Application of system dynamics to corporate strategy: an evolution of issues and frameworks

Abstract

I discuss five projects that became important building blocks in the application of system dynamics to corporate strategy. The first captures the tension among conflicting performance objectives and their impact on company performance. The second represents an R&D organization as it responds to changing pressures and direction from management. The third explains the progressive “commoditization” of products and services. The fourth examines the dynamics of innovative industries. The final model focuses on the market impacts of social factors, e.g., trust, fashion, bandwagon effects and network effects. The progression began with classical industrial dynamics models focused on orders, production, and shipments. Each milestone marks greater behavioral richness and complexity. What do we know now that we did not know when the field was founded fifty years ago? The most important lessons concern the critical roles of organizational, social, and psychological factors in important business decisions, competition and the evolution of markets. Copyright © 2007 John Wiley & Sons, Ltd.