Common Modes of

Dynamic Behavior
Business Dynamics
by John Sterman

Dennis T. Beng Hui, De La

Salle University-Manila
Exponential Growth
„ The larger the quantity, the larger the net
increase. Exponential growth has the
remarkable property of a constant
DOUBLING TIME.
„ Examples: population, money in a
bank.

Dennis T. Beng Hui, De La

Salle University-Manila
Exponential Growth

VAR

TIME

Dennis T. Beng Hui, De La

Salle University-Manila
Goal Seeking
„ The rate at which the system
approaches its goal diminishes
as the discrepancy falls. We do
not observe a constant rate of
approach that suddenly stops
just as the goal is reach

Dennis T. Beng Hui, De La

Salle University-Manila
Goal Seeking

Goal

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TIME

Dennis T. Beng Hui, De La

Salle University-Manila
Oscillation
„ It is third fundamental mode of
behavior in system dynamics. The
state of the system is compared to its
goal, and corrective actions are taken
to eliminate discrepancies.
„ The state of the system constantly
overshoots its goal or equilibrium
state, reverses, then undershoots
and then so on.
„ The overshooting arises from the
presence of significant time delays.
Dennis T. Beng Hui, De La
Salle University-Manila
Oscillation

VAR Goal

TIME

Dennis T. Beng Hui, De La

Salle University-Manila
Interactions of the
Common Modes of
Dynamic Behavior

Dennis T. Beng Hui, De La

Salle University-Manila
S-Shaped Growth
„ Growth is observed to grow
exponentially, the gradually
declines. Eventually, one or
more constraints halt the growth
process.

Dennis T. Beng Hui, De La

Salle University-Manila
S-Shaped Growth
Limiting
Constraint

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Dennis T. Beng Hui, De La

Salle University-Manila
S-Shaped Growth with
Overshoot
„ Often, systems with s-shaped
growth contain significant time
delays. These time delays lead
to the possibility of the system
to overshoot and oscillate
around the limiting constraint.

Dennis T. Beng Hui, De La

Salle University-Manila
S-Shaped Growth with
Overshoot

Limiting
Constraint
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Dennis T. Beng Hui, De La

Salle University-Manila
Overshoot and Collapse
„ Consumption or erosion of the
limiting constraint happens such
that the system does not reach
equilibrium and the system
collapses.

Dennis T. Beng Hui, De La

Salle University-Manila
Overshoot and Collapse
Limiting
Constraint

VAR

TIME

Dennis T. Beng Hui, De La

Salle University-Manila
 Other Modes of behavior
„ Statis or equilibrium – change is too slow relative
to your time horizon for it to be meaningful. .
„ Randomness – this is a measure of ignorance.
When we say random variations, we mean that we
don’t actually know the reasons for these
variations.
„ Chaos – chaotic systems fluctuate irregularly,
never exactly repeating, even though its motion is
completely deterministic. This irregularity arises
endogenously and is not created by random
shocks.

Dennis T. Beng Hui, De La

Salle University-Manila