Thinking Systemically: Why it Matters Now

Leaders with a strategic systems thinking lens look for the best places (leverage points) to act in a system to affect positive change. This lens is no longer a luxury, it is essential.

It's no secret that global issues affecting organizations are increasingly interconnected and complex. Business leaders are compelled to consider decisions from a systemic standpoint — that is, they must deal with all the intersecting elements in a system, and think about how decisions and actions interact with each other. I’ll look at an example of that in a moment. Leaders who fail to see interconnections may promote solutions that yield unintended consequences, don’t resolve the targeted problem, or work in the short term but are not sustainable over time.

In an economic crisis — when there is little wiggle room for extra costs, staff overtime, or opportunities lost — not seeing the relationships among issues can be ineffective, or worse, perilous for an organization. While leadership is about passion, people and process skills, and industry knowledge, it's also about understanding the whole, managing people complexity, and orchestrating the many parts of the whole for optimization. Global leaders must augment their 21st century toolbox to include a new lens on global interconnectedness and new tools and skills in strategic systems thinking — these tools are increasingly necessary to succeed.

Why Leaders Have To Think Differently

Advances in technology, changing demographics, and globalization have caused corporations to affect and be affected by global systems at an extraordinary pace.

Unlike in the past, influential interest groups hold an unprecedented level of power. These groups effectively organize regionally, nationally, and globally to lobby companies and governments for social, economic, and environmental causes and demand their voices be heard.

At the same time, there have been giant leaps in technology that affect two specific areas: healthcare and communications. Healthcare advances allow humans to live longer which means more people are using dramatically increased amounts of food, water, and energy. Meanwhile, advances in communications have increased the amount of data available and at lightning speeds of transmission and access. All of these massive and meaningful global shifts mean that leaders have more interconnected factors to consider when making changes to the supply chain, creating demand, serving the customer, or operating within different, complex, political, social, legal, cultural, and economic structures.

What is Strategic Systems Thinking?

When we talk about "strategic systems thinking," we are talking about the holistic appreciation of complex systems, and a set of thinking tools for understanding those systems and acting to create value within them.

"Systems thinking" is the ability to understand things as a whole (or holistically) — including the many different types of relationships between the many elements in a complex system. By way of a definition, "Systems thinking is a sensibility for the subtle interconnectedness that gives living systems their unique character." – from Peter Senge's book, The Fifth Discipline (Doubleday, 1990). Senge’s book is considered the seminal work on systems thinking and its application to organizations.

"Strategic Thinking" refers to a set of thinking skills leaders can apply to make better decisions inside a complex system. Interaction Associates (IA) has researched and now offers development in a set of discrete strategic thinking skills. With a grasp of what we call strategic systems thinking — strategic thinking skills applied to solve problems or exploit opportunities within the system — leaders are better equipped to take action with better results and fewer unintended consequences.

The key to understanding a system is not how the parts act individually, but their interaction. How they support the good of the whole: the whole machine, the whole organization, the whole company, the community...the world.

Strategic systems thinking identifies at least four aspects of the system that affect the business endeavor:

• the goal of the system,
• the status quo (or current state) of the system,
• what is feeding into the system, and
• what is exiting the system.

Leaders with a strategic systems thinking lens look for the best places (leverage points) to act in a system to affect positive change. This lens is no longer a luxury, it is essential. These skills also prepare leaders to ask essential questions within the context of a strategy or goal:

• What are you seeing?
• What connections are you making?
• Where should we focus our attention?
• How can we test that idea?

Interconnectedness: The Green Mountain Example

Now for an example of strategic systems thinking in action. We're going to look at Green Mountain Coffee Roasters, a Vermont-based coffee company with over 100 blends, and customers throughout the U.S. and over 20 countries. This example is explored in depth in the Sustainable Food Lab report Innovations for Healthy Value Chains.

In applying strategic systems thinking to its business, Green Mountain began by considering the major source in its supply chain system: coffee farmer suppliers in Nicaragua, Mexico and Guatemala. What Green Mountain discovered was that farming families were going hungry in the 3-4 lean months of the year known as los meses flacos, when there was serious food scarcity.

Green Mountain saw that the economic and social conditions of its farmers—the life blood of the company—had a direct, long-term impact on the overall viability of the company. To better sustain its supply chain and create better outcomes from a humanitarian point of view, Green Mountain assessed the system by asking the following strategic questions:

• Have the CSR programs in coffee growing communities had the intended impact, and if so, how do we know?
• Can these programs be more effective, and if so how?
• What does success look like, and how do we measure it?

Green Mountain decided to refocus its CSR efforts with an eye toward resolving interconnected issues: reducing poverty, hunger, and waste, and promoting responsible energy use. It exhibited the skill of deep listening, gathering directly from its farmer partners what was most important to their livelihood. Green Mountain — together with its NGO partners and the farmers — developed five major indicators of economic viability of the coffee growers’ business. The most useful of the indicators were (1) the ability of a grower to stay on his own farm, rather than hire himself out to work on other farms during the season; and (2) the ability to re-invest in farm enterprise improvements (including hiring in labor). The company then adopted strategies to improve these metrics.

Systems thinking clearly has not hurt the bottom line at Green Mountain. In the period of making these changes (2004-6) the company was seeing sales of roughly $341 million. In FY 2008, sales exceeded $500 million.

Economic issues cannot be separated from environmental or social issues. As Jeffrey Sachs, renowned economist and author, noted in Scientific American [1], "Our reckless gambles on the recent financial bubble are dwarfed by the long-term gambles we have taken through the failure to address the interconnected crisis of water, energy, poverty, food and climate change."

IA offers several unique ways to help leaders develop the skills of strategic systems thinking, among other crucial global leadership skills. One of these is the multi-day immersion experience — Accelerator Expedition. Learn more about Accelerator Expedition here. [2]