Though there is no universally accepted process for developing and using good quality system dynamics models there are some basic practices that are quite commonly used. A more complete description of the modeling process is contained in "Guidelines for Model Conceptualization," by Jørgen Randers in Jørgen Randers (ed.), Elements of the System Dynamics Method, MIT Press, Cambridge, MA 1980 pp. 117-138 (now available from Pegasus Communications).
The following steps are a useful guideline.
Issue statement. The issue statement is simply a statement of the problem that makes it clear what the purpose of the model will be. Clarity of purpose is essential to effective model development. Developing a model of a system or process without specifying how the system needs to be improved or what specific behavior is problematic is difficult. Having a clear problem in mind makes it easier to develop models with good practical applicability.
Variable Identification.Identify some key quantities that will need to be included in the model for the model to be able to address the issues at hand. Usually a number of these are very obvious. It can sometimes be useful just to write down all of the variables that might be important and try to rank them in order to identify the most important ones.
Reference modes.A reference mode is a pattern of behavior over time. Reference modes are drawn as graphs over time for key variables, but are not necessarily graphs of observed behavior. Rather, reference modes are cartoons that show a particular characteristic of behavior that is interesting. For example, a company's sales history may be growing but bumpy, and the reference mode may be the up and down movement around the growth trend. Reference modes can refer to past behavior, or future behavior. They can represent what you expect to have happen, what you fear will happen and what you hope will happen. Reference modes should be drawn with an explicitly labeled time axis to help refine, clarify and bound a problem statement.
Reality Check. Define some Reality Check statements about how things must interrelate. These include a basic understanding of what actors are involved and how they interact, along with the consequences for some variables of significant changes in other variables. Reality Check information is often simply recorded as notes (often mental notes) about what connections need to exist. It is based on knowledge of the system being modeled. Chapter 14 of the User Guide makes this information explicit using the Reality Check functionality in Vensim.
Dynamic hypotheses. A dynamic hypothesis is a theory about what structure exists that generates the reference modes. A dynamics hypothesis can be stated verbally, as a causal loop diagram, or as a stock and flow diagram. The dynamic hypotheses you generate can be used to determine what will be kept in models, and what will be excluded. Like all hypotheses, dynamic hypotheses are not always right. Refinement and revision is an important part of developing good models.
Simulation Model.A simulation model is the refinement and closure of a set of dynamic hypotheses to an explicit set of mathematical relationships. Simulation models generate behavior through simulation. A simulation model provides a laboratory in which you can experiment to understand how different elements of structure determine behavior.
The above process is iterative and flexible. As you continue to work with a problem you will gain understanding that changes the way you need to think about the things you have done before. Later chapters in this guide go through the process of model development from a number of different perspectives placing emphasis on different parts of the above process.
Vensim provides explicit support for naming variables, writing Reality Check information, developing dynamic hypotheses and building simulation models. Creating good issue statements and developing reference modes can easily be done with pencil and paper or using other technologies. Dynamic hypotheses can be developed as visual models in Vensim, or simply sketched out with pencil and paper. Simulation is the one stage where it would be impractical to dispense with the computer altogether.
