Module
Business Dynamics and Policy-making

Type
Core GBM module (30 hours)

ECTS
5

UoW credits
10

Coordinator
Kazmierz Sliwa, dr. hab

Overall Aims and Purpose

Accelerating economic, technological, social, and environmental change challenges managers to learn at increasing rates. We must increasingly learn how to design and manage complex systems with multiple feedback effects, long time delays, and nonlinear responses to our decisions. Yet learning in such environments is difficult precisely because we never confront many of the consequences of our most important decisions. Effective learning in such environments requires methods to develop systems thinking, to represent and assess such dynamic complexity – and tools managers can use to accelerate learning throughout an organization.

This course introduces you to system dynamics modeling for the analysis of business policy and strategy. You will learn to visualize a business organization and processes in terms of the structures and policies that create dynamics and regulate performance. System dynamics draws on feedback theory and techniques of mathematical modeling and computer simulation to elucidate the relationships dynamic behavior they exhibit over time. A common theme that runs through the course is the search for connections between the behavior of people (and groups) in organizations and the organizational trajectories they generate, between systemic structure and resulting behavior.

The principal purpose of modeling is to improve our understanding of the ways in which an organization's performance is related to its internal structure and operating policies as well as those of customers, competitors, and suppliers. During the course you will use several simulation models to explore such strategic issues as fluctuating sales, production and earnings; market growth and stagnation; the diffusion of new technologies; the use and reliability of forecasts; and the rationality of business decision making.

Course Content

1. Managing Hyper Growth: Lessons from People Express Airline (Interactions of Operations, Strategy, and Human Resource Policy). Simulation Game
2. Introduction and Overview: Purpose, Tools and Concepts of Business Dynamics. Business Dynamics in Action: Automobile Leasing Strategy: GMC Experience
3. System Dynamics Tools
- Part 1: Problem Definition and Model Purpose
- Part 2: Building Theory with Causal Loop Diagrams
- Part 3: Mapping the Stock and Flow Structure of Systems
- Part 4: Dynamics of Stocks and Flows
- Part 5: Linking Feedback with Stock and Flow Structure: Theory of Feedback
- Part 6: Linking Feedback with Stock and Flow Structure
4. Growth Strategies
- Part 1: Modelling Innovation Diffusion and the Growth of New Products
- Part 2: Network Externalities, Complementarities, and Path Dependence
5. System Dynamics Tools Part 6: Delays
6. Modeling Human Behavior: Bounded Rationality
7. Instability and Oscillations. Managing Supply Chains
8. Managing Manufacturing and Supply Processes

Texts and Software

1. Sterman, J. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World (Text and CD-ROM). Irwin/McGraw Hill. ISBN 0-07-238915X.
2. D. Whitestone and L. A. Schlesinger, "People Express (A)," Case 9-483-103, Harvard Business School

Additional readings will be handed out on an occasional basis and all will be posted in the course homepage in the WSB – NLU intranet. In addition, we will be using modeling software. Several excellent packages for system dynamics simulation are now available commercially, including:
ithink, from High Performance Systems,
Powersim, from Powersim Corporation,
Professional DYNAMO, from PA Consulting, and:
Vensim, from Ventana Systems.