This is an archived course. A more recent version may be available at ocw.mit.edu.
Lectures: 2 sessions / week for 7 weeks, 1.5 hours / session
Recitations: 1 session / week for 7 weeks, 1.5 hours / session
15.871 Introduction to System Dynamics
15.871 and 15.872 together constitute the introductory sequence in system dynamics.
Why do so many business strategies fail? Why do so many others fail to produce lasting results? Why do many businesses suffer from periodic crises and fluctuating sales, earnings, and morale? Why do some firms grow while others stagnate? And how can a firm identify and design high-leverage policies, policies that are not thwarted by unanticipated side effects?
Accelerating economic, technological, social, and environmental changes challenge managers to learn at increasing rates. And 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.
15.871 and 15.872 introduce you to system dynamics modeling for the analysis of business policy and strategy. You will learn to visualize a business organization in terms of the structures and policies that create dynamics and regulate performance. System dynamics allows us to create 'microworlds,' management flight simulators where space and time can be compressed, slowed, and stopped so we can experience the long-term side effects of decisions, systematically explore new strategies, and develop our understanding of complex systems. We use simulation models, case studies, and management flight simulators to develop principles of policy design for successful management of complex strategies. Case studies of successful strategy design and implementation using system dynamics will be stressed. We consider the use of systems thinking to promote effective organizational learning.
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, suppliers and other stakeholders. 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; the rationality of business decision making; and applications in health care, energy policy, environmental sustainability, and other topics.
Students will learn to recognize and deal with situations where policy interventions are likely to be delayed, diluted, or defeated by unanticipated reactions and side effects. You will have a chance to use state of the art software for computer simulation and gaming. Assignments give hands-on experience in developing and testing computer simulation models in diverse settings.
No prior computer modeling experience is needed.
Sterman, John. Business Dynamics: Systems Thinking and Modeling for a Complex World. New York, NY: McGraw-Hill, 2000. ISBN: 9780072389159.
Additional readings are required.
In addition, we will use modeling software. Several excellent packages for system dynamics simulation are available commercially, including iThink, from iSee Systems, Powersim, from Powersim Corporation, and Vensim, from Ventana Systems. All are highly recommended. You may wish to learn more about these packages, as all are used in the business world and expertise in them is increasingly sought by potential employers.
The required modeling software is VensimPLE. In this course, we will be using the Vensim Personal Learning Edition (VensimPLE) by Ventana Systems. VensimPLE is free for academic use. VensimPLE is available for Windows only. However, Mac users have two options. Those with Intel-based Macs can easily run Vensim using a PC emulator such as Parallels, VMWare, or Darwine. Ventana has also recently released a beta version that runs directly on the Mac. The Mac-native version may not, however, be as stable as the PC version. VensimPLE comes with an online user's guide and a folder of demo models.
Note: The disc that comes with the Business Dynamics textbook includes a version of VensimPLE. However, the version available online is newer and has enhanced functionality. Be sure to download the current version from the Vensim website above. All Vensim models on the text CD work with the new version.
| ACTIVITIES | PERCENTAGES |
|---|---|
| Assignments | 85% |
| Class participation | 15% |
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