The value of Systems Thinking and System Dynamics in the management of complex organizations. A selection of case studies

Given their hierarchical nature, organizations are character- ized by hierarchical structures that divide them into departments in order to achieve greater efficiency with the division of labor. An holistic approach like the one introduced by Systems Thinking should therefore be able to allow the coordination between these departments, overcoming technical difficulties and the unwilling- ness of those who must be coordinated (Forrester, 1961; Sterman, 2000). While Systems Thinking is universally accepted from a the- oretical point of view, the challenge over the last years has been to apply what the theory is capable of producing to the contingent strategy and decisions that organizations find themselves taking on a daily basis (Senge, 1990; Meadows, 2008). To this end, a prag- matic, but still heavily based on theory, approach to the analysis and evaluation of organizational and economic impacts following strategic decisions, can be found into the quantitative counterpart of Systems Thinking, that is System Dynamics (Forrester, 1994; Richmond, 1994; Peterson & Eberlein 1994). A review of what has been achieved in sixty years of research could thus help focus on the characteristics of Systems Thinking and System Dynamics that make it suitable for achieving this purpose. Hence, this book represents an attempt to make a synthesis of 20 years of my own personal activities in the field of scientif- ic research with a specific focus on the application of Systems Thinking and System Dynamics to the field of management of complex organizations, organizational learning, management of change, the evaluation of the impact of policies and technology, sustainability and decision making. It aims at exploring and analyzing whether Systems Think- ing and System Dynamics could constitute a potentially “right” approach to unfurling complexity in order to understand how systems (organizations) work, how their performances can be improved and if a Systems Thinking and System Dynamics approach can be the right methodology to address sustainable change (Stroh, 2015; Meadows, 2008; Senge, 1990). In particular, it is worth noticing here that we will talk about Systems Think- ing and System Dynamics at the same time even as they are somehow two faces of the same coin (Richmond, 1994; Forrester, 1994; Peterson & Eberlein, 1994;), which in thinking is systems (Meadows, 2008; Richmond, 1993). The Systems Thinking side of the coin is the qualitative part of the methodology, mainly al- lowing for a systemic description of a problem and hence for the understanding of underlying structures that may cause behavior over time; whereas System Dynamics is the quantitative aspect of the approach, allowing to quantify by means of a simplified description (in terms of the concept of accumulation) the vari- ables of a system and hence to project, through simulation, its behavior over time (Forrester, 1994; Richmond, 1994). The value of System Dynamics modeling and simulation is that it quanti- tatively helps to explore the dynamic hypotheses that we make on a system and test the impact of potential policies aiming at its durable change, in a recursive approach that allows research- ers to verify the outcome of certain hypotheses and eventually adapt (even the model structure itself) in order to get closer to the real behavior of the system (Forrester, 1994; Sterman 2000). Of course, all models are a simplification of reality and in this sense, following John Sterman’s definition, all models are wrong, as in general, complexity and controllability of a model grow as its number of variables also increase (Sterman, 2002a): in other words, there is no perfect (or totally right) model but there are good models that can help explain specific (but even pretty com- plex)issues. In other words, as it will be discussed in the rest of the book, Systems Thinking (ST) and more specifically System Dynamics (SD) are two integrated methodologies for framing, understand- ing and discussing complex issues and problems, currently being used throughout the public and private sector for policy analysis and design. In particular, SD has its deep roots (Hammond, 2002) in Systems Thinking (Senge, 1990; Meadows, 2008), it was devel- oped in the late 50s by J. W. Forrester at MIT and was first de- scribed in detail in Forrester’s book Industrial Dynamics (Forrester, 1961) with some additional principles presented in later works. It is a modelling and simulation methodology particularly fit at describing complex, non-linear, counter-intuitive feedback-driven behaviors, also characterized by feedback relationships and delays acting in the system. A central tenet of System Dynamics is that the complex behaviors of organizational and social systems are the result of ongoing accumulations (stocks) of people, material or financial assets, information, or even biological or psychological states, and both balancing and reinforcing feedback mechanisms. SD is also a computer-based modelling method that makes use of formal models in order to understand the elements of complex systems over time. The combination of Systems Thinking (qual- itative description of a systems’ structure) and System Dynamics (description of the systems’ behavior over time and its variations following diverse inputs) will provide the understanding of how a circular system’s behavior emerges and will allow to gain insights on how policy changes in that system might alter its behavior and, most of all, why. System Dynamics thus offers the practical application of all these concepts in the form of computerized models, in which alternative policies and scenarios can be tested in a system- atic way that answers both “what if” and “why”. This volume is organized as follows: Chapter One will cover a quick resume of the most rele- vant (historically speaking) organizational theories and sets the ground for understanding how Systems Thinking and System Dynamics constitute a natural methodological evolution of those theories. Chapter Two will argue more in detail, building on the background of theories resumed in Chapter One, how Systems Thinking is a crucial competence to manage change and learning in modern organizations. Chapter Three will introduce the reader to the Systems Thinking and System Dynamics approach, by explaining its tools and lemma as well as delving into the details of the mode- ling approach when dealing with specific organizational issues. It is of course highly recommended to integrate the notes of Chapter Three with a few fundamental books from the Systems Thinking and System Dynamics bibliographies of reference, like the seminal books from Jay W. Forrester (Industrial Dynamics, 1961; Principles of Systems, 1968), Donella H. Meadows (Think- ing in Systems, 2000), Peter Senge (The Fifth Discipline, 1992), John Sterman (Business Dynamics, 2000). Chapter Four constitutes the core part of the book, as it pre- sents more than 20 case studies of application of Systems Think- ing and System Dynamics extracted from the last 20 years of my scientific career. They are extracted from scientific papers that I have written for Journals, Books and Conferences and have been selected because they provide a good idea of the application of the methodology as well as its width (and hence versatility) of application in many fields of management and organizational behavior. They have been regrouped in a few main areas: Case studies on the Management of Organizations • Case studies on Public Policy • Case studies in the domain of Sustainability • Case studies on Security issues • Case studies on Education and Training Chapter Five closes this book by summarizing the added value of a systemic perspective in the management of complex organizations and how Systems Thinking and System Dynamics constitute a valuable, and still missing, item in the development of a new and modern approach to decision making in the man- agement of complex organizations, by integrating classical or- ganizational and managerial theories with IT technologies: this approach is the one I have named, over the course of the last 10 years, as Smart Model-based Governance. Chapter Six will try to draw some conclusions that emerge from the reasonings included in this book and will set the path for the next (hopefully successful) 20 years in research on the sustainable management of complex and dynamic organizations.