In the last few years, ideas from a field of engineering instrumental to advances in radar, aircraft simulators, and defense systems have increasingly been applied to management problems. Both managers and consultants have used system dynamics and its principles of feedback and secondary effects to think through how a strategy might or might not work, depending on how competitors react, how organizational changes are received, and what kinds of consequences—intended and unintended—emerge. Many believe that system dynamics has helped them become skilled at inventing the future, either by sketching out causal loops on the back of an envelope, or by assembling equations of cause and effect in a computer model. Both approaches work.
Adapted from a speech given in 1989 by the inventor of system dynamics, Jay Forrester, the following article is both a short history and a helpful primer. Forrester describes how the ideas he used to uncover the real causes of cyclicality in industry could be adopted to explain why low-cost housing has failed to renew inner-city neighborhoods. At the end of the article, a postscript sums up developments that have taken place in system dynamics in the past six years.
Many managers who went to business school fifty or even ten years ago suspected that much of what was being taught about strategy and organization was essentially static in its perspective: the world stood still while we analyzed and fixed it. It is hardly surprising that these managers, having had their suspicions confirmed by their experience in complex, dynamic markets, are now quick to see the relevance of the ideas of Jay Forrester and his colleagues.
Two threads run through the story of how I came to develop the field of system dynamics. First, everything I have ever done has converged on system dynamics. Second, at many critical moments, when opportunity knocked, I was willing to walk through the open door to what was on the other side....McKinsey Quarterly — November 1995
The beginning of system dynamics
Jay W. Forrester