Strategic Modelling and Business Dynamics - Morecroft John D.

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ran at London Business School throughout the 1990s. The purpose of this programme was rather different than a typical MBA course in strategic modelling and business dynamics. Participants were often senior managers and/or their experienced staff advisers. For these people it was important to communicate how they should use modelling and simulation for strategic development and organisational change. Mastering the skills to build models and simulators was secondary to their need for becoming informed model users, by which I mean people capable of initiating and leading strategic modelling projects in their own organisations – as many STSM participants subsequently did. So the programme was designed to emphasise the conceptual steps of model building including problem articulation and causal loop diagramming. The course also provided syndicate teams with a complete, compact and self-contained experience of the steps of a group modelling project from problem definition, to model formulation, testing and simulation. This compact experience was delivered through mini-projects, chosen by the teams themselves, and developed into small-scale models under faculty supervision.

      The programme began in the same way as the MBA course, with the Beer Distribution game used as an icebreaker and an entertaining introduction to feedback systems thinking, dynamics and simulation. Participants then learned, through lectures and syndicate exercises, the core mapping and modelling concepts in Chapters 2 and 3. It may seem surprising that executives would take an interest in hotel showers and drug-related crime (the examples in Chapters 2 and 3 that illustrate causal loop diagrams, feedback structure, equation formulation and simulation), but they always did. Real-world applications were then demonstrated with lectures about serious and successful modelling projects such as the Oil Producers' model in Chapter 8 or the Soap Industry simulator in Chapter 10. In addition guest speakers from business or the public sector, sometimes past-participants of STSM, were invited to talk about their experiences with modelling. Participants also spent half a day or more using a strategy simulator such as the People Express Management Flight simulator (referred to in Chapter 6) or the Beefeater Restaurants Microworld, available from www.strategydynamics.com. Working in small teams of three or four, participants discuss and agree a collective strategy for their assigned company and then implement the strategy in the corresponding simulator. Invariably, when dealing with dynamically complex situations, the best laid plans go astray and teams' experiences provide much valuable material for a debriefing on the pitfalls of strategy making. The final two days of the programme are spent on the team mini-projects mentioned above.

      Ten and twelve session taster courses suitable for MBAs and Executives can be found on the Instructors' website in the folder entitled Course Outlines.

      Undergraduate and Specialist

Masters Courses

      I am confident that the content of this book works for MBA and Executive Education. It has also proven to be suitable for undergraduate and specialist masters courses in modelling and simulation. Obviously undergraduates lack the business experience of typical MBAs. They will therefore find it harder to make sense of the coordination problems that routinely crop up in organisations and contribute to puzzling dynamics, chronic underperformance and failures of strategy. Here the book's website models perform a vital function. They bridge the experience gap by enabling younger readers to simulate puzzling dynamics and to experience coordination problems for themselves.

      Otherwise the sequencing of materials can be much the same as for an MBA course, with perhaps more emphasis given to non-business examples and cases. For example, it is possible to devote an opening session to the fisheries gaming simulator in Chapter 1 as a replacement for the Beer Distribution Game. Alternatively in order to retain, at the start of the course, a vivid role-playing exercise and social ‘icebreaker’ then simply replace the Beer Game with the Fish Banks simulator. Like the Beer Game, Fish Banks is also available at modest cost from the System Dynamics Society www.systemdynamics.org. The game debrief can be supplemented with the model and materials in Chapter 1. Then after the game, instructors can cover the core modelling Chapters 2 through 5 and selectively add content from Chapters 6 through 10 to suit the audience. For example students who are not especially interested in firm-level business dynamics and strategy may prefer to spend more time on public sector applications in Chapter 9 and on the industry-level simulator of the global oil producers in Chapter 8.

      A ten session taster course for Masters in Management students and for undergraduates can be found on the Instructors' website in the folder entitled Course Outlines.

      CHAPTER 1

      The Appeal and Power of Strategic Modelling

      • Introduction

      • A New Approach to Modelling

      • The Puzzling Dynamics of International Fisheries

      • Model of a Natural Fishery

      • Operating a Simple Harvested Fishery

      • Preview of the Book and Topics Covered

      • Appendix – Archive Materials from World Dynamics

Introduction 7

      I have always been fascinated by models and games and particularly by model conceptualisation, the process by which people represent and simplify situations from the real world to make sense of them. Consider for example, the popular board game of Monopoly. Players find themselves as property developers in an imaginary city. It could be London or New York, except of course (and this is the curious thing) the board doesn't look remotely like a real city or even like a geographical map of either city. The game board is just a large square of card on which are printed neatly labelled and coloured boxes displaying familiar place names like cheap and cheerful Old Kent Road in brown, bustling Trafalgar Square in red and elegant Mayfair in dark blue. There are houses and hotels, but no streets. There are stations, but no railway lines. There is a community chest, but no community of people. There is a jail, but no police department. Players move around the city with a throw of the dice in a curious assortment of vehicles: a boot, a ship, a horse, an iron, a cannon and even a top hat. It is a fantasy world, a much simplified view of real estate in a city, and yet it captures something real – the essence of commercial property ownership and development in a growing competitive market. The more property you own and control, the more you earn. Bigger is better, winner takes all.

      The challenge of any kind of modelling lies precisely in deciding, among myriad factors, what to include and what to leave out. The same principle applies whether you are devising a board game like Monopoly or building a simulator for a management team in BMW, Dow Chemical, Goldman Sachs, Harley-Davidson, Mars Inc., Microsoft, Royal Dutch/Shell or Transport for London. The starting point is essentially, ‘what's important here?’ What do you and others have in mind when you think about the strategy and future success of a business, a city or an entire industry? What is the issue under investigation and which factors need most attention to address the issue? These practical questions in turn raise a more basic philosophical question about how we conceptualise the enterprises in which we live and work. How do people, whether they are leaders, advisers or commentators, make sense of firms, industries or societies, explain them to others, and anticipate outcomes well enough to shape and communicate intelligent strategy and policy?

      I can recall this fascination with conceptualisation from a time when business dynamics, or more generally system dynamics (and its specialist visual language of stocks, flows and information feedback), was entirely new and unfamiliar to me. It was back in the early 1970s. The Limits to Growth study, a research project exploring how to create an economically and ecologically sustainable society, was attracting attention worldwide. The project was conducted at the Massachusetts Institute of Technology (MIT) and two influential books based on this work, World Dynamics (Forrester, 1971) and Limits to Growth (Meadows et al., 1972),

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