• February 9, 2024

    Are you an executive or manager facing substantial change in your industry? Are you making decisions based on complex systems? Do you need a method for your teams and groups that is sophisticated enough to help navigate through change without always relying on technology or advanced degrees? The work force is stretched and skilled labor is growing scarcer, AI is at the doorstep but is it there yet? Is your executive board looking for new ways to approach strategy development? What frameworks are your operations teams utilizing for special-study projects or isolating perceived business problems? How are they going to deliver the results or plan for a remedy?

    Navigating the ever increasing global, regional, and national complexities requires new ways of thinking?

    Forty Seven percent of top colleges state that systems thinking is a key capability for companies to deal with growing complexity.

    Here is a current real-world example as to why. This applies to ‘Supply Chain & Critical Systems, Predictive Analytics & Intel’ All of it is a capability. It involves understanding what the suppliers of these industries need to survive. Understanding this provides the ability to discern coming changes in the industry up or down.

    This example is of a restaurant chain. How it can forecast when things are likely to go south and why?

    Is it when the businesses around it start layoffs so those employees no longer eat at your shop? Is it when new restaurant competitors start shutting down? Is it when the price cutting begins etc. Perhaps but all of these are lagging indicators. These are also examples of ‘Fixes that fail’ meaning we try to react linearly to a changing situation which works for a while but fails over time. I.e., we change our prices to attract customers but as things get worse the cuts are not enough and profits suffer. However, if we look at those businesses that supply those companies and those restaurants with their machines and equipment and see that they are starting to slow down, we may gain more useful insight? ‘Meaningful Measures’ those measurable or insightful indicators that allow us to make more accurate business decisions. What if these businesses were laying off or experiencing a drop in sales? Wouldn’t that mean that new restaurants were not emerging, or failing too fast…and why? Is it unhealthy food, poor pay, rising costs of inflation? It could be but are those good enough measures? These are lagging indicators and only reveal themselves after the damage has begun. What businesses need is the time to react to changing behavior ahead of the actual negative impact of that behavior. The question then becomes, how much time does the company need to properly make decisions and react to changing times?

    But for now, let’s say they simply react to the daily changes. The businesses start laying off and or shutting down which means that there are fewer employees or regulars eating at food chains. Which then start to drop prices and add specials to entice folks back and again this works to varying degrees for a while. ‘Fixes that fail’ and we do not know when these fixes will fail. By understanding which and what systems, either endogenous or exogenous from us, are generating this effect extends we can’t see these events coming. We cannot properly forecast a downturn in the market in the industry.

    So, what does this mean? It means that businesses today are more exposed to becoming either casualties of unexpected change or lucky survivors. It means that businesses are perhaps, more reactive than they need to be and can take steps to through systems dynamics to become more proactive.

    Now let us flip it. Let’s look at those companies who employ system dynamics and structured systems thinking and have built representative models of their industry and understand what systems most indicate a negative change in behavior within their industry. These are the companies that have a better chance to navigate these events, and realize they are occurring ahead of competitors, and have time to adjust the path of their ship.

    What does this look like and how does it drive behavior?

    In this case the company sees that its customers will soon be over leveraged in essential goods and will begin to be laid off, in which case they may stop eating out anywhere. Competitive food chains will start dropping prices and offering specials, and the shutdowns and closings will begin.  Leading to those fixes that fail decision making we talked about or even unintended consequences. This is when we implement a decision with the best intentions but they in turn lead to unforeseen consequences. In this case it may manifest in that people decide that they do not need to eat three meals a day and two are fine or eventually that one meal will do. Who can say where the behavior will go?

    To summarize, if we engage systems structured thinking we can better forecast the changing behavior that will likely impact our industries good or bad. Out of the businesses that do and the businesses that do not those that do are far more likely to survive the rising tides or take advantage of fair winds over those that do not.

    Black swan events are impossible to predict and emerge by surprise. But they can be weathered better, if the business is prepared. By increasing visibility to rising threats ahead of the time that they impact the company we can better survive or avoid them.

    In structured systems thinking we try to ‘see the iceberg.’ Seeing the iceberg for the restaurants is the difference between focusing on the manifest problems of the day: filling schedules, ordering supplies, and the latent issues that may be lurking beneath the surface – slowing demand signals, shifting taste preferences. Even if we do not know exactly what’s happening, if we can sense changes in the latent system that we depend on, it draws our attention to focus on it and start looking before it takes us by surprise.


    If you want to learn more about Systems Thinking and how it can help you in your day-to-day decision making click the link below.



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