We present the first simulations within an effective theory of structure formation ( ETHOS ) , which includes the effect of interactions between dark matter and dark radiation on the linear initial power spectrum and dark matter self-interactions during non-linear structure formation . We simulate a Milky Way-like halo in four different dark matter models and the cold dark matter case . Our highest resolution simulation has a particle mass of 2.8 \times 10 ^ { 4 } { M _ { \odot } } and a softening length of 72.4 { pc } . We demonstrate that all alternative models have only a negligible impact on large scale structure formation . On galactic scales , however , the models significantly affect the structure and abundance of subhaloes due to the combined effects of small scale primordial damping in the power spectrum and late time self-interactions . We derive an analytic mapping from the primordial damping scale in the power spectrum to the cutoff scale in the halo mass function and the kinetic decoupling temperature . We demonstrate that certain models within this extended effective framework that can alleviate the too-big-to-fail and missing satellite problems simultaneously , and possibly the core-cusp problem . The primordial power spectrum cutoff of our models naturally creates a diversity in the circular velocity profiles , which is larger than that found for cold dark matter simulations . We show that the parameter space of models can be constrained by contrasting model predictions to astrophysical observations . For example , some models may be challenged by the missing satellite problem if baryonic processes were to be included and even over-solve the too-big-to-fail problem ; thus ruling them out .