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MBA - Master of Business Administration V2

ST4S39-V1

Strategic Systems Thinking

Chrystalla Markou

Ola Ouso

Student number: R1710D3725770

Submission date: 19 August -18

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1. Introduction:

The success of any organization is basically influenced by the strategic management decisions, hence big concentrate should be given to the strategic management level if they have strategic system thinking or not, this essay is a theoretical paper aims to critically appraise the following statement:

Systems thinking essentially seeks to understand phenomena as a whole formed by the interaction of parts.” (Stacey, 2011)

by reviewing the literature of the following concepts: strategy, strategic thinking, system thinking, complexity perspective, and complex adaptive systems.

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2. Approaches to Strategic Thinking:

  • 2.1. Strategy definition, schools, and making:

Strategy term in the business economics used first time at American universities particularly at Harvard Business School (Kazmaier.C, 2016, P2). Then Alfred D. Chandler. Jr, author of Strategy and Structure (1962) defined strategy as “the determination of the basic long-term goals and objectives of an enterprise, and the

adoption of courses of action and the allocation of resources for carrying out these goals.”

as sited in (Nicholas. F, 2011, p2). Mintzberg 1987 in his article “Crafting a Strategy” at Harvard Business Review explained how to craft a strategy step by step starting from knowing the organization capabilities then focus on the market opportunities and organization stability.

Kenichi Ohmae, in his article titled ‘‘Getting Back to Strategy’’ (1988), states that strategy

means ‘‘working hard to understand a customer’s inherent needs and then rethinking what a category of product is all about.’’ as sited in (Anthony W. Ulwick,1999, p3). Ansoff & McDonnell 1990 emphasized that each organization should have four levels of rules guided: (objective and targets, product strategy and marketing, organizational

concepts, operational policies) as sited in (Mainardes. E. W et al, 2014, p47)

Michael Porter in his rule released another definition for strategy in his article 1996, “strategy is the creation of a unique and valued position, involving a different set of activities.”

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While (Anthony W. Ulwick,1999, p4) defined the strategy “A strategy is simply a plan, a plan that describes what an organization proposes to do to achieve a stated mission”. Richard Whittington in his article “big strategy/small strategy” highlighted that powerful

firms rally efforts on big strategy to assure the effects reverberate throughout society. (Richard Whittington, 2012, p263).

Henry Mintzberg and James A. Waters (1985, p270) summarized the types of strategy into 8 types: planned, Entrepreneurial, Ideological, Umbrella, Process, Unconnected, Consensus, Imposed.

Then Henry Mintzberg and Joseph Lampal in 1999 released an article named “Reflecting on The Strategy Process” described in this article the ten schools of strategy formation, which they are: Design school, planning school, positioning school, entrepreneurial school, cognitive school, learning school, power school, cultural school, environmental school, configuration school.

Neil Reston in his book Strategic Management” (2011, p24) divided strategic management schools to three:

Planning school: based on Ansoff matrix to place a product in defined market.

Positional school: based on Boston Consulting Group matrix that aim to place the

organization and its product in a favorable market or environment. Resource based school: placed by Robert Grant and concentrate on the internal environment.

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From my understanding organization strategy is a long term plan to obtain a stated goal, this plan is placed by the senior managers that have strategic thinking to generate a main plan using many tools to analyze the external and internal environment.

So, the organization strategy is different between organizations in terms of adaptability and flexibility based on the organization type and size, hence strategic writer should have a high level of strategic thinking, ability to analysis different contexts, and planning for different levels.

  • 2.2. Strategic thinking:

The objective is indeed to think and manage strategically, not to engage in strategic planning for the sake of strategic planning (Nickols. F, 2008, p6), It is clear that a great deal of strategic thinking must be put in the development of a strategic plan, and once developed, a great deal of strategic management is required to achieve its objectives.

What is strategic thinking?

Mintzberg describes strategic thinking as a distinct way of thinking that utilizes intuition

and creativity with the outcome being “an integrated perspective of the enterprise.”

Goldman et al. apply Mintzberg definition to a business context, suggesting that effective strategic thinking leads to competitive advantage as sited in (Haycock. K, et al, 2012, p3). The U.S. Internal Revenue Service, 2001 offers another definition of Strategic Thinking as a leadership competency which offers another clearly different comparison to strategic planning. As sited in (Matthew R. Fairholm, 2009, p18).

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Tim O'Shannassy, (1999, p15) defined the Strategic thinking as a flexible means of solving strategic problems and conceptualizing the future of the firm within the strategic management framework combining a range of individual and group mental activities.

Strategic thinking occurs in a dynamic landscape and by its nature adopts a perspective on the future and future possibilities (McMillan. E et al, 2006, p3). Strategic thinking characteristics are analytical and creative (Gallimore. K, 2015, p2).

Thus, strategic thinking: formulates effective strategies that take into account the external influences on an organization from a national and global perspective, and take into confederation the internal facts by examines policy issues and strategic planning with a long-term perspective leading to a compelling organizational vision, determines objectives, sets priorities and builds upon strengths

Strategic thinking elements:

Feyzollah. Z. E et al (2015, p 148) talked about Gean Liedtka model that summaries the

elements of strategic thinking based on Henry Mintzberg theories, this model showed the five ideals of strategic thinking as illustrated in the below chart.

Ideals of strategic thinking Focus of resources and processes on goals An integrated view of business
Ideals of strategic thinking
Focus of resources and
processes on goals
An integrated view of business
system
Time continuity (analyzing the
past, present and future)
Intellectual opportunism (from
everywhere and all times)

Leading with hypothesis (converting ideas to the hypothesis then execute)

Feyzollah. Z. E et al (2015, p 148) The main elements of strategic thinking (Gean Liedtka)

Strategical thinking Model:

Hashim MK, (2016, p5) provided us with strategic thinking approach model illustrated in the below chart.

Understanding present situation and desired future

Strategical thinking Model: Hashim MK, (2016, p5) provided us with strategic thinking approach model illustrated in

Diagnosing the business domain

Obtaining insight

Obtaining insight

Obtaining insight

Developing foresight

Strategical thinking Model: Hashim MK, (2016, p5) provided us with strategic thinking approach model illustrated in

Mapping the future direction

Strategical thinking Model: Hashim MK, (2016, p5) provided us with strategic thinking approach model illustrated in
Maintaining focus
Maintaining focus

Hashim MK, (2016, p5), strategic thinking approach model

  • - The first step understanding present situation and desired future: it helps the organization to be future-oriented by understanding the present real situation then draw the desired future.

  • - The second step is to diagnosing the business domain: includes observing and understanding the firm’s business, its different internal components (such as its resources, skills, knowledge, technology, structure, operations, and culture), and the relationships with the stakeholders in the external environment.

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  • - The third step is to obtaining insight: obtaining insight involves in thinking critically about the threats and opportunities. Also, to identify creatively the needs, the key success factors of existing and new customers, markets, products and services, technologies, capabilities, resources, business models, and other future requirements, and potential competitive advantage.

  • - The forth step is to developing foresight: include forecasting the organization future, in the strategic thinking process, foresight is developed through the construction of scenarios. Scenarios represent written descriptions of some likely future postures, in terms of key variables and strategic issues.

  • - The fifth step is mapping the future direction: the organization needs to clearly identified its future direction to be able to survive and grow in the long run, mapping the organization ’s future direction involves applying critically and creatively the inputs obtained from the previous four components of the strategic thinking components.

  • - The sixth step maintaining focus on the organization’s chosen direction.

Maree Conway, (2009, p2) emphasized that writing plans that are based on robust strategic thinking requires a re-conceptualization of the traditional planning model to see it as a process consisting of three stages: strategic thinking, strategic decision making, and strategic planning, as shown in the following figure.

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Strategic Thinking Generating Options What might happen?

Strategic Decision Making Making choices What will we do?

Strategic Thinking Generating Options What might happen? Strategic Decision Making Making choices What will we do?
Options
Options
Strategic Thinking Generating Options What might happen? Strategic Decision Making Making choices What will we do?
  • Decisions

Strategic Thinking Generating Options What might happen? Strategic Decision Making Making choices What will we do?
  • Actions

Strategic Thinking Generating Options What might happen? Strategic Decision Making Making choices What will we do?
Strategic Thinking Generating Options What might happen? Strategic Decision Making Making choices What will we do?

Strategic Planning Taking Action How will we do it?

Maree Conway, (2009, p2), Three Level Strategy Development

Richard Whittington et al, (2007. P5) clarified the tendency to regard strategies as being decided upon through relatively formal structures and systems, with less attention given to the messiness of interpersonal relations and political processes. This clarify the importance of system and system thinking in strategies building.

  • 3. System Thinking:

The need for systems thinking (ST) in organizations is being increasingly felt, and sustained effort towards nurturing ST in organizations is still rare (Vemuri. E et al, 2017, p 2). Von Bertalaffy (1956) defines a system as a complex of interacting elements” as mentioned in (Cristina Mele et al, 2010, p127)

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Michael C. Jackson in his book (2008, p3) defined the system as “system is a complex whole the functioning of which depends on its parts and the interactions between those parts.” Meadows 2008 said that systems thinking consists of three kinds of things: elements (in this case, characteristics), interconnections (the way these characteristics relate to and/or feed back into each other), and a function or purpose. (Ross D. Arnold ey al , 2015,

p670).

Katz and Kahn (1966) apply the concept of open system to the organization. The

organization is seen as a system built by energetic input-output where the energy coming from the output reactivates the system. As sited in (Cristina Mele et al, 2010, p128).

Lauren Johnson and Anderson 1997 in their book “System Thinking Basics” sited the

principles of system thinking into five principles:

  • 1. Thinking of the big picture.

  • 2. Balancing short-term and long term perspectives.

  • 3. Recognizing the dynamic, complex, interdependent nature of system.

  • 4. Taking into account both measurable and unmeasurable factors.

  • 5. Remember that we are all part of the system and we each influence those systems and influenced by them.

Vemuri. E et al, 2017 provided us with the Spirit, Mind, Body Model (SMB) for the adoption of Systems Thinking (ST) in organizations, and explained the model frame work as elaborated in the below figure:

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Systems of Spirit

Systems of Mind

Systems of the Body

Vision

Surface structures:

Tools for ST

Mission Values Strategy Governance Communication Feedback systems

Training Deep structures Training and coaching up Recognition and reward systems Change management systems Mental models Feedback systems

Training material for ST Company Wide intranet Knowledge management systems FAQs

Vemuri. E et al, 2017, p4, SMB framework for the adoption of systems thinking in organizations

Networked systems can be described based on three parameters: variety, variability, and indeterminacy. Starting from these distinctions, it is possible to address the relative concept of complexity, which can be very useful in interpreting. (Cristina Mele et al, 2010,

p131).

Amanda J. Gregory in his paper “A System Approach to Strategic Managementmentioned and explained the Systems methodologies that service of strategic management, those methodologies are: Viable System Diagnosis, Strategic Assumption Surfacing and Testing, Soft Systems Methodology, and Critical Systems Heuristics. Ultimately, what systems thinking cultivates is a holistic, nonlinear approach to problems and opportunities; mindfulness in all that we do; a collaborative mindset with others; and

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reflection in action on the dynamically changing world through which we move. (Cathy Boeckmann and Thomas Heise, 2013, p28). Systems Tools help us do systems thinking by helping us generate and organize information about our system our situation of interest, System thinking tools as mentioned in Burge Hughes Walsh Limited website are : 18 Words, Affinity Diagram, Conceptual Model, Context Diagram, Decision Matrix, Functional Failure Mode and Effects Analysis, Function Means Analysis, Functional Modelling, Graphical Analysis, Influence Diagram, Input-Output Diagram, Matrix Diagram, Morphological Box, Multiple Cause Diagram, N2 Analysis, Quad of Aims, Rich Picture, Root Definition, Sequence Diagram, Spray Diagram, Systems Map, Tree Diagram.

we can say that Systems Thinking enables a framework that can produce sustainable success. Below are the seven benefits of Systems Thinking for successful organizational change.

1. A framework and way of thinking to make sense of out an organization's complexities, since all things are systems.

  • 2. A way to learn new things more easily. Its basic rules are simple and consistent they

stay the same from system to system and organization to organization.

  • 3. A better way to integrate new ideas within the systems context.

  • 4. A clearer way to see and understand what is going on in any organization and its

environment. Complex problems become easier to understand, as do the interrelationships or parts and multiple cause and effect cycles.

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5.

A new and better way to create strategies, to problem solve, and to make superior

decisions while finding leverage points for change, keeping the outcomes (positioning)

and goals in the mind at all times.

  • 6. A better way to stay focused on outcomes is by using the key the systems

approach question "What are the desired outcomes?" This question should be used to begin the discussion about any issue, change, and complex problem an organization

has.

  • 7. Thinking from a system approach provides a better language and a more complete and

holistic way of thinking. Its principles are a camera's wide-angle lens. It gives us a better

view on our "radar scope" a more effective way of thinking, communicating, acting, and achieving superior results.

Systems Thinking offers organizations many advantages to address complex problems in an inclusive, lasting way (CPS HR Consulting)

  • 4. Complexity Perspective:

John Mingers and Leroy White 2009 in their article about the recent contribution of systems thinking to operational research and management science distinguished between three broad areas to taken up Complexity within management theory:

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  • - An organization’s environment is complex, characterized as a ‘‘fitness landscape” with non-linear interactions such as locking, increasing returns, punctuated equilibria and complex webs of interacting agents.

  • - Organizational strategy must change since the future is essentially unpredictable; markets do not attain equilibrium; and there may be sudden dramatic changes.

  • - Within organizations there should be flat loose structures; networks of interacting, autonomous agents; periods of chaos should be expected; and patterns of Behaviour may be ‘‘attractors”.

The complex, embedded and dynamic nature of modern organizations requires a systemic approach to strategic management Ronald J. Salazar et al, 2009 distinguished between system theories and Complex Adaptive Theories in the following table:

Systems Theories

 

Complex Adaptive Theories

Based in mathematics

 

Includes psychology and sociology schools

Processes are Markovian and predictable

 

Processes are random and unpredictable

Cause-and-effect are known

 

Cause-and-effect linkages do not exist

Organizations seek equilibrium

 

Individuals experience far-from-equilibrium conditions of conflict and ambiguity

Long-term

goals

are

either

purposeful

or

Long-term goals emerge out of both spontaneously or

emerge

via competitive selection

Behavior driven by negative feedback

 

Positive feedback influences behavior too

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5. Conclusion:

At the end of this essay, I would like to concentrate again on the start statement, Systems thinking essentially seeks to understand phenomena as a whole formed by the interaction of parts.” (Stacey, 2011).

If we don’t understand the Organization as an interaction of parts and use the Strategic

System Thinking to obtain its goals, it will disappear after a while.

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References:

Arnold, R. D. Wade J. P. (2015) A Definition of Systems Thinking: A Systems Approach, Science Direct Procedia Computer Science, 44, PP 669 678.

Amanda J. Gregory. (2007) ‘A System Approach to Strategic Management’, Business School, University of Hull, United Kingdom.

BOECKMANNM C. HEISE TH. (2013) ‘Systems, Sense Making, and Organizational Change’, Kenning Associates LLP.

Conway, M. (2009) Strategic Thinking: what it is and how to do it, E- article available on

Emran, F. Z. Emamgholizadeh, S. (2015) Strategic Thinking and Its Approaches’, Journal of Applied Environmental and Biological Sciences, 5(11S), PP 145-150.

Fairholm, M. R. Card, M. (2009) Perspectives of strategic thinking: From controlling chaos to embracing it’, Journal of Management & Organization, 15, pp 1730.

Gallimore, K. (2015) ‘Developing a tentative framework for strategic thinking’, Manchester Metropolitan University.

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Hashim, M. (2016) ‘Approaches to Formulating Business Strategy: A Review’, Arabian Journal of Business and Management Review, V7(1), pp. 1-7.

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L.

and

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V.

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Thinking

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Mingers, J. White, L. (2010) ‘A review of the recent contribution of systems thinking to operational research and management science’, European Journal of Operational Research, 207, pp 11471161.

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