Business dynamics Book

	Preface	vii
Part I	Perspective and Process	1
1	Learning in and about Complex Systems	3
1.1	Introduction	3
1.2	Learning Is a Feedback Process	14
1.3	Barriers to Learning	19
1.4	Requirements for Successful Learning in Complex Systems	33
1.5	Summary	39
2	System Dynamics in Action	41
2.1	Applications of System Dynamics	41
2.2	Automobile Leasing Strategy: Gone Today, Here Tomorrow	42
2.3	On Time and Under Budget: The Dynamics of Project Management	55
2.4	Playing the Maintenance Game	66
2.5	Summary: Principles for Successful Use of System Dynamics	79
3	The Modeling Process	83
3.1	The Purpose of Modeling: Managers as Organization Designers	84
3.2	The Client and the Modeler	84
3.3	Steps of the Modeling Process	85
3.4	Modeling Is Iterative	87
3.5	Overview of the Modeling Process	89
3.6	Summary	104
4	Structure and Behavior of Dynamic Systems	107
4.1	Fundamental Modes of Dynamic Behavior	108
4.2	Interactions of the Fundamental Modes	118
4.3	Other Modes of Behavior	127
4.4	Summary	133
Part II	Tools for Systems Thinking	135
5	Causal Loop Diagrams	137
5.1	Causal Diagram Notation	137
5.2	Guidelines for Causal Loop Diagrams	141
5.3	Process Point: Developing Causal Diagrams from Interview Data	157
5.4	Conceptualization Case Study: Managing Your Workload	159
5.5	Adam Smith's Invisible Hand and the Feedback Structure of Markets	169
5.6	Explaining Policy Resistance: Traffic Congestion	177
5.7	Summary	190
6	Stocks and Flows	191
6.1	Stocks, Flows, and Accumulation	191
6.2	Identifying Stocks and Flows	197
6.3	Mapping Stocks and Flows	210
6.4	Summary	229
7	Dynamics of Stocks and Flows	231
7.1	Relationship between Stocks and Flows	232
7.2	System Dynamics in Action: Global Warming	241
7.3	System Dynamics in Action: The War on Drugs	250
7.4	Summary	262
8	Closing the Loop: Dynamics of Simple Structures	263
8.1	First-Order Systems	263
8.2	Positive Feedback and Exponential Growth	264
8.3	Negative Feedback and Exponential Decay	274
8.4	Multiple-Loop Systems	282
8.5	Nonlinear First-Order Systems: S-Shaped Growth	285
8.6	Summary	290
Part III	The Dynamics of Growth	293
9	S-Shaped Growth: Epidemics, Innovation Diffusion, and the Growth of New Products	295
9.1	Modeling S-Shaped Growth	296
9.2	Dynamics of Disease: Modeling Epidemics	300
9.3	Innovation Diffusion as Infection: Modeling New Ideas and New Products	323
9.4	Summary	346
10	Path Dependence and Positive Feedback	349
10.1	Path Dependence	349
10.2	A Simple Model of Path Dependence: The Polya Process	354
10.3	Path Dependence in the Economy: VHS versus Betamax	359
10.4	Positive Feedback: The Engine of Corporate Growth	364
10.5	Positive Feedback, Increasing Returns, and Economic Growth	385
10.6	Does the Economy Lock in to Inferior Technologies?	387
10.7	Limits to Lock In	389
10.8	Modeling Path Dependence and Standards Formation	391
10.9	Summary	406
Part IV	Tools for Modeling Dynamic Systems	407
11	Delays	409
11.1	Delays: An Introduction	409
11.2	Material Delays: Structure and Behavior	412
11.3	Information Delays: Structure and Behavior	426
11.4	Response to Variable Delay Times	434
11.5	Estimating the Duration and Distribution of Delays	437
11.6	System Dynamics in Action: Forecasting Semiconductor Demand	449
11.7	Mathematics of Delays: Koyck Lags and Erlang Distributions	462
11.8	Summary	466
12	Coflows and Aging Chains	469
12.1	Aging Chains	470
12.2	Coflows: Modeling the Attributes of a Stock	497
12.3	Summary	511
13	Modeling Decision Making	513
13.1	Principles for Modeling Decision Making	513
13.2	Formulating Rate Equations	522
13.3	Common Pitfalls	545
13.4	Summary	549
14	Formulating Nonlinear Relationships	551
14.1	Table Functions	552
14.2	Case Study: Cutting Corners versus Overtime	563
14.3	Case Study: Estimating Nonlinear Functions with Qualitative and Numerical Data	569
14.4	Common Pitfalls	573
14.5	Eliciting Model Relationships Interactively	585
14.6	Summary	595
15	Modeling Human Behavior: Bounded Rationality or Rational Expectations?	597
15.1	Human Decision Making: Bounded Rationality or Rational Expectations?	598
15.2	Cognitive Limitations	599
15.3	Individual and Organizational Responses to Bounded Rationality	601
15.4	Intended Rationality	603
15.5	Case Study: Modeling High-Tech Growth Firms	605
15.6	Summary	629
16	Forecasts and Fudge Factors: Modeling Expectation Formation	631
16.1	Modeling Expectation Formation	631
16.2	Case Study: Energy Consumption	638
16.3	Case Study: Commodity Prices	643
16.4	Case Study: Inflation	645
16.5	Implications for Forecast Consumers	655
16.6	Initialization and Steady State Response of the TREND Function	658
16.7	Summary	660
Part V	Instability and Oscillation	661
17	Supply Chains and the Origin of Oscillations	663
17.1	Supply Chains in Business and Beyond	664
17.2	The Stock Management Problem	666
17.3	The Stock Management Structure	675
17.4	The Origin of Oscillations	684
17.5	Summary	707
18	The Manufacturing Supply Chain	709
18.1	The Policy Structure of Inventory and Production	710
18.2	Interactions among Supply Chain Partners	729
18.3	System Dynamics in Action: Reengineering the Supply Chain in a High-Velocity Industry	743
18.4	Summary	755
19	The Labor Supply Chain and the Origin of Business Cycles	757
19.1	The Labor Supply Chain	758
19.2	Interactions of Labor and Inventory Management	764
19.3	Inventory--Workforce Interactions and the Business Cycle	782
19.4	Summary	788
20	The Invisible Hand Sometimes Shakes: Commodity Cycles	791
20.1	Commodity Cycles: From Aircraft to Zinc	792
20.2	A Generic Commodity Market Model	798
20.3	Application: Cycles in the Pulp and Paper Industry	824
20.4	Summary	841
Part VI	Model Testing	843
21	Truth and Beauty: Validation and Model Testing	845
21.1	Validation and Verification Are Impossible	846
21.2	Questions Model Users Should Ask--But Usually Don't	851
21.3	Pragmatics and Politics of Model Use	851
21.4	Model Testing in Practice	858
21.5	Summary	890
Part VII	Commencement	893
22	Challenges for the Future	895
22.1	Theory	895
22.2	Technology	896
22.3	Implementation	899
22.4	Education	900
22.5	Applications	901
Appendix A	Numerical Integration	903
Appendix B	Noise	913
	References	925
	Index	947