First Semester Schedule: Sunday and Tuesday 15:00-16:20 and 16:30-18:00

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1 Ali N. Mashayekhi Mehr 1385 Sharif University of Technology Graduate School of Management and Economics System Dynamics for Business Policy Course Schedule GENERAL INFORMATION First Semester Schedule: Sunday and Tuesday 15:00-16:20 and 16:30-18:00 TAs: Mr. Foroughi, Mr. Vakili, Mr., Mr. Ghili, Mr. Bonabi, Mr. Joshaghani TA Sessions: The TAs will lead a weekly session in which they will answer questions and discuss solutions to the due assignments. Time and place of TAs sessions will be arranged during the first week of the course. Grading Emphasis: Assignments: 20% Project: 20% Mid-term exam 20% Final Exam: 40% Objectives and Scope The course intends to teach dynamic and systemic thinking. This course introduces you to system dynamics modeling for the analysis of socio-economic and business policy and strategy. You will learn to think over time and visualize a socio-economic entity in terms of the structures and policies that create dynamics and regulate performance. System dynamics allows us to create micro-worlds, management flight simulators where space and time can be compressed, slowed, and stopped so we can experience the long-term side effects of decisions, systematically explore new strategies, and develop our understanding of complex systems. We consider the use of systems thinking to promote effective learning. The principal purpose of modeling is to improve our understanding of the ways in which an organization's performance is related to its internal structure and operating policies as well as its interaction with customers, competitors, and suppliers. During the course you will use several simulation models to explore such strategic issues as fluctuating sales, production and earnings; market growth and stagnation; the diffusion of new technologies; the use and reliability of forecasts; growth and decays of cities; public policy and natural resource management; and the rationality of business 1

2 decision making. Students will learn to recognize and deal with situations where policy interventions are likely to be delayed, diluted, or defeated by unanticipated reactions and side effects. You will have a chance to use state of the art software for computer simulation and gaming. Assignments give hands-on experience in developing and testing computer simulation models in diverse settings. Text and Software The primary text is Sterman, J. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World. Irwin/McGraw Hill. ISBN Several excellent packages for system dynamics simulation are now available commercially, including ithink, from High Performance Systems, Powersim, from Powersim Corporation, Professional DYNAMO, from Pugh-Roberts Associates, and Vensim, from Ventana Systems. You may wish to learn more about these packages, as all are used in the business world, and expertise in them is increasingly sought by potential employers. For further information, see the following resources: ithink: See the High Performance Systems web site at < Powersim: See the Powersim web site at < Professional DYNAMO: Contact Pugh-Roberts Associates, 41 William Linskey Way, Cambridge, MA 02142, 617/ Vensim: See the Ventana Systems web site at < In this course, we will be using the Vensim Personal Learning Edition (Vensim PLE), a FREE package offered by Ventana Systems. Vensim PLE comes with on line user s guide and help, and also a folder of demo models. Download Vensim PLE from the Vensim web site at < 2

3 Course Schedule: (Subject to change) 85/6/28 2 Sunday 85/7/2 Introduction and Overview: Dynamic perspective; system thinking; process of understanding and managing the real world, course outline and term projects Read Business Dynamics [BD], Ch. 1. #1 No. Date Topic Reading Assignment Out 1 Tuesday Course organization - Assignment Due 3 Tuesday 85/7/4 Models: Definition and categories; The modeling process Reference mode Read BD, Ch. 3, Ch. 4 4 Sunday 85/7/9 A theory of structure for systems: Closed systems or Feedback System; Feedback loops, stock and flows, auxiliary variables, and information links Dynamic hypothesis #2 #1 5 Tuesday 85/7/11 6 Sunday 85/7/16 System Dynamics Tools: Causal loops System Dynamics Tools: Mapping stock and flow structure of systems Read BD, Ch. 5 (Skim sections 5.4, 5.6) Read BD, Ch. 6 (Skim sections 6.2.7, 6.2.8, 6.2.9, 6.3.4, 6.3.6) #3 #2 7 Tuesday Dynamics of Stocks and Read BD, Ch. 7 Flows 85/7/18 8 Sunday HOLIDAY 85/7/23 9 Tuesday Introduction to vensim Read Vensim manual Term project definition #4 #3 3

4 85/7/25 10 Sunday 85/8/30 System Dynamics Tools: Linking feedback with stock and flow structure Read BD, Ch. 8 (sections ) 11 Tuesday 85/8/2 12 Sunday 85/8/7 13 Tuesday 85/8/10 14 Sunday Mathematical equation and model simulation Distribution system game/ REVIEW AND DISCUSSION REVIEW AND DISCUSSION/ Distribution system game REVIEW AND DISCUSSION #5 #4 #6 #5 85/8/14 15 Tuesday 85/8/16 16 Sunday 85/8/21 17 Tuesday 85/8/23 18 Sunday 85/8/28 19 Tuesday 85/9/30 20 Sunday 85/9/5 21 Tuesday Exponential growth Goal seeking S-Shape Delays Overshoot Oscillation Non-Linear Systems and Modeling Growth Processes Growth Strategies Part 1: Modeling Innovation Diffusion and the Growth of New Products Growth Strategies Part 2: Positive Feedbacks in the economy, path dependence, and the engines of growth Mid-term exam Read BD Ch. 4: 4.1.1, 4.1.2, Read BD 4.2.2, 4.1.3, Ch. 9.1 (Skim 9.1.2, 9.1.3) Skim BD, Ch. 9.2 Read BD, Ch. 9.3 (Skim sections end) Read BD Ch. 10 (Skim section 10.2) #7 #6 #8 #7 85/9/7 22 Sunday Why Build Models: Re- Engineering the Supply Chain Read BD, Ch. 11 #9 #8 4

5 85/9/12 in a High-Velocity Industry 23 Tuesday 85/9/14 Managing Instability Part 1: Formulating and testing robust models of business processes 24 Sunday Managing Instability Part 2: The Supply Line and Supply 85/9/19 Chains 25 Tuesday Managing Instability Part 3: Forecasting and Feedback: 85/9/21 Bounded Rationality or Rational Expectations? Read BD, Ch. 12 (Skim section 12.6) Read BD, Ch Read BD, Ch. 16 Read Paulos, Recession forecast if steps not taken 26 Sunday 85/9/26 Managing Instability Part 4: Hog bellies, oil tankers, and business cycles Read BD, Ch end #10 #9 27 Tuesday 85/9/28 28 Sunday Applications of System Dynamics: On Time and Under Budget Dynamics of Project Management Presentation of students projects Read BD, Ch 2.3 and Smith et al., Death of a Software Manager Read BD, Ch /10/3 29 Tuesday Presentation of students projects 85/10/5 Sunday HOLIDAY 85/10/10 5