“The whole is greater than the sum of its parts,” goes a saying attributed to Aristotle. Systems thinking can help realize that synergy – this article explores how.
By Emil Bjerg, journalist and editor
This is the fourth article in our series on methods for business leaders to navigate a volatile present and future. We’ve previously covered working with megatrends and scenario planning. The previous article covered the Delphi Method.
In this article, we’ll cover systems thinking basics, give examples of real-world applications, and dive into how your organization can start implementing the method.
What is systems thinking?
The metaphor of a car is often used to explain systems thinking: A car gets a specific task done – taking you from A to B. But no single part of a car does that alone, neither the wheels, the engine, nor the seats. But the combination of the parts in a car gets the job done.
“A system is not the sum of the behavior of its parts; it’s the product of their interactions,” Russell Ackoff, a professor at Wharton Business School and a pioneer in systems thinking, explains. The same is true for other systems, whether a computer, a phone – or an organization or business.
Systems thinking encourages a holistic perspective on a problem or an organization, recognizing the interdependent nature of systems in business and beyond. In other words, systems thinking involves understanding how different parts of the organization are interconnected and how changes in one area can impact others.
The approach originated in the mid-20th century and has proven itself to be a versatile method, being applied across disciplines and sectors. Companies like Patagonia, Ford, and Costco are among those applying the method. We’ll return to how these companies have applied systems thinking after discussing some of the benefits of the framework.
Why use systems thinking?
Breaking down silos: In recent years, it’s become popular to talk about ‘breaking down silos’ and unify organizations across departments. Systems thinking is a great framework to do just that. Peter Senge argues that systems thinking can foster a common language and understanding of how different parts of the organization interact. This facilitates better communication and collaboration across teams, leading to more effective problem-solving and goal achievement.
Identify root causes and unintended consequences: Systems thinking encourages looking beyond immediate symptoms to identify the underlying causes of problems – potentially in another area or department of an organization. That allows organizations to address issues at their core, leading to more sustainable solutions. Further, by understanding the interconnectedness of the system, organizations can anticipate the potential ripple effects of their actions and make informed decisions that minimize negative effects or consequences.
Understanding Complexity: As Donella Meadows writes, systems thinking can equip organizations with the right tools to analyze complex situations and identify opportunities for innovation. By considering the entire system, organizations can develop solutions that address multiple challenges simultaneously. Furthermore, Meadows argues, systems thinking can encourage organizations to consider the environmental and social impact of their decisions, promoting sustainable practices and responsible resource management.
Now, let’s get practical and see how some well-known companies have benefitted from the approach.
Costco
Let’s start with a simple example. When Costco realized that a significant barrier to meeting their customers’ increasing demand for organic vegetables was their supply chain, they decided to invest in organic producers. This way, they increased “their relationship capital with both customers and suppliers while improving natural capital.” The example shows, that systems thinking can provide relatively simple answers and solutions with a considerable gain.
And now, a few examples with more complexity where systems thinking informs the whole modus operandi of the companies.
Ford Motor Company
During the 2008 financial crisis, to avoid bankruptcy, Ford implemented a holistic approach. Instead of focusing only on individual cost-cutting measures, they adopted a systems thinking perspective, considering the entire company as an interconnected system.
By doing so, they recognized that isolated cost-cutting measures could have unintended consequences, potentially harming long-term value creation. By applying a systems thinking framework, they aimed to understand the ripple effects of their decisions across different parts of the organization, from suppliers to dealerships to customers.
What they gained: The approach led to several crucial decisions. They involved employees in identifying solutions, streamlined operations, and invested in developing fuel-efficient vehicles. All that helped Ford avoid bankruptcy and emerge more robust in the long term.
How this is systems thinking: Ford’s approach exemplifies several critical aspects of systems thinking:
- Interconnectedness: They recognized the interconnectedness of various parts of their business, understanding that decisions in one area would impact others.
- Long-term perspective: They focused on long-term value creation by considering the potential future consequences of their choices.
- Stakeholder consideration: They considered the needs and interests of various stakeholders, such as employees, suppliers, and customers.
Patagonia
Patagonia, a renowned outdoor apparel company, has been recognized for its environmental commitment for a long time. One approach that helps them do that is integrating systems thinking into the core of their business. They do so through an understanding, that their business is not only about manufacturing and selling clothes. They consider their entire system’s environmental and social impact, from sourcing materials to the end-of-life of their products. They even invented a rain-proof material without the dangerous chemical PFAS.
What they gained: Systems thinking has brought them several benefits. Their prioritization of recycled and organic materials and their active advocating for environmental protection has given them a loyal customer base that shares their values. Along with that, great marketing material.
How this is systems thinking:
- Holistic view: The company considers the entire “Patagonia System,” encompassing their operations, supply chain, product lifecycle, and role within the broader social and environmental context.
- Sustainability: They design their systems with sustainability in mind, aiming to minimize their negative impact and contribute to positive change.
Implementing Systems Thinking: A Practical Guide
Translating theory into practice can be a daunting task.
Therefore, we’re ending this article with a short roadmap for implementing systems thinking. Let’s do that with a simple introduction to key concepts.
The first key concept is interconnectedness. A change in one element, be it a marketing campaign or a shift in customer preferences, can have cascading effects throughout the system, impacting seemingly unrelated areas at first glance.
Furthermore, systems thinking highlights the significance of feedback loops. Information doesn’t simply flow through a one-way street within a system. Instead, it circles back, influencing future actions and behavior. Let’s take an example:
Increased employee contentment can lead to better output, fostering further investment in employee well-being and training, creating a positive feedback loop. On the other hand, high employee turnover can lead to skill gaps and decreased efficiency, potentially triggering further cost-cutting measures and perpetuating a negative feedback loop. Recognizing and managing these feedback loops is crucial for achieving long-term stability and preventing unintended consequences.
Another critical concept to grasp is that of mental models. Each individual within an organization holds unconscious assumptions and beliefs that shape their perception of the system. These mental models can influence how people interpret information, make decisions, and interact with others.
To give an example: The sales team might view a decline in sales as a marketing issue, while the marketing team might attribute it to product quality. By bringing these differing perspectives to the table and openly discussing the underlying assumptions, the team can develop a more holistic understanding of the situation and work towards a solution that addresses the root cause of the problem.
With those concepts explained, we can discuss how to implement systems thinking. With reference to The Systems Thinker, there are two types of models for systems thinking. A ‘model’ in this context is not a specific physical object. Instead, it’s a conceptual framework or representation of a system. This framework helps you visualize and understand the key components of a system and how they interact. Some might help by drawing maps of how different components in their system interacts. The two models are:
The expert model: Imagine a super-detailed blueprint. This type of model is accurate and complex, ideal for experts analyzing a problem in-depth.
The learning model: Imagine a basic Lego structure. This model focuses on the big picture and helps people understand the main connections within a problem.
According to The Systems Thinker, the model you should choose should reflect how complex a model you need as well as how complex – or simple – a model your team needs.
Now, let’s delve into the practical aspects of implementing systems thinking.
1. Define success upfront
Before you start, know what “winning” looks like. Set clear goals and measurable outcomes for your systems thinking project. This way, you can learn from both successes and setbacks.
2. Tailor your approach
Every project is unique. Think about what type of impact or change you want it to create on your team or organization and how systems thinking can add to that.
3. Use the “Design and Evaluation Framework” as a guide
This framework helps you consider three key aspects of your model:
- Accuracy: How detailed and realistic should your model – your conceptual framework – be?
- Usability: How easy is it for your team to understand and use the model?
- Team involvement: How will your team be involved in creating and using the model?
4. Evaluate as You Go
Don’t wait until the end to see if your approach is working. Regularly assess your progress and adjust your strategy if needed. Successful systems thinking is an ongoing process. Both successes and failures offer valuable lessons. Use them to refine your framework and continuously improve.
Let’s end on an encouraging note. While the jargon connected to systems thinking can make it seem complex and challenging to get started, systems thinking is simply about looking at the bigger picture, understanding connections, and using that knowledge to solve problems creatively and effectively.
