Ithink6 Tutorial

Getting Started with ithink® v 6.0

© MM High Performance Systems, Inc.
The Systems Thinking Company TM
http://www.hps-inc.com

Table of Contents
Welcome

The Basics: A Tutorial for New Users 4

Appendix: Basic Software Operations & Features 34

Rendering
Illustration 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

Simulating
Illustration 6: Creating a Graph or Table Pad 39
Illustration 7: Defining a Graph or Table Pad Page 40

Communicating
Illustration 8: Using the Text Tool 41

© MM High Performance Systems, Inc. All rights reserved. 2

Welcome
Welcome to the ithink® software “Getting Started” Tutorial! This tutorial provides an experiential
introduction 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 and
features in much greater detail. The approach here is selective (not all features are illustrated), and
context-rich. Through a case study involving a “.com” start-up, you’ll learn how to perform basic
operations with the software, and to use the basic features, associated with: (1) rendering a mental
model, (2) simulating the model to yield dynamic outputs, (3) analyzing the outputs to understand
what’s causing them, and what you might do to change them, and finally (4) communicating your
understanding 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 the
screens you encounter may therefore look slightly different than some of the screen shots appearing
in 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, if
you choose to “take a break” and return later to complete the tutorial, no problemo. Have fun. Be
cool (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 we
render, simulate, analyze and communicate our mental models. Mental models are the things we all
necessarily 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-upon
appropriate 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, and
learning to simulate them more reliably, are vital to making your world, and our world, work more
effectively. 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 and
communicating of a mental model of a “.com” start-up. Because we are seeking to build your basic
expertise as quickly as possible, we will keep the illustration simple. By the time you complete the
tutorial, 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 the
software 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 of
rendering, simulating, analyzing and communicating. This progression of diagrams appears in an
Appendix that begins on p 34.

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

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

Step 1. Rendering a Mental Model: Mapping
This 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” rather
than “ithink Analyst 6.0.”

Overview of the environment:
You are looking at one of the three “levels” that define the operating environment of the ithink
software. This is the Map/Model “level.” It is here that you will perform your rendering and
numerating 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 the
left vertical window frame. Don’t click them yet.

The up-arrow will take you to the Interface level, or “communication” view. The tools available
there 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 the
rendering 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-up
share in the exhilaration of your meteoric, virtual stock price run-up! The down-arrow takes you
to 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 are
doing this in a group), one little chunk at a time, rather than seeking to map the whole thing at
once. 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 for
the process to spin out of control because the software makes it so easy to do the rendering. In this
part 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, or
novel is quite another thing altogether! The same is true with the ithink software. Think quality
not 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 the
beauties of the ithink software is its very sparse, yet very powerful language set. The “building
block icons” are the first four icons on the left end of the horizontal palette that adorns the top
frame of the software…

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

To do so, follow the directions in Illustration 1, which appear in the Appendix that follows this
tutorial (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 monthly
revenue (it’s the anticipation of this flow growing into a large volume that makes both
entrepreneurs 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 the
Subscription Customers stock. Call it Cash. Then, hook-up a flow to the Cash stock (follow the
directions in Illustration 2 in the Appendix). When you complete this set of operations, your map
should 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 is
called a “flow regulator.” The circle ultimately will contain the “logic,” or “decision rule” that
adjusts the volume of the flow (i.e., directs the spigot to open wide, or shut itself down). Note that
the flow, in this case, emanates out of a “cloud.” Sometimes, as you’ll see, flows empty into
clouds. Clouds denote a boundary point for the model. The cloud out of which the revenue flow is
emanating means that we are not going to include within the boundary of the model the source of
the flow. That source is the stock that is being drained by the flow; namely, customers’ cash
reserves.

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.” Flows
represent actions, “how things are going.” To see the distinction, imagine that you could suddenly
freeze all of the action going on within a system. When all actions cease, all flows go to zero. But
notice that the conditions—i.e., the magnitude of the stocks—would remain wherever they were at
the 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 chips
you have deposited before the freeze occurs. OK, resume gorging.

Recognizing the distinction between stocks and flows is absolutely critical to accurately capturing
the 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 you
have just rendered. Can you see that it’s possible for the flow of revenue to be increasing, yet the
stock of cash to be decreasing—at the same time [Hint: Consider that the stock of cash also has an
outflow—expenses! We’ll be adding this flow to the map soon]? Without recognizing the
distinction between stocks and flows, the dynamic in which the volume of a flow moves in one
direction, and the magnitude of the associated stock moves in the opposite direction, could not be
captured.

As a final way to solidify the distinction, remember that the units-of-measure of flows will be the
same 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 employ
first-letter caps when naming stocks, and all lower case when naming flows. Doing so helps to
make more visual the distinction between these two types of variables—particularly when they
appear 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 connector
and 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 to
implement 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 the
screen shots have been re-positioned relative to their default locations. We’ve done this, and
advocate strongly that you do same, when needed, in order to prevent wires (connectors) from
violating nameplates. (See Illustration 1, Step 6 for help). Because an explicit purpose of any
ithink map is to paint a clear picture, you should avoid violating nameplates whenever possible. In
fact, it’s worth paying a lot of attention to the neatness of map layout. It will be hard for people to
understand “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 the
Appendix 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 equation
infrastructure. We will need it in order to ultimately simulate the system. Let’s take a look at
what’s been going on. To do so, click the down-arrow located on the top left frame of the
Map/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” (meaning
the 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 of
revenue that flowed in over the instant, minus the volume of expense that flowed out over the
instant. Flows, which are defined as occurring over a unit of time (e.g., over a month), are
multiplied by the “length of the instant” (i.e., dt), which usually is less than a full time unit, so that
only 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 you
create a stock. Note, for example, that the beginning of a “bathtub accounting” equation has been
set up for the other stock in the system (Subscription Customers), even though that stock has, as
yet, no flows attached. The generic equation simply totes up the flows into and out of a given
stock during each time period over the course of a simulation. The equation reports out the
resulting current magnitude of the stock at each point in time. You don’t have to worry about
writing this accounting equation because the software does it for you. It figures out whether to add
or subtract associated flow values based on the direction in which the arrowheads on the pipes
point (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 some
numerical 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 the
Equations 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 the
icon 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 the
File 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. They
indicate 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 required
information. 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 radio
buttons 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 in
more advanced applications when you wish to construct an “initial value” equation rather than
using a number to initialize your stock. The calculator keypad, to the right of the list, is useful for
clicking 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 the
initial value box. “Units” are explained in further detail in the Electronic Help Files. Along the
bottom of the dialog are four buttons. The last two—Cancel and OK—should require no
explanation. The Document button, when clicked, pops up a box into which you can type text that
describes your assumptions, documents the source of your numerical information, etc. Finally, the
Message… 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 examine
this 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. By
doing 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 the
stock dialog for “Cash” (otherwise the stock will not be able to take on negative values). Once the
simulation 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 you
should see…

At the top of the dialog, you have the option to make the flow a uniflow or a biflow. Biflows allow
flow to occur in either direction (both into, or out of, the stock). Uniflows allow flow only in the
direction 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. The
variable is in the list because we drew a connector from it into the revenue flow regulator. The
dialog box is now telling us that we’re required to use it in defining the revenue equation. Suppose
we 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 the
equation, the “?” on the surface of the element will not extinguish until you do. The software thus
enforces a one-to-one correspondence between what you see on the diagram and what appears in
the underlying equation. This is something you’d never get with, say, a spreadsheet, because
spreadsheet logic is invisible, lying underneath the associated numbers—the mirror image of how
the ithink software operates!

Click once on subscription_revenue to enter it into the equation. Now suppose we decided we also
wanted to include a second kind of revenue in the equation—say, initiation fee revenue. Type (or
click) “+.” 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 thus
not only ensures that “what you see is what you get,” it also ensures that “what you don’t see, you
don’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 revenue
flow 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 fee
monthly 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 a
graph and table. Use Illustration 6 to create a Graph Pad on the Map/Model level (just plop the pad
down anywhere and don’t “pushpin” or “lock” it). Then use Illustration 7 to enter Cash as the
variable 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 Y
axis) has been re-formatted to remove the two decimal places that appear in the default scale. To
re-format the scaling (if you wish), double-click “Cash” on the top of the graph page to pop-up the
formatting dialog. Then, choose “0.” By the way, you may also use the Paintbrush (located on the
tool 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 any
curve/line that’s on the page, the associated numerical value at that point in time for each variable
being 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 the
graph pad. Then choose Model Prefs… from the Model Menu. The dialog box shown below will
appear. Note, in the dialog, that the three building block icons under the word “Animate” have
boxes 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 animation
unfold. Did you feel your pulse quicken? OK, not a terribly exciting simulation result…at least
not yet! Thus far, only Cash is changing over time. The other stock and all of the flows are
constant 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, your
results probably don’t look exactly like what’s shown here. That’s because we availed ourselves of
some formatting options that we didn’t tell you about yet. First, within the Table dialog box, we
un-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” to
include $ and to drop the two-digit precision (After all, what “.com” entrepreneur worries about
cents? If they had any, they never would have gone into one of these businesses! Joke. Just
kidding. We love “.com” entrepreneurs… especially rich ones!). To format Cash, we first OK’ed
the Table dialog to return to the Table itself. We then double-clicked on Cash (in the Table) to pop
up 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 of
rendering 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 steps
multiple 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 wired
all of the expense calculations directly into the expense flow regulator. But then the resulting
equation 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 around
costs—something that often proves useful to do.

Something else to note…In incorporating the new “logic” into the map, we again did some
rearranging of nameplates, re-positioning of structure, etc. We did this in order to ensure that the
evolving 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 as
possible. Take the time to tell your story clearly!

OK, open the entities with ?’s and fill in the required equation logic or numerical information. The
logic should be straight-forward. If you have trouble, open and refer to the “dotcom” model in the
Getting Started Folder in your software. For numbers, use:
expensesubscriber = 8
Employees = 5
avg costemployee = 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 are
bankrupt faster than you can say “Holy IPO!”

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

Make your map look like this…

We’ve added an inflow, “gaining,” of new Subscription Customers. The activity of gaining new
customers is represented as a “word-of-mouth” process in which existing customers attract a
certain 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 Subscription
Customers inspired thinking about an outflow. One of the great values of making a mental model
explicit 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 one
example of this. The fraction of the existing customer base that your “.com” loses each month is
represented 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 have
questions, or want to check your thinking, open the “dotcom” model that is located in the Getting
Started Folder. Here’s a first set of numbers:
initiation fee = 25 (a one-time charge for new subscribers)
wom = 0.2
loss fraction = .025

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

Step 3. Analyzing
How’d you do? We’re reaching a level of model complexity at which most people, who have not
specifically worked at developing their mental simulation capabilities, will have difficulty
accurately intuiting dynamics. One good use of the ithink software is for exercising your mental
simulation 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, despite
the fact that its customer base is burgeoning (graph Subscription Customers, run a simulation, and
watch how this stock is literally “exploding”)! The company makes $22/month profit on each
customer (a subscription fee of $30 minus an expensesubscriber of $8/month). So why can’t it
make money when its customer base is exploding as it is?! Maybe it just isn’t exploding fast
enough. Let’s use the ithink software’s Sensitivity Analysis feature to see if this is the case. The
question 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 to
select it in the Selected list. Selecting any variable in the Selected list activates the “Variation
Type” 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 will
cause one additional value for wom_multiplier to be created (0.4, which is ½ way between 0.2 and
0.6). We now are set up to conduct three back-to-back simulations in which on run 1, wom
multiplier 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 up
for displaying multi-run Sensitivity Analysis results—to be created within the Table Pad that you
created previously. The page is automatically defined to be a “Comparative” Table. Within the
Allowable list, double-click on profit to enter it into the Selected list. This will enable us to see
how profit varies with variations in the wom multiplier. Choose S-Run from the Run Menu, or
click the “Forward” button on your run controller. You should see results that look like these (if
you 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, the
the 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 its
first year of operation. Doubling the value of the wom multiplier enables the start-up to begin
making money by July. Tripling the value of the multiplier advances the date for achieving
profitability 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 each
10 existing customers would generate 4-6 new customers each month. “.com” services have been
known to attract customers like wildfire, so who knows, maybe such a multiplier could be
achieved. But let’s analyze the results a little more closely. To do so, add another page to your
Table Pad (see Illustration 7 if need be). Select “Comparative” within the table dialog. Then, enter
Subscription Customers as the selected variable. Finally, re-run your sensitivity analysis. What
did 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 0.4
and 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 really
be 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 have
revealed a so-called “open loop” in our model. Currently, we can make the “wom multiplier” for
subscription customers take on any value we want. This lets us achieve an arbitrarily large base of
customers, at an arbitrarily rapid pace. And, we can do both without the need for any expansion in
the 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 existing
customers. This is true whether those five employees are serving 100 customers (as is true at the
outset 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, one
of the substantial advantages of the ithink software over other analytical tools (like spreadsheets) is
the ease with which it enables feedback loops to be incorporated into the model structure, and then
visualized 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.” Just
OK the alert, and don’t worry about it. Also, note that the “Ghost Tool” (it’s the last tool on the far
right of the palette—next to the red dynamite stick) was used to create a ghost image of “target ec
ratio” to serve as an input to “loss fraction.” Making a “photocopy” of this variable enables us to
avoid stretching a wire across other wires, making our diagram more difficult to read in the
process. 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 to
each other. The “.com”’s customer base could grow completely independently of the firm’s
staffing level—not a very realistic assumption. Creating the variable “employeecustomer 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 “employeecustomer ratio” is defined as Employees/Subscription Customers. The other two
variables—“wom multiplier” and “loss fraction”—had been constants. We’ll now turn both into
something called “graphical functions.” Double-click “wom multiplier,” then click once on
“employeecustomer ratio” to enter it into the equation box. Click the “divided by” symbol (i.e., /)
on the calculator keypad. Then, click once on “target ec ratio.”

We don’t want “wom multiplier” to equal employeecustomer ratio/target ec ratio. We want it to
depend 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 graphical
function, make the “wom multiplier” graphical function look like what you see here. To do so, you
will probably have to type the numbers you see here into the Output column. The curve will be
created 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
“employeecustomer ratio” (relative to target), the higher is the “wom multiplier.” When the ratio
equals the target ratio, the multiplier takes on its maximum value.

Something to remember about graphical functions: they do not extrapolate! This means that
should (employeecustomer ratio)/target ec ratio exceed 1.0, the “wom multiplier” will remain at
0.5 (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 remained
constant—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, a
self-regulating process known as a “counteracting feedback loop.”


The link back to “loss fraction” creates a second counteracting feedback loop. Here’s the graphical
function that relates “employeecustomer ratio” (relative to target) to “loss fraction”…

As the ratio falls (indicating too many customers to be adequately serviced by the number of
employees), 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 want
this to occur! So, once again, growth sets in motion pressures that ultimately feed back to limit
it—a self-regulating, or counteracting feedback loop, process.

Implement the two new graphical functions, then set the “target ec ratio” to 1/100—meaning that
1 employee can adequately serve up to 100 customers. Then, if necessary, turn off Sensitivity
Analysis (choose Sensi Specs… under the Run menu and un-check the Sensi On box). Next, run a
simulation and graph “Subscription Customers” and “Cash” or “Profit.” How’s the venture
looking now?

Not so hot, huh?! The customer base—which grew explosively, before we added the two
counteracting feedback loops—again initially takes off. But quickly the growth is slowed and the
firm’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 failure
in the face of a rapidly expanding customer base.” True. Very true. But there’s more to the
story…

Let’s take a look at an Income Statement for the “.com”. We’ll create a simple one (one that also
includes 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,” blank
line, “expense,” then the three types of expenses, blank line, and finally “profit.” Double-click the
variables to incorporate formatting so that your hybrid Income Statement looks like this after you
simulate (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 payroll
expense 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 a
small fraction of payroll expense. If the firm tries to peg growth of headcount to the growth of its
customer base (something it would appear necessary to do in order to maintain adequate levels of
service), 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 thinking
about how to enable others to discover what we have learned. However, we can make use of some
of the experiential communication features in the ithink software to continue our exploration. The
issue at hand in our “.com” model is balancing headcount growth with the growth of the customer
base so as to maintain the quality of the services we are delivering—and in so doing, keeping the
word-of-mouth snowball rollin’ downhill and gathering momentum. What we discovered,
however, is that payroll expense is a biggee. And, therefore, matching headcount growth to
customer 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” to
see how well we can do at growing this business, while achieving solvency and profitability. If
you do not wish to take the time to create an interface, you have two options. You can stop for
now and come back and pick up here later. Or, you can open the “dotcom” model and “fly” using
our 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 the
resulting 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 the
Map/Model window. Here’s what you’ll see, and what some of it is called (hover for Tool
Names)…

The Interface level, or communication view, is used to create interfaces for your models. We’ll put
together 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 something
to 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 the
Graphics 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. Importing
graphics is straight-forward once you’re inside the dialog. We’ve saved you the graphic we used in
case you also want to use it. It’s called “Golddice.pct” and it’s saved in the Graphics folder in the
Getting Started Guide folder. Just click the From File radio button, then click the Import Picture
button. Navigate to the “Golddice.pct” file (found in the Graphics folder contained within the
Getting 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, will
transport 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 blue
space and new “paper” automatically will be created). When you have an empty page, put down a
Graph Pad and pin the pad to the page (see Illustration 5, if needed). Put down a text block on the
page 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 your
Welcome screen. Position your cursor near the border of the button (the cursor will change to an
arrow 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 the
name. It’s not necessary to do this because the name will automatically be imported, but it’s in the
dialog 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 Control
Panel…” on it). You may wish to use the paintbrush to change the color of your button. You can
re-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 Button
Purpose. Then click the Define Navigation button. Click-and-hold on the drop-down menu (it
says “None”) that enables you to select a visual effect. Pick one (we suggest Iris In). Choose
Effect to Black. Then, click the Navigate To… button located next to the camera icon. A camera
will appear. Do NOT click on any page surface with it yet because when you do, it will “take a
picture” of the page and “remember it” as the place to which to navigate. Scroll to the Control
Panel screen, such that it is centered on the screen, just as you would want it to be if you had
navigated to it from the Welcome screen (which is what you are about to implement). When
you’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 satisfied
with it.
On the Control Panel, we’ll include two Slider Input Devices, a Warning Device (we’ll convert it
to 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. The
following dialog box will appear...


Double-click the “hiring” flow in the Allowable list to enter it into the Selected list. Some
Min/Max boxes will then appear for purposes of establishing a range for “hiring.” Set the Min
value to 0 and the Max to 20 (meaning the number of employees you are able to hire per month
will be between 0 and 20). Click-and-hold on the Increment drop-down menu (it says “Free
Float”). Choose “1” as the increment. Finally, check the “Reset To” box. This will prevent you
from 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 the
Paintbrush to re-color your slider if you don’t like the default (red) color. Note the “?” on the
slider. Click it. Up pops the documentation for the variable that you included when you created
the hiring flow (if you included the documentation!). Click-and-hold on the slidebar, then slide it
rightward (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 we
start “flying,” this is how you’ll make your hiring decisions—the re-set to zero, however, will be
automatic for this slider.

Next, define the second slider in the same manner. This slider should control monthly subscription
fee—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. You
may 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 hiring
is an inflow, and Employees is the stock into which it’s flowing—Employees, at each point in
time, 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
“employeecustomer ratio” into the Selected list. Shazam!!! Lotsa stuff comes at you. Basically
what you’re looking at is an apparatus for defining a “normal, cautionary, panic” range for the
variable you’ve entered—in this case the “employeecustomer ratio.” The target value for this ratio
is 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’ll
consider “bad” (worthy of “panic”).

Begin by selecting the high-end, right scale box. Type in a 0.02. Then, into the low-end, left scale
box, type a 0. Next, select the right-most, “normal” zone by clicking once in the hollow, elongated
rectangle into which the two downward-pointing arrows are sticking. This zone is highlighted in
the illustration. Type 0.01 into the “Zone begins at” box. Next, select the “caution” zone (the
middle one), by clicking in it. Type 0.005 into the “Zone begins at” box. Finally, check the “Show
As 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’s
been 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 text
box 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 the
default (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 click
the Set button. Repeat the process for “Profit.” Scale it from –30000 to 30000. Then use the
paging arrow (see Illustration 7 if you’re having difficulty) to page-up to create a page 2.

On page 2, include “employeecustomer ratio” and “target ec ratio.” Be sure to put them on the
same scale. To do so, click-and-hold on whichever one is first in the Selected list. Drag down
until the second of the two is also selected (highlighted). Then, click once on the two-headed
arrow located to the right of the first variable. Min/Max scale boxes will appear. Type 0 in the Min
Box 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. OK
the dialog.

This 3-page set of variables gives you a pretty comprehensive basis for making the decisions you
will 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 associated
flow is a “biflow.” The input to the flow is “Profit.” We suggest you “ghost” Profit and put the
ghost image near the flow, rather than running a wire all the way across the diagram. See if you
can create this structure on your own. Once you have created this variable, enter it into a numeric
display 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 wild
blue 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 every
two 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. Two
months of simulated results will unfold. Based on what you see, you can make new decisions, or
let 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 influence
on both.
A good test of what you’ve learned in this tutorial would be for you to include feedback from
subscription 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 does
include 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 of
graphics, 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 the
underlying drama (e.g., the CEO, the VP of finance, a disgruntled or satisfied customer, etc). A
message might congratulate a user for particularly good quarterly financials, or berate them for
particularly bad ones, for example. Coaching is messaging that’s intended to help end-users to
improve their performance. Usually, in order to do so, it’s necessary for the end-user to first
confront, then modify, their mental models. Again, dotcom2 illustrates both messaging and
coaching, and you should be sure to check it out so that you can experience this very powerful
capability built-into the software.

Finally, people who were not involved in constructing a model need some way to understand what
assumptions have been incorporated into the model. We’ve incorporated a feature into the
software 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 of
the 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 variables
you would like to unfurl, one at a time, in the sequence that you think best “tells the story” of the
model. In addition to model variables, you can intersperse graphics, pop-up text, and even movies
and/or sounds, so as to truly bring your story to life! Let’s create a simple sequence here. You can
look 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” options
at 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 will
unfurl the logic of revenue generation.” Choose “Large” as your font size. Click OK. Then name
your button: “Tell the “.com” story…” OK the dialog, then test your storytelling button by clicking
it. 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 the
sequence you wish it to be “told.”


This concludes your ithink “Getting Started” experience. We hope it has given you a sense for the
incredible 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: support@hps-inc.com
phone: 603-643-9636 or 800-332-1202
fax: 603-643-9502
website: 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


Ithink6 Tutorial

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (10)

Similar a Ithink6 Tutorial

Similar a Ithink6 Tutorial (17)

Más de aurelioandrade

Más de aurelioandrade (11)

Último

Último (20)

Ithink6 Tutorial