Business Dynamics:
Systems Thinking and Modeling for a Complex World

John Sterman

Irwin/McGraw-Hill, 2000
ISBN 0-07-231135-5

From the preface:

This book introduces you to system dynamics modeling for the analysis of policy and strategy, with a focus on business and public policy applications. System dynamics is a perspective and set of conceptual tools that enable us to understand the structure and dynamics of complex systems. System dynamics is also a rigorous modeling method that enables us to build formal computer simulations of complex systems and use them to design more effective policies and organizations. Together, these tools allow us to create management flight simulators-microworlds where space and time can be compressed and slowed so we can experience the long-term side effects of decisions, speed learning, develop our understanding of complex systems, and design structures and strategies for greater success.

Features and Content:

University and graduate-level texts, particularly those focused on business and public policy applications, have not kept pace with the growth of the field. This book is designed to provide thorough coverage of the field of system dynamics today, by examining

  • Systems thinking and the system dynamics worldview;
  • Tools for systems thinking, including methods to elicit and map the structure of complex systems and relate those structures to their dynamics;
  • Tools for modeling and simulation of complex systems;
  • Procedures for testing and improving models;
  • Guidelines for working with client teams and successful implementation.

You will learn about the dynamics of complex systems, including the structures that create growth, goal-seeking behavior, oscillation and instability, S-shaped growth, overshoot and collapse, path dependence, and other nonlinear dynamics. Examples and applications include

  • Corporate growth and stagnation,
  • The diffusion of new technologies,
  • The dynamics of infectious disease such as HIV/AIDS,
  • Business cycles,
  • Speculative bubbles,
  • The use and reliability of forecasts,
  • The design of supply chains in business and other organizations,
  • Service quality management,
  • Transportation policy and traffic congestion,
  • Project management and product development,

and many others.

The goal of systems thinking and system dynamics modeling is to improve our understanding of the ways in which an organization's performance is related to its internal structure and operating policies, including those of customers, competitors, and suppliers and then to use that understanding to design high leverage policies for success. To do so this book utilizes

  • Process Points that provide practical advice for the successful application of the tools in real organizations.
  • Case studies of System Dynamics in Action that present successful applications ranging from global warming and the war on drugs to reengineering the supply chain of a major computer firm, marketing strategy in the automobile industry, and process improvement in the petrochemicals industry.

System dynamics is not a spectator sport. Developing systems thinking and modeling skills requires the active participation of you, the reader, via

  • Challenges. The challenges, scattered throughout the text, give you practice with the tools and techniques presented in the book and stimulate your original thinking about important real world issues. The challenges range from simple thought experiments to full-scale modeling projects.
  • Simulation software and models. The accompanying CD-ROM includes all the models developed in the text along with state-of-the-art simulation software to run them. There are several excellent software packages designed to support system dynamics modeling. These include ithink, Powersim, and Vensim. The CD includes the models for the text in all three software formats. The disk also includes fully functional versions of the ithink, Powersim, and Vensim software so you can run the models using any of these packages without having to purchase any additional software.
  • Additionally, the Instructor's Manual includes suggested solutions for the challenges, additional assignments, suggested course sequences and syllabi, and other materials.

Intended audience:

The book can be used as a text in courses on systems thinking, simulation modeling, complexity, strategic thinking, operations, and industrial engineering, among others. It can be used in full or half-semester courses, executive education, and self-study. The book also serves as a reference for managers, engineers, consultants, and others interested in developing their systems thinking skills or using system dynamics in their organizations.

Contact information of the author:

John Sterman
J. Spencer Standish Professor of Management
Director, MIT System Dynamics Group
MIT Sloan School of Management
30 Wadsworth Street
Cambridge, MA 02142
617/253-1951 (voice)
617/258-7579 (fax)

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