Simplifying Complexity: A Systems Thinking Approach to Business

Image courtesy: Minimalist Mechanics — Simon Ngubeni

Imagine a finely crafted timepiece, a watch made of intricate components, gears, and parts. Although seemingly insignificant in isolation, these elements harmoniously come together to create something valuable.

Similarly, consider a jigsaw puzzle, composed of numerous small pieces. When viewed in isolation, each piece might appear puzzling and unclear. When seen within the larger image, however, these pieces all interlink to form a cohesive whole.

These analogies, however simplistic, capture the essence of systems thinking — an approach that examines the world’s complexity by understanding how various parts work together to form a whole, rather than seeing isolated fragments.

A systems thinking approach is also useful in simplifying the complex workings of business, allowing us to view a business as a system.

Approaching this requires analyzing systems from three dimensions.

1. Big Picture: This looks at what the system is in its essence, as a big picture. It also involves understanding a system’s intended function and its reason for existence.
2. Parts: This considers the various components and parts that make up the whole — the puzzle pieces that form the big picture and the various gears & cogs that make up the whole.
3. Processes and Patterns: This involves a consideration of how each of the parts work and, more importantly, how these parts work together. Here, the focus is on the relationships between parts and how these all harmonize to form the whole and create the big picture.

From this perspective, we can consider how this applies to a business when considered as a system. Whether we consider the businesses we work in, buy from, or own, each can be simplified as a system and understood at the level of:

1. Big Picture (i.e., What it is and What is its purpose).
2. Parts (i.e., What are the components that form the whole).
3. Processes & Patterns (i.e., How the parts work and, more importantly, how they work together).

Big Picture (Purpose):

As a system, every business can be stripped down to a fundamental purpose, or big picture. Josh Kaufman summarizes this well in his definition of a business in “The Personal MBA”.

Put simply, every business functions as a repeatable process of creating something of value (i.e., something that others want/need) at a price that they’re willing to pay, in a way that satisfies the customers’ expectations/needs, and doing all this profitably so that running the business is worthwhile.

This big picture definition holds true across varying scales and sizes, whether it be the modest roadside vendor or multinational corporations. At the heart of every business that we interact with, the same essential purpose exists.

Parts (Components):

This big picture can be broken up into certain core elements that combine to form the whole. Theses are:

1. Value Creation — the processes involved in making something that others want or need and are willing to pay money for.
2. Marketing — a combination of things done to draw people’s attention and to create a demand for the value created.
3. Sales — The processes involved in turning interested potential customers into paying customers.
4. Value Delivery — The processes involved in giving customers what you’ve promised (or more than that), in a way that leaves them satisfied.
5. Finance — The things involved in ensuring that all the above is done profitably, where the cost of running the business is less than the earnings received; thus making the business worthwhile.

If one looks carefully, one will see that these parts exist in any well-functioning business. If any one of these components is eliminated, however, no business can successfully fulfill its “big picture”.

Processes & Patterns (Functions and Relationships):

Beyond merely identifying the parts that make up the big picture of a business, as a system, it is critical to also consider the relationship between the components, how the parts all work in relation to each other. This level of thinking (i.e., in terms of relationships) is fundamental because it is here where a distinction can be made between mediocre and well-performing systems (and businesses).

Two different businesses can share the same fundamental big picture, and can both be made up of a similar set of fundamental parts. However, it is how these parts perform and relate to each other that can distinguish between average and great

Recap: Applying Systems Thinking to Business

Adopting a systems thinking perspective offers practical advantages for both business and work. When considering one’s business as a system, practical questions arise that help unravel its intricacies, such as:

1. What is the overarching purpose, the big picture, for which my venture exists?
2. What are the fundamental components that collectively form the whole? (Especially in terms of the aspects discussed earlier — Value Creation, Marketing, Sales, Value Delivery, and Finance.)
3. How can these components collaborate to generate or enhance value? How can these interrelationships be refined for better outcomes?

Consider applying a systems approach to your work & business to add value and simplify complexity.