Systems Thinking is what we call a paradigm, a paradigm is a mental program that has almost exclusive control over our behaviour. So, we can understand that a paradigm is the foundation that shapes our way of seeing the world. There are fundamentally 2 paradigms, the negative and the positive. In the negative, you have pessimists who see themselves as victims and who play the blame game and in the positive you have optimists who take responsibility and who make things happen. When confronted with a problem, the pessimist adopts the attitude “Why me?” and “I can’t”, switching off. In the same situation, the optimist adopts the attitude “Why not me?” and responds “How can I”. This ensures they are switched on, and are positively engaged in solutions. Systems thinking sits firmly in the latter paradigm.
When approaching a problem, there are two fundamentally different paradigms within science. One is called analysis, and the other synthesis. Analysis is the traditional method of reasoning taken within modern science, where we try to gain an understanding of the system by breaking it down into its constituent elements. On the other hand, synthesis, which is the foundation to systems thinking works in the reverse direction, trying to gain an understanding of an entity, through the context of its relations, within a whole that is part of.
Analysis is based upon the premise that our basic unit of interest is in the individual parts of a system, a process of reasoning called reductionism. Reductionism is the process of reducing systems to their constituent parts and then describing the whole system primarily as simply the sum of the individual parts. In this approach we use a three-step process for analysing things.
- Firstly, we take something, and we break it down into its constituent elements. It is intuitive to us when we wish to understand how a car, or a project or a business works. We isolate it and reduce it to its component parts.
- Secondly, we analyse these individual components in isolation, in order to describe their properties and their functioning in isolation.
- Thirdly, we recombine these components into the original system that can now be described in terms of the properties of its individual elements.
The reductionist approach is the fundamental method behind modern science, and by extension, our modern understanding of the world, and it has proven highly successful in many ways from understanding atoms and DNA to designing the modern Corporation. As successful as it has been, it also has inherent limitations to it. We understand systems by breaking the parts down and isolating them. The reductionist paradigm systematically and inherently demotes the relationships between these components, thus within this paradigm of reductionism, the whole system is implicitly thought to be nothing more than the sum of its parts. Analysis works well when there’s a low level of interconnectivity and interdependencies within the system we’re modelling.
This may be true for some systems, but it’s certainly not always the case. Many of the systems we are interested in have a high level of interconnectivity and interdependency. examples being ecosystems, computer networks, modern business and many types of social systems. These systems are primarily defined by the relations within the system and not the static properties of their elements, we can and often do continue to use analysis to try to describe them, but the reductionist approach is not designed for this. We end up making wrong decisions, and trying to add value in areas that don’t support the system. We need to change our basic paradigm to one that is more focused upon these relations, as opposed to the components, and this is where synthesis and systems thinking is a powerful approach.
Synthesis is a process of reasoning that describes an entity through the context of its relations and how it functions within the whole system that it is a part of. Systems thinking is the process of reasoning called synthesis, and is also called holistic, meaning that it is characterized by the belief that the parts of something are intimately interconnected and explicable only by reference to the whole. It focuses on the relationships between the elements, the way those elements are put together, or arranged into a functioning entirety. There are also key steps in this process of reasoning.
- The first step in the process is to identify the system that our object of interest is a part of examples of this might be a person being part of a greater culture, or a department as part of a larger organization.
- Now we try to gain a broad outline of how this whole system functions. E.g. production is part of the organization, and to fully understand it, we need to understand the whole business.
- Lastly, we try to understand how all the departments are interconnected and arrange them to function as an entity. By completing this process, we can now identify the relationships within which production is embedded, its place, and function within the whole. This becomes the primary frame of reference for describing systems.
The functioning of the system becomes greater than the sum of its component parts and produces something the parts individually can’t. It is called emergence.
In business we still take the traditional analytical approach, breaking it down to its component parts and then analysing them independently of each other. Take budgeting. The annual budget templates are sent to individual departments by finance. Each department sets up their budget for the following financial year in isolation to every one else. Individual and team improvement projects for the year are identified and presented as part of the budget. We establish Key Performance Indicators (KPIs) for individual and team measurements for day to day operations and projects. The broader KPIs may be part of the budget pack, but they are interpreted by the department in isolation of the rest of the business. During budget presentations no one questions the interpretations of the KPIs, or the context of the department strategy and action plan. In some organizations, these are even presented to the Executive in isolation.
This is why businesses operate in Silos, with the barest of communication between them. Performance is inconsistent, and the businesses constantly miss targets and fight fires continually. It is also why most projects fail to deliver the promised results.
Each level of the business consolidates the sum of the component parts, eventually this becomes the business presentation to shareholders, creating expectations that can never be met. The result is that every few years, there is a turnover of managers and executives as they either become overwhelmed or are removed from their positions for performance reasons.
If we approach organizations with a systems thinking mentality, we’ll see them as very different entities. The first step is to look at the organizations strategy to ensure that the action plan and metrics support this. Smart measures guide the business and individual departments within the business in the same direction, to ensure that organizational strategy and the objectives of the action plan derived from it are achieved. The systems thinking approach ensures that your business is operated sustainably, and that continuous improvement projects are implemented at the bottlenecks (constraints) so that improvements have a positive impact on business performance and profitability. Key Steps are as follows:
- Create cross functional teams to work together through steps 2 – 6 below
- Map the value chain, review processes and identify the constraint
- Elevate the constraint and focus attention to ensure optimal effectiveness
- Change measures (KPIs) to optimise flow through the value chain
- Change or improve systems over time to improve flow – One change at a time so you can measure the impact of the change
- Create a learning organization where continuous improvement and growth is central to the culture across the value chain.
To survive and be sustainable in a complex adaptive system that is the supply chain in the 21st century, we need to adjust our thinking the be flexible, adaptable and agile. Consumer demand patterns are changing so fast, that if we can’t adapt, we will become extinct like KODAK and NOKIA at the advent of digital photography and smart phone technology respectively. If we learn one thing from COVID-19, it must be that changes in any form can happen at any time. We don’t want to be complacent and caught resting on our laurels in our comfort zone.