Courses:

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Background: 15.871 & 15.874

15.871 (Introduction to System Dynamics) is a half semester (6 unit) course. 15.874 (System Dynamics for Business Policy) is a full semester (12 unit) course. The two courses meet concurrently during the first half of the term and are the same. In the second half of the semester, 15.874 continues.

Instructors

The course will be taught by Prof. John Sterman, Prof. Brad Morrison, and Prof. Nelson Repenning.

TA Sessions

The TAs will lead a weekly review session in which they will answer questions about assignments in progress and discuss solutions to past assignments.

Grading Emphasis

Each assignment is graded on a 10-point scale. Two points will be forfeited for assignments handed in late. Assignments handed in more than 1 class late will receive no credit. This policy will be strictly enforced.

Web Site

We will be using a class server to post course materials online. The 15.871/15.874 area will contain the syllabus, assignments, simulation models, reading list, helpful hints, software access, and other useful information. We will use it to send emails with information such as hints for assignments, schedule changes for TA sessions, etc. You should also use it to find partners for group assignments, or to pose questions to the class as a whole.


Objectives and Scope

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, fluctuating sales, earnings, and morale? Why do some firms grow while others stagnate? How do once-dominant firms lose their competitive edge? 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 change 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.

This course introduces 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 role playing games, 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 principle 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.

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.

Listeners are welcome only if space permits.


Texts and Software

Required Text

1. Sterman, J. Business Dynamics: Systems Thinking and Modeling for a Complex World. Irwin/McGraw Hill, 2000. ISBN 0-07-238915-X (Text and CD-ROM); see the textbook's web site for information about the book, including software models.
   
2. Reading packet (available from the campus copy center).

The packet includes selected articles and case studies required for certain sessions and supplements the book. We have noted on the readings page the days for which these articles/cases should be prepared (NOTE: before the class in which we discuss them). Additional readings will be handed out on an occasional basis. The readings page also indicates which sections of the text you should be sure to read to learn the material you will need to do the assignments, and which sections you can skim (NOTE: 'skim' ≠ 'skip').

In addition, we will be using modeling software. Several excellent packages for system dynamics simulation are available commercially, including iThink, from High Performance 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. For more information on the software used in this course, please see the tools page.