Decision Making / 3 / 3.5

3.5 THE BUSINESS DYNAMICS CONTEXT

‘In business, symptoms of underlying problems often appear as instability, cycles of ‘boom and bust’ (Paich and Sterman, 1993) and counter-intuitive response of business problems to corrective action (Sterman, 2000). The most tempting normal management strategies involve applying corrective action to the obvious symptoms. Corrective action is frequently applied with little real understanding of the root causes. Too frequently, strategies are directed at correcting a handful of seemingly disparate symptoms when, in reality, those symptoms can be tightly coupled. One obvious reason is that root causes themselves are rarely obvious. In situations where counter-intuitive response to corrective action is observed, managers should seek to apply a system-dynamics modelling approach. The analysis outlined in this book is the first and essential step of that broader system dynamics approach.’