Strategic Modelling and Business Dynamics: A Feedback Systems Approach

5.7. Modelling for Learning and Soft Systems

Modelling is not a cookbook procedure – it is fundamentally creative. At the same time, it is a disciplined, scientific and rigorous process that involves observing dynamic phenomena in the real world, surfacing and testing assumptions, gathering data and revising the model to improve understanding. In the absence of strategic modelling, people run business and society, with varied degrees of success, relying on judgement, experience and gut feel. The outer layer of Figure 5.29 shows this normal trial-and-error approach. Based on their mental models of organisations and industries, people devise strategy, structure and decision rules. They take strategic decisions (requiring organisational experiments) whose full implications are never clear at the outset. Then they observe what happens in the real world. The learning cycle is complete when people adjust their mental models on the basis of outcome feedback, in other words by comparing what was achieved with what was intended. The model building process described in this chapter complements the normal but fallible learning cycle. Modelling helps people to share, clarify and improve their mental models. It also enables them to test and refine strategic decisions and organisational experiments through simulation (before trying them out in the real world). The overall process we call 'Modelling for Learning' (Morecroft & Sterman, 1994).

5.7.1. A Second Pause for Reflection: System Dynamics ...