Steps in the

System Dynamics Modeling Process

1

1. Problem Articulation
a. What is the problem? Why is it a problem?
b. What are the key variables and key concepts that must be considered?
c. How far into the future should we consider? How far back in the past lie the roots
of the problem?
d. What are the behaviors over time of the key variables or concepts? (Draw BOTGs
or Reference Graphs)

2. Dynamic Hypothesis
a. What are the current theories about the problematic behavior?
b. Formulate a hypothesis that explains the dynamics of the problem as a function of
internal (endogenous) consequences of the feedback structure in the system.
c. Develop maps of the causal structure. (stock and flow maps or causal loop
diagrams)

3. Build a Model
a. Decide on the structures and decision rules to use.
b. Estimate the parameters, initial conditions, and behavioral relationships.
c. Test to determine if the structure is consistent with the purpose of the model and
the boundary.

4. Test the Model

a. Does the model reproduce the problem behavior adequately for your purpose?
b. Does the model behave realistically when stressed by extreme conditions?
c. How does the model behave given uncertainty in parameters, initial conditions,
model boundary, and aggregation?
d. Are other tests needed/desired?

5. Policy Design and Evaluation

a. In what situations (environment) is the model relevant?
b. What new decision rules, strategies, and structures might be tried in the real
world? How can they be represented in the model?
c. What are the effects of the policies?
d. How robust are the policy recommendations under different scenarios and given
uncertainties?
e. Do the policies interact? Are there synergies or compensatory responses?

1
This information was reproduced (and slightly modified, to simplify wording) from John Sterman's book
Business Dynamics: Systems Thinking and Modeling for a Complex World, 2000, McGraw-Hill, and is
reproduced with permission of The McGraw-Hill Companies.
11.1 Steps in System Dynamics Modeling Process Student Lessons Page 11-9
Modeling Dynamic Systems: Lessons for a First Course 3rd Edition © 2011 Diana M. Fisher
In his book, Business Dynamics, Sterman stresses the iterative nature of the modeling
process. In the process of modeling it is often necessary to revise earlier steps. He
suggests the following diagram helps illustrate this strategy.

1. Problem Articulation
(Boundary Selection)

5. Policy 2. Dynamic
Formulation Hypothesis
& Evaluation

4. Testing 3. Formulation

Figure 1: Iterative nature of the modeling process.

Sterman goes on to explain that the modeling process (creating a virtual world) must
continually interact with elements/actors within the real world system to maintain a
reality check, so the modeling process does not stray from the real system it is trying to
simulate.
Real
World

Decisions
(Organizational 1. Problem Articulation
Experiments) (Boundary Selection) Information
Feedback

5. Policy 2. Dynamic
Formulation Hypothesis
& Evaluation

4. Testing 3. Formulation

Mental
Strategy, Models
Structure, of Real
Decision World
Rules

Figure 2: Maintaining a reality check between the virtual system and the real system.

11.1 Steps in System Dynamics Modeling Process Student Lessons Page 11-10
Modeling Dynamic Systems: Lessons for a First Course 3rd Edition © 2011 Diana M. Fisher