Search CDOQ

Friday, January 16, 2009

Systems Thinking as taught by Ackoff

One of my heroes is Dr. Russell Ackoff. I have read a few books he has written and have learned Systems Thinking from him. I am surprised that the field of Systems Thinking is not well understood. Following is my attempt to share what I learned from one of Ackoff's recent lectures.

Albert Einstein once said, "You can't solve a problem with the same mind that created it." According to Dr. Russell Ackoff most managers agree with Einstein's statement but not many know what it means. It is easy to agree with something whose meaning is vague.

In the Renaissance era, when the science as we know it today was born, a scientific inquiry method called Analysis was developed. Analysis comes naturally to us. Just watch kids breaking new things and being curious about the parts. The understanding of something follows a three step process in analytical thinking:

1. Take it apart
2. Understand (function, role, behavior) what the parts do
3. Assemble the understanding of the parts into understanding of the whole

Our culture is built on analytical thinking. For example, when you go to school to study business, you don't study business. You study marketing, finance, organization, logistics, etc. The assumption is that if you understand how the parts work you can assemble them together to gain the understanding of the whole. Corporations are run in a similar fashion. Running of the organization is divided into different parts-by products, geography, function, etc. and then you aggregate running of the parts into running of the whole-corporation.

Analytical thinking teaches us "how" and it never teaches us "why". It gives you knowledge but not understanding. The understanding comes from Synthesis which explains "why". The explanation of a system always lie outside the system. For example, how do you explain why the engine is in the front of the car? The engine replaced the horse which used to be in the front of the carriage and soon what we call a car today was referred to as the horseless carriage. That is why the engine is located in the front of a car. You could not have figured this out by applying analytical thinking.

Systems thinking is a new way of thinking which focuses on synthesis instead of analysis. Synthetic thinking has three steps which are exactly the opposite of analysis. To understand something using synthesis you:

1. Ask "what is this a part of?" instead of taking the parts apart. You identify the containing whole. For example, to understand a car you identify the transportation system and to understand a corporation you identify the economy, etc.
2. Understand the behavior of the containing whole instead of understanding behavior and properties of the parts. For example, understand the transportation system and the economic system re car and corporation respectively.
3. Dis-aggregate the understanding of the containing whole by identifying the function of the system you are trying to explain instead of aggregating the understanding of parts into the understanding of the whole. For example, understand the role a car plays in the transportation system and the role a corporation plays in the economic system.

A system is a whole and is defined by its function in a larger system. Every system is contained in a larger system and its role in that larger system defines it. For example, a car is defined by its function of transportation in privacy. An essential property of a system is that it can not be divided into independent parts and its properties are derived out of interaction of its parts and not the action of its parts taken separately. For example, what makes a car is the interaction of the motor, engine, steering, etc. If you take a system apart it looses all its essential properties.

A system is a product of the interaction of its parts and never the sum of its parts. When you take a car apart it is no longer a car. And, parts of the car lose their essential functions. For example, a car part-motor is no longer a motor because it can not move anything including itself.
Hence, the parts are defined by their interaction with other parts within the system. The collective interactions of all parts dictate the system behavior.

To maximize the system performance, some parts may have to sacrifice their performance. For example, all supermarkets have products called "loss leaders". These products (milk, bread, etc.) are sold at loss to bring the customers inside the store and the store layout is designed so that customers spend money on products which are more profitable. And, that is sacrificing the performance of the parts for the benefit of the whole. The corporations usually demand best performance from all its parts and hence the corporations usually under-perform their potential.

Decision makers should learn how the parts interact and not how the parts act independently. And, this is not part of our education system especially business education where you don't learn how marketing interacts with finance, logistics, accounting, etc. We put labels to problem like marketing problem, finance problem, logistics problem, etc. These labels don't tell you anything about the problem since the problems are also results of interaction. When you have a headache, do you get brain surgery done? No. You take an Advil since we know that the chemicals from the pill will get dissolved in the blood and it will go to the pain point in the brain and relive the pain. We know this because we understand interactions of various parts of the body. However, in corporations brain surgery for headaches is done all the time. For example, when a marketing manager sees sales go down in a region (vs. last quarter) he sees it as "marketing problem" and tries to solve the problem by manipulating marketing variables. Most corporate problems are better solved somewhere else and not where they appear.

The only thing more difficult than starting something new is stopping something old. If you just start something new then you either become a hero or you get fired. There is no way of running a risk-less revolution or transformation. You have to take a risk to make a change. If you want to get it done, just do it!

Now, let's see how Systems Thinking is applied or not applied to the current economic crisis. Why did we get into the mess? The people running the corporations are trained in Analytical thinking and not Systems thinking. And, they did not understand the interactions of various corporations within the global economy.

To solve the credit crisis, the government gave money to the banks. It is equivalent of doing brain surgery for a headache.

The rules of the "new economy" are being written. All the policy influencers can greatly benefit from applying systems thinking to solve the "economic problem":-)

Your thoughts?