CHAPTER 3
The Managerial Use of Industrial Dynamics

The information-feedback concepts of system behavior, mathematical models of dynamic interrelationships, and the digital computer to simulate system interactions make experimental industrial system design possible. The manager can have a design laboratory to assist him in creating improved control policies and the information flows on which they depend. This will lead to greater depth in management education and to changes in the qualifications of managers. It can be expected to alter the present staff versus line management duties in companies.

IN Chapter 2 the example of an industrial system has provided an elementary demonstration of a way to study the effect of policy and organizational structure. The example has been based on very simplified flows of information, orders, and materials, but even so, realistic and informative results have emerged. What then is the place of such analysis in the quest for better methods of management?

It is only through costly experience and errors that managers have been able to develop effective intuitive judgment. We need to expedite this learning process. Other professions in similar circumstances have turned to laboratory experiments.


3.1 The Management Laboratory

Controlled laboratory experiments on industrial and economic situations are now possible with computers to do the work required by mathematical models that simulate the system being studied. Unlike real life, all conditions but one can be held constant and a particular time-history repeated to see the effect of the one condition that was changed. Circumstances can be studied that might seldom be encountered in the real world. Daring changes that might seem too risky to try with an actual company can be investigated. The manager, like the engineer, can now have a laboratory in which he can learn quickly and at low cost the answers that would seldom be obtainable from trials on real organizations.

The controlled laboratory experiment is a powerful tool -- when used properly. The wind-tunnel model of an airplane illustrates the strengths and dangers of this technique. Today's aircraft would be impossible without laboratory model experiments; but the erroneous design of a model or mistaken interpretation of laboratory results can lead to disaster in the final airplane. In the same way the manager must come to understand his new tools, their dangers, and their effective use.


3.2 Steps in Enterprise Design

The management laboratory approach will follow the same steps common to other design laboratories. These have been mentioned in Chapter 1. The goals must be defined, the

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