Decision makers tend to overestimate short term effects and underestimate long term effects when dealing with complex systems. They need to choose from a wide array of possible options resulting in a 'combinatorial explosion'. Traditional analysis methods do not support decision makers sufficiently.
Dynamic simulations are based on the field of 'system dynamics' and support decision makers in describing and analysing complex feedback loops of cause and effect relationships. Dynamic simulations used as 'management flight simulators' allow decision makers to assess the short- and long-term effects of decisions in a virtual world. Due to the power of dynamic simulations, insights gained in the virtual world are readily transferable to the real world and help to produce robust solutions for practical problems.
PA Consulting Group is applying this innovative method to:
- decision making support during strategy development
- simulation of complex projects (eg major construction projects)
- forecasting of markets (eg commodities).
PA's service offering ranges from qualitative dynamic simulation – hence the development of a high level dynamic hypothesis about a problem (represented by causal loop diagrams) – to full scale quantitative dynamic simulation.
Further information
More information on dynamic simulation is available in this extract (in German language only):
'The iceberg phenomenon. Business dynamics and dynamic simulation: the importance of invisible performance drivers' by Stephens, C and Klug, T.
Click here to download the extract (PDF, 528KB).
The extract is published in PA's new book 'Reallocate leadership - Perspectives for managers in the 21st century' by Harbig, A., Klug, T., Bröcker, M.(Hrsg.), Gabler 2006, S. 121-131. The book is written in German.
