CHAPTER 1
Industrial Dynamics
Industrial dynamics is the investigation of the information-feedback character of industrial systems and the use of models for the design of improved organizational form and guiding policy. Industrial dynamics grows out of four lines of earlier development -- information-feedback theory, automatizing military tactical decision making, experimental design of complex systems by use of models, and digital computers for low- cost computation. Each of these is reviewed as part of the background from which this book has evolved.THIS book treats the time-varying (dynamic) behavior of industrial organizations -- industrial dynamics.Industrial dynamics is the study of the information-feedback characteristics of industrial activity to show how organizational structure, amplification (in policies), and time delays (in decisions and actions) interact to influence the success of the enterprise. It treats the interactions between the flows of information, money, orders, materials, personnel, and capital equipment in a company, an industry, or a national economy.Industrial dynamics provides a single framework for integrating the functional areas of management -- marketing, production, accounting, research and development, and capital investment. It is a quantitative and experimental approach for relating organizational structure and corporate policy to industrial growth and stability.Industrial dynamics should provide a basis for the design of more effective industrial and economic systems. An industrial dynamics approach to enterprise design progresses through several steps:
Identify a problem.
Isolate the factors that appear to interact to create the observed symptoms.
Trace the cause-and-effect information-feedback loops that link decisions to action to resulting information changes and to new decisions.
Formulate acceptable formal decision policies that describe how decisions result from the available information streams.
Construct a mathematical model of the decision policies, information sources, and interactions of the system components.
Generate the behavior through time of the system as described by the model (usually with a digital computer to execute the lengthy calculations).
Compare results against all pertinent available knowledge about the actual system.
Revise the model until it is acceptable as a representation of the actual system.
Redesign, within the model, the organizational relationships and policies which can be altered in the actual system to find the changes which improve system behavior.
Alter the real system in the directions that model experimentation has shown will lead to improved performance.
Such an approach is based on several premises
Decisions in management and economics take place in a framework that belongs to the general class known as information-feedback systems.

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