Systems Thinking Is The Key to Excellence

According to Wikipedia:

Systems thinking is the process of understanding how things, regarded as systems, influence one another within a whole. In nature, systems thinking examples include ecosystems in which various elements such as air, water, movement, plants, and animals work together to survive or perish. In organizations, systems consist of people, structures, and processes that work together to make an organization ‘healthy’ or ‘unhealthy’.

Systems thinking has been defined as an approach to problem solving, by viewing “problems” as parts of an overall system, rather than reacting to specific part, outcomes or events and potentially contributing to further development of unintended consequences. Systems thinking is not one thing but a set of habits or practices within a framework that is based on the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation. Systems thinking focuses on cyclical rather than linear cause and effect.

In systems science, it is argued that the only way to fully understand why a problem or element occurs and persists is to understand the parts in relation to the whole. Standing in contrast to Desccarteses’ scientific reductionism and philosophical analysis, it proposes to view systems in a holistic manner. Consistent with systems philosophy, systems thinking concerns an understanding of a system by examining the linkages and interactions between the elements that compose the entirety of the system.

Lean is systems thinking epitomized, and the failure or inability to think in terms of systems is at the heart of the foolish application of lean at the tool level only, at the core of a failure of senior leadership to understand an embrace lean, and at the very center of all of the valid criticism of traditional accounting.

In short, no one can truly understand lean and no one can truly lead a lean enterprise unless they are a system thinker.

… the only way to fully understand why a problem or element occurs and persists is to understand the parts in relation to the whole.

Lack of systems thinking is what leads people to set inventory reduction metrics on supply chain managers, invest in better ERP systems and pound relentlessly on the inventory management tools and people, all the while ignoring product design.  Component and SKU proliferation, failure to design products that explode into multiple variations from a narrow set of primary components, and measuring design by component purchase cost rather than unique component count are the real drivers of high inventories; and there isn’t much even the best supply chain manager with the newest computer can do to alter the trajectory design puts inventory onto.

… by viewing “problems” as parts of an overall system, rather than reacting to specific part, outcomes or events and potentially contributing to further development of unintended consequences.

Such as outsourcing manufacturing to China then wondering why the product development and manufacturing engineering functions don’t work so good any more.

… the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation.

This is why lean accounting is the only way to understand the business.  Collecting costs and revenues by value stream puts all of the components with a relationship to each other on one statement that can be measured by the overall bottom line.  Traditional accounting ignored the “context of relationships” – it assumes you can cut sostsin one area without consequences in other areas.

… systems thinking concerns an understanding of a system by examining the linkages and interactions between the elements that compose the entirety of the system.

A high-fallutin’ way of saying value stream mapping is the way to understand the business, rather than as a set of disjointed departmental budgets, goals and metrics.

Traditional management assumes an independent set of functions – lean assumes a hopelessly inter-connected system. We have traditionally thought that good leadership came from understanding all of the functions of the business – sales, manufacturing, design, accounting, etc…  Knowing all of them individually – no matter how well they are known – is not of much value unless leadership understands them in terms of a system and how they inter-relate and inter-act with each other to make the whole what it is.



  1. Jacob Austad Says: May 31, 2013 at 4:21 am

    Hi Bill

    Thanks for this blog….you nailed it!

    All too often I’ve seen people believe they were “Lean” by implementing tools in a specific sequence and anyone who tried to start by understanding the problem first were seen as “problem makers” not willing to listen and comply to rules and regulations.
    I have come to believe the most important questions are: What problem are you trying to solve? And: How to you know?

    One thing though: I agree with you in regards to the importance of understanding the business, but it is not (always) necessary to do a Value Stream Mapping. It is actually possible to understand the business by listening to the customers when they place a demand on the system. Understanding customer needs is key to design the right business processes.
    In my view also VSM is a tool and a little Systems Thinking is often better than a VSM-event!

    The only tool you need without having a problem is: a Swiss Army Knife 

    Anyway: Thank for a good blog… I enjoy it