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Thinking in systems: What every smart manager knows
Businesspeople don’t know for sure what other managers are planning to invest, or what consumers will be willing to buy, or how their products will compete.
“We can’t control systems or figure them out. But we can dance with them!” wrote systems guru, Donella Meadows.
We tend to be fascinated by events, glued to the moment. Missing the forces hidden behind the curtain that decide how the actors in the three-act play, that we call ‘business’ perform.
Why are managers ‘predicably irrational’ only seeing the attractive obvious, often ignoring what is more difficult to understand, that does not jive with conventional wisdom.
Ours is a world of systems. Strathmore University is a system, so is Nairobi, as is Safaricom, not to mention the national economy, that consists of systems, within systems.
From the powerhouse mitochondria in the human cell, to all the complex workings that make us human, they are all systems.
Some systems are simple with inputs and outputs like filling a bathtub with water, that soon goes down the drain.
All systems have feedback loops, like a thermostat to adjust temperature. General systems theory suggests that without feedback loops working, systems soon become dysfunctional.
Helps to understand the big picture --Why systems behave the way they do. Forget having the illusion of predictability and absolute control -- in a galaxy of complex systems -- but having an appreciation of the basics of systems theory, at least sheds some light on why things happen the way they do.
Thinking in Systems, a paperback classic by Donella Meadows, first published in 2008, should be required reading for all managers, providing an ‘ah ha’ moment that helps make sense of the mess of usually unpredictable complexity.
Managers try to clean up the mess
“Managers are not confronted with problems that are independent of each other, but with dynamic situations that consist of complex systems of changing problems that interact with each other. I call such situations messes … Managers do not solve problems, they manage messes,” advised systems thinker Rusell Ackoff.
“The rich get richer and the poor get poorer.” Systems thinking helps explain why this may be true.
“According to the competitive exclusion principle, if a reinforcing feedback loop rewards the winner of a competition with the means to win further competitions, the result will be the elimination of all but a few competitors,” writes Meadows. But this ‘winners’ effect’ is not new.
“For he that hath, to him shall be given; and he that hath not from him shall be taken even that he hath,” notes the New Testament in the book of Mark 4:25.
One and two is more than you think
Even having just dual variables is not as simple as it may seem. “You think that because you understand ‘one’ that you must therefore understand ‘two’ because one and one make two. But you forget that you must also understand ‘and’” advises an ancient Sufi parable.
When you hear the word ‘optimum’ flashing lights should go off at your desk. Thanks to good old-fashioned delays, oscillations and the cyclical nature of just about everything, the idea of an optimum state and balanced equilibrium should be questioned.
“The idea of making a complex system do just what you want it to do can be achieved only temporarily, at best. We can never fully understand our world, not in the way our reductionist science has led us to expect. Our science itself, from quantum theory to the mathematics of chaos, leads us into irreducible uncertainty. For any objective other than the most trivial, we can’t optimise; we don’t even know what to optimise,” advises Meadows.
Bounded rationality
Businesspeople don’t know for sure what other managers are planning to invest, or what consumers will be willing to buy, or how their products will compete.
They don’t know their current market share, and they don’t really know the size of the market. Their information about these things is incomplete and delayed, and their own responses are delayed. So they systematically work in a cycle of under and over investment.
We are not all knowing, rational optimisers, with perfect real time information, noted Herbert Simon, Nobel Prize winner in economics.
In putting forward his theory of ‘Bounded Rationality’ he pointed out that managers are forced to act, make decisions on the limited imperfect information they have at hand. To the manager their actions in the moment make rational sense, because they lack a more accurate wider system wide perspective.
“Rather, we are blundering ‘satisficers’ attempting to meet (satisfy) our needs well enough (sufficiently) before moving on to the next decision.
We do our best to further our own nearby interests in a rational way, but we can take into account only what we know. We don’t know what others are planning to do, until they do it. We rarely see the full range of possibilities before us. We often don’t foresee (or choose to ignore) the impacts of our actions on the whole system.
So instead of finding a long-term optimum, we discover within our limited purview a choice we can live for now, and we stick to it, changing our behaviour only when forced to,” explains Meadows.
Understanding systems theory 101 at least seems to make the complex, simpler to understand. “I have yet to see any problem, however complicated, which when looked at the right way, did not still become more complicated,” said Poul Anderson.
