POWELL
Teaching Modeling in Management Science
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Teaching Modeling in Management
Science
Stephen G. Powell
Amos Tuck School of Business Administration
Dartmouth College
Hanover, New Hampshire 03755, USA
stephen.g.powell@dartmouth.edu
A Radical Proposition
The heart of Management Science is not the
science of optimization or simulation, but the art
of reasoning logically with models.
Abstract
This essay discusses how we can most effectively
teach Management Science to students in MBA or
similar programs who will be, at best, part-time
practitioners of these arts. I take as a working
hypothesis the radical proposition that the heart of
Management Science itself is not the impressive
array of tools that have been built up over the
years (optimization, simulation, decision analysis,
queuing, and so on) but rather the art of reasoning
logically with formal models. I believe it is
necessary with this group of students to teach
basic modeling skills, and in fact it is only when
such students have these basic skills as a
foundation that they are prepared to acquire the
more sophisticated skills needed to employ
Management Science. In this paper I present a
hierarchy of modeling skills, from numeracy skills
through sophisticated Management Science skills,
as a framework within which to plan courses for
the occasional practitioner.
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Management Science in the Business School
A host of problems face teachers of Management
Science in the business school (INFORMS
Education Committee, 1995; Powell, 1998a). The
subject itself has been removed from the core
curriculum of the AACSB, and Management
Science courses have been removed from the core
in a number of highly-respected schools. No
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accurate data are available, but it is widely
accepted that Management Science plays a much
smaller role in most business schools than it once
did. These developments are particularly ironic at
this time, since Management Science is enjoying a
renaissance in practical applications, from revenue
management at the airlines to financial
engineering on Wall Street.
Before we can determine how best to teach
Management Science, we must ask what the
discipline offers to the business school
curriculum. Why should MBA students learn
about Management Science, and how should they
learn it? One difficulty, of course, is that
Management Science is not a recognized
functional area in most businesses, nor is it in the
business school. Very few students will pursue
careers in which Management Science plays a
central role. In addition, Management Science is
rarely used in other courses, and some, perhaps
many of our faculty colleagues have negative
images of the subject itself. (In many cases we
need to educate our colleagues on the relevance of
Management Science in the business world, its
relevance in their own fields, and even on the
value of using modeling in teaching their courses.)
My thesis is that Management Science can,
indeed, make a fundamental contribution to the
education of business students, but it will not be
by teaching them linear programming (although
we should do that). Management Science can
teach business students the essential skills of
analytical reasoning, especially how to use models
to think through business problems. I suggest that
there are six categories of skills business school
students need that management scientists are best
equipped to provide:
• basic quantitative reasoning skills (for
example, order-of-magnitude estimation)
• informal modeling skills (for example,
identifying critical assumptions)
• formal modeling skills (Excel skills, for
example)
• the ability to understand and learn from
models in other disciplines (for example,
the Black-Scholes model in finance, the IS-
LM model in macroeconomics, or the EOQ
model in operations)
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• end-user modeling skills; that is, the ability
the build and analyze models on one’s own
(Plane, 1994)
• the skills to understand and work with
large-scale models (the traditional
“intelligent consumer” rationale for
teaching Management Science).
Many of these skills are not recognized as
fundamental to business students, yet at the same
time many faculty colleagues complain about their
student’s weaknesses in mathematics and
quantitative reasoning. I believe we have an
opportunity to substantially improve business
school education (while creating more jobs for our
profession) by articulating the need for learning
these skills and then teaching them as part of the
Management Science curriculum.
Perspectives on Modeling
When I refer to modeling or model-building I am
referring to the fundamental activity of creating a
simplified representation of reality in order to
understand reality better, not necessarily to the
sophisticated models built by Management
Scientists. Model building is such a natural and
familiar activity to most management scientists
that many do not recognize its central role.
Modeling is both an innate human capability and
an arcane, specialized art. The role of those of us
who teach Management Science is to build a
bridge between the student’s innate abilities to
simplify and abstract the world to improve their
understanding, and the formal skills needed to
build a useful computer model.
In The Search for Solutions, a book on modeling
in the sciences, Judson (1980) notes that “model-
making is a profound and instinctual human
response to understanding the world.” Children
are modeling when they take on adult roles in
their play. Adults are modeling when they use
maps, when they use political labels (like
“liberal”) to describe politicians, or when they
choose insurance based on an informal assessment
of risks. The important point for management
scientists to understand is that many of the basic
concepts necessary to build formal models,
simplification, abstraction, and so on, are already
present in some form in most people’s minds. In
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fact the mind itself seems to be highly evolved to
use models in many ways. But mental models are
not as effective in many situations as are formal
models, so the educational task is to help the
student augment his or her existing skills with
those needed to build explicit, formal models that
(unlike informal, mental models) can be
evaluated, critiqued, and improved upon by both
the builder and others.
Seymour Papert, whose 1980 book Mindstorms
should be required reading for anyone teaching
Management Science, is a computer scientist and
the originator of the programming language Logo.
Papert is an expert in childhood learning and has a
vision of how well-developed computer software
can help children learn fundamental thinking
skills. Part of this vision involves the notion that
programming a computer can help a child learn to
think by forcing the child to reflect on his or her
own thought processes:
…in teaching the computer how to
think, children embark on an exploration
of how they think. The experience can
be heady: Thinking about thinking turns
the child into an epistemologist, an
experience not even shared by most
adults
I see a similar role for modeling and Management
Science in the business school: developing
models can help students le arn how they think and
can think better in the future (whether or not they
are actually using models).
Finally, the Systems Dynamics community has
developed the notion of “microworlds,” computer
software that helps the user learn about the
dynamics of a typical business situation, such as
the perils of exponential growth. Peter Senge, in
The Fifth Discipline (1990), offers this vision of
the role models, in this case models packaged as
microworlds, can have on management:
Now a new type of microworld is
emerging. Personal computers are
making it possible to integrate learning
about complex team interactions with
learning about complex business
interactions. These new microworlds
allow groups to reflect on, expose, test,
and improve the mental settings for both
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crafting visions and experimenting with
a broad range of strategies and policies
for achieving those visions. Gradually,
they are becoming a new type of
“practice field” for management teams,
places where teams will learn how to
learn together while engaging their most
important business issues.
While I stress the importance of teaching students
to build their own models (end-user modeling),
Senge stresses the use of models in team building
and group learning. Both activities are
complementary, and build upon a basic
understanding of what a model is and how to use
one effectively.
A Hierarchy of Modeling Skills
My argument, in its simplest form, is that before
we embark on teaching Management Science we
should teach modeling. But what are the
modeling skills we should teach, and how can we
organize these skills from basic to advanced? I
propose a four-part hierarchy, which starts with
the most basic skills involving logic and numbers,
then moves on to basic modeling skills every
student should have, progresses to more advanced
skills that some students can acquire, and ends
with the most advanced Management Science
tools we are likely to teach our students. These
four categories are described below along with
examples of specific skills in each class.
Numeracy and logical skills
Anyone who teaches Management Science has
encountered students who can understand the
rudiments of Management Science but cannot
successfully build or analyze models because they
cannot reason with numbers. What are some of
these necessary numeracy skills? One
fundamental skill is the ability to make rough
numerical estimates quickly. For example, if we
sell 1200 units at $495 will our revenues be about
$600,000 or $6 million? This skill is basic to
debugging a model and in general to avoiding
mechanical mistakes in quantitative reasoning. It
is also extremely useful in understanding and
discussing model-based results.
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Some other numeracy skills include
• using special cases to test the limits of an
argument or calc ulation
• checking the consistency of units in a
calculation to avoid errors
• using the "sniff test," a quick intuitive
evaluation of the plausibility of a result or
conclusion, to detect unreasonable
assumptions or other errors in reasoning.
In addition to numeracy skills, modeling requires
the ability to reason logically. For example, one
must be able to recognize an assumption in one's
own or another's argument. On another level,
successful use of an "IF" statement requires a
basic familiarity with logic.
I stress the importance of these foundational
skills for two reasons: first, because they are
important but are almost always taken for
granted in graduate-level teaching, and
second, because we must teach them if we are
to prepare our students mentally for learning
Management Science itself.
Basic modeling skills
Beyond basic numeracy and logical skills, the
modeler-in-training needs to acquire basic
modeling skills. These are skills that are used in
building and analyzing any model, from the
simplest spreadsheet model to the most complex
integer program. Once again, they are often taken
for granted by expert modelers who long ago
acquired these skills. But an effective teacher
above all can understand which skills students
lack. And I have found that many students
stumble in learning Management Science because
they lack a basic understanding of the rudiments
of creating a useful descriptive model and
exploring that model to build intuition (see also
Plane, 1997).
Here is a sample of some basic modeling skills:
• categorizing variables: distinguishing
parameters, decisions, and outcome
measures
• modularization: decomposing a model into
relatively independent parts
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• isolating parameters: entering a parameter
in one place in a model and referring to it
wherever else it is needed
• establishing a base case: deciding whether
to measure proposed changes against the
most likely case, the current case, or the
worst case
• backing in: using breakeven analysis to
identify a critical level for a variable
• sensitivity analysis: learning which
parameters have the most powerful effect
on the outcomes
• pattern analysis: looking for patterns in the
results to assist in translating model results
into information useful to managers (Baker,
2000).
I believe it is important to recognize that these
kinds of skills are necessary in all modeling
activities. Teachers of Management Science
should at least be aware of these skills, and ideally
should create explicit opportunities in their
courses for students to learn these skills.
Advanced modeling skills
The craft skills of modeling do not end with the
basic skills illustrated above. In fact, there is no
reason to assume that modeling skills are finite.
But what kinds of skills can advanced students
learn, perhaps in a second-year MBA class in
modeling?
Here is a sample of some advanced skills:
• prototyping: building a simple model first,
testing its implications, and then expanding
and improving it along lines that will
improve the quality of the analysis
• sketching a graph: using a simple generic
graph to suggest properties of a relationship
between two model variables
• using families of mathematical
relationships: using families of curves with
a few parameters (such as the demand
family Q=aP-b ) to support later sensitivity
analysis
• imagining the answer: working backward
from the desired answer to known data
• modeling the data: understanding that all
data is a (possibly biased) sample from
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reality and explicitly modeling the process
that gave rise to the data
• separating idea generation from evaluation:
controlling one’s critical faculty by
generating ideas in a uncritical fashion.
I have written more extensively elsewhere
(Powell, 1995a, 1998b) on the importance of these
skills to the practice of modeling. Their
importance to us as teachers is that most students
will not recognize or acquire these skills on their
own. In fact, it takes most practitioners years of
experience to develop just a few of these skills.
Our task as teachers is to explicitly identify these
skills, and to find ways to encourage our students
to use them.
Management Science tools and applications
Finally, we come to the tools that form the
accepted heart of Management Science:
optimization, simulation, decision analysis,
queuing, and so on. To reiterate what was said
earlier, most students cannot successfully acquire
and use these skills unless they have an adequate
foundation. This foundation consists of the basic
numeracy, logical, and modeling skills described
above. In fact, the better a student is as a modeler
the more effective use they can make of the
Management Science tools. I believe as a
profession we have underestimated the
importance of these basic skills over the years and
assumed that any motivated student can learn to
use Management Science tools. In reality, these
tools are more sophisticated than we sometimes
realize, or at least using them presumes a basis in
modeling that many of our students do not have.
It is a far more effective pedagogical strategy to
teach less of Management Science and more basic
modeling, if that is what our students need, than to
teach a full complement of Management Science
tools to a student audience that is poorly equipped
to use them.
Importance of basic skills
I have argued throughout this essay on the
importance of teaching (or at least ensuring that
our students have) basic modeling skills before we
teach Management Science tools. There are a
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number of reasons why I believe this is so, beyond
the obvious fact that many of our students do not
possess these skills. First, basic modeling skills
are used routinely, while advanced skills are used
only occasionally. It is far more important for a
student to understand basic sensitivity analysis
than it is to understand shadow prices, since he or
she will always do the former but may never
encounter a linear program in the workplace.
A second reason is that sophisticated methods fail
if basic skills are inadequate. I have seen students
fail attempting to solve simple one- or two-
variable nonlinear programs, when a simple grid
search would have sufficed. In our desire to teach
sophisticated algorithms we must not suppress our
students’ common sense.
A third reason to teach the basics of modeling is
that no one else in the business school is doing so,
and management scientists have a strong
comparative advantage. Furthermore, modeling
skills are in increasing demand in the workplace.
It may seem ironic that Excel skills are in demand
by recruiters but very few ask for Management
Science skills. This may be due to the fact that
managers whose MBAs are ten or twenty years
old do not realize that Management Science is
now an eminently practical tool. I believe that the
best way to educate these managers is to equip our
students with excellent Excel, modeling, and
Management Science skills, and let the graduating
students show by example how powerful and
practical these tools have become. For some
examples of successful MBA model-building see
Liberatore and Nydick, 1999; Sonntag and
Grossman, 1999; and Powell, 1997.
Finally, spreadsheets are a natural vehicle for
teaching both basic modeling skills and
Management Science (Savage, 1997). We could
not have asked for a more helpful development
than the evolution of the spreadsheet into a
universal business language. There is still a
residual feeling among some members of our
profession that spreadsheets are not a legitimate
modeling tool. I agree, of course, that many
sophisticated models require more powerful or
specialized software. But most managers will
never work with software beyond the spreadsheet.
And every manager has a spreadsheet. These
reasons alone make it the platform of choice for
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teaching MBAs. In addition, as William Hogan
has suggested to me, the spreadsheet is the second
best way to do many things, and therefore the best
way to do almost everything. We will simply
have to accept that we may choose to build our
research models in GAMS or GPSS, but teach our
MBAs to use Solver and Crystal Ball.
Final thoughts
Managers are both decision makers and learners.
Modeling (both mental and formal) is a
fundamental human tool for learning about the
world and for preparing to make decisions. As
teachers of Management Science, our task is to
help students augment their innate modeling skills
with formal modeling skills, including the tools of
Management Science. Friendly software,
especially spreadsheets, has made this task easier
than ever by dramatically reducing the costs of
modeling. As a result, future managers can and
will be model builders, model consumers, and
active computer learners. This is a golden
opportunity for management scientists.
Successful use of Management Science requires a
solid foundation in basic modeling skills. Many
of our students do not possess these skills. Much
of modeling is a craft, and should be taught in a
manner appropriate to craft. While this requires a
different approach than teaching the scientific
aspects of Management Science, it can be done
(Powell, 1995a; 1995b; 1998b).
By going back to the basics of modeling, as I
advocate here, we can
• establish a firm foundation for the
Management Science course
• present a coherent, general, and useful set
of skills to students
• provide skills that will be useful to students
learning other disciplines
• provide widely-applicable business skills
• reestablish the role of Management Science
in the business school curriculum.
References:
Baker, K. (2000), “Gaining Insight in Linear
Programs from Patterns in Optimal Solutions,”
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INFORMS Transactions on Education,

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Liberatore, M. J. and R. L. Nydic k (1999),
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