Effective decision making and learning in a world of growing dynamic complexity requires us to become systems thinkers--to expand the boundaries of our mental models and develop tools to understand how the structure of complex systems creates their behavior.

This book introduces you to systems dynamics modeling for the analysis of policy and strategy, with a focus on business and public policy applications. System dynamics is a perspective and set of conceptual tools that enable us to understand the structure and dynamics of complex systems. System dynamics is also a rigorous modeling method that enables us to build formal computer simulations of complex systems and use them to design more effective policies and organizations. Together, these tools allow us to create management flight simulators--micro-worlds where space and time can be compressed and slowed so we can experience the long-term side effects of decisions, speed learning, develop our understanding of complex systems, and design structures and strategies for greater success.

You will learn about the dynamics of complex systems, including the structures that create growth, goal-seeking behavior, oscillation and instability, S-shaped growth, overshoot and collapse, path dependence, and other nonlinear dynamics.

Examples and applications include

• Corporate growth and stagnation,
• The diffusion of new technologies,
• The dynamics of infectious disease such as HIV/AIDS,
• Business cycles,
• Speculative bubbles,
• The use and reliability of forecasts,
• The design and supply chains in business and other organizations,
• Service quality management,
• Transportation policy and traffic congestion,
• Project management and product development,

and many others.

The goal of systems thinking and systems dynamics modeling is to improve our understanding of the ways in which an organization's performance is related to its internal structure and operations policies, including those of customers, competitors, and suppliers and then to use that understanding to design high leverage policies for success. To do so this book utilizes

• Process Points that provide practical advice for the successful application of the tools in real organizations.
• Case studies of Systems Dynamics in Action that present successful applications ranging from global warming and the war on drugs to reengineering the supply chain of a major computer firm, a marketing strategy in the automobile industry, and process improvement in the petrochemicals industry.

System dynamics in not a spectator sport. Developing systems thinking and modeling skills requires the active participation of you, the reader, via

• Challenges. The challenges, placed throughout the text, give you practice with the tools and techniques presented in the book and will stimulate your original thinking about real world issues. The challenges range from simple thought experiments to full-scale modeling projects.
• Simulation software and models. The accompanying CD-ROM and web site (http://www.mhhe.com/sterman) include all the models developed in the text along with state-of-the-art simulation software to run them. There are several excellent software packages designed to support system dynamics modeling. These include ithink, Powersim, and Vensim. The CD and web site include the models for the text in all three software formats. The disk also includes fully functional versions of the ithink, Powersim, and Vensim software so you can run the models using any of these packages without having to purchase any additional software.
• Additionally, the Instructor's Manual and instructor's section of the website include suggested solutions for the challenges, additional assignments, PowerPoint files, with the diagrams and figures from the text suitable for transparencies, suggested course sequences and syllabi, and other materials.

Intended Audience

The book can be used as a text in courses on systems thinking, simulation modeling, complexity, strategic thinking, operations, and industrial engineering, among others. It can be used in full or half-semester courses, executive education, and self-study. The book also serves as a reference for managers, engineers, consultants, and others interested in developing their systems thinking skills or using system dynamics in their organizations.

A Note on Mathematics

System dynamics is grounded in control theory and the modern theory of nonlinear dynamics, There is an elegant and rigorous mathematical foundation of the theory and models we develop. System dynamics is also designed to be a practical tool that policy makers can use to help them solve the pressing problems they confront in their organizations. Most managers have not studied nonlinear differential equations or even calculus, or have forgotten it if they did. To be useful, system dynamics modeling must be accessible to the widest range of students and practicing managers without becoming a vague set of qualitative tools and unreliable generalizations, that tension is compounded by the diversity of backgrounds within the community of managers, students, and scholars interested in system dynamics, backgrounds ranging from people with no mathematics education beyond high school to those with doctorates in physics.