With so many business management and leadership styles now available to choose from – and more approaches being developed and promoted all the time – it can be difficult to be certain which techniques are best suited to any one organization.
One method that spans sectors and allows for highly effective operation in today’s densely and widely connected business landscape is that of systems thinking.
What is this philosophy of business management, and how is it applied? Here is a closer look.
What is systems thinking?
Systems thinking can be applied to more than business management. Almost every aspect of our world can be broken down into a series of systems that connect with – and operate within – other systems. This outlook is essential to the school of systems thinking; it is all about relationships and impact.
A business that is managed using this philosophy must pay special attention to the relationships between:
- Individual operatives – including between employers, managers and employees
- Departments and groups of departments
- Equipment, digital tools and systems
- Stakeholders, partners and suppliers
- Other businesses within the sector
- Related sectors
The links and interplay between different variations of these relationships should also be taken into consideration. For example, emphasis should be placed on the importance of the relationships between operatives and their equipment or digital systems, and between heads of departments and their suppliers.
Systems thinking feeds into the wider management technique of organizational leadership. These types of skills are now taught at leading colleges, with reputable programs such as the Ed.D. in Leadership and Organizational Innovation from Marymount University even available online. Students will learn the answers to questions such as, what is organizational leadership?
While traditional management styles tend to focus on a top-down approach with step-by-step methods and clearly set responsibilities, the ever-changing nature of almost every modern business sector now demands a more flexible outlook focused on adaptability and versatility.
Organizational leadership is an approach that is far better suited to today’s constantly morphing landscape, with core skills including strong and clear communication; effective problem-solving and decision-making; employee, stakeholder and consumer motivation; and agile change management.
The six core concepts of systems thinking
While the core philosophy of systems thinking is straightforward, many practitioners have broken it down into a series of rules and concepts to make its associated aims easier to achieve.
Among the most popular are the following six concepts of systems thinking:
- Interconnectedness
- Synthesis
- Emergence
- Feedback loops
- Causality
- Systems mapping
Interconnectedness
This concept focuses on the idea that every part of a system relies on another element to survive and function.
Instead of taking a linear or top-down approach to individual tasks, such as the management of departments, entire businesses or even the wider world, changing one’s perspective to consider the interconnectedness of each aspect of these larger units helps to develop a more complete understanding.
Synthesis
The idea of synthesis is closely related to that of interconnectedness. It refers to the understanding of how all interconnected elements can operate as a whole, as well as individually. It’s a behavior born of an in-depth appreciation of relationships and their contribution to wider functions.
Emergence
Emergence refers to the products of interconnectedness and synthesis. It’s the formation of an idea or object as a result of all moving parts working together. It can be thought of as the outcome of the relationships between various elements of a system.
Feedback loops
This concept involves the knock-on effects of specific relationships and connections on the wider systems of which they form a part.
There are both balancing and reinforcing feedback loops. An ecosystem within nature is a good example of a balancing feedback loop where, if everything is left to operate without outside intervention, all of its elements will balance.
On the other hand, a reinforcing feedback loop may be either positive or negative. The effects of certain actions and relationships on a system may push that system further down a particular route – for better or worse – so it’s important to recognize, analyze and respond to instances of this type in good time. They can then be harnessed or prevented, depending on their potential impact.
Causality
Causality is closely related to the concept of feedback loops. By understanding why a feedback loop or knock-on effect has been created, business managers may learn to replicate it over and over (if it is positive) or prevent it from going too far in the wrong direction or recurring (if it is negative).
This idea is called causality and allows a system to be easily managed, adjusted and adapted as the influence of its elements upon one another is better understood.
Systems mapping
This is less of a theoretical concept and more of a practical toolkit that any systems thinker may employ to bring all of the above elements together when analyzing a system and planning adjustments or improvements.
The ability to create various charts, tables, maps, flow diagrams and other visualizations feeds into this and helps to develop an innate understanding of interconnectedness, synthesis, emergence, feedback loops, causality and systems mapping. This facilitates more sophisticated systems forecasting and management in future.
Other practices
There are a range of other methods that feed into systems thinking and aim to simplify, streamline or break down this vast concept and enable interested parties to put it into practice.
These methods include the “5 Cs” – curiosity, clarity, compassion, choice and courage, and the “three objectives” – analysis, synthesis and decision-making and tools, such as the behavior-over-time graph, the causal loop diagram, the connection circle, the iceberg visual, the ladder of inference, and the stock-flow map.
These have been developed as a result of studies and research by various industry practitioners and business specialists, and you may find that some concepts and approaches are more applicable to your own business methods, systems or philosophies than others. The field is always advancing, so it is worth adopting a policy of regular research into systems thinking to discover new tools.
A real-life example
Baking a cake can be considered a simple real-life example of systems thinking as there are a number of considerations and processes that contribute to the final result.
First, it’s important to plan the creation of the cake. To do this, you must consider why the cake is being made. Is it for a person’s birthday? Anniversary? Graduation? Last day at work? This will influence the design.
The skill level of the baker and the cost or availability of equipment and ingredients may have an impact on the type of cake that will be made. Conversely, you may decide to choose the type of cake first, which will influence your choice of ingredients and baker as well as your budget.
How many people will be eating the cake? This will influence the size of the cake. Are there any allergies or intolerances among those who will be eating the cake? This will affect its ingredients and, by extension, its cost.
Where will the ingredients be purchased, and from where will they be originally sourced? This may affect their cost and even the ecological sustainability and ethics of the cake when air miles and the methods of production are taken into account.
The size and ingredients of the cake will also impact how long the cake will take to make and the approach taken to source its components.
The tools and type of oven you have will affect the length of time it will take to create the cake and the complexity of the overall operation.
Where will the cake be made? Are there suitable tools and resources available there, or will more be needed? Does the cake need to be transported? How long will it need to be stored before it is eaten?
These elements may push you to consider whether a more practical approach would be to buy a pre-made cake from a grocery store. In that case, which grocery store has the best or most appropriate cakes at the right price and with the correct ingredients?
These and so many more questions will affect the decisions you make.
You can see from this example that this system is not linear. Concepts and questions feed back into each other, sometimes multiple times. It is less of a step-by-step method and more of a series of relationships and knock-on effects, all of which have some level of influence on the route that will eventually be taken.
Benefits to the employee
When a linear, heavily top-down approach is scrapped and processes are implemented that harness and respond to the analysis of trackable data, it becomes easier to see the direct result of each individual’s input. This means that employees are more likely to take pride in – and ownership of – their specific duties.
Their input might be invited as their managers seek to apply their specializations in a responsive and effective manner, offering them more autonomy.
If a business owner or manager remains transparent about how elements of their company’s processes and approaches are influenced by certain systems and their results, employees will be able to gain a greater understanding of the bigger picture, which can help them to feel more valued and engaged as a stakeholder.
By its nature, systems thinking involves a greater focus on individual performance. The clear cause-and-effect approach means that outcomes are often easier to influence directly and are therefore more rewarding.
Flexibility and adaptability are the keys to this business philosophy, which means that work days can often involve significant variety, keeping workers more deeply engaged in their duties.
The agility mentioned above is implemented with the aim of higher efficiency, which means a slicker workflow, lower stress levels and a possible reduction in the less-fulfilling aspects of work, such as administrative tasks.
The reduced expenses resulting from greater efficiency may even enable businesses to offer higher wages.
Benefits to the company
One main aim of systems thinking is improving efficiency. This can mean achieving reduced expenditure and higher levels of output in a shorter span of time. When systems are streamlined, less-effective processes can be revised and condensed, achieving better value for money when it comes to work hours and the use of energy and physical or digital equipment.
The owners and managers of a business may also feel less stress, particularly if they achieve a balancing or positive reinforcing feedback loop. This will have a positive effect on morale across the business and may even improve relationships with partners and stakeholders.
The approach is also an excellent way to stay ahead of competitors. If a business is set up to respond swiftly and effectively to changes in systems in the sector locally, regionally and globally, it can be a leader in its industry, building consumer trust and achieving better results.
Systems thinking can even help to improve wider aspects of the business, including sustainability and energy use. These are systems in and of themselves, and understanding their interplay with other processes may help to save even more money and significantly reduce any negative ecological impact the business may have.
Benefits to the consumer
Improved efficiency and higher, swifter output may mean that companies can offer their products and services at a lower price, resulting in savings for consumers.
By taking a responsive, systems-focused approach to business, an organization may gain greater consumer trust by consistently outperforming its rivals. This offers peace of mind to customers.
The quality of products and services may be improved when systems thinking is adopted, which benefits consumers as they will always be on the lookout for the very best when choosing where to spend their money.
Systems thinking and futureproofing
Processes and approaches in the world of business continue to evolve and adapt. New technologies are introduced with astounding speed, making it vital for any company to be as responsive as possible.
In this environment, a systems-based approach is undoubtedly the one that makes the most sense. It builds longevity and robustness into every element of an organization, setting it up for a more secure future.
For this reason, business owners and managers should seriously consider taking an approach of systems thinking when planning for the next quarter, the next financial year, or even further ahead.
