Systems thinking in business

What is systems thinking?

Systems thinking is a perspective to make sense of the world. It asserts that the world is made up of systems — sets of things that work together, entities in an interconnecting network. Systems are overlapping, nested, interconnected and dynamic.

It is not limited to computing or technology (although these fields do use systems thinking extensively by their nature). Systems and their composite entities can be ecological, social, financial, and more.

A systems thinking perspective focusses on the relationships between these entities and the dynamics that shape this relationship, and how they interact together to create certain effects.

Systems thinking is not a new concept, first articulated by Jay Wright Forrester in the 1950s. Since then, it has increased in sophistication and has been applied across a variety of sectors, from economic, environmental healthcare to military applications. It is thinking about how everything fits together, and the implications this brings to shaping the future.

In 1990, Peter Senge was a lead proponent to bring systems thinking to mainstream business language with his bestselling book The Fifth Discipline. In this book, Senge proposed that a “learning organisation” — one that could continually improve itself — was dependent on a systems thinking mindset.

How is it different?

It is distinct from traditional business approaches to problem solving in commercial contexts. Broadly, these mimic organisational structures: A strategic and tactical approach is set at the top of the organisation, divided into parts, and further separated out for delivery or solving at a team or individual level.

In this paradigm, success is often judged quantitatively — is it as cheap, fast, or efficient as it could possibly be? — and individuals often lose track of how their own part fits within the larger whole.

Systems thinking keeps the focus on the higher-order overall goals, and requires that each component is viewed in context of its relationships and dependencies. In other words, a part is never looked at in isolation.

This enables a different — and better — conversation about effectiveness and overall outcomes.

Consider a car: Endless optimisation of individual parts — the fastest engine, most responsive brakes, lightest frame — may sound good on paper, however, the end result may not be suitable for any actual market, nor real user needs. Worse still, the car may not even be functional, or able to be manufactured at a reasonable cost.

How is it relevant to business?

Systems thinking can be applied to help understand a business, the environment it exists within, and its component parts (functions, teams, products).

A systemic perspective will encourage you to explore the relationships between entities, and the dynamics that define these relationships. When applied across scales, it highlights environmental factors that dominate a business, and the areas that a business has discretion and control over.

Services and products can also be defined as systems, as well as entire business functions. The overarching focus, however, is unchanged: Understanding entities, relationships, and their dynamics.

What benefits does it bring?

The right problems are solved

Systems thinking can improve your ability to think holistically about what’s happening, which helps you seek structural (not event-level) solutions to your toughest challenges. It helps you define and solve the right problems.

Assumptions are uncovered

Assumptions enable progress. They are a potent tool, and when not explicited a severe hazard. Systems thinking helps to find and articulate assumptions and whether they are enablers or risks to strategies. It creates space to experiment and test in a meaningful way to enable your business.

Unintended consequences are identified

Mapping relationships and dependencies helps to understand the implications of actions — intended and otherwise. Systems thinking catches unplanned and secondary consequences before they occur so they can be managed.

The system learns

Continuous engagement with connections and relationships forces questions to be asked: ‘What is really going on here?’. ‘How do these parts fit together?’, ‘What really matters?’. Business systems are constantly changing, and constant questioning to connect mental representations of the business with reality is critical.

Disparate perspectives are connected

Business systems are made of people with different points of view. Systems thinking brings them into each representation, process and decision to determine the highest impact actions and opportunities. For every business, the ability to contemplate strategy, service offerings and staff experience is critical to creating good outcomes.

Pragmatism is fostered

A holistic perspective enables better-informed decision making and resource allocation over time through continuous conversation about goals and functions across a system.

Significant subtleties are uncovered

Systems thinking sensitises individuals to the crucial role that structured, deliberate conversations play in the business. Systems thinking helps to identify key individuals and dynamics that are embedded deep within assumptions and norms so they can be taken advantage of.

Systems thinking creates competitive advantage

By knowing both the form of the current business and its operating context, leaders can identify the distinctions in relationships and dynamics that make a difference and act to capitalise upon it.

What can I do with it?

Systems thinking focusses continually on the holistic outcome of a system — a business. Rather than seeing only (important!) minutia, a broader field of view and focus on objectives can be maintained.

This enables a system participant or steward to pay attention to change and context and ensure the whole will endure and thrive.

Snowmelt is available to help you think about your business and its objectives systemically.