A System Dynamics Analysis of Value Creation in Project Context

Abstract

The focus of this paper is on analyzing the value creation dynamics in the project implementation phase. By value creation, we mean the activities, processes, and strategies that the project team uses to increase benefits and/or reduce costs in the project. By synthesizing the literature on project management and system dynamics, we developed a simulation model with various structures underlying project dynamics. We considered four structures that influence project realized value: project team features, project characteristics, project controls and value creation processes, and project remedial actions due to ripple effects. The resulting model can systematically examine the interplay of value creation processes: work progression, rework, redesign and innovation, and rescheduling. We used the model to explain how the project team’s capability, motivation, and speed of making the best-for-project decisions ensure that the value creation goals are met. We simulate various scenarios that show the significance of the processes and their influencing structures on the realized value. The results present how endogenous and exogenous drivers of system behavior unfold over time and provide a richer understanding of the effect of various model structures such as project complexity and uncertainty on value creation.