Applied Systems Thinking Mark A. Wilson Strategy Bridge International, Inc. mwilson@StrategyBridge.com

Applied Systems Thinking: The Organization as a System

What is a system? a combination of interacting elements organized to achieve one or more stated purposes “an integrated set of elements, subsystems, or assemblies that accomplish a defined objective. These elements include products (hardware, software, firmware), processes, people, information, techniques, facilities, services, and other support elements.” SE Handbook v.3.2.2, Copyright © 2011 International Council on Systems Engineering A system is a set of things, connected in such a way that they produce their own pattern of behavior over time. Donella Meadows

What is systems engineering? Systems Engineering (SE) is an interdisciplinary approach and means to enable the realization of successful systems. It focuses on defining customer needs and required functionality early in the development cycle, documenting requirements, and then proceeding with design synthesis and system validation while considering the complete problem: operations, cost and schedule, performance, training and support, test, manufacturing, and disposal. SE considers both the business and the technical needs of all customers with the goal of providing a quality product that meets the user needs. SE Handbook v.3.2.2, Copyright © 2011 International Council on Systems Engineering Is our definition broad enough to include the “engineering” of organizations?

Systems Thinking (INCOSE) Systems thinking is a unique perspective on reality—a perspective that sharpens our awareness of wholes and how the parts within those wholes interrelate. A systems thinker knows how systems fit into the larger context of day‐to‐day life, how they behave, and how to manage them. Systems thinking recognizes circular causation, where a variable is both the cause and the effect of another and recognizes the primacy of interrelationships and non‐linear and organic thinking—a way of thinking where the primacy of the whole is acknowledged. SE Handbook v.3.2.2, Copyright © 2011 International Council on Systems Engineering

Systems Thinking Systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static “snapshots.” … And systems thinking is a sensibility — for the subtle interconnectedness that gives living systems their unique character. Peter Senge There is no software in existence today that actually “does” architecting

Contrast with Analytic Thinking Separate the “whole” into its component elements Address the components separately Integrate your understanding of the components back into the “whole” Whirlpool Galaxy by Hubble http://photojournal.jpl.nasa.gov/catalog/PIA04230 How often do we practice “analytic” thinking? How much “systems” thinking are we practicing?

Problem-Solving Approaches Systems Engineering I understand the problem and I know a solution that will address it. My goal is to engineer that solution and control how we go about doing so (focus is on “how”). Systems Engineering is systematic: relating to or consisting of a system; presented or formulated as a coherent body of ideas or principles; methodical in procedure or plan; marked by thoroughness and regularity (Reference: Merriam-Webster On Line, m-w.com) Systems Thinking I can’t yet define what the problem is. I want to explore the possibilities. I’m willing to be open and adapt my approaches. Systems Thinking is systemic: of, relating to, or common to a system (Reference: Merriam-Webster On Line, m-w.com) - Classic SE is very “goal” driven…assumes a “control” paradigm…prescient design. Whether anyone wants to admit it or not, Deep Water asked the contractors to solve an unbounded problem = SSM; can say the same thing about Intelligence Community, TSA, etc. SSM demands that you be willing to make feasible changes: avoids problem of “malicious compliance”

When Systems Thinking Is Absent Law of Unintended Consequences: Actions always have effects that are unanticipated or unintended. Examples: Credit Card Accountability Responsibility and Disclosure Act of 2009 made it harder for many people to obtain a credit card Patient Protection and Affordable Care Act of 2010 limited many part time employees to working < 30 hours/week U.S. government quotas on imported steel protected U.S. steel companies and steelworkers, but caused U.S. automakers to pay more for steel than their foreign competitors.

Thinking about System-Level Behavior: Emergence Macro-level behaviors (patterns) that cannot be predicted from studying the micro level behaviors in isolation. Systemic behavior that is only observable as a consequence of system element interactions. All systems display emergent characteristics. Emergent behavior is often non-linear. The output is not necessarily proportional to the inputs. Emergent properties can be anticipated by creating patterns that have previously produced similar results.

Characteristics of Emergence System-level properties exist only at the system level as the system functions. Properties are not observable at the constituent element or subsystem levels. They cannot be understood, explained, or inferred from the structure or behavior of constituent elements or their local properties. Cause and effect relationships can only be established through retrospection. Reductionist analytic techniques are incapable of useful predictions of emergent, system-level behavior. Implication: traditional systems engineering may not be sufficient for addressing SoS challenges.

Examples of Emergence Biological Systems Examples Consciousness is an emergent property of the human brain. Crickets tend to synchronize their mating calls - calling all at once at the same speed. Engineered System Example Geosynchronicity is an emergent property of a particular satellite orbit at a precise altitude and inclination. Social System Example Our way of life in the United States of America is an emergent property of the cultures of people who settled here, the U.S. Constitution, and legal and political governance mechanisms The U.S. Constitution was ratified in 1789

Organizational Culture is an Emergent Property Attitudes Behavior Culture influences attitudes that drive behaviors; attitudes and behaviors then shape the culture Areas of influence: Risk philosophy; Task accomplishment; Communication How does culture affect your organization?

The System of Systems (SoS) “A set or arrangement of systems that results when independent and useful systems are integrated into a larger systems that delivers unique capabilities.” U.S. DoD Systems Engineering Guide for Systems of Systems (Version 1.0) “…a collection of task-oriented or dedicated systems that pool their resources and capabilities together to create a new, more complex system which offers more functionality and performance than simply the sum of the constituent systems.” Wikipedia (February 2012) “…a set of collaboratively integrated systems that possess two additional properties: operational independence of the components and managerial independence of the components.” Maier (1998)

SoS Observations Most systems today are part of an SoS whether or not explicitly recognized Most systems are created and evolve without explicit SE at the SoS level The SoS comes into existence when something occurs to trigger recognition of the SoS An organization may be identified as responsible for the SoS along with definition of the objective of the SoS Does not include changes in ownership of the component systems in the SoS

The Extended Enterprise is a System of Systems Definition An extended enterprise is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market. Firms in the extended enterprise may operate independently, for example, through market mechanisms, or cooperatively through agreements and contracts. Example: "McDonald's” includes not only McDonald's Corporation, but also franchisees and joint venture partners of McDonald's Corporation, the third party logistics providers that provide food and materials to McDonald's restaurants, the advertising agencies that produce and distribute McDonald's advertising, the suppliers of McDonald's food ingredients, kitchen equipment, building services, utilities, and other goods and services, the designers of Happy Meal toys, and others. Reference: Wikipedia

The Systems Diagram: A Tool for Understanding Enterprises A technique to help you understand complex systems interactions Fosters systems thinking about the problem Helps keep you focused on original intent Enables you to analyze systems boundaries Illustrates how a change in one factor may have an impact elsewhere Helps you understand the factors and relationships that are important Helps you see aspects suggested by “the whole” that might not be obvious from the parts

Example Based on a talk by General Jumper, former chief of staff of the air force Network-Centric, Peer-based, System of Systems with Networks + Sensors + C2 Nodes + BMC2 Provides decision- quality information exchange environment Can take documents and abstract them or build diagrams directly from discussion and experts

Could you diagram your extended enterprise? Actors: nouns or noun phrases Interactions: Verbs or verb phrases

Scenario: An Extended Enterprise A state judged blocked New York City's planned ban on the sale of large sugary drinks, calling them "arbitrary and capricious.” The law would have restricted sale of sugary drinks to 16 oz. or less. The law would have exempted a variety of retailers -- including 7-Eleven. "The effect would be a person is unable to buy a drink larger than 16 ounces at one establishment but may be able to buy it at another establishment that may be located right next door," Tingling wrote. The lawsuit was brought by a group of business associations -- including the American Beverage Association, the National Association of Theatre Owners of New York State and the New York Korean-American Grocers Association. The mayor's office quickly vowed to appeal the decision. City officials believe the health department has the legal authority to use the ban to fight an "obesity epidemic," according to a tweet from Bloomberg's office. Nearly 60% of New York City adults and 40% of city schoolchildren are overweight or obese, according to the decision. Critics have decried the rules as a sign of the growing "nanny-state" and an unfair intrusion on personal freedom. Reported by CNN, 11 March 2013

Applied Systems Thinking: A Systems View of the Organization

Attributes of Successful Organizations A future-focused strategy based on reality Recognition that the organization is a system Broad and deep understanding of the interactions within organizational system and the larger enterprise system of which it is a part. Clear, unambiguous governance Explicit objectives, roles and responsibilities, resources, methods of accountability and measurement of progress Leaders commit adequate time and resources Leaders devote the necessary time to think and act strategically, as well manage the daily in-box transactions.

A Generalized Systems View of the Organization System Boundary MEASUREMENT, ANALYSIS & KNOWLEDGE MANAGEMENT LEADERSHIP CUSTOMER & MISSION FOCUS STRATEGIC PLANNING RESULTS Environment, Relationships, Strategic Situation OPERATIONS WORKFORCE Systems thinking should address both the larger systems (super systems) and what really makes up my system beyond what I am focused on. If I want to change a process then I need to examine the other elements of the system. Reference: Criteria for Performance Excellence, 2011-2012

Good strategy is coherent action backed up by an argument. What is “Strategy?” “unified, comprehensive, and integrated plan that relates the strategic advantages of the firm to the challenges of the environment.” Jauch & Glueck, 1988 Etymology: derived from the Greek strategos – a military commander. Q - What is the product or desired outcome of strategic planning? A - Every MBA knows the answer to this one, we all had a required policy and strategy course and in that course somewhere was a definition of strategy “It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization” (Jauch and Glueck, 1988, p. 11). Richard Rumelt is a UCLA academic Good strategy is coherent action backed up by an argument. Richard Rumelt

Levels of Strategic Thinking Enterprise Operational Level Programs Divisions Groups Tactical Level Projects Work Centers Strategic: vision and overall goals for the Enterprise. Operational: translation of strategic initiatives into objectives that can be assigned to a specific operating entity or entities. Tactical: tangible, specific objectives assigned to an individual or a group

Manage Systemically and Systematically gov·ern·ance     Origin: 1325–75 …the system of management and controls exercised in the stewardship of your organization. 2011-2012 Criteria for Performance Excellence

Systems Thinking is Critical Changes in our environment are driving us to think differently about governance Can’t effectively legislate behavior with new generation workers Information explosion—more accessible knowledge World is smaller—everything is connected Communication is more complex

Thinking Systemically about Governance Culture Reward structure must facilitate behavior change Roles and Responsibilities Aligning objectives and expectations Communication Sufficiency, context, content Measures How do you measure the value of intangibles?

Tracking Progress Establish a few, carefully chosen measures which provide useful information Too many measures can obscure information Focus on trends, not snapshots Measurements taken over a period of time Balanced perspective Product and Process Outcomes Customer-Focused Outcomes Workforce-Focused Outcomes Leadership and Governance Outcomes Financial and Market Outcomes Customer Satisfaction Supplier Performance

A Roadmap for Managing Strategically

Questions? Systems Thinking Systems Thinker “Toolkit” Vision & Mission Strategic Context Organizational Dynamics Initiation/Recovery/Termination Current Reality Systems Thinker “Toolkit” Strategic Goals and Objectives Scenario Planning PEST / SWOT Classification Frameworks Future Focus Culture & Values