Systems Thinking in Modern Business

This post from Leyla Acaroglu on the six fundamental concepts of systems thinking does a great job at defining and summarising some of the key ideas that I would argue have become far more important and more broadly applicable in the complex adaptive  environment that businesses of all types now operate in. In the book we talk about how emergent strategies are increasingly needed to navigate effectively through complex scenarios and shifting contexts. So the basic principles of systems thinking have never been more relevant.

I’m writing this up for my own benefit but, as always, it’s worth reading the original.

One of the core concepts of systems thinking is interconnectedness. A system is ‘a set of inter-related components that work together in a particular environment to perform whatever functions are required to achieve the system’s objective’ (Donella Meadows). All elements in a system are therefore reliant on something else (and often a complex array of things) for survival:

‘…when we say “everything is interconnected” from a systems thinking perspective, we are defining a fundamental principle of life. From this, we can shift the way we see the world, from a linear, structured “mechanical worldview” to a dynamic, chaotic, interconnected array of relationships and feedback loops.’

The shift in mindset is therefore from linear to circular, and systems thinking seeks to untangle the relationships between these interconnected things.

If analysis is about breaking complexity down into manageable components and is therefore more reductionist and appropriate for the mechanical, linear view of the world, the goal in systems thinking is synthesis, or how the elements combine to create something new. So this requires an appreciation of not only the individual components, but the relationships and dynamics between those individual components, and how they combine to create the whole: ‘synthesis is the ability to see interconnectedness’.

Emergence is the result of things interacting and coming together to produce something different (I liked this quote from R Buckminster Fuller that Leyla used: ‘There is nothing in a caterpillar that tells you it will be a butterfly’). When elements interact in a system they create constant feedback loops between the components. These feedback loops can either be reinforcing or balancing. A reinforcing feedback loop can happen when elements in a system encourage more of the same thing, which is often not a good thing since ‘an abundance of one element can continually refine itself, which often leads to it taking over’. This reminded me of John Willshire’s ‘pattern problem’, which he expounded at the last Firestarters:

Conversely, balancing feedback loops are self-correcting and produce stability rather than bolstering more of the same (like a predator/prey situation in natural ecosystems). But dramatic changes in the ecosystem can turn balancing feedback loops into reinforcing ones.

In a dynamic constantly evolving system, understanding feedback loops and causality, or how elements influence each other, becomes important. When we map systems, we need to take account of not only the elements, but the connections, relationships and feedback loops between them. We can then develop insights around interventions or strategies that can shape the system in the most effective way.

It strikes me that this way of thinking is far more important now in business. Not least because value generation is less about rigid, linear processes and more about networked relationships. If businesses increasingly operate as part of more complex ecosystems we need to be able to map the component parts, to appreciate the relationship, feedback loops and causality between them, and how we can establish and orchestrate successful networks that work for everyone involved. We need to understand how intervening in one area impacts the dynamics in other areas.

Strategy is a loop, or a circle, not a linear process. Being agile and adaptive is not about replacing one rigid process with another. It’s about being responsive to shifting dynamics in increasingly complex environments.

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Also published on Medium.