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2012/2013  KAN-CM_V89  Introduction to System Dynamics

English Title
Introduction to System Dynamics

Course information

Language English
Exam ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Course period Autumn
Changes in course schedule may occur
Thursday 08.00-09.40, week 36-41, 43-49
Wednesday 10.45-12.35, week 37,39
Time Table Please see course schedule at e-Campus
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Christian Erik Kampmann - Department of Innovation and Organizational Economics
Administration: Shi Hua Chen Kold - shc.ino@cbs.dk
Main Category of the Course
  • Business Ethics, value based management and CSR
  • Innovation and entrepreneurship
  • Supply Chain Management and Logistics
  • Financial and management accounting
  • Statistics and mathematics
  • Corporate and Business Strategy
  • Economics, macro economics and managerial economics
Last updated on 18-06-2012
Learning objectives
Upon completing the course the student should be able to:
  • 1) account for the elements of the systems approach, i.e.,
  • a) understand how many modern products and services have systemic features and define what is meant by this concept using concrete examples,
  • b) describe and discuss the philosophical and methodological principles underlying the systems approach and system dynamics,
  • c) relate the tenets of system dynamics to the challenges to rational decision making, forecasting, learning, and policy design in complex systems,
  • 2) use the analytical tools of system dynamics on a basic level, i.e.,
  • a) account for and explain the significance of structural elements such as stocks, flows, feedback loops, delays, and nonlinear relationships and analyze the dynamic behvior of simple feedback systems made up of these elements,
  • b) account for principles of model formulation and testing and discuss the application of these principles in concrete examples,
  • c) account for generic structures underlying archetypical system phenomena such as oscillation, drift to low performance, "shifting-the-burden" and addictive behavior, carrying capacity overshoot and collapse, diffusion dynamics, "time-compression diseconomies", and technology lock-in, and illustrate the appearance of these phenomena in different fields,
  • d) analyze the outcomes of relatively simple pre-formulated case study models
  • 3) demonstrate how the systems approach may be applied to real-world managerial issues, i.e.,
  • a) reformulate a given issue in terms of its systemic aspects, b) formulate hypotheses of key feedback mechanisms and system elements that may impinge on the issue
  • c) sketch how the problem may be incorporated in a computer model, and d) discuss possible insights yielded by the analysis.
Open to all CBS graduate students. Open to DTU and UCPH Faculty of Science graduate students subject to approval from study line coordinators. Maximum participants: 80. Maximum CBS participants: 50.
Introduction to System Dynamics:
Type of test Oral Exam
Marking scale 7-step scale
Second examiner Second internal examiner
Exam period December/January and February, DTU students: December 14
KU students, CBS exchange students: December
CBS resident students: December or January.
Aids Open Book, Written and Electronic Aid is permitted
Duration 20 Minutes
You will have 20 minutes to prepare for the question you draw for the oral exam.  All written and electronic materials are allowed during preparation.  Questions on the oral exam will include references to the issues encountered in the homework assignments for the course.  Although assignments are voluntary and not graded, you are strongly encouraged to complete all assignments and bring assignment solutions to the exam as study aids.
Course content

A striking feature of today’s business environment is the interconnectedness and complexity of almost every aspect of business practice.  The globalized economy, the explosion in information and communication capacity, the increased concern with global environmental degradation and climate change, the opening up and acceleration of innovation and R&D, and the transformation of firm offerings from isolated products to platform-based services are some of the underlying drivers of this trend.  As a consequence, the success or failure of a firm strategy depends crucially upon how the firm interacts with surrounding entities, as well as how the internal parts of the organization interact across traditional boundaries, more than it depends upon the individual performance of these parts.  In a word, business conditions are increasingly systemic and the environment characterized by dynamic complexity.
In order to meet the challenge we must learn how to design and manage complex systems with multiple feedback effects, long time delays, and nonlinear responses to our decisions.  Yet learning in such environments is difficult precisely because we never confront many of the consequences of our most important decisions. Effective learning in such environments requires methods to develop systems thinking and tools that managers can use to accelerate learning throughout an organization.
The course introduces you to systems thinking and system dynamics modeling for the analysis of business policy and strategy.  System dynamics is a branch of systems analysis that is particularly accessible and useful for a managerial audience.  Developed at MIT's Sloan School of Management, where it remains one of the single most popular courses in the MBA program, it is a flexible, intuitive, and powerful approach to structuring managerial problems, visualizing the interconnectedness of business systems and their surrounding environment, and exploring their complex dynamic interaction through computer modeling and simulation, without the need for sophisticated mathematics or computer skills.
You will be introduced to the basic principles and techniques of system dynamics along with a string of examples of dynamic complexity in different managerial disciplines.  You will learn how to identify, analyze and effectively take account of the dynamic processes involved in areas like product development strategies, supply chain management, product life cycle assessments, the dynamics of innovation and product diffusion, platform leadership, technology launch strategies, first- and second-mover advantage, "time compression diseconomies" in product development, and the dynamics and limits of growth.  Upon completing the course, you should have a thorough understanding of the approach and an ability to recognize and deal with situations where policy interventions are likely to be delayed, diluted, or defeated by otherwise unanticipated side effects caused by dynamic complexity.
Systemic problems cross traditional discplinary boundaries and requires us to work in cross-disciplinary teams.  Therefore, the course is offered simultaneously to graduate students at CBS, the Technical University of Denmark (DTU), and University of Copenhagen Faculty of Science (UCPH), as part of the CIEL collaborative platform between the three universities.  (See http://www.cbs.dk/en/CBS-Focus/Menu/Entrepreneurship/Menu/CIEL).  To the extent possible, we will arrange for you to work in cross-disciplinary groups combining students from all three institutions.

By interacting hands on with business cases and associated computer models as 'management flight simulators' where space and time can be compressed, slowed, and stopped, you can experience the long-term side effects of decisions, systematically explore new strategies, and sharpen your strategic thinking skills in real-world situations.

Teaching methods
The course involves 15 weekly 2-hour classroom sessions. Moreover, much of the required understanding will be gained by working on a set of biweekly homework assignments. The assignments are voluntary and not graded, but it is strongly recommended that you complete them since they afford a much deeper, direct understanding of the methods and issues of the course. Moreover, we will to the extent possible arrange for you to work in cross-disciplinary groups of students from DTU, CBS and UCPH (see description of course content).
Student workload
Classroom participation 30 hours
Reading/preparation 195 hours
Expected literature

Course textbook:  STERMAN, J.D. (2000), Business Dynamics, McGraw-Hill.

Selected additional readings:

BARRABA, V. Et al. (2002): A Multi-method Approach for Creating New Business Models: The General Motors Onstar Project, Interfaces 32 (1): 20-34.
MEADOWS, D.; RANDERS, J.; MEADOWS, D. (2004), Tools for the transition to sustainability, Ch. 8 of Limits to Growth: the 30-year update, Chelsea Green Publishing.
OLIVA, R.  (2010) Death Spirals and Virtuous Cycles:  Human Resource Dynamics in Knowledge-Based Services.  The Handbook of Service Science. P. Maglio, J. Spohrer & C. Kieliszewski. London, Springer: 321-358.
OLIVA, R., STERMAN, J. D. & GIESE, M. (2003) Limits to Growth in the New Economy: Exploring the "Get Big Fast" Strategy in e-commerce.System Dynamics Review, 19, 83-117.
PAICH, M., PECK, C. And VALANT, J. (2011), Pharmaceutical market dynamics and strategic planning: a system dynamics perspective. System Dynamics Review, 27: 47-63.
REPENNING, N. P. & STERMAN, J. D. (2002) Capability Traps and Self-Confirming Attribution Errors in the Dynamics of Process Improvement. Administrative Science Quarterly, 47, 265 - 295.
REPENNING, N.; Sterman, J. (2001), Nobody ever gets credit for fixing problems that never happened: Creating and sustaining process improvement.  California Management Review, 43(4).
STERMAN, J. (forthcoming)  Sustaining Sustainability: Creating a Systems Science in a Fragmented Academy and Polarized World.  In M. Weinstein and R.E. Turner (eds),Sustainability Science: The Emerging Paradigm and the Urban Environment. Springer.
STERMAN, J. D. (2008).  Risk Communication on Climate:  Mental Models and Mass Balance.  Science322: 53-533.
STERMAN, J. D., HENDERSON, R., BEINHOCKER, E. & NEWMAN, L. (2007) Getting Big Too Fast: Strategic Dynamics with Increasing Returns and Bounded Rationality. Management Science, 53, 683-696.
STRUBEN, J. And STERMAN, J. (2008). Transition challenges for alternative fuel vehicle and transportation systems. Environment and Planning B. 35, 1070-1097.
WALTHER, G., et al. (2010), Impact assessment in the automotive industry: mandatory market introduction of alternative powertrain technologies. System Dynamics Review, 26: 239-261

Last updated on 18-06-2012