Google Inc. System Dynamics – Stocks, Flows, and Feedback Loops

The systems thinking model of management rests on the knowledge of nonlinear behavior of complex systems through such concepts as stock, associated flows, feedback loops, table functions and time delays. Stocks and flows are some the most significant system dynamics as they represent the movement of elements in and out of the system (Sterman, 2000). Specifically, stocks refer to entities that can be depleted and replenished while flows are units that affect depletion or replacement of stocks. Feedback loops are another principal element of system dynamics. A feedback loop is a system structure that causes the output of a node to influence the input of the same node (Checkland, 1981). This paper examines Google Inc. in relation to system dynamics with a special focus on stocks, flows, and feedback loops. Knowledge on stocks, flows, and feedback loops can help leaders and managers understand the interactions between the organization and the environment, leading to more informed decisions.

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            To begin with, it is important to note that Google engages in multiple businesses spanning from hardware design and production, data management, to search engine advertising. Therefore, the company’s inventory involves diverse activities that require distinct supply chains.  Key stocks at Google include hardware products, raw materials, and knowledge about data management, advertising, and search engines. The technology giant develops and manufactures a variety of hardware products such as smartphones, laptops, router lines, virtual reality headsets, smart speakers, and tablets, among other technology devices. Each of these products must be stored before they are boxed and shipped for retail sale. Consequently, Google keeps a stock of each hardware product that is in production. The key reason for doing so is to strike a balance between ‘input’ and ‘output’ flows. Customers’ demand for a specific product represents an output flow that prompts Google to deplete its product stock while supply from partnering manufacturers and Google’s own manufacturing firms represents an ‘input’ flow through which the company replenishes its hardware stockpile.

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            The second stock consists of raw materials which Google uses in manufacturing processes. Examples of raw materials include plastics, processors, cables, and electronic components that are utilized in technology products. Although Google principally partners with hardware manufacturers like Huawei and HTC to oversee production of hardware products, it directly controls some manufacturing segments such as those related to Chromecast digital media players and fiber optic cables. Associated flows for raw material stock include rate of manufacturing, supply, and adoption. The rate of manufacturing refers to how quickly the company produces technology products. Higher manufacturing rates are likely to deplete stocks of raw materials while the opposite is true. The supply alludes to the rate at which the company orders new raw materials from suppliers to replenish its stock. Adoption is a secondary flow as it distresses the level of production. Finally, Google holds a stock of knowledge about data management, advertising, and search engines. In fact, this is one of the primary stocks that have the greatest impact on Google’s business model. The company is considered a monopoly in the world of search engine and online advertising since it owns a majority market share. This implies that it dictates market trends with the stock of knowledge on search engine technology it has. Associated flows include factors in the larger technology environment, customer preferences, and efficiency in technology.

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            One positive feedback loop at Google involves sale of hardware products. More sales translate to more revenue which is then used in the production of more products. A case in point of a product that constitutes a feedback loop is the Nexus smartphone brand which the company launched recently. With this product, Google enjoys economies of scale with its customers. The more products the company sells, the higher the revenues it gets from customers, and further, the more money is reinvested back in production. This reduces costs which, in turn, means more sales. This virtuous cycle benefits both the customer and the company. Certainly, the process cannot proceed forever and this is why Google discontinues production of old hardware models to adopt new ones.        

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In conclusion, Google is a complex system that portrays the interplay between stock, associated flows, and feedback loops. Key stocks at Google include hardware products, raw materials, and knowledge about data management, advertising, and search engines. Associated flows comprise customer demands, technological trends, supply, rate of adoption, and rate of production. By gaining a comprehensive understanding of flows, stock, and feedback loops, managers at Google can have a clearer picture of essential inputs and outputs in specific processes as well as factors that influence them. This perspective allows one to view the organization as a system of interacting elements within the context of a larger system (Boardman & Sauser, 2008). In a complex system, the role of managers is to influence and reinforce the behavior of interactions and to balance processes. Knowledge on stocks, flows, and feedback loops can help leaders and managers understand the interactions between the organization and the environment, leading to more informed decisions.

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