System dynamics is a method of modeling complex feedback systems. The central concept to the system dynamics method is understanding how all the objects in a system interact with one another. Typically, the objects in any system interact through feedback loops, where a change in one object affects other objects over time, which in turn affects the original object, and so on. An example of this dynamic is money in a bank account. Money in the bank earns interest, which increases the size of the account. Now that the account is larger, it earns even more interest, which adds more money to the account. Another example of a simple feedback loop is adjusting the water tap to reach a desired temperature. You turn the faucet, feel the temperature, and compare it to the desired temperature. You continue to adjust the water, with smaller and smaller adjustments, until you reach the desired temperature.
System dynamics attempts to model the basic structure of a system, and thus understand the behavior it can produce and how changes in the objects of the system impact other objects in the system. System Dynamics models often start as flow diagrams with links that detail the relationships between different objects in a system. Like all Operations Analytics techniques, system dynamics takes advantage of the fact that a computer model can be of much greater complexity and carry out more simultaneous calculations than can the mental model of the human mind and reveal both the intended and unintended consequences of altering an existing system.