The Laws of the Fifth Discipline Senge: Chapter 4 THE FIFTH DISCIPLINE

Today’s problems come from yesterday’s solutions IT solutions of yesterday are today’s “problems” Bringing integration, complexity And along with complexity The potential for Chaos The potential for Catastrophe 1 June 2002 Prepared by James R. Burns

Today’s problems come from yesterday’s solutions THE CARPET BUMP: Jump on the bump and the bump reappears somewhere else Why are sales of autos so slow, nationally this quarter? Because of the tremendous rebates and zero interest promotions of the previous quarters Of course, this would dry up demand, as those planning to buy in this quarter bought last because of the extraordinarily good “deals” 1 June 2002 Prepared by James R. Burns

Today’s problems come from yesterday’s solutions A new manager attacks chronically high inventory problems and succeeds Now, market spends 20% of its time responding to angry customers whose orders are not fulfilled on time Now, the sales force must convince the customer they can have any color they want so long as its BLACK 1 June 2002 Prepared by James R. Burns

Today’s problems come from yesterday’s solutions Police are able to arrest narcotics dealers on east 34th street Now the drug scene has switched to north Frankford 1 June 2002 Prepared by James R. Burns

The harder you push, the harder the system pushes back THIS IS CALLED COMPENSATING FEEDBACK Low income housing projects of the 60’s Food and agricultural assistance in developing countries For the food thing, more food available has been compensated for by reduced deaths due to malnutrition, higher population growth, and eventually more malnutrition 1 June 2002 Prepared by James R. Burns

MORE: The harder you push, the harder the system pushes back The weakening dollar—due to some foreigners pulling the dollar out of our equity markets—thinking their own markets are better places to invest But what happens is that domestic manufacturers goods are now more competitive in foreign and domestic markets This leads to better profits Which leads to better stock prices Which leads to foreign investors getting back into American markets Some in government are worried. The Feds need to sell the bonds to finance the war effort—deficit spending again—will these foreigners not show up as they have in the past to buy these bonds? 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns 1 June 2002 Prepared by James R. Burns

MORE: The harder you push, the harder the system pushes back Slowing sales leads to more sales people selling the same product at lower cost with more advertising, leading to still less revenues needed to solve the real problem—the competition’s better products 1 June 2002 Prepared by James R. Burns

MORE: The harder you push, the harder the system pushes back When your performance is sub-par, how to you respond? Do you, like the respond like Boxer in Orwell’s Animal Farm, “I will work harder..?” This is the wrong response—you have to look for a more fundamental solution You are responding to symptoms here, not core problems, root causes 1 June 2002 Prepared by James R. Burns

The harder you push, the harder the system pushes back This is exhausting While, like Boxer, working harder we are blinding ourselves as to how we ourselves are contributing to the obstacles 1 June 2002 Prepared by James R. Burns

Behavior grows better before it grows worse Compensating feedback usually involves a delay, a time lag between the short-term benefit and the long-term dis-benefit Choose carefully who you follow up the corporate ladder—if you pick people who are interested only in the short run, you will get blind-sided by the negative long-term effects of their decisions When our performance is sub-par, we often react rather than respond. We should be more analytical about our selves taken in relation to the system we are embedded in. 1 June 2002 Prepared by James R. Burns

The easy way out usually leads back in We tend to apply familiar solutions to complex problems, applying what we know best Pushing harder and harder on familiar solutions, is a reliable indicator of non-systemic thinking 1 June 2002 Prepared by James R. Burns

The easy way out usually leads back in Drug companies look for drug therapies as a cure for cancer Why don’t they look for nutrition therapies?? Diet Therapies?? They can’t patent and acquire an exclusive right to market such a therapy In other words, they can’t make money off these other therapies 1 June 2002 Prepared by James R. Burns

The cure can be worse than the disease This is sometimes true of Chemotherapy Short-term improvements may lead to long-term dependencies, addictions, as expressed by the SHIFTING THE BURDEN ARCHETYPE 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns Shifting the Burden Consultants, often used by companies, become addictive and prevent a company from training its managers to solve its own problems These structures reduce the ability of the system to shoulder its own burdens Long-term solutions must do the opposite 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns Faster is slower WHY?? Too many mistakes were made We must do it right the first time We try to do things fast, make a mistake and wind up having to re-do all that we did This is a process issue—get the process right and we WILL do things right the first time 1 June 2002 Prepared by James R. Burns

Cause and effect are not closely related in time and space The effects we see today may be attributable to a cause that occurred years ago Most of us assume most of the time that cause and effect are closely related in time and space Even Allen Greenspan can make this mistake 1 June 2002 Prepared by James R. Burns

Cause and effect are not closely related in time and space There is a fundamental mismatch between the nature of reality in complex systems and our predominant ways of thinking about that reality 1 June 2002 Prepared by James R. Burns

Cause and effect are not closely related in time and space If there is a problem in manufacturing, we assume the cause is also in manufacturing If sales people can’t meet targets, we think we need new sales incentives and promotions If there is inadequate housing, we build more housing If there is insufficient food, we send more food 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns Small changes can produce big results--but the areas of highest leverage are often the least obvious Systems thinking teaches that the most obvious solutions don’t work—at best they improve matters in the short run, only to make things worse in the long run. 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns Small changes can produce big results--but the areas of highest leverage are often the least obvious Trim tabs and ships rudders If you wanted to make a moving tanker turn left, where would you go to push on the ship? 1 June 2002 Prepared by James R. Burns

You can have your cake and eat it too, but not at once Skip it 1 June 2002 Prepared by James R. Burns

Dividing an elephant in half does not produce two small elephants. Living systems have integrity Three blind men each encountered an elephant… Seeing whole elephants does mean understanding how major functions such as manufacturing, marketing and engineering interact 1 June 2002 Prepared by James R. Burns

Principle of the system boundary Interactions that must be examined are those most important to the issue at hand regardless of parochial organizational boundaries What makes this difficult to practice is the way organizations are designed to keep people from seeing important interactions 1 June 2002 Prepared by James R. Burns

Principle of the system boundary, continued One obvious way is by enforcing rigid internal divisions that inhibit inquiry across divisional boundaries, such as those that grow up between marketing, manufacturing and engineering THIS IS BAD POLICY 1 June 2002 Prepared by James R. Burns

Prepared by James R. Burns There is no blame We tend to blame outside circumstances for our problems—the competitors, the press, the changing mood of the marketplace, the government Systems thinking teaches that there is no outside—that you and your problems are part of a single system 1 June 2002 Prepared by James R. Burns

Copyright C 2002 by James R. Burns All rights reserved world-wide. CLEAR Project Steering Committee members have a right to use these slides in their presentations. However, they do not have the right to remove this copyright or to remove the “prepared by….” footnote that appears at the bottom of each slide. 1 June 2002 Prepared by James R. Burns Prepared by James R. Burns