Systems Thinking

One fundamental principle, reflected in the work of leading systems theorists such as Jay Forrester, Peter Senge, C. West Churchman and Russel Ackoff, is that complexity and dynamism can best be understood in the context of a “system”. Ackoff defines a system as “a set of two or more interrelated elements of any kind: for example, concepts (as in the number system), objects (as in a telephone system), or people (as in a social system)”. It is therefore “a whole that can be divided into parts”.

A characteristic of any system is that the behavior of each element has an effect on the behavior of the system as a whole. For example, the actions of an individual doctor can affect many elements in the work system within a hospital. The actions of an individual manager can affect many of the sub-units within the operational system of a corporation. The actions of customers can affect many of the other elements in the system that constitutes an “industry”: suppliers of raw materials and components, various manufacturers or solution providers, distribution channels, retailers, the industry association, lobbying groups, and legislative bodies, among others. In short, any system is more than the sum of its parts.

The Systems Thinking Perspective: Structure Produces Behavior

A fundamental principle of systems thinking is that one must view the world simultaneously from three levels: events, patterns of behaviors, and structure. We will provide an example of each one by putting it in the context of a business system: the logistics and sales system that connects a manufacturing firm to its many customers. In this system, we focus on observing the effect of delivery delays on product sales.

Events: An event is each sale to each customer. These events are recorded in a report, showing the number of products sold in the prior month.

Patterns of Behavior: The report includes a chart which plots prior monthly sales over a rolling twelve month historical horizon. This graphs the “pattern of behavior” of the monthly sales rate. The pattern demonstrates a healthy sales increase up until six months earlier, when the sales rate flattened out and then turned down slightly. Another chart illustrates the average delivery time to the firm’s customers. The pattern of behavior of delivery time over the past twelve months shows that up until eight months ago, delivery times were equal to the industry average, but then began to increase steadily.

Structure: Taken together, the patterns of behavior of these two variables, monthly sales and average delivery time, suggest an increasing average delivery time causes a decrease in sales. This relationship is a manifestation of the cause-effect-cause “structure” of the industry system in which this firm competes.

The implications of this simple logistics-sales illustration can be inferred: any organization can affect greater change in its environment when it understands a system at the structural level, as opposed to the event or pattern level. For example, the organization analyzing the logistics and sales system, armed with its new understanding of the delivery-sales structure, can make a number of decisions that will shorten the average delivery time, and as a consequence, increase sales.

On the other hand, if the organization tried to fix its delivery and sales problems without understanding the structure of the system, its efforts to affect individual events, such as sales to individual customers might result only in making some of the underlying problems even worse. For example, new sales might add to the average delivery time if the firm did not invest in additional logistics capacity such as new delivery trucks.

It is important to note that in this example the “structure” is not readily apparent. Instead, it had to be discovered through analysis and then it must be compared to the mental models and experience of the organization’s managers. By identifying the structure of a system, the analysts create a theory of how things work. That is, they model how , in a particular situation the organization’s logistics and sales interact and influence each other. Creating such theories of “how things work” or how a system operates draws upon and reshapes the “mental models” of managers and other experienced members of the firm.

The goal of applying systems theory to scenarios is to provide decision makers with a methodology to identify and better understand the complex relationships that are at the heart of any “system” and the dynamic nature of how these relationships change.

Structural Dynamics and the Five Disciplines of the Learning Organization

Discipline	Discipline Definition	How the Discipline links to Structural Dynamics
Personal Mastery	Personal mastery is the discipline of continually clarifying and deepening our personal vision, and expanding our capability to crate the results that we desire	The challenge of confronting uncertainty about the future is stressful for many people. Scenario planning provides a way for them to rehearse and master the future in a simulated environment.
Mental Models	Mental models are deeply ingrained assumptions, generalizations, or even pictures or images that shape our understanding of the world and influence our actions and decisions.	The firm’s shared mental models of industry and firm structures are made explicit and documented in “Dynamic Scenario Generators” and in system dynamics computer simulation models.
Shared Vision	Shared Vision builds a sense of commitment rather than compliance by developing shared “pictures of the future” that we seek to create.	The Shared Vision of an organization emerges from its most desirable future scenario. Scenario planning, especially Dynamic Scenarios is a way to credibly develop attractive plausible futures.
Team Learning	Team learning is the group process of aligning vision and developing capability greater than the sum of the individual members’ contributions.	Dynamic Scenarios provide an occasion for the organization to conduct open dialogues about how the firm can create its own future and align their members in the purposeful pursuit of it.
Systems Thinking	Systems thinking is a discipline for understanding wholes, a framework for seeing interrelationships and patterns of change which shape our environment, rather than unrelated events.	Systems thinking provides the tool and techniques for creating and communicating scenarios. Dynamic Scenarios is the methodology which integrates systems thinking with scenario planning.

For a more complete description of Dynamic Scenarios, see Learning from the Future: competitive foresight scenarios, edited by Liam Fahey & Robert M. Randall, John Wiley & Sons, Inc., Chapter 8: Dynamic Scenarios: Systems Thinking Meets Scenario Planning, by Anika Savage (formerly Audrey E. Schriefer and Ed Ward.

For information on Causal Loop Models see....

Mind Maps and Causal Models: Using Graphical Representations of Field Research Data

We offer a two day Introduction to Systems Thinking workshop.

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