Strategic Modelling and Business Dynamics: A Feedback Systems Approach

3.1. Asset Stock Accumulation

Asset stock accumulation is a very important idea in system dynamics, every bit as fundamental as feedback and in fact complementary to it. You can't have one without the other. Asset stocks accumulate change. They are a kind of memory, storing the results of past actions. When, in a feedback process, past decisions and actions come back to influence present decisions and actions they do so through asset stocks. Past investment accumulates in capital stock – the number of planes owned by an airline, the number of stores in a supermarket chain, the number of ships in a fishing fleet. Past hiring accumulates as employees – nurses in a hospital, operators in a call centre, players in a football squad, faculty in a university. Past production accumulates in inventory and past sales accumulate in an installed base.

Figure 3.1. Asset stock accumulation in a stock and flow network

All business and social systems contain a host of different asset stocks or resources that, when harnessed in an organisation, deliver its products and services. Crucially, the performance over time of an enterprise depends on the balance of these assets and resources (Warren, 2002). An airline with lots of planes and few passengers is out of balance and unprofitable. Empty seats bring no revenue. A factory bulging with inventory while machines lie idle is out of balance and underperforming. ...