Creating the Future: Undesirably
This example shows that the Growth and Underinvestment structure is simply a Limits to Growth structure with some implications in terms of minimizing the limits.
In a business context marketing can generate demand. When the marketing effort succeeds in this fashion the normal inclination is to do more marketing. If some works more should work better.
The difficulty comes into play when the demand runs into the limiting aspect of capacity. Greater demand will result in a requirement for more products to be shipped, and when the demand approaches and finally exceeds capacity it will result in longer product delivery time. Longer delivery time is fine as long as it's less than what's acceptable to the market. If delivery time exceeds acceptable delivery time (not shown) then it will begin to impact demand.
As delivery time interacts with the delivery standard, and there should be such a thing, it will add to the perceived capacity required. Since capacity is something that usually requires substantial investment and takes time to develop there is a delay associated with its increase. Because of this delay it is quite possible that by the time capacity has been increased the increases in delivery time will have negated the increase in demand created by the marketing effort.
Thus, as the organization ponders action, which quite often it does, for far too long, the demand will dissipate and they will say, "See, we didn't really need the added capacity after all." And I guess they didn't need the extra sales that would have resulted from the capacity increase either.
- Diagram created with Vensim
- For effective strategies for dealing with this structure see Growth and Underinvestment Systems Archetype.
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