System dynamics for business strategy: a phased approach

Abstract

Detailed, calibrated system dynamics models offer an effective tool for supporting business strategy. They correspond to the business lines and planning approaches of the organization, serve as an important check on the adequacy of the model as a representation of the system, provide accurate assessments of the cost–benefit tradeoffs of alternative strategies, and allow results to be more easily sold to others. However, detailed models also have disadvantages: they are complex, can be more difficult to understand, and run the risk of becoming “black boxes”. This paper discusses a four-phased approach to consulting that, building from other system dynamics modeling styles (“systems thinking” and small, insight-based models), offers an effective means of developing detailed models while simultaneously educating the client. The approach is illustrated with case examples from the credit card and aircraft industries. Copyright © 1999 John Wiley & Sons, Ltd.