Workshop on Systems Analysis: Summary Report (1984)

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PART I OPENING PRESENTATIONS

OPENING PRESENTATION A Systems Approach to Development Planning Processes* M. T. Zen Deputy Chairman for Natural Resource Development Agency for the Assessment and Application of Technology (BPPT) The world is facing transformation, but the greatest technical innova- tion of the future will not lie in the design of one nuclear reactor or one airplane. It will involve whole systems of energy development, transportation and communication, defense, human settlements, industrial complexes, food production, education, and public health. The basic scientific factors that underlie the elements of the system will become ever more important. Basic science will lead us to new realms of innovations in which the life sciences, earth sciences, physical sciences, and behavioral sciences will be combined in new ways of learning and in new forms of societal life. With the aid of the simulation techniques and computers that are now available, the time has come to seek more common languages and common concepts for a joint system of man and nature in the so-called Man-Society-Nature-Technology System. A systems approach to development planning aims to (1) introduce a systems approach in the planning process, (2) show why a systems approach is needed in the process, and (3) indicate areas where the systems method can be applied effectively. Here we will focus on the need for systems thinking, becoming familiar with systems, understanding the systems approach, and some examples of application. There are numerous definitions of a system, but all denote the interrelationship of components: • "An organized or complex whole."—R. A. Johnson, et al. • "An assemblage or combination of things or parts forming a complex whole."—E. W. Martin • "An aggregation or assemblage of objects united by some form of regular interaction or interdependence; a group of diverse units so combined by nature or art to form an integral whole, and to function, operate, or move in unison and, often, in obedience to some form of control."—Webster's New International Dictionary, 2nd ed. *Professor Zen's animated oral presentation explored a number of relationships of systems analysis to the development process, with illustrative graphics to stimulate thinking and understanding. In the absence of a formal paper, his address has been summarized. - 3 -

- 4 - • "A bundle of relationships."—A. Rapaport • "A configuration of components interconnected for a purpose according to a plan."—M. H. Grosz Table 1 illustrates three types of systems, while Table 2 outlines the elements of the systems approach. Some examples of problem areas where the systems approach can be applied effectively in Indonesia, as in other countries, are: • Energy development, for example, large-scale coal mining, transportation, handling, processing and utilization, offshore gas pipeline network, solar energy system (see Table 3 for the systems aspect of an energy chain) • Human settlement programs, for example, transmigration in Indonesia where approximately 500,000 families are being resettled in Sumatra, Kalimantan, and Sulawesi • Transportation and communication systems • Water resources development and management • Food production, transportation, storage, and distribution • Defense. TABLE 1 Three Types of Systems System Physical Biological Man-made Payroll X Data processing X Heating XXX Weapons X Transportation XXX Bell Telephone X Banking X Drainage XXX Penal X X Legal X Portable life support X Weather X Atomic X

- 5 - TABLE 2 Elements of the Systems Approach Element Description General systems theory Systems philosophy Systems analysis Systems management Concerned with developing a systematic, theoretical framework for describing general relationships of the empirical world "A way of thinking" about phenomena in terms of wholes, including parts, components, or subsystems, with an emphasis on their interrelationships A method or technique used in problem solving or decision making. Closely related to scientific method. Involves awareness of a problem, identification of relevant variables, analysis and synthesis of various factors, followed by a program of action The application of systems theory to managing organizational systems or subsystems CONCLUSIONS AND RECOMMENDATIONS The Agency for the Assessment and Application of Technology (BPPT) is responsible for the assessment and implementation of technology in Indonesian development. Whatever action BPPT takes, therefore, will have long-range consequences. In this regard, systems planning is long-range thinking affecting action in the present. By including a systems design "laboratory" and functionally oriented divisions and departments, BPPT will incorporate the systems approach in all levels of its operations. Since this approach can only be mastered by doing it, it is strongly recommended that BPPT tackle projects where the approach can be fruitfully adopted, building upon experience and implementing the approach as widely as possible during the fourth 5-year development plan, REPELITA IV. REFERENCES Johnson, R.A., F. Kast, and J.E. Rozenweig. 1967. The Theory of Management Systems. McGraw-Hill, New York, New York, USA. Martin, E.W. 1966. The systems concept. Business Horizons (Spring).

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OPENING PRESENTATION Systems Analysis, Companion to Economic Development David B. Hertz Director, Intelligent Computer Systems Research Institute, University of Miami Chairman, NRC Panel In developing nations, systems analysis (S/A) can be an important companion of economic development at all levels. The course of economic development is guided by policy choices—good or bad, wise or foolish, sound or shaky—but, as one hopes, they are made at some intermediate level of good sense. To make important policy choices without analysis is sometimes the height of folly, and to ignore the opportunities that systems analyses offer is to put one's head in the sand. Systematic collection of information about policy problems is the essential first step. Without systematic methods of analysis, however, the value of such information is severely limited. An understanding of the interrelationships among the factors involved in making and imple- menting any policy choice is critical. Systems analysis provides the methods for ordering and interpreting the collected information and, in fact, for directing succeeding phases of the implementation effort. The key objectives are to make hypotheses about the variables and their interrelationships in order to (1) conduct any further investiga- tions required, and (2) provide ultimate recommendations for action decisions. This applied research can provide a basis for decision makers extending their capacities to understand and use effectively the data and information that continually pour into the halls of government. Of course, some of the information may be incorrect, much will be misleading, and some of it may be outright nonsense. The task of the systems analyst is to sort the wheat from the chaff if possible, and to make sense out of the relationships among the remaining grains. Why then is systems analysis crucial to decisions in the developing countries? How can one approach problems in Indonesia such as food production, transportation, and waste disposal, building on the work already done by staff of the Agency for the Assessment and Application of Technology? CONTRIBUTIONS OF SYSTEMS ANALYSIS To answer these questions, one must first examine what systems analysis offers decision makers not only in developing countries, but also in those nations whose economies, no matter how advanced, can run into - 7 -

- 8 - various kinds of economic difficulties. Three results can be considered the key contributions of this form of applied science: 1. S/A can contribute to understanding the particular system under study, be it waste disposal, transportation, food production, or another key element of the economic system. Furthermore, beyond additional understanding about the specific system, it should be able to explain a great deal about how that system is hooked into, attached to, related to, or aligned with other such systems in the country and the world. 2. S/A can—indeed must—permit one to make predictions about the future state of the system under study, given what is known about its past and present structure. Naturally, such predictions are subject to errors and will hold, if at all, for only limited periods of time. One must also recognize the danger of overconfidence. It is, however, important to remember that the purpose of systems analysis is to permit a decision maker to move forward and take actions in reasonable anticipation that the future will develop approximately as the analyst suggests. 3. S/A can provide the specifics of alternative actions that "influence" the behavior of the system in ways that will agree with the policymaker's objectives. The process should increase the probabilities that those objectives will be met. Understanding, prediction, and analyses of alternative courses of action are the key contributions of the systems analysis approach to the government executive. How are they accomplished? COMPUTER-ASSISTED SYSTEMS ANALYSIS In this computer-oriented age, the potential for systematic analyses of complex problems is greatly enhanced. It must be emphasized, however, that use of the tools of computer programming in a complex way does not mean that the solutions reached using the computer must themselves be complex. To the contrary, quite often the application of complex thought to difficult problems results in theories of extraordinary simplicity. For example, the application of computer-assisted systems analysis to the problems of agriculture will not necessarily point to complicated mechanisms for modernizing the food system. It often permits an early identification and efficient organization of major and interrelated variables. The decision to undertake a man/computer analysis of a systems problem should be considered an investment decision in a form of research and development—applied research, to be sure, but research nonetheless—of perhaps the most important kind that a developing nation can undertake. The research investment will be in human resources, the primary component, and beyond these will come the ability to undertake the real experimentation that will provide the bases and information for

- 9 - the larger scale decisions. To this may be added, as a less significant but important element, the investment in time and effort of the decision makers themselves. No useful systems analysis can result from any study, no matter how elaborate or well designed, that the political policy apparatus cannot understand. If it must be supported outside such understanding, its long-term success will remain in doubt. If support is denied because the project results and recommendations were not understood, the entire exercise will have been undertaken in vain. Nobel Laureate Herbert Simon, who has credentials in the fields of systems analysis, economics, and intelligent computer systems, has written that every decision involves "facts" and "values." Simon makes the point in Reason in Human Values (1983) that decisions are something more than factual propositions; they have an imperative quality; they select one future state of affairs (or I would here add, some desirable state of affairs that is considered by some reasonable and, I hope, rational process, to have some chance of occurring) in preference to another; and they direct behavior toward the chosen alternative. They have an ethical as well as a factual content. Systems analysis can help public officials identify and define problems, and it can provide more information and data about possible solutions and more understanding about the problems that must be attacked and solved before improvement in the systems parameters is at hand. These are political decisions; no analyses or computerized programs can ever make final choices because in each instance the values that enter into the final decisions are quantifiable only with the greatest difficulty. That does not mean, however, that values must wait until the end of the analysis to be superimposed upon the proposed alternatives. The objectives as laid down in the terms of reference of a systems study should already reflect the values—a critical requirement of any analysis that is to stand a reasonable chance of implementation—of the decision maker. Thus a transportation study that gives water-based transportation maximization as the basic objective would be a different analysis than one that stresses air transportation. Confusing the objectives would certainly reduce the likelihood of acceptance and implementation. UNDERLYING PRINCIPLES What are the underlying principles that provide assistance in improving systems to meet local and national objectives? Two branches of mathematics, as well as the computer and the human intelligence of systems scientists, form the basis for most of the analytical work undertaken successfully: probability and statistical inference, and higher algebra including predicate (logic) calculus. Both play a key role in data analyses model building. As to probability and statistical inference, the future is always uncertain, and the results of analyses hinge, more often than not, upon the outcome of extremely variable events. Thus probability and statistical mathematics are used to help cope with this inherent uncertainty. No matter how deterministic problems seem to be, no matter how clear nonstatistical models may seem, it is perilous to

- 10 - ignore the world's fundamental statistical nature. Many elegant and well-designed studies fail to achieve effective implementation because the world of variable events has not been taken into account. This uncertainty, however, provides the very basis for achieving results from which sure-fire certainty would bar one. For example, genetic improvement in animals and foodstuffs is based solidly on statistical changes in genetic codes. Risk taking—and winning—through the construction of a new industry in a developing country depends upon a thorough understanding of the underlying variations in supply, demand, and quality, among other factors. Thus given the existence of uncer- tainty, the systems analyst must give it its proper due. The concepts of probability and statistical methods play a major role in the quantitative analyses of the risk of any investment recommendation. Higher algebra is used for various kinds of programming that deal with problems of combining many variables or factors to achieve the com- bination that best meets a set of objectives and constraints. Program- ming tools can now be combined with statistical models and simulations in very versatile combinations to determine the best allocations of resources in situations where no one alone would be particularly useful. Representations of the processes involved in the activities to be controlled by active governmental or industrial intervention, implemented by algorithms that can be programmed for computers and applied to specific operations or parts of activities—"models"—are among the fundamental building blocks of systems analyses. In using a systems analysis model to help make decisions, it is, of course, essential to quantify the elements of the decision process itself. The result should be a statement of the benefit/cost relationships of the probable consequences of alternative courses of action. The key elements underlying the ultimate decision recommendations mus t be: • Resources at hand • Reasonable alternatives for action • Commitments required for each of the alternatives • Probabilities of results from alternatives (e.g., costs incurred, revenues or other benefits received) • Interactions between alternatives chosen and prior and later choices, and other elements in the total system • Constraints or bounds on resources or alternatives. The inherent difficulties involved in quantifying alternatives, the results to be achieved from choices, and the interaction of past and future choices should not be underestimated. The decision maker needs to be able to analyze consistently and quantitatively the net effects of applying his resources in a chosen pattern. REFERENCE Simon, H.A. 1983. Reason in Human Values. Stanford University Press, Stanford, California, USA.