CHAPTER IV

OPEN SYSTEMS THEORY

 MEANING
• Open Systems Theory (OST) is a modern
systems-based changed management theory
designed…
• to create healthy, innovative and resilient
organizations and communities in today’s …
• Fast changing and unpredictable
environments.
• Organizations conduct their businesses in the society and
influence and change their external environments;
• The reverse is also happening;
• As long as they influence and are influenced, the
Organizations and communities are said to be open
systems. Change comes over time.

• This two-way influential change is known as active

adaptive change.
• For long term survival, organizations must, not only be
open, but also adapt themselves to the changes in the
external environment.

• If organizations do not open themselves up, they are likely

to vanish/perish.
• The theory of open systems is being utilized by many
successful organizations, including…
• corporate giants such as Microsoft and Hewlett Packard.
• People too are open systems.

• Through their actions they influence and

change their external environment, and at
the same time are constantly being
influenced by changes in the external
• environment.
• This is called socio-ecological change
• The prime driver of this change is:

• the increasing rate of change…

• in people’s values and expectations in the
external environment.
EXAMPLES:
• Social networking technology can influence
consumer decision making.
• When Johnson & Johnson ran TV
advertisements in the US pushing mothers
to take the painkiller ‘Motrin’, an outraged
community immediately got onto Facebook
and Twitter to VENT THEIR SPLEEN.
1. Quickly identify embryonic changes
and opportunities in the external
environment;
2. Actively influence the environment
for a sustainable future; and
3. Are designed to adapt and respond at
lightning speed to make the most of
their opportunities
• Traditional theories regarded
organizations as closed systems that
were autonomous and isolated from
the outside world.
• In the 1960s, however, more holistic
and humanistic ideologies emerged.
Traditional theory had failed to take into
account many environmental influences that
impacted the efficiency of organizations.
Recognizing this, most theorists and
researchers embraced an open-systems view
of organizations.
• Environmental influences can be either
specific or general.
• The specific environment refers to the
network of suppliers, distributors,
government agencies, and competitors with
which a business enterprise interacts.
• The general environment encompasses four
influences that emanate from the
geographic area in which the organization
operates.
• These are:
1. Cultural values, which shape views about ethics
and determine the relative importance of
various issues.
2. Economic conditions, which include
• economic upswings,
• recessions,
• regional unemployment, and
• many other regional factors that
affect a company's ability to grow and prosper.
• 3. Legal/political environment, which effectively
helps to allocate power within a society and to
enforce laws
4. Quality of education, which is an

important factor in high technology and

other industries that require an educated

work force.
 THE OPEN SYSTEMS THEORY
• The open-systems theory also assumes that all
large organizations are comprised of multiple
subsystems,
• Each receives inputs from other subsystems and
turns them into outputs for use by other
subsystems.
• The subsystems are not necessarily represented by
departments in an organization, but might
resemble patterns of activity.
• Legal/political environment, which
effectively helps allocation of power within
a society and to enforce laws.
• The legal and political systems in which an
open system operates can play a key role in
determining the long-term stability and
security of the organization's future.
• These systems are responsible for creating a
fertile environment for the business
community,
• but they are also responsible for ensuring—
via regulations pertaining to operation and
taxation—that the needs of the larger
community are addressed.
• Quality of education, which is an important
factor in high technology and other

industries that require an educated work

force.

• Businesses will be better able to fill such

positions if they operate in geographic

regions that feature a strong education
system.
THANK YOU