Downloadable Resources Open interactive popup.In the last few years, ideas from a field of engineering instrumental to advances in radar, aircraft simulators, and defense systems have increasingly been applied to management problems. Both managers and consultants have used system dynamics and its principles of feedback and secondary effects to think through how a strategy might or might not work, depending on how competitors react, how organizational changes are received, and what kinds of consequences—intended and unintended—emerge. Many believe that system dynamics has helped them become skilled at inventing the future, either by sketching out causal loops on the back of an envelope, or by assembling equations of cause and effect in a computer model. Both approaches work.Adapted from a speech given in 1989 by the inventor of system dynamics, Jay Forrester, the following article is both a short history and a helpful primer. Forrester describes how the ideas he used to uncover the real causes of cyclicality in industry could be adopted to explain why low-cost housing has failed to renew inner-city neighborhoods.

1. Jay Forrester Urban Dynamics
2. John Bardeen

At the end of the article, a postscript sums up developments that have taken place in system dynamics in the past six years.Many managers who went to business school fifty or even ten years ago suspected that much of what was being taught about strategy and organization was essentially static in its perspective: the world stood still while we analyzed and fixed it. It is hardly surprising that these managers, having had their suspicions confirmed by their experience in complex, dynamic markets, are now quick to see the relevance of the ideas of Jay Forrester and his colleagues.Two threads run through the story of how I came to develop the field of system dynamics. First, everything I have ever done has converged on system dynamics. Second, at many critical moments, when opportunity knocked, I was willing to walk through the open door to what was on the other side. Early daysLife must be practical.

At high school, I built a wind-driven electric plant that provided our first electricityI grew up on a cattle ranch in Nebraska in the middle of the United States. A ranch is a crossroads of economic forces: supply and demand, changing prices and costs, the pressures of agriculture. In such a setting, life must be practical; one works to get results. While I was at high school, I built a wind-driven electric plant that provided our first electricity.When I finished school, I had a scholarship to go to agricultural college, but just before I was due to enroll, I decided it wasn’t for me. Instead, I went to the engineering college at the University of Nebraska. Electrical engineering, as it turned out, was about the only academic field with a solid core of theoretical dynamics. And so the road to the present began.

Research and applicationAfter my degree, I became a research assistant at Massachusetts Institute of Technology, where I was commandeered by Gordon S. Brown, a pioneer in feedback control systems. During World War II, we worked on developing servomechanisms for the control of radar antennae and gun mounts.

Again, this was research toward an extremely practical end; it ran from mathematical theory right through to the operating field itself.At one stage, we had built an experimental radar control for an aircraft carrier, to direct fighter planes against enemy targets. It was meant to be redesigned for production a year or so later. The captain of the carrier Lexington came to MIT and saw the experimental unit, and said, “I want that, I mean that very one—we can’t afford to wait for the production models.” He got it.About nine months later, the experimental control stopped working, and I volunteered to go to Pearl Harbor to find out why.

I discovered the problem, but didn’t have time to fix it before the ship left port, so when the executive officer asked if I would like to go along and finish my job, I said yes. I had no idea what I was letting myself in for. We were off shore during the invasion of Tarawa, and then took a turn through the Marshall Islands, which were occupied all around us by Japanese fighter-plane bases.The Japanese didn’t like having a US Navy taskforce wrecking their airports, so they kept trying to sink our ships. After dark, they dropped flares along one side of the taskforce and came in with torpedos from the other.

Finally, they succeeded in hitting the Lexington, cutting off one of the four propellers and setting the rudder in a hard turn. Again, this gave me a very practical idea of how research and theory are related to field application.At the end of World War II, my mentor Gordon Brown showed me a list of projects he thought might interest me. From the list, I picked the building of an aircraft flight simulator. This was to be rather like a pilot trainer, but so precise that it could take wind tunnel data for a model airplane and predict the behavior of the new plane even before it was built.It took a year to decide that a machine of that complexity could do no more than solve its own internal idiosyncrasiesThe aircraft simulator was planned as an analog computer. It took us only about a year to decide that an analog machine of that complexity could do no more than solve its own internal idiosyncrasies.

Through a long sequence of changes, we came to design the Whirlwind digital computer for experimental development of military combat information systems. This eventually became the SAGE (semi-automatic ground environment) air defense system for North America.The SAGE system was another practical job where theory and ideas were only as good as the working results. It had 35 control centers, each 160 feet square, four stories high, and with 80,000 vacuum tubes.

Installed in the late 1950s, these centers were in service for about 25 years. Records show they were operational 99.8 percent of the time.

Even today, such reliability is hard to match. Why management?People often ask why I left engineering to go into management. There were several reasons. By 1956, I felt the pioneering days of digital computers were over. This might seem surprising after the major technical advances of the past few decades. But in fact, computers improved more dramatically in terms of speed, reliability, and storage capacity between 1946 and 1956 than in any decade since.Another reason was that I was already in management. We had been running a several billion dollar operation in which we had complete control of everything: writing contracts, designing computers, deciding what went into production, and managing a vast enterprise that involved the Air Defense Command, the Air Material Command, the Air Research and Development Command, Western Electric, AT&T, and IBM.

So going into management was not really a change.The turning point came when James Killian, then president of MIT, told me about the new management school that was being set up, and suggested that I might be interested. The Sloan School of Management was founded in 1952 with a grant of $10 million from Alfred Sloan, the man who built the modern General Motors Corporation. The money was given with the expectation that a management school in a technical environment like MIT’s would probably develop differently from one in a liberal arts setting.By the time I joined the Sloan School in 1956, I had 15 years’ experience in the science and engineering side of MIT, and working out what an engineering background could mean to management seemed like an interesting challenge. I had a year free of other duties to decide why I was at the school.It had been assumed that applying technology to management meant either pushing forward the field of operations research, or exploring the use of computers in the handling of management information. Neither of these was what I was looking for.

Have fun ^^.5.

Operations research was interesting, and undoubtedly useful, but it did not tackle issues that made the difference between corporate success and failure; it lacked the practical importance that I have always worked toward. As for computers, manufacturers, banks, and insurance companies were already using them, and it seemed unlikely that a few of us in a management school would have much impact, as the momentum was already so great. The beginning of system dynamicsChance intervened again when I found myself talking to people from General Electric. They were puzzled as to why their household appliance plants sometimes worked three or four shifts and then, a few years later, had to lay off half their staff. It was easy to say that business cycles caused fluctuating demand, but not entirely convincing.I started to do some simulation, using a pencil and a page in a notebook.

This was the beginning of system dynamicsAfter finding out how the corporation made hiring and inventory decisions, I started to do some simulation, using a pencil and a page in a notebook. At the top, I put columns for inventories, employees, and orders. Given these conditions and the policies being pursued, one could predict how many people would be hired the following week.

This produced a new set of conditions for inventories, employment, and production.It became clear that here was the potential for an oscillatory or unstable system that was entirely internally determined. Even if incoming orders remained constant, employment instability could still arise as a consequence of common decision-making policies. This first pencil and paper inventory control system was the beginning of system dynamics.It also marked the origins of what are now the DYNAMO compilers. Richard Bennett, an expert computer programmer, was working with me when I wrote an article for the Harvard Business Review in 1958.

I needed computer simulations for the article, and suggested he code up the equations so that we could run them on our computer. However, being an independent type, Dick said he would not code the program, but would instead produce a compiler that would automatically generate the computer code.The result was the SIMPLE compiler—Simulation of Industrial Management Problems with Lots of Equations. Bennett’s insistence on creating a compiler was another turning point; it accelerated the modeling that rapidly expanded system dynamics. The early compiler was extended by Alexander Pugh III into the highly influential DYNAMO series.This modeling afforded a number of insights about why high-tech companies can grow to a certain size and then failAt about this time, I was asked to join the board of the Digital Equipment Corporation, because several of its founders had worked for me in the Whirlwind computer days. I did not understand the nature of high-technology growth companies as well as I wished to, and undertook to model such companies to guide my own position on the board.

This modeling afforded a number of insights about why high-technology companies often grow to a certain size and then stagnate or fail. It moved system dynamics out of physical variables like inventory into much more subtle considerations: the top management influence structure, leadership qualities, the characters of the founders, how goals are set, the interactions between capacity, price, quality, and delivery delay, and how an organization’s traditions determine its decision making and its future. Wider applicationsA series of incidents in 1968 shifted the focus of system dynamics from corporate modeling to broader social systems.

Collins, mayor of Boston for eight years, decided not to run for reelection, and accepted a one-year appointment as Visiting Professor of Urban Affairs at MIT. He ended up in the office next to mine. In talking with him about the time he spent coping with Boston’s urban problems, I experienced the same feeling that I had come to recognize in conversations with business executives. The story sounded persuasive, but it left an uneasy sense that something was wrong or incomplete.I suggested to Collins that we might combine our efforts, taking his experience in Boston and my background in modeling and looking for interesting insights about cities. He immediately asked how to go about it.

I told him we would need advisers who knew a great deal about cities from personal experience—people who had struggled with cities, who had worked in them, who knew what really happens. But we would not be able to predict what would come of the effort, or how long it would take. We would have to gather a group half a day a week, probably for months, to seek an understanding of the structure and processes of cities that might explain stagnation and unemployment.Collins listened and said, “They’ll be here on Wednesday afternoon.” Such was his position in Boston at that time that he could call up almost anybody in politics or business, ask for their Wednesday afternoons for a year, and get them.

He delivered the people, and it was out of these discussions that my book Urban Dynamics developed. Strong reactionsUrban Dynamics was the first of my modeling work to produce strong emotional reactions. It suggested that all of the major urban policies being pursued by the United States lay somewhere between neutral and highly detrimental in their impact, whether from the viewpoint of the city as an institution or from the perspective of unemployed, low-income residents. More, it argued that the most damaging policy of all was to build low-cost housing. At that time, this policy was thought essential to reviving the inner cities.Urban Dynamics argued that low-cost housing was a double-edged sword for making urban conditions worseThe conclusions of our work were not easily accepted.

It took people several hours to come to an understanding of what urban dynamics was about. City officials and members of local communities would become more and more negative and emotional until they could see and accept the way in which low-cost housing was a double-edged sword for making urban conditions worse. Such housing used up space where jobs could have been created, while drawing in people who needed jobs.

Building low-cost housing was a powerful process for producing poverty, not alleviating it.Soon after Urban Dynamics came out, I was asked to lead two sessions on a four-week management program for senior urban executives from large cities. I have never had a lecture on any subject, anywhere, go as badly as the first of these sessions. In the group was a member of the New York city government who came from the black community in Harlem.

Jay Forrester Urban Dynamics

This article describes System Dynamics, designed by in a practical way. After reading you will understand the basics of this powerful strategy tool. What is System Dynamics?Can complex systems such as companies, organizations and societies be influenced? System Dynamics makes this possible because the systems thinking approach studies and manages complex feedback systems as found in companies and other social systems. The term is derived from the book Industrial Dynamics by the American scientist, which was published in the 1958. This management method demonstrates perfectly how processes really behave. Structure of system dynamicswas a pioneer in describing the dynamics of systems developed by human beings.

In complex systems there is often a relationship between cause and result. This management method helps to map the feedback structure and dynamics as a result of which changes can be better aligned. In the process, companies focus especially on long-term changes.

Public authorities focus more on the effects of policy options whereas projects groups are focused on achieving a shared team vision. System Dynamics in briefThis management method sees a system as a business process. It can be used in a wide range of areas. It is a management method in which adaptability during change processes is promoted and errors are tracked down and eliminated. By using a systematic way of thinking with respect to policy and strategy, managers in organizations can effectively:. Lower costs,.

John Bardeen

Improve performance,. Improve staff motivation,. Increase customer satisfaction.By using System Dynamics, organizations can be more customer-oriented and will be capable of delivering a high level of quality so they stand out from their competition. Share your experience and knowledge in the comments box below.If you liked this article, then please subscribe to our Free Newsletter for the latest posts on Management models and methods. You can also find us on, and.More information. Duggan, J.

System Dynamics Modeling with R. Springer International Publishing AG.

(1997). Industrial dynamics.

Journal of the Operational Research Society, 48(10), 1037-1041. (1958).

Industrial dynamics: a major breakthrough for decision makers., 36(4), 37-66. Karnopp, D. C., Margolis, D. L., & Rosenberg, R. System dynamics: a unified approach.How to cite this article:Van Vliet, V. System dynamics. Retrieved insert date from ToolsHero: a link to this page on your website:ToolsHero.com: System dynamicsDid you find this article interesting?Your rating is more than welcome or share this article via Social media!