Strategic Modelling and Business Dynamics: A Feedback Systems Approach

Chapter 6. The Dynamics of Growth from Diffusion

• Stocks and Flows in New Product Adoption – A Conceptual Diffusion Model

• The Bass Model – An Elegant Special Case of a Diffusion Model

• A Variation on the Diffusion Model: The Rise of Low-cost Air Travel in Europe

• Strategy and Simulation of Growth Scenarios

• Conclusion

• Appendix: More About the Fliers Model

Now we turn our attention from goal-seeking feedback and cyclicality to reinforcing feedback and the dynamics of growth. We begin with a product diffusion model responsible for S-shaped growth-and-stagnation in the sales lifecycle of new products and services. The model applies to a wide range of consumer goods from VCRs and DVDs to web-sites, microwave ovens and mobile phones. We examine the structure and dynamics of the well-known Bass diffusion model (Bass, 1969) and then propose a variation on this model to investigate growth strategy in the airline industry.

S-shaped growth appears in many guises. It is found in biological and ecological systems where for example exponential growth of a species runs up against a natural limit such as available land or food. A typical pattern of behaviour over time is shown at the top of Figure 6.1. Consider the qualitative features of the trajectory. In the early years, there is very little movement in the state of the system as exponential growth covertly gathers pace. In the middle years, the doubling power of exponential growth becomes dramatically apparent with a huge absolute change in the state ...