in the Selected list activates the “VariationType” selection. Choose “Incremental” as your variation option. Then enter a Start value of 0.2(the current value for wom multiplier) and an End value of 0.6. Next, click the Set button.Because the default “# of Runs” (see lower left of dialog) is set to 3, clicking the Set button willcause one additional value for wom_multiplier to be created (0.4, which is ½ way between 0.2 and0.6). We now are set up to conduct three back-to-back simulations in which on run 1, wommultiplier will be 0.2, on run 2 it will be 0.4, and on run 3 it will be 0.6. Capiche?

Next, click the Table button (lower left of dialog). This will cause a page—automatically set upfor displaying multi-run Sensitivity Analysis results—to be created within the Table Pad that youcreated previously. The page is automatically defined to be a “Comparative” Table. Within theAllowable list, double-click on profit to enter it into the Selected list. This will enable us to seehow profit varies with variations in the wom multiplier. Choose S-Run from the Run Menu, orclick the “Forward” button on your run controller. You should see results that look like these (ifyou formatted profit)…


Note the “?” in the Table header. If you click it, the values used in the Sensitivity Analysis(organized by Run #) will be listed in a pop-up. In this case, those values (of only one variable, thethe wom multiplier) are easy to remember: 0.2, 0.4, 0.6.

Notice that at a growth rate of 0.2 (that’s 20% per month!), the “.com” doesn’t turn a profit in itsfirst year of operation. Doubling the value of the wom multiplier enables the start-up to beginmaking money by July. Tripling the value of the multiplier advances the date for achievingprofitability to May. The real question, then, is: Is it possible for the “.com” to generate a word-of-mouth multiplier in the 40%-60% per month range? This would mean, for example, that each10 existing customers would generate 4-6 new customers each month. “.com” services have beenknown to attract customers like wildfire, so who knows, maybe such a multiplier could beachieved. But let’s analyze the results a little more closely. To do so, add another page to yourTable Pad (see Illustration 7 if need be). Select “Comparative” within the table dialog. Then, enterSubscription Customers as the selected variable. Finally, re-run your sensitivity analysis. Whatdid you find?

You should have discovered that over the first year of operation, with a wom multiplier of 0.2, the“.com”’s Subscription Customer base grew to nearly 800 (from 100). With a wom multiplier of 0.4and 0.6, the number of customers climbed to nearly 7,400, and more than 63,000, respectively!Here, again, “.com”’s have been known to grow like crazy. But, could all of these customers reallybe adequately serviced by five employees?! Remember, no hiring occurs in this simulation!

Not likely, even with the hours most “.com” employees put in! In fact, the sensitivity runs haverevealed a so-called “open loop” in our model. Currently, we can make the “wom multiplier” forsubscription customers take on any value we want. This lets us achieve an arbitrarily large base ofcustomers, at an arbitrarily rapid pace. And, we can do both without the need for any expansion inthe firm’s headcount! Specifically, in this case, five employees will continue to provide support at


a level that neither deters new customers from signing up, nor accelerates the loss of existingcustomers. This is true whether those five employees are serving 100 customers (as is true at theoutset of the simulation), or 63,000 customers (which occurs 12 months out)!

Let’s “close the loop” from staffing levels back to growth of the firm’s customer base! In fact, oneof the substantial advantages of the ithink software over other analytical tools (like spreadsheets) isthe ease with which it enables feedback loops to be incorporated into the model structure, and thenvisualized and analyzed. Add the loops shown at the bottom of this map to your model…

In the process of adding them, you will receive an alert about “altering a sensitivity variable.” JustOK the alert, and don’t worry about it. Also, note that the “Ghost Tool” (it’s the last tool on the farright of the palette—next to the red dynamite stick) was used to create a ghost image of “target e\cratio” to serve as an input to “loss fraction.” Making a “photocopy” of this variable enables us toavoid stretching a wire across other wires, making our diagram more difficult to read in theprocess. To make “ghost images,” just select the Ghost tool, click on the variable to be “ghosted,”then navigate to where you wish to place the ghost and click to deposit it.

Previously, the stock of “Subscription Customers” and the stock of “Employees” were unrelated toeach other. The “.com”’s customer base could grow completely independently of the firm’sstaffing level—not a very realistic assumption. Creating the variable “employee\customer ratio,”and then running wires from it back to the variables that govern the inflow to, and outflow from,


the stock of “Subscription Customers,” closes two loops! Let’s implement the associated logic,and see how closing these loops changes the model’s dynamics.

The “employee\customer ratio” is defined as Employees/Subscription Customers. The other twovariables—“wom multiplier” and “loss fraction”—had been constants. We’ll now turn both intosomething called “graphical functions.” Double-click “wom multiplier,” then click once on“employee\customer ratio” to enter it into the equation box. Click the “divided by” symbol (i.e., /)on the calculator keypad. Then, click once on “target e\c ratio.”

We don’t want “wom multiplier” to equal employee\customer ratio/target e\c ratio. We want it todepend on (i.e., be a “function of”) it. So, click the button at the bottom left of the dialog that says“Become Graph.” Then, following the instructions in Illustration 5 for creating a graphicalfunction, make the “wom multiplier” graphical function look like what you see here. To do so, youwill probably have to type the numbers you see here into the Output column. The curve will becreated as you do this.

Notice, first, that both the X and Y axes have been re-scaled from their 0 to 100 default values.Next, an upward sloping curve has been traced through the range—meaning that the higher the“employee\customer ratio” (relative to target), the higher is the “wom multiplier.” When the ratioequals the target ratio, the multiplier takes on its maximum value.

Something to remember about graphical functions: they do not extrapolate! This means thatshould (employee\customer ratio)/target e\c ratio exceed 1.0, the “wom multiplier” will remain at0.5 (the maximum value taken on by the graphical function). When the ratio falls below target—such as would happen if the firm’s customer base were exploding while its headcount remainedconstant—the “wom multiplier” also would fall, reducing the inflow to the firm’s customer base.A growing customer base is therefore creating pressures that “feed back” to slow its own growth, aself-regulating process known as a “counteracting feedback loop.”


The link back to “loss fraction” creates a second counteracting feedback loop. Here’s the graphicalfunction that relates “employee\customer ratio” (relative to target) to “loss fraction”…

As the ratio falls (indicating too many customers to be adequately serviced by the number ofemployees), the “loss fraction” rises. As more customers depart, the customer base shrinks,helping to bring the ratio into a better balance—though not in the way the Company would wantthis to occur! So, once again, growth sets in motion pressures that ultimately feed back to limitit—a self-regulating, or counteracting feedback loop, process.

Implement the two new graphical functions, then set the “target e\c ratio” to 1/100—meaning that1 employee can adequately serve up to 100 customers. Then, if necessary, turn off SensitivityAnalysis (choose Sensi Specs… under the Run menu and un-check the Sensi On box). Next, run asimulation and graph “Subscription Customers” and “Cash” or “Profit.” How’s the venturelooking now?

Not so hot, huh?! The customer base—which grew explosively, before we added the twocounteracting feedback loops—again initially takes off. But quickly the growth is slowed and thefirm’s customer base levels off. The “.com” loses gobs of money. Not a very pretty picture!

“But hold on,” you say. “The employee population is constant! This dooms the company to failurein the face of a rapidly expanding customer base.” True. Very true. But there’s more to thestory…

Let’s take a look at an Income Statement for the “.com”. We’ll create a simple one (one that alsoincludes some Balance Sheet items) using a page in the Table Pad. Using illustration 5, as needed,create a new Table Pad page. Enter “Cash,” a Blank Line (the first entry in the Allowable list in


the Table Pad dialog), and then “revenue,” “initiation revenues,” “subscription revenues,” blankline, “expense,” then the three types of expenses, blank line, and finally “profit.” Double-click thevariables to incorporate formatting so that your hybrid Income Statement looks like this after yousimulate (only the months through July are shown)…

Look at the initial situation, i.e., Jan: Initial, within the “.com”. From the get-go, the firm’s payrollexpense is way out of whack! Monthly payroll is $25,000 (5 employees times an average of$5,000 per employee per month). It dwarfs the other expense categories. Revenues total only asmall fraction of payroll expense. If the firm tries to peg growth of headcount to the growth of itscustomer base (something it would appear necessary to do in order to maintain adequate levels ofservice), won’t payroll expense just get out of whack again?

These are precisely the kinds of questions the ithink software is designed to help you answer!We’ll explore this question while using the last category of features in the software.

Step 4. Communicating

We are not yet to the point where we have a solid enough grip on our model to begin thinkingabout how to enable others to discover what we have learned. However, we can make use of someof the experiential communication features in the ithink software to continue our exploration. Theissue at hand in our “.com” model is balancing headcount growth with the growth of the customerbase so as to maintain the quality of the services we are delivering—and in so doing, keeping theword-of-mouth snowball rollin’ downhill and gathering momentum. What we discovered,however, is that payroll expense is a biggee. And, therefore, matching headcount growth tocustomer growth may prove difficult—at least at current salary and subscription fee levels!


We are now going to create an interface for our model that will enable us (and others) to “fly it” tosee how well we can do at growing this business, while achieving solvency and profitability. Ifyou do not wish to take the time to create an interface, you have two options. You can stop fornow and come back and pick up here later. Or, you can open the “dotcom” model and “fly” usingour interface. If you wish to continue, quickly add an inflow to the stock of Employees. Name it“hiring,” and set its value to 0. Also, click the Document button in the hiring dialog. In theresulting document box, type: “This is the number of employees per month you hire.”

Once you’ve completed these tasks, click the up-arrow at the top of the left frame of theMap/Model window. Here’s what you’ll see, and what some of it is called (hover for ToolNames)…

The Interface level, or communication view, is used to create interfaces for your models. We’ll puttogether a very simple one here to illustrate some of the features and to give you a chance to “fly”this business.

Let’s begin by creating a Welcome screen. Use the Text Box (see Illustration 8) to say somethingto welcome people to your simulation-based learning environment. We said, “Welcome to…“.com” Dynamics.”

In addition to making use of the text tool (the “A” on the palette), we imported a graphic into theGraphics Frame. If you would also like to do this, select the Graphics Frame from the palette.Click to deposit it. Then, double-click anywhere on its border to open the dialog. Importinggraphics is straight-forward once you’re inside the dialog. We’ve saved you the graphic we used incase you also want to use it. It’s called “Golddice.pct” and it’s saved in the Graphics folder in theGetting Started Guide folder. Just click the From File radio button, then click the Import Picturebutton. Navigate to the “Golddice.pct” file (found in the Graphics folder contained within theGetting Started with ithink folder) and click Open. Then click OK to get out of the dialog box.Here’s what our Welcome screen looks like…


The next addition to the Welcome screen will be a navigation button that, when clicked, willtransport us to the simple control panel from where you will be able to “fly” the business. First,scroll to a clean “page” (you may need to add “paper;” to do so, just drop a button into the bluespace and new “paper” automatically will be created). When you have an empty page, put down aGraph Pad and pin the pad to the page (see Illustration 5, if needed). Put down a text block on thepage and type “Control Panel.” Here’s what ours looks like, thus far…


Now, scroll back to the Welcome screen. When you’re there, select the Button from the palette(it’s the second tool in the second set of tools; it’s blue) and deposit it on the lower left of yourWelcome screen. Position your cursor near the border of the button (the cursor will change to anarrow when you are “on” the border), then double-click to open its dialog.

Look on the lower right of the dialog to find the word “Button,” the default name for the button.Replace it by typing, “To Control Panel…” Then click the Import Picture button to import thename. It’s not necessary to do this because the name will automatically be imported, but it’s in thedialog that appears that you will be able to specify font size, etc. OK the resulting text-specifications dialog. Click OK, and look at your button (it should have the words “To ControlPanel…” on it). You may wish to use the paintbrush to change the color of your button. You canre-size the button by clicking on the border to select it. Re-sizing handles will appear. Click-and-hold any handle and drag to re-size.

Double-click on the border of the button to re-enter its dialog. Select “Navigate” under ButtonPurpose. Then click the Define Navigation button. Click-and-hold on the drop-down menu (itsays “None”) that enables you to select a visual effect. Pick one (we suggest Iris In). ChooseEffect to Black. Then, click the Navigate To… button located next to the camera icon. A camerawill appear. Do NOT click on any page surface with it yet because when you do, it will “take apicture” of the page and “remember it” as the place to which to navigate. Scroll to the ControlPanel screen, such that it is centered on the screen, just as you would want it to be if you hadnavigated to it from the Welcome screen (which is what you are about to implement). Whenyou’re happy with the positioning, click the camera anywhere on the screen to “take the snapshot.”Then OK your way out of the dialogs that will appear. Next, try out your button-navigation by


clicking your “To the Control Panel…” button. Re-program the navigation if you’re not satisfiedwith it.On the Control Panel, we’ll include two Slider Input Devices, a Warning Device (we’ll convert itto a warning lamp), a button, and a numeric display. Make your panel look like this…

Let’s define these devices. We’ll begin with the sliders. Double-click on the one on the left. Thefollowing dialog box will appear...


Double-click the “hiring” flow in the Allowable list to enter it into the Selected list. SomeMin/Max boxes will then appear for purposes of establishing a range for “hiring.” Set the Minvalue to 0 and the Max to 20 (meaning the number of employees you are able to hire per monthwill be between 0 and 20). Click-and-hold on the Increment drop-down menu (it says “FreeFloat”). Choose “1” as the increment. Finally, check the “Reset To” box. This will prevent youfrom inadvertently continuing to hire each month, when you really only wanted to hire this month.OK the dialog.

Notice that the nameplate for the slider (i.e., “hiring”) is sitting atop the numeric display. Click-and-hold on the nameplate and drag it to the bottom of the slider. You may choose to use thePaintbrush to re-color your slider if you don’t like the default (red) color. Note the “?” on theslider. Click it. Up pops the documentation for the variable that you included when you createdthe hiring flow (if you included the documentation!). Click-and-hold on the slidebar, then slide itrightward (i.e., increasing the hiring volume from 0 to some positive number). Release your click.Note that a “U” appears. Click it to re-set the slider to its initial value (in this case 0). Once westart “flying,” this is how you’ll make your hiring decisions—the re-set to zero, however, will beautomatic for this slider.

Next, define the second slider in the same manner. This slider should control monthly subscriptionfee—the amount you charge your customers per month for the internet service you are providing.Set a range of 30 to 40, with an increment of 1, and do not check Reset To. OK the dialog. Youmay wish to move its nameplate just for symmetry’s sake.

Next, let’s define the numeric display. Double-click it to open its dialog. Assign “Employees.”Format it with no decimal places. OK the dialog. It’s nice to have Employees here because hiringis an inflow, and Employees is the stock into which it’s flowing—Employees, at each point intime, therefore will reflect the accumulation of all the hiring you have done up to that point.


On to the Warning Flasher… Double-click to open the device’s dialog, then double-click to enter“employee\customer ratio” into the Selected list. Shazam!!! Lotsa stuff comes at you. Basicallywhat you’re looking at is an apparatus for defining a “normal, cautionary, panic” range for thevariable you’ve entered—in this case the “employee\customer ratio.” The target value for this ratiois 1/100, or 0.01. Values greater than or equal to 0.01 are “good/normal.” Values less than 0.01,but greater than, say, 0.005, we’ll consider to be “cautionary.” Values less than 0.005, we’llconsider “bad” (worthy of “panic”).

Begin by selecting the high-end, right scale box. Type in a 0.02. Then, into the low-end, left scalebox, type a 0. Next, select the right-most, “normal” zone by clicking once in the hollow, elongatedrectangle into which the two downward-pointing arrows are sticking. This zone is highlighted inthe illustration. Type 0.01 into the “Zone begins at” box. Next, select the “caution” zone (themiddle one), by clicking in it. Type 0.005 into the “Zone begins at” box. Finally, check the “ShowAs Lamp” box. The lamp will use red, yellow and green as indicator colors. Red corresponds with“Panic,” yellow with “Caution,” and green with “Normal.” OK the dialog.

Our next task is to create a Run button. Easy to do. Double-click on the border of the button that’sbeen placed to the left of the graph pad. Choose “Menu” under button purpose. The default-selection Menu item is “Run,” and that’s just the item we want, so just leave it. Then, in the textbox where it says, “Button” (lower right of the dialog), type, “Run.” Then, OK the dialog.

As with the other devices, you may wish to “paint” your Run button some color other than thedefault (Blue).

Next up…let’s put some variables on the ol’ Graph Pad. We’ll create a number of pages. Double-click the Pad. Select “Cash” and “Profit” for this page. You should set some preliminary scales


for both. Click on “Cash” in the Selected list, then click on the two-headed arrow to the right of it.Min/Max scale boxes will appear. Type –70000 for the Min and 70000 for the Max. Then clickthe Set button. Repeat the process for “Profit.” Scale it from –30000 to 30000. Then use thepaging arrow (see Illustration 7 if you’re having difficulty) to page-up to create a page 2.

On page 2, include “employee\customer ratio” and “target e\c ratio.” Be sure to put them on thesame scale. To do so, click-and-hold on whichever one is first in the Selected list. Drag downuntil the second of the two is also selected (highlighted). Then, click once on the two-headedarrow located to the right of the first variable. Min/Max scale boxes will appear. Type 0 in the MinBox and 0.05 in the Max box. Then, click the Set button. Next, page up to page 3.

Enter “Employees” and “Subscription Customers” onto this page. You can scale them later. OKthe dialog.

This 3-page set of variables gives you a pretty comprehensive basis for making the decisions youwill need to make in flying the “.com” business.

We are now almost ready to “fly.” But first, let’s create one more performance barometer:Cumulative Profit. Head back down to the Map/Model level. Make “Cumulative Profit” a stock.Since it can go negative, be sure to uncheck “Non-negative” in the stock’s dialog. The associatedflow is a “biflow.” The input to the flow is “Profit.” We suggest you “ghost” Profit and put theghost image near the flow, rather than running a wire all the way across the diagram. See if youcan create this structure on your own. Once you have created this variable, enter it into a numericdisplay on your Control Panel. Then, see how high you can make it go by the end of the run.

We now need only to put the software into “Pause and Resume” mode. Then, it’s off into the wildblue yonder!

Choose “Time Specs…” from the Run Menu. Find the text box (middle left of dialog) that says“INF” (it’s to the right of Pause Interval). Type a 2. You are telling the simulation to pause everytwo months for you to make decisions (with respect to “hiring” and “monthly subscription fee”).OK the dialog.

We’re now ready to fly!!!

Adjust your sliders if you wish to make some “pre-flight” decisions. Then, click Run. Twomonths of simulated results will unfold. Based on what you see, you can make new decisions, orlet things ride. See how well you can do over the twelve month period.

Final Considerations

You should be aware that we have created a “free lunch” in our Flight Simulator. The “free lunch”is provided by virtue of the fact that there is no “cost” to boosting “monthly subscription fee.”Why wouldn’t we just crank it to 40? There is no feedback from the fee to either the gaining or


losing of subscription customers. In reality, raising subscription fee would likely have an influenceon both.A good test of what you’ve learned in this tutorial would be for you to include feedback fromsubscription fee back to the gaining and losing flows. Doing so will remove the “free lunch”we’ve provided. We’ve included a model in the Getting Started folder called “dotcom2” that doesinclude this feedback, as well as many other things. We encourage you to have a look at it!

We have not included any “messaging” or “coaching” in your model. Both are included in“dotcom2.” Both are powerful ways to engage and assist end-users. Messages (in the form ofgraphics, sounds, text, and/or movies) provide feedback on how things are going, and urge end-users to make, or not make, certain decisions. Usually, they “come from” some character in theunderlying drama (e.g., the CEO, the VP of finance, a disgruntled or satisfied customer, etc). Amessage might congratulate a user for particularly good quarterly financials, or berate them forparticularly bad ones, for example. Coaching is messaging that’s intended to help end-users toimprove their performance. Usually, in order to do so, it’s necessary for the end-user to firstconfront, then modify, their mental models. Again, dotcom2 illustrates both messaging andcoaching, and you should be sure to check it out so that you can experience this very powerfulcapability built-into the software.

Finally, people who were not involved in constructing a model need some way to understand whatassumptions have been incorporated into the model. We’ve incorporated a feature into thesoftware called “Storytelling” specifically to address this need. Let’s quickly add a “story-telling”button to your interface.

Go to your Welcome screen and deposit a button somewhere upon it. Double-click the border ofthe button to access its dialog. Choose “Storytelling” under Button Purpose. Then click the“Create Story…” button. A dialog will pop up that will enable you to select the model variablesyou would like to unfurl, one at a time, in the sequence that you think best “tells the story” of themodel. In addition to model variables, you can intersperse graphics, pop-up text, and even moviesand/or sounds, so as to truly bring your story to life! Let’s create a simple sequence here. You canlook in “dotcom2” for a more elaborate “story.”

Click on each to enter the following variables, in the order listed: “Cash,” “revenue,” “expense.”Once “expense” has been entered into the storytelling list, click on it. The “Annotate with” optionsat the bottom of the dialog will become illuminated. Choose “Text,” then click the “Edit Text”button. You’ll be given a text field into which you can type a message. Type: “Next, we willunfurl the logic of revenue generation.” Choose “Large” as your font size. Click OK. Then nameyour button: “Tell the “.com” story…” OK the dialog, then test your storytelling button by clickingit. You will need to re-size and re-position the pop-up text box. Once you do re-position it, it will“remember” where you put it and always pop up in that location.

After your test-story, complete your story by including the remainder of the revenue logic in thesequence you wish it to be “told.”


This concludes your ithink “Getting Started” experience. We hope it has given you a sense for theincredible power of this highly versatile software tool. If you have any comments or questions,please contact us via e-mail, fax or phone. We’d love to hear from you!

e-mail: [email protected]: 603-643-9636 or 800-332-1202fax: 603-643-9502website: http://www.hps-inc.com

mailto:[email protected]

http://www.hps-inc.com/


Appendix: Basic Software Operations & Features

Rendering

Illustration 1: Depositing, Naming & Re-positioning Stocks, Converters and Nameplates


Illustration 2: Hooking-up Flows


Illustration 3: Re-positioning, “Bending” and Reversing Flows


Illustration 4: Hooking-up and Re-positioning Connectors


Illustration 5: Defining a Graphical Function


Simulating

Illustration 6: Creating a Graph or Table Pad


Illustration 7: Defining a Graph or Table Pad Page


Communicating

Illustration 8: Using the Text Tool

Date post:	16-May-2015
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