Course Objectives
In Foundations of Strategy we saw that rents (profits beyond expected investment returns) derive from unique resource combinations and well-protected strategic positions. We only began, however, to delve into how managers assemble resources, establish positions, and expand and exploit those advantages over time. This course helps us to understand and predict patterns of change in industries, companies, products, and competition and provides tools to craft well-coordinated strategies leading to unique resources and advantageous strategic positions.
To gain insight into business dynamics – how managerial decisions interact and how resources, industries, companies, products, and competitive positions develop over time – the course is grounded in systems concepts and introduces tools for mapping and modeling systems. The modeling tools require no more than a mathematical background in algebra and assignments involving mathematical modeling are carried out in small (three person) teams. All Fuqua students already have the necessary math skills for this course, those skills will be refreshed in class, and anyone who fears (or just plain dislikes) mathematics can rely on the assistance of teammates. At the end of the course, everyone should have a clearer understanding of how companies and industries develop over time and how we can better manage that development. In addition, those already mathematically inclined should have identified new ways to apply their mathematical skills in a managerial setting while the mathematically disinclined should have a few new mathematical tools to apply when decisions need to be informed and supported by numbers.
We will look at problems and draw examples from a wide variety of industries and functional areas. Along the way, we will find that systems concepts and systems modeling tools are central to strategy in all settings for two reasons. First, resources and positions are dynamic and all dynamics (e.g., industry evolution, business cycles, growth and decline of individual companies or product lines) are generated by interactions within systems. Once we have the tools (causal loop diagrams, stock and flow diagrams, simulation models) to understand the structure of the strong interactions within systems, we can identify the drivers of business dynamics and determine where and when to intervene to turn those drivers in our favor (e.g., know when to invest or sell resources, know which customers to target, know when to change pricing policies or production policies or both simultaneously). Second, many opportunities are lost when managers look at problems too narrowly. A narrow focus misses the ways that pricing, production, client development, hiring, and product design are interconnected. It is the job of general managers (and strategy consultants) to identify and manage the broader connections among functional decisions so that the parts of the overall system work to complement one another and so that change efforts are focused where they will be most effective. Systems concepts and tools reveal these connections and help us identify where leverage can be found to bring about change. In summary, across a wide variety of settings, systems tools reveal the drivers of business dynamics and help us to design strategies that will develop the resources and positions we desire.
Sterman, J. D. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World. Boston, McGraw-Hill Companies.
Course Website
Note: Two sections of this course were taught each year by Scott Rockart during 2003, 2004, and 2005. In 2003 the sections were called Management 491.301 and 302, in 2004 Management 491.301 and 302, and in 2005 Management 491.303 and 304. The name and designation have changed as the course has become a permanent part of the curriculum and to highlight the school’s growing body of courses on strategy.