This paper considers the problem of managing process improvement when resources are constrained. The paper constructs a system dynamics model that formalizes the critical interaction between using resources to produce primary output and investing resources in process improvement as means to increase throughput. The model incorporates learning so that the productivity of doing improvement activities grows as workers accumulate experience with new methods. The model enables a rigorous examination into how the feedback structure of process improvement presents challenges to people in a system facing the dual pressure to produce output and to build capability. Simulation analysis highlights the dynamics of the tradeoff between production and improvement and demonstrates the existence of a tipping point that distinguishes enduring high levels of production from modest or no improvement. Results show the superior performance of counter-intuitive policy orientations that favor learning.
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