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Systems Thinking

Enabling a Systems Thinking World

Systems Thinking World
LinkedIn Discussion Group
January 2010
Systems Thinking
A way of viewing the world, which
Realizes the realities of a system, which is
An entity that maintains it existence through
the mutual interaction of its parts, and requires
Anasysthesis, an integration of analysis and
synthesis, and demands
Seeing and acting in a manner which
considers the trees, the forest, the
intentioned actions, and their implications
Thoroughly Confused Yet?
Now we shall simplify
A System
A influences B
B influences A
Mutual interaction
If you change A you change B, and if you
change B you change A
This is as simple as it gets!
Do You Need Systems Thinking?
There are multiple perspectives
on just what the situation is,
and how to deal with it
Things seem to oscillate
A previously applied fix seems
to overshoot the goal
A previously applied fix has
created problems elsewhere
Over time there is a tendency to
settle for less
After a fix is applied, in time the
problem returns
The same fix is used repeatedly

There is a tendency to allow an
established standard to slip
Growth slows over time
Partners for growth become
Limitations experienced are
believed to result from
insufficient capacity
There is more than one limit to
Limited resources are shared by
Growth leads to decline

Implications of Systems
Todays problems come from
yesterdays solutions.
The harder you push, the harder
the system pushes back.
Behavior grows better before it
grows worse.
The easy way out usually leads
back in.
The cure can be worse than the
Faster is slower.
Cause and effect are not closely
related in time and space.
Small changes can produce big
resultsbut the areas of highest
leverage are often the least
You can have your cake and eat
it toobut not all at once.
Dividing an elephant in half
does not produce two small
There is no blame.
Implications of Systems (2)
Cause and effect are separate in
time and space. Consequently,
system changes often have
unintended consequences which
are seldom connected to their cause
The structure of a system
determines its behaviour
In a system with no causal
chains (no feedback) the output
is determined (and usually
proportional to) the inputs.
In a system with feedback loops
the output is determined by the
(dynamic) structure.
Most systems have multiple
Changing any of these aims will
change the system.
Optimization of systems cannot
be achieved by maximizing
performance of the parts in
Some components may need to
be subordinated for the benefit
of the whole.
Achieving this will require trust
and cooperation: a willingness to
see the bigger picture

Diagnosis v Analysis
Quote from Russell Ackoff, Re-creating the Corporation
Levels of Awareness
Cause and effect (Simple)
Patterns of behavior responsible for cause
and effect
Underlying structure responsible for the
patterns of behavior
Cause and effect (multiple)
Underlying structures responsible for the
patterns of behaviors

Levels of Awareness (2)
Which system the problem or the
potential solutions
Whats included /excluded (boundaries)
What is the best representation
How do know we have reached the end
(terminal end of our model more modelling
is inconclusive)

Causal Loop Diagrams
An approach to understanding a system,
though only qualitatively
thing 1 adds
to thing 2
thing 1 subtracts
from thing 2
sales adds to revenue
product sales subtracts from finished
goods inventory
resources interact with productivity to add to
finished goods inventory
Reinforcing Loop
Action adds to a result which influences
more of the same action in the future ->
Interest rate and principal
interact to create interest
Interest adds to principal
Principal adds to interest
Balancing Loop
Attempts to bring two things into
agreement. Goal seeking.
Desired state and current state
interact to create a gap
Gap adds to action
Action adds to current state
Current state subtracts from gap
When current state reaches desired
state gap = 0 and theres not more
impetus for action.
Which Loop is Which
Just count the minus - signs around the
An even number and its a reinforcing loop
An odd number and its a balancing loop
The implications of interaction often take
Seldom does anything happen
Systems deceive us because of delays
Emergent Characteristics
Systems exhibit characteristics which are
not characteristics of any of their parts
Balancing Loop exhibits balance or goal
seeking, not a property of any of its parts
Reinforcing Loop exhibits growth, not a
property of any of its parts
Systems Archetypes
Combinations of balancing and reinforcing
Demonstrate very characteristic patterns of
Occur frequently across all disciplines
Stock & Flow Diagrams
Within systems there are things which flow
and things which accumulate
Neither of these things are explicitly
represented in a Causal Loop Diagram
Stock & Flow diagrams enable one to think
in more detail about the interactions of a
Four Stock & Flow Primitives
Stock: represents a quantify of something.
Consider a bathtub containing water
Flow: represents the movement of something into
or out of a stock. With the bathtub stock above,
water can flow in or out
Parameter: represents a value involved in defining
some part of an interaction
Link: conveys information about one primitive to

Stock & Flow Interactions
Stocks increase or decrease only though a
Cloud indicates source or destination isnt
relevant for current consideration
Valid Interactions
from a stock to a parameter,
from a parameter to a parameter,
from a parameter to a flow,
from a flow to a parameter,
from a parameter to a stock in order to
establish its initial value.
Sample Interaction
Orders are a flow into inventory, a stock, causing
it to increase. Sales, a flow, moves finished goods,
a stock, out of the company.
Resources and productivity, parameters, interact
in some manner to define production, a flow, that
moves inventory to finished goods.
A Word of Caution
Causal Loop Diagrams and Stock & Flow
Diagrams are only qualitative
representations of a system
Our ability to infer the implications of
interactions is limited
A quantitative view of a system requires
simulation of the stock and flow model
Limited Ability to Infer
High profile consulting company with 120 employees.
60 are professionals
60 are rookies in training to be professionals.
Clients billed
$15k per month for professionals
$5k per month for rookies
Takes 6 months for a rookie to become a professional
Company wants to remain at 120 employees
10 professionals quit each month
Rookie hired for each professional that quits
Company has $1.2 million in revenue per month
Structure and Steady State
Consider the Following
What will happen if the pro quit rate jumps
from 10 to 12 in month 4
Try to chart the result without looking at the
next slide
Very few are able to infer the implications of
this change correctly
Systems are complex
The Implications
The one time change sets off a 6 month transition in the
system where the number of pros declines from 60 to 48
and the number of Rookies increases from 60 to 72. While
this transition is in progress revenue drops accordingly
from $1.2 M per month to $1.08 M/month
Its Just a Model
Models are simplifications of reality intended
to promote understanding
Whether it is a good model or not depends
on the extent to which it promotes

*** REMEMBER ***
All models are false
Some models are useful
Levels of Understanding
Systemic Ignorance where most of the world operates most of the
time, yet the unrealized systems are having their affect all the time.
Causal Loops while only qualitative, investigating a situation with
causal loops provides one with a somewhat better chance of a sound
decision than Systemic Ignorance.
Stock & Flow while still only qualitative investigating a situation
with a stock & flow diagram forces one to be more explicit regarding
what flows and what accumulates and it is often found to be quite an
improvement over simply employing Causal Loops.
Modeling & Simulation simulating stock & flow diagrams with
calibration, sensitivity testing, and related steps provides a quantitative
awareness which enables the soundest perspective from which to
make decisions.

Systems Thinking is Easy
Systems Thinking is essentialy the science
of AND.
For every change, which may be an action
or a result simply ask
What will this change influence, and
What will influence this change
And after you answer the question ask it
again and again and again

Systems Exist
Systems exist and operate all the time
There is no escape
You can choose to understand them
Or by default chosen to be the victim of
Do you have a preference?
Is it a difficult choice?

Why Become A Systems
Systems Thinking has the potential to
provide you with a greater
understanding of the world around you
and more control over your life than any
other subject you could possibly study!
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