Saturday, May 2, 2009

Review of Strategic Management Dynamics

I have been looking into system dynamics to better apply systems thinking to sustainable management, that is, helping businesses integrate ecological thinking (being aware of the environmental consequences of your business) to business decision making and finding profits along the way.

In the research of what's current with system dynamics tools today since Jay Forrester pioneered it's development in the 1970's, I came across a different use of system dynamics that helps provide a more visual understanding of system dynamics applied to a business architecture. The key advantage is that it ties closely to the PowerPoint and spreadsheet tools typically found in the modern company's management toolkit and helps tell the story of how management decisions will influence future performance. That work has been done by Kim Warren - my review of his book on the subject follows below.


It is an ongoing task to keep abreast of the best management practices in our global economy. As a result, we are always searching for better tools to be more insightful, to be more effective, and to get better performance. When one finds a tool that seems to resonate as useful because of challenges we have experienced in the past we are motivated to add it to our toolkit and skill set. But our experience has also taught us that we tend to initially have high expectations which are typically followed by some resetting to a more pragmatic view and finally, if one spends the time becoming skilled, the new tool becomes a necessary addition to our management skill set.

I was reminded of this recently watching a baseball game in which the batter struck a sharp grounder down the third base line. The third baseman charged to his right, scooped the ball up as he dropped into a crouched slide to arrest his momentum, and then rose, right foot planted to make a hard accurate throw to first base for the out. The experienced commentator noted that in the past one was taught to first stop, turn, plant your right foot, and then throw to first base. But this slide, plant and throw scheme was definitely fast, fluid, and effective – artistic in execution. He was impressed and remarked that handling the play like he had been taught - old style, the throw would have been too late for the out. The third baseman had demonstrated this technique that set a new standard of skill and effectiveness.

This is how I would describe Kim Warren’s Strategic Management Dynamics, a new tool to add to your management ‘game’ a skill that with some practice, will lead to better insights of the dynamic architecture and future of your business. It will help you understand where past performance will likely lead in the future and how one can change that to get better future performance.

What I found resonated with my experience was the use of system thinking to take a holistic view of your company’s operation. This fits well with the sustainable management movement that is beginning to become a major part of most organizations as they remake their business for the economic realities and environmental constraints facing us in the 21st century.

Second, it focuses on the strengths of system dynamics to capture the feedback, resources (stocks) and control points (flows) of the corporate architecture. Presenting the dynamics in a graphical language helps bridge barriers to effective discussion between top-down strategists and bottoms-up, spreadsheet-focused, operational managers of the business.

Third, you haven’t lost the system dynamics insights behind a dashboard that which allows others to be unsure where the numbers come from. In Strategy Dynamics, the familiar spreadsheet view of the company is clearly evident as well as the dynamics.

Fourth, Strategy Dynamics better bridges the silo-focus that commonly exists in companies that hinders effective understanding and collaboration across business units. It is easier to see how marketing and sales initiatives dealing with intangibles like attracting and retaining customers or managing employee retention affects capabilities and interacts with product development and day-to-day business operations.

Fifth, a lot of decisions involve tradeoffs between short-term and longer-term performance. Strategy Dynamics makes those choices more tangible and sobering because it often takes a few years to see the impact of decisions that lead to success or failure. Being able to intelligently simulate those in advance just enables better decision-making.

Finally, as many organizations begin to focus on other intangibles like “how much will being ecologically proactive attract customers” or “how to understand how my corporate social responsibility program improves bottom-line performance,” the Strategy Dynamics approach helps tell the performance story to the often skeptical C-level management team and shareholders who have to keep an eye on the bottom-line.

I highly recommend Kim Warren’s strategic management dynamics enhancement of the system dynamics toolkit for enabling more insightful and effective management decision-making. It will definitely improve your management ‘game.’

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