System Dynamics

Article by: Vincent van Vliet

Last update: January 25, 2022

System Dynamics: this article describes System Dynamics, designed by Jay Forrester 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? They can! 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 Jay Forrester, which was published in the 1958. This management method demonstrates perfectly how processes really behave.

Structure of system dynamics

Jay Forrester was 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 brief

This 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,
Improve performance,
Improve staff motivation,
Increase customer satisfaction.

By using it, organizations can be more customer-oriented and will be capable of delivering a high level of quality so they stand out from their competition.

Implementation of System Dynamics

System Dynamics can be implemented through following these steps:

Identification of the problem: by identifying a problem, everybody in the organization will know what to work on.
Development of a dynamic hypothesis that explains the cause of the problems; a number of possible root causes are sought and identified.
Building of a computer simulation model that exposes the root of the problem; using simulations or calculations the real root causes emerge and lesser causes can be eliminated.
Testing of the model to be certain that it reproduces the behaviour that is seen in the real world; feedback is used to study the future effect.
Devising and testing of alternative measures that alleviate the problem; solutions that may seem less effective at first glance can lead to good results.
Implementation of the solution, it is still possible to make adjustments.

Optimal Response

System Dynamics focuses on push-strategies rather than pull strategies. A good customer service is focuses on understanding customer demands and/or complaints, instead of assuming that customers are willing to wait until organizations change their processes.

An organization receives optimal responses from its customers. Especially when the customer needs are responded to and when the organization understands what customers think is important. System dynamics can help in this.

It’s Your Turn

What do you think? Is system dynamics applicable in today’s organizations? Do you recognize the practical explanation or do you have more suggestions? What are your success factors?

Share your experience and knowledge in the comments box below.

More information

Duggan, J. (2016). System Dynamics Modeling with R. Springer International Publishing AG.
Forrester, J. W. (1997). Industrial dynamics. Journal of the Operational Research Society, 48(10), 1037-1041.
Forrester, J. W. (1958). Industrial dynamics: a major breakthrough for decision makers. Harvard business review, 36(4), 37-66.
Karnopp, D. C., Margolis, D. L., & Rosenberg, R. C. (1990). System dynamics: a unified approach.

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Published on: 05/28/2015 | Last update: 01/25/2022

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Article by:

Vincent van Vliet

Vincent van Vliet is co-founder and responsible for the content and release management. Together with the team Vincent sets the strategy and manages the content planning, go-to-market, customer experience and corporate development aspects of the company.