Scenarios and Testing Models
System dynamics models explore possible futures by asking 'what if' questions, and their utility depends on whether they produce realistic patterns of behavior, not on the realism of the driving scenarios.
THE IDEA
System dynamics models are used to explore possible futures and ask “what if” questions. The utility of a model depends not on whether its driving scenarios are realistic (since no one can know that for sure), but on whether it responds with a realistic pattern of behavior.
When to use it
Testing the long-term impact of a new pricing strategy on market share and profitability in a competitive market.
Evaluating the effects of different public health interventions (e.g., vaccination rates) on disease spread over time.
Assessing the resilience of a supply chain to various disruption scenarios, such as natural disasters or supplier failures.
Exploring the consequences of different regulatory policies on environmental sustainability and economic growth.
FROM THEORY TO EVERYDAY LIFE
In practice
Business Policy Testing
A company uses a system dynamics model to simulate the effects of different marketing spend scenarios on long-term customer acquisition and retention, focusing on whether the model's behavior matches historical patterns rather than if the exact future scenario is accurate.
Climate Policy Simulation
Researchers test various carbon tax rates in a climate-economy model, evaluating the model's output patterns (e.g., temperature rise and GDP impact) for plausibility rather than requiring the exact future predictions to be correct.
A MOMENT TO REFLECT
Put it to work.
Think of a complex system you interact with daily. How could you create a simplified model to test 'what if' scenarios, and what would it mean for the model to show a realistic pattern of behavior?
Why might focusing on the realism of input scenarios be misleading when evaluating a model's usefulness? Provide a real-world example.
How can you distinguish between a model that produces a convincing pattern by chance versus one that captures underlying system dynamics?
CONTINUE THE CONVERSATION
Source texts
- Thinking in Systems A Primer