Strategic Modelling and Business Dynamics

Strategic Modelling and Business Dynamics
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The first book to explain how you can measure social media ROI across multiple departments, for internal/external social media based activities, as well as for new business models (product/services). This book provides help in establishing a thorough social media plan, examining your goals, audience and channel strategy, before examining tools and techniques to measure social media metrics and key performance indicators. This book debunks the myth that ROI, web metrics and social media measuring is a ‘black art’, and makes it easy to understand and use, enabling the reader to create bespoke ROI metrics and improve the return on activity. Practical, straightforward and informed by the key principles which the author has explored in his Social Media MBA, this transformative look at ROI will inspire a move away from ‘Likes’, ‘Followers’ and ‘mentions’ and towards pounds, euros and dollars.

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Morecroft John D.. Strategic Modelling and Business Dynamics

About the Author

Foreword by Peter Checkland

Preface to the Second Edition

Preface from the First Edition3

Manufacturing Dynamics and Information Networks

Bounded Rationality and Behavioural Decision Making

Modelling for Learning

The Dynamics of Strategy

Soft Systems and Complementary Modelling Methods

How to Use This Book

MBA and Modular/Executive MBA

Non-Degree Executive Education

Undergraduate and Specialist

CHAPTER 1. The Appeal and Power of Strategic Modelling

Introduction7

A New Approach to Modelling

The Puzzling Dynamics of International Fisheries

Model of a Natural Fishery

Operating a Simple Harvested Fishery

Preview of the Book and Topics Covered

Appendix – Archive Materials from World Dynamics

References

CHAPTER 2. Introduction to Feedback Systems Thinking

Ways of Interpreting Situations in Business and Society

A Start on Causal Loop Diagrams

Structure and Behaviour Through Time – Feedback Loops and the Dynamics of a Slow-to-Respond Shower

From Events to Dynamics and Feedback – Drug-related Crime

Purpose of Causal Loop Diagrams – A Summary

Feedback Structure and Dynamics of a Technology-based Growth Business

Causal Loop Diagrams – Basic Tips

Causal Loop Diagram of Psychological Pressures and Unintended Haste in a Troubled Internet Start-Up

References

CHAPTER 3. Modelling Dynamic Systems

Asset Stock Accumulation

The Coordinating Network

Modelling Symbols in Use: A Closer Look at Drug-related Crime

Equation Formulations

Experiments with the Model of Drug-related Crime

Benefits of Model Building and Simulation

References

CHAPTER 4. World of Showers

Getting Started

Redesigning Your World of Showers

Inside World of Showers

Simulations of World of Showers B

References

CHAPTER 5. Cyclical Dynamics and the Process of Model Building

An Overview of the Modelling Process

Employment and Production Instability – Puzzling Performance Over Time

Equation Formulations and Computations in Production Control

Modelling Workforce Management and Factory Production Dynamics

Equation Formulations in Workforce Management

Chronic Cyclicality in Employment and Production and How to Cure It

Modelling for Learning and Soft Systems

Appendix 1: Model Communication and Policy Structure Diagrams

Appendix 2: The Dynamics of Information Smoothing

References

CHAPTER 6. The Dynamics of Growth from Diffusion

Stocks and Flows in New Product Adoption – A Conceptual Diffusion Model

The Bass Model – An Elegant Special Case of a Diffusion Model

A Variation on the Diffusion Model: The Rise of Low-cost Air Travel in Europe

Strategy and Simulation of Growth Scenarios

Conclusion

Appendix: More About the Fliers Model

References

CHAPTER 7. Managing Business Growth

A Conceptual Model of Market Growth and Capital Investment

Formulation Guidelines for Portraying Feedback Structure

An Information Feedback View of Management and Policy

Policy Structure and Formulations for Sales Growth

Policy Structure and Formulations for Limits to Sales Growth

Policy Structure and Formulations for Capital Investment

Simulation Experiments

Redesign of the Investment Policy

Policy Design, Growth and Dynamic Complexity

Conclusion

Appendix – Gain of a Reinforcing Loop

References

CHAPTER 8. Industry Dynamics – Oil Price and the Global Oil Producers

Problem Articulation – Puzzling Dynamics of Oil Price

Model Development Process

A Closer Look at the Stakeholders and Their Investment Decision Making

Connecting the Pieces – A Feedback Systems View

A Simple Thought Experiment: Green Mindset and Global Recession

Using the Model to Generate Scenarios

Devising New Scenarios

Endnote: A Brief History of the Oil Producers' Project

References

CHAPTER 9. Public Sector Applications of Strategic Modelling

Urban Dynamics – Growth and Stagnation in Cities

Medical Workforce Dynamics and Patient Care

Fishery Dynamics and Regulatory Policy

Conclusion

Appendix – Alternative Simulation Approaches

References

CHAPTER 10. Model Validity, Mental Models and Learning

Mental Models, Transitional Objects and Formal Models

Models of Business and Social Systems

Tests for Building Confidence in Models

Model Confidence Building Tests in Action: A Case Study in Fast-moving Consumer Goods

Model Structure Tests and the Soap Industry Model

Equation Formulation Tests and the Soap Industry Model

Tests of Learning from Simulation

Summary of Confidence Building Tests

Conclusion – Model Fidelity and Usefulness

Endnote: The Loops of Feedback

References

About the Website Resources

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John Morecroft is Senior Fellow in Management Science and Operations at London Business School where he has taught system dynamics, problem structuring and strategy in MBA, PhD and Executive Education programmes. He served as Associate Dean of the School's Executive MBA and co-designed EMBA-Global, a dual degree programme with New York's Columbia Business School. He is a leading expert in system dynamics and strategic modelling. His publications include numerous journal articles and three co-edited books. He is a recipient of the Jay Wright Forrester Award of the System Dynamics Society for his work on bounded rationality, information feedback and behavioural decision making in models of the firm. He is a Past President of the Society and one of its Founding Members. His research interests include the dynamics of firm performance and the use of models and simulation in strategy development. He has led applied research projects for international organisations including Royal Dutch/Shell, AT&T, BBC World Service, Cummins Engine Company, Ford of Europe, Harley-Davidson, Ericsson, McKinsey & Co and Mars. Before joining London Business School he was on the faculty of MIT's Sloan School of Management where he received his PhD. He also holds degrees in Operational Research from Imperial College, London and in Physics from Bristol University.

Many areas of human activity reveal dynamics of this type, with several classic patterns of behaviour: exponential growth or decline; oscillation; S-shaped growth; growth followed by collapse, etc.

.....

An important consequence of my collaboration with Arie and Shell was the launch, at London Business School, of a week-long residential executive education programme called Systems Thinking and Strategic Modelling (STSM). The programme used learning-by-doing to engage executives with the core principles of feedback systems thinking and system dynamics modelling. Chapter 2 (Introduction to Feedback Systems Thinking) and Chapter 3 (Modelling Dynamic Systems) are derived from STSM. Moreover, the programme brought together, for a period of 10 years, a faculty team at London Business School that helped to develop system dynamics in many important ways and materially contributed to the content of this book. The team members were Arie de Geus, Erik Larsen, Ann van Ackere and Kim Warren and then later Shayne Gary. I enjoyed working with this special group of people and know that together we accomplished a great deal. Thanks to you all.

The shower models in Chapter 4 were sparked by Erik Larsen who felt, in the spirit of modelling for learning, that we shouldn't simply lecture STSM participants about the tricky balancing loop in a shower ‘system’. Instead, we should build a simulator that would allow participants to see (or even experience) the resulting dynamics. So together we developed prototype simulators that became the basis for the World of Showers A and B models in Chapter 4. Alessandro Lomi and Ari Ginsberg later joined us to write a journal article based on these models, entitled ‘The dynamics of resource sharing – a metaphorical model’. Two MBA students at London Business School, Thomas Furst and Derrick D'Souza, helped me to develop an early version of the gaming interface, and my wife Linda Morecroft worked on the user guide and interface enhancements for World of Showers.

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