Chapter 4 Discussion

Systems Thinking

Systems and Systems Thinking

• Systems thinking has its foundation in the field of system dynamics founded in 1956 by Jay Forrester of MIT

• Forrester recognized the need for a better way of testing new ideas about social systems, in the same way we test engineering ideas

• Systems thinking views the world according to activities, processes, events, people (roles), functional organizations, patterns, structures and their interrelationships

• Established Systems Dynamics

The System’s Perspective

• General Systems Theory– Ludwig von Bertalanffy

– John Miller

– Talcott Parsons, Edward Shils

• Open and Closed Systems

• RosettaNet - Coopetition

Nature of Systems

• Interdependence• Shared Goals• Process and Feedback

- Cybernetic• Entropy• Equifinality

General Systems Theory

• Wholeness - a system is composed of two or more interrelated subsystems

• Sharing - the subsystems are bonded together through the subparts they share

• Synergy - the output of a system is greater than or different from the sum of its subsystem parts

General Systems Theory

• Entropy - without an input of energy an open system will run down, become disorganized and unable to efficiently function.

• Self-Regulation - a system must be cybernetic to evaluate feedback and make corrective adjustments

General Systems Theory

• Differentiation - the subsystem’s position is secured by its ability to function effectively in that position.

• Integration - the effective organization of individual subsystems give the system its degree of synergism

• Equifinality- different systems may start at different points and use different means to arrive at the same end product

Levels of Systems Complexity

The Uniqueness of Systems Thinking

• Traditional analysis focuses on the separating the individual pieces of what is being studied

• “Analysis" comes from the root meaning "to break into constituent parts"

• Systems thinking focuses on how the things interact with the other constituents of the system—a set of elements that interact to produce behavior—of which it is a part.

• Systems thinking involves expanding views to take into account larger numbers of interactions as an issue is studied

• The defining characteristic of a system is that it cannot be understood as a function of its isolated components.

Understanding Systems

• The behavior of the system doesn't depend on what each part is doing but on how each part is interacting with the rest

• To understand a system we need to understand how it fits into the larger system of which it is a part

• The system parts are not primary it is the relationship between the parts

• The definition of a part is fundamentally a matter of perspective and purpose, not intrinsic in the nature of the 'real thing' we are looking at.

Weick on Sense Making• "Your beliefs are cause

maps that you impose on the world, after which you 'see' what you have already imposed"

• The effective organization is garrulous, clumsy, superstitious, hypocritical, monstrous, octopoid, wandering, and grouchy"

• " If an organization is narrow in the images that it directs toward its own actions, then when it examines what it has said, it will see only bland displays.

Weick on Sense Making• This means in turn that the

organization won't be able to make much interesting sense of what's going on or of its place in it.

• The kind of sense that an organization makes of its thoughts and of itself has an effect on its ability to deal with change

• An organization that continually sees itself in novel images, images that are permeated with diverse skills and sensitivities, thereby is equipped to deal with altered surroundings when they appear."

Karl Weick on Sense Making

• Enactment• Selection• Retention

Enactment• Describes the way an

organisim (organization) adapts and adjusts to its environment by acting upon it to change it.

• He uses this term in the context of 'sense making' by managers or employees to describe how they can enact 'limitations' upon the system to avoid issues or experiences.

• It is a form of social construction.

Organizational learning • Either organizations don't learn

or that organizations learn but in non linear ways - "Perhaps organizations are not built to learn

• Instead, they are patterns of means-ends relations deliberately designed to make the same routine response to different stimuli, a pattern which is antithetical to learning in the traditional sense".

• So, organizational learning occurs when groups of people give the same response to different stimuli."

Retention and Information Processing

• Weick sees the organization as a system taking in equivocal information from its environment, trying to make sense of that information, and using what was learned in the future

• Organizations evolve as they make sense of themselves and their environment

• Communication is key because of its role in the sense-making processes people use

Selection and Retention

• The people who handle information in organizations work through stages: – selection -- narrow down the

equivocally , decide what to deal with and what to leave along, ignore, or disregard

– retention -- decide what information, and its meaning, they will retain

Other Organizational Learning Processes

• An act is when you say something

• An interact is when you say something and someone responds

• a double interact occurs when you say something, someone responds, then you respond to that, adjusting your original comment

Senge and the Learning Organization

• Systems thinking• Personal Mastery• Flexible mental

models• Shared Vision• Team Learning

Senge and Systems Thinking – The Learning Organization

At the heart of a learning organization is a shift of mind --from seeing ourselves as separate from the world to connected to the world, from seeing problems as caused by someone or something 'out there' to seeing how our own actions create the problems we experience. A learning organization is a place where people are continually discovering how they create their reality. And how they can change it.

Methodology

• At the foundation of systems thinking is the identification of circles of causality or feedback loops, which can be reinforcing or balancing and can contain delays

• Model building involves building mental models about the interrelationships between important elements in a complex system, for the purpose of examining the behavior of the variables of interest

• The distinction between qualitative and quantitative systems thinking is commonly made by referring to the former as soft and the latter as hard system dynamics

Systems thinking concentrates on the relationship between elements not on the elements themselves

• Like chemicals, you get different results if you mix them differently in different quantities.

• Ask, how do these factors relate?

• What happens if we change one?

• What happens to the other? • What happens if one increases? • Does it lead to a decrease in the

other? An increase? Or is the other unaffected?

An Example of Systems Variables using Hexagon Methodology

• The Hexagon Methodology is part of the System Dynamics (SD) tool set

– the other major SD tools are Causal Loop Diagrams, Behavior over Time (BOT) graphs, Simulation Modeling

• Designed to identify, capture and organize the key factors of a business opportunity/problem.

– It utilizes the knowledge and experience of a management team to identify both hard and “soft” (cultural) variables.

– Divergent brainstorming of variables helps ensure that the relevant ones are captured

– Clustering and prioritization help identify the key variables for Causal Loop Diagramming

1. Focus Question“What are the key factors required for our HealthCare system’s sustainable success?

Hexagon Methodology: Focus Question

The Hexagon Methodology starts with a Focus Question. The Focus question helps limit the scope of variable generation to relevant ones.

The management team brainstorms a list of possible variables. These variables are captured, posted and clarified as necessary.

1. Focus Question

“What are the key factors required for our HealthCare system’s sustainable success?

2. Brainstorming with Hexagons

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs

6

Quality Care

7

Low Staff Turnover

8

Value Pricing

8

Patient Satisfact.

Hexagon Methodology Brainstorming

The variables are then clustered into related sectors to simply the and to level the relative level of detail.

1. Focus Question

“What are the key factors required for our HealthCare system’s sustainable success?

2. Brainstorming with Hexagons

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs

6

Quality Care

7

Low Staff Turnover

8

Value Pricing

8

Patient Satisfact.

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs 6

Quality Care

7

Low Staff Turnover

8

Value Pricing 8

Patient Satisfact.

3. Clustering

Financial

Staff

Network

Market Share

Quality of Care

Hexagon Methodology: Clustering

The clustered variables are prioritized, given sector names and key variables identified; Behavior over Time (BoT) graphs are drawn as appropriate.

1. Focus Question

“What are the key factors required for our HealthCare system’s sustainable success?

2. Brainstorming with Hexagons

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs

6

Quality Care

7

Low Staff Turnover

8

Value Pricing

8

Patient Satisfact.

5

Low Costs

1

Financial Strength

Employee Satisfact.

3

Strong Network

4

Market Share

6

Quality Care

7

Low Staff Turnover

8

Value Pricing 8

Patient Satisfact.

3. Clustering

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs 6

Quality Care

7

Low Staff Turnover

8

Value Pricing 8

Patient Satisfact.4. Prioritization

and Potential Metrics

Top Tier Partners

Patient Family

Sat.

Financial

Staff

Network

Market Share

Quality of Care

Financial

Staff

Network

Quality of Care

Market Share

Hexagon Methodology: Prioritization

2

TIME

The high priority variables and sectors are then used for the basis of creating the Causal Loop Diagram. Policy Lever variables are also identified.

1. Focus Question“What are the key factors required for our HealthCare system’s sustainable success?

2. Brainstorming with Hexagons

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs

6

Quality Care

7

Low Staff Turnover

8

Value Pricing

8

Patient Satisfact.

5

Low Costs

1

Financial Strength

Employee Satisfact.

3

Strong Network

4

Market Share

6

Quality Care

7

Low Staff Turnover

8

Value Pricing 8

Patient Satisfact.

3. Clustering

1

Financial Strength

2

Employee Satisfact.

3

Strong Network

4

Market Share

5

Low Costs 6

Quality Care

7

Low Staff Turnover

8

Value Pricing 8

Patient Satisfact.4. Prioritization and

Potential Metrics

Top Tier Partners

Patient Family

Sat.

Financial

Staff

Network

Market Share

Quality of Care

Financial

Staff

Network

Quality of Care

Market Share

Hexagon Methodology: Initial CLD Creation

2

Market Share

5. Initial CLD Variables & Policy Levers

Financial

Staff Hiring

NetworkQuality of Care

Anatomy of a Causal Loop Diagram (CLD)

Variable

Order Rate

Capacity

Production

Backlog

O

Causal Direction: ‘S’ = ‘Same’ direction; ‘O’ = ‘Opposite’ direction.

S

S

Causal LinkS

Time Delay: the change is delayed.

External Variable or Decision Lever

Metric or Measurement

CLDs are composed of Variables and Relationships between these variables

SO T

W

CLD Overview

• CLD Methodology provides a fast, cross-functional group analysis of a complex system to produce a shared, explicit model of the systems key variables and their inter-relationships to use for discovery, strategic plan development/communication and for analyzing the impact of organizational culture on performance

CLDs are Extendable

ProcessReengineering

PerformanceMeasurement

Net revenue

Managed care

Private indemnity

ExpensesROIC

Operatingprofit

Investment

Medicare

Outpatient

Inpatient

Net PPEWorking capital

Other

1997

Balanced Scorecards

Operating Expense per Case

1996 1st Qtr2nd Qtr3rd Qtr

1997

Out-Patient

In-Patient

Net Revenue Per Case

1996 1st Qtr2nd Qtr3rd Qtr

Adjusted

Aggregate

Causal Loop Diagrams

Management Shared Mental Models

NVFCapitalSources

NVF CapitalInvestments

Partnering

KnowledgeInfrastructure

ClinicalServices

StakeholderSatisfaction

CommunityWellness

MarketShare

Revenue

Cost

OperatingMargin

CapitalAssets

FinancialAssets

EmployeeAssets

CustomerAssets

FEAF Modeling

Knowledge Mgmt

SWOT Analyses

Culture analysis

Checkland and Systems Thinking

• Identify problem situation & find relevant objects in real work environment– This involves eliciting what is relevant to

different actors in the system. During this phase the situation is highly unstructured

– Use a SWOT Analysis – Strengths, Weaknesses, Opportunities and Threats

• Capture relevant relationships between objects– Understand these from perspectives,

mental models or worldviews of the participants

Checkland and Systems Thinking

• Formulate root definition of activity system

• This definition forms the underlying logic of the models we construct to deal with the system. It is the essential formulation of the systems activities

Utilizing CATWOE in Root Definitions

• Customers - who would be victims/ beneficiaries of the purposeful action?

• Actors - who would do the activities? • Transformation process - What is the

purposeful activity? Expressed as: Input => Throughput/Transformation =>

Output• Weltanschauung (worldview) - What

view of the world makes the definition meaningful?

• Owner - Who could stop this activity/ make or break the system?

• Environment- What factors affect the environment?

The 5 Es for Evaluating Transformation

• Efficacy - Do the means work to justify the ends?

• Efficiency - Are minimum and necessary resources being considered?

• Effectiveness - Does the T help the attainment of longer term goals related to the O's expectations?

• Ethicality - Is T a moral thing to do?

• Elegance - Is T aesthetically pleasing?

Root Definitions

• Once the CATWOE are identified, they are transformed into a root definition

• A root definition can also be evaluated as to whether it contains all of the elements of the CATWOE criteria.

• The transformation process or T must contain outputs that are of the same nature as an input. They must both either be concrete or abstract, logical or physical, but not a mix of the two states of expression.

The Transformation Process

• T - Transformation Process - The activity expressed as

Input (I) => T => Output (O) • T changes or transforms I into O. I

must be present in O but in a changed state.

• An abstract I must yield an abstract O.

• A concrete I must yield a concrete O.

Weltanschauung or World View

• Weltanschauung is a declared, overall perspective of the system as a whole

• Components of a worldview include values or what is good or bad, what is desirable or undesirable, what is interesting or not interesting, or what the (often assumed, but unstated) intended goals or objectives of a system are

• They constitute the organization culture

Methods Following the Root Definition

• Build different prototype models of the system

• Compare with other model views that may be appropriate– Each model must have

enough detail and specifications including resource use and performance measures for it to be evaluated and compared with other model views that may be appropriate

System Methods

• Implement 'feasible & desirable' changes based on the appropriate model views that are selected

• The various conceptual models are compared against each other, and actions are derived from them and prioritized

• The model is then put into action and appropriate measures are taken to evaluate success.

Stafford Beer

• Organizational Cybernetics

• Contributions to ORMS (Operational Research and Management Sciences)

• Use of Cybernetic systems– They are complex– Probabilistic– Self-regulatory

The Viable Systems Model (VSM)

• Operations – Systems One– Involved with what the

organization is trying to achieve

• Coordination – Systems Two– Ensures an efficient and

stable use of resources achieved in a harmonious fashion

Beer’s VCM

• Control – Systems Three– Deals with vital information

about problems in operations that short term coordination cannot deal with. Audits divisions, interprets policy and ensures they are implemented in operations

• Intelligence (Policy) – Systems Four– Captures information about the

total environment– Performs SWOT (SW –

internal, OT – external)

Beer on Team Syntegrity

• Problem Jostle• Topic Auction• Outcome Resolve

Russ Ackoff and Interactive Planning

• Interactive planning– “Plan or be Planned for…”

• Methodology– Formulate the mess

– Ends Planning

– Means Planning

– Resource Planning

– Design of implementation and control

Formulate the Mess

• Systems analysis (processes, structure, culture and environmental relationships)

• Obstruction analysis

• Preparation of reference projections (project about future performance based on systems and obstruction analyses)

Ends Planning

• Design must be technologically feasible

• Design must be sustainable

• Steps– Select a mission

– Specify desired properties of the design

– Idealized design – move from idealized properties to a detailed idealized design

Means Planning, Resource Planning and Implementation

• Compare reference scenario and idealized design

• Develop strategies for closing gap

West Churchman

• Critical systemic thinking• Principles

– Systems approach begins when first you see the world through the eyes of another

– Systems discovers that every world-view is restricted

– No experts in systems approach

– Systems approach is not a bad idea

Teleology – 9 Conditions

• A system is teleological• System is a measure of

performance• There is a client whose

interest is served• System has teleological

components• A system has an

environment• There is a decision maker

who can produce changes

Teleology – 9 Conditions

• There is a designer whose design influences decision maker

• Designer aims to maximize the system’s value to client

• Built-in guarantee that the purpose of the system defined by the measure of performance of the system can be achieved and secured

System Identification

• Sweep in – inclusive• Unfolding • Boundary setting• Securing• Wisdom (though

combined with ethics)• Hope (belief in an

ethical future)