Systems Thinking

Copyright Goal Systems International, 2006

This is the first of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of

commercial companies, not-for-profit organizations, and government agencies.

Part 1

An Introduction to theSystems Approach

By H. William Dettmer

There is no question that in our age there is a good deal of turmoil about the manner in whichsociety is run. Probably at no point in the history of man has there been so much discussionabout the rights and wrongs of the policy makers[Citizens have] begun to suspect that thepeople who make the major decisions that affect our lives don't know what they are doingThey don't know what they are doing simply because they have no adequate basis to judge theeffects of their decisions. To many it must seem that we live in an age of moronic decisionmaking.

C. West ChurchmanThe Systems Approach [Introduction] [1:vi]

Sounds like Churchman is talking about us today, doesn't it? The preceding quotation comes from theintroduction to his seminal book on systems thinking, The Systems Approach, written in 1968. That's sadtestimony to the fact that few decision makers in the world have learned much about complex systems inthe last 37 years. In the immortal words of Winston Churchill, Man will occasionally stumble over thetruth, but usually he just picks himself up and continues on.

We've been continuing on for four decades. It's time to go back and revisit that truth we stumbled overin 1968. We can snicker at the fact that life seemed so much simpler then. The world has gotten smalleras travel, communication, the information age, and the Internet have combined to connect people andsocieties as never before. As economies have evolved from regional to national to transnational to global,our organizations have grown in size and complexity. It is nearly impossible for the people running themto fully understand what goes on where the rubber meets the road in nations, governments, andcompanies.

Analysis versus Synthesis

Since the turn of the century (the 20th century, that is), the accepted approach to dealing with increasingcomplexity is to try to reduce it into manageable bites and address them in isolation. This approach isreferred to as analysis. We analyze a complex situation or issue by trying to break it down into componentpieces and consider each in isolation from the others. This kind of thinking has its roots in analyticgeometry, where one basic axiom is that the whole is equal to the sum of its parts. Think about that for amoment. The underlying assumption behind this conclusion is that all of the parts are essentiallyindependent of one another.

But although this mathematical thinking might apply to bricks and other inanimate objects, it fails whenapplied to dynamic, homeostatic, or cybernetic systems [2:28-31]which generally include any organicsystems, or those where human beings have a role. And unfortunately such systems are the ones that exertthe most influence on our lives. We see the failure of the analytical approach all the time: The RohrCorporation's Riverside, California, plant recorded a 55% increase in profits in 1996. Great news, if allyou focus on is short-term profits. When you look at the larger system, you see the reason for thatincrease is better efficiency (meaning cost cutting) temporarily had a greater impact than the 3%decline in sales. Or, as the corporate treasurer enthusiastically observed, Costs have come down quickerthan our revenue has decreased. [3:G-1]. (I'm sure the 3,500 people laid off at Riverside by Rohr in the


preceding few years are immensely gratified to know that!) The Rohr story is a classic example of self-delusion by analytical thinking.

If an analytical approach to management is counter-productive, what should we be doing instead? Aholistic, or whole system approach is considerably better suited to the kinds of complex organizations weusually encounter today. What's the difference between an analytical and a systems approach? Thesystems approach represents synthesis-thinking with an integrated perspective about the whole enterprise.Before one can synthesize, one must first analyze. In other words, we first take the system apart (usuallyconceptually-it's not often practical to physically deconstruct the systems we normally work with) tounderstand the functions of each link or component. Once the components are fully understood inisolation, we study the interactions among components to understand how the system as a wholefunctions. Understanding these interactions requires integrating the components into something largerand more capable than the components represent alone. In the fourth installment of this series, we'llexamine analysis and synthesis in more detail. And in the ninth installment, we'll consider some tools tohelp us visualize and manage a system as an integrated whole.

A Paradigm Shift

In 1962, Thomas Kuhn introduced the word paradigm [4:x] to describe a pattern of knowledge, rules,assumptions, or thinking. The difference between an analytical approach to management and a synthesisapproach might easily be characterized as a paradigm shift, or a significant change in the rules of thegame. Paradigm shifts can be either evolutionary (i.e., a slow pace of change) or revolutionary-dramatic,short-term, and immediate high impact. The rise to primacy of air travel over ships was an evolutionarychange. The advent of the atomic bomb was a revolutionary shift-almost overnight-in the way we lookedat national defense.

The shift from analysis to synthesis in the way we consider systems is assuredly an evolutionaryparadigm shift. It's been under way for nearly 40 years. It started in engineering, where synthesis has beenthe source of creativity and innovation. Even now, an Internet search on analysis versus synthesis willturn up a preponderance of engineering references. But since Churchman's work, the concept of synthesishas begun a transition from the purely technical arenas to the sociological, ecological, environmental, andphilosophical. So far, this transition seems to have been neither consistent nor continuous. In fact in somerespects, as our world has become more complex, many leaders and managers seem to have retreatedeven more deeply into analytical thinking: If our world is getting more difficult to manage, we need toanalyze the situation more. We need more detailed information! (Who was is that said the definition ofinsanity is doing the same thing over and over, and expecting a different result?)

The Importance of Theory

Theory can be a slippery word. Many (most?) people outside the science community don't reallyunderstand the meaning of the word. I frequently hear executives say, I don't have time to worry abouttheory-I'm too busy dealing with the real world. A similar comment one frequently hears is, Well, that'sonly a theory. Both statements indicate an erroneous perception that theory is no more than speculation,or a best guess. Nothing could be farther from the truth.

W. Edwards Deming, one of the people who taught the Japanese the concepts of quality that theysubsequently used to hammer the west economically for the last quarter of the 20th century, said this abouttheory:

Experience alone, without theory, teaches management nothing about what to doto improve quality and competitive position, nor how to do itExperience will answera question, and a question comes from theory. [5:19]

And later:


Without theory, there is no learningTheory is a window into the world.Theory leads to prediction. Without prediction, examples and experienceteach nothing. To copy an example of success, without understanding itwith the aid of theory, may lead to disaster. [6:106]

Deming was not the first or only system thinker, but because of his impact on Japanese business, hehappens to be one that many people pay attention to. Not long before he died, Deming proposed what hecalled his system of profound knowledge. [6: 94-118] Successful transformation of any organization,Deming suggested, depending on a thorough understanding of four components of profound knowledge.These components include appreciation for a system, knowledge about variation, the theory ofknowledge, and an understanding of psychology.

Grossly oversimplified, Deming was saying that if you don't see your environment as a system ofinterdependent parts, you don't understand the nature of variation within and among those parts, you haveno clue about why or how you know what you know about your system, and you don't comprehend thepsychology that drives the humans that make up your system, you haven't got a chance success-except bydumb luck. (And who would be comfortable depending on that?) In the sixth installment of this series,we'll see how Deming's idea of profound knowledge will help us understand and manage our systems assystems.

The Scientific Method

All of these concepts we've examined so far-analysis and synthesis, the importance of theory, andDeming's system of profound knowledge-represent the underlying foundation for an effective systemsapproach to management. But they are no more than a foundation without a methodology to follow. Thescientific method is an excellent transition from foundation to practice.

The scientific method begins with informal observation of discrete phenomena or events. The personpracticing the method, sensing a connection of some kind among the events and using inductive logic,generalizes a hypothesis to explain the cause-and-effect relationship between them. This hypothesis isthen tested either by experimentation or more intensive observation to confirm or refute the hypothesis. Ifthe hypothesis is invalidated, it's usually thrown away. On the other hand, if there seems to be someconfirmation in the experiments or observations, then the hypothesis takes on the characteristics of atheory: a proposition with some evidence to support it. As time goes on and more data on the subject isaccumulated, some aspects of the theory may be reinforced, and some data points that don't fit the theorymay be discovered. If these data can't be adequately explained in light of the theory or acceptedknowledge, then the theory may be abandoned. However, it is more likely that the theory will be modifiedto fit the existence of the outlying data points. In this way, the theory is improved, and our knowledge ofreality is enriched. In other words, we have learned something! This learning is at the heart of PeterSenge's classic management book, The Fifth Discipline. [7]

The importance of learning in any endeavor cannot be overemphasized. George Santayana once said,Those who cannot learn from history are doomed to repeat it. This is another way of saying Learnfrom your mistakes, or you'll have to do them over again until you get it right. (Remember the definitionof insanity, mentioned earlier?)

Summary

There is a paradigm shift underway, from analytical thinking to systems thinking. In time, it willtransform the way business is done, in commercial enterprise, government, and the not-for-profit sector.You can ride the leading edge of this wave, or you can swim like the devil to try to catch up with it afterit's passed. Over the next twelve months, we'll see how you can do the former, if you're so inclined.

We'll see how theory and sound methods will contribute to the challenge of learning more about oursystems, how they function, and how to get improvement efforts right the first time.


Winners make things happen. Losers let things happen, or watch thingshappen and wonder what happened.

Unknown

Endnotes

1. Churchman, C. West. The Systems Approach. New York: Dell Publishing Co., 1968.2. Athey, Thomas H. The Systematic Systems Approach. New Jersey: Prentice-Hall, 1982.3. Rohr reports big increase in earnings, The Riverside (California) Press-Enterprise, May 22, 1996,p.G-14. Kuhn, Thomas S., The Structure of Scientific Revolutions. Chicago, IL: University of Chicago Press,1962.5. Deming, W. Edwards. Out of the Crisis. Cambridge, MA: MIT Center for Advanced EngineeringStudy, 1986.6. ______. The New Economics for Industry, Government, Education. Cambridge, MA: MIT Center forAdvanced Engineering Study, 1993.7. Senge, Peter. The Fifth Discipline: The Art and Practice of the Learning Organization. New York:Doubleday, 1990.


This is the second of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 2

Business and the Blitzkrieg

H. William Dettmer

It would be foolish, however, to disguise the gravity of the hour. It would be still more foolish to loseheart and courage or to suppose that well-trained, well-equipped armies numbering three or four millionsof men can be overcome in the space of a few weeks, or even months, by a scoop or raid of mechanizedvehicles, however formidable. We may look with confidence to the stabilization of the Front in France

Winston Churchill, May 19, 1940 [1:17-18]

Prophetic wordstoo bad they were completely wrong. Thirty-two days later, in the same railroad car, atthe same place where Germany signed an unconditional surrender in 1918, Hitler accepted the surrenderof France.

During World War II, no battle group struck more fear into the hearts of its opponents than the Germanpanzer corps. In 1939-40, fast-moving tank divisions, operating in independent, flexible, small groups,swept across Poland in 26 days. The Baltic States fell in less than a week, Denmark in four hours, andFrance in five weeks. [2] British forces on the continent were pushed back against the sea at Dunkirk. Theonly reason they survived to be evacuated across the English Channel (by small boat flotilla) was that theGermans inexplicably decided to stop their advance. Later, in 1942, Rommel's panzers similarly ran thenorth coast of Africa from Egypt to Morocco, devastating British forces.

The British and French armies, in particular, were standing, well-trained professional armies. Why, then,were the German panzer corps so effective while their opponents acted so confused?

Learning from Experience

The difference: The Germans learned more from their experience in World War I than the Allies(including the Americans) did. While the British, French, and Americans focused on deployingtechnology improvements, they pretty much prepared mentally to re-fight the direct, slow-moving frontalengagements of the war to end all wars. (Too bad it really wasn't that!)

Spearheaded by the creative Prussian military genius, Heinz Guderian, the German Army developed theconcept of maneuver warfare we know as the blitzkrieg - literally, lightning warand it caught theworld totally by surprise in 1939. [2]

For decades, businesses throughout the world have operated much the same way the French and Britishdid in 1939: they're fighting the last engagement, albeit with newer technology, such as the Internet, e-business, and sophisticated information systems such as Enterprise Resource Planning (ERP). But theirthinking, and the behavior that springs from it, remains the same as it always has been.

However, as in 1939, times have changed. While the world has grown smaller, it is in many respects aless stable place now than it was in the 1930s. This is especially true of economics and politics.

Maneuver Warfare


German tacticians created the blitzkrieg to defeat discrete, known opponents through speed, flexibility,agility, and surprise--a concept that can be generally characterized as maneuver warfare. It has long beenaccepted that these same attributes of maneuver warfare can be translated into other domains, such asbusiness.

But whereas the military application of maneuver warfare is aimed at discrete, specific opponents, itsapplication to business is may be less distinct. Yes, maneuver tactics in business can be particularlyeffective in head-to-head competition between specific competitors. But their greater value may be intheir ability to help a business respond rapidly to a volatile, ever-changing operating environment. Inother words, the concepts of maneuver warfare can help organizations deal with the uncertainty of aworld that, more than ever before, is not standing still. Moreover, by understanding maneuver warfare asa potential strategic advantage, companies can develop a level of comfort embracing what Peter Druckerhas called discontinuous changeeven seeking it out or, better yet, leading it!

Our real opponent in business is the uncertainty of a volatile, constantly changing environment, as muchas it is any particular competitor. In such circumstances, is the ability to change directions (and actions)on a dime any less important just because we're responding to events, rather than opponents?

There's an old saying: When life hands you lemons, make lemonade. Sound simple enough, but theability to make this kind of adjustment on short notice demands the flexibility and agilitytheresponsivenessthat maneuver warfare offers. But it's one thing to say this; it's quite another to apply it.So it's appropriate to examine the philosophical foundation on which the blitzkrieg and its success werebuilt.

The Conceptual Foundation of Blitzkrieg Tactics

The ability of the German panzer divisions to sow such dramatic confusion and fear among theiradversaries depended on four interrelated concepts that were impressed into every member of those units:einheit, fingerspitzengefhl, auftragstaktik, and schwerpunkt. [1:51-59] Okay, so these words are a realmouthful for those not fluent in German. Let's take them one at a time.

Einheit. (pronounced aye'n-height). The literal meaning of the word is mutual trust. It's the sense ofwell being a member of a cohesive team realizes from knowing that he or she can depend utterly onfellow team memberssuperiors, subordinates, and contemporaries alikefor help, support, or justfaithfully doing what's expected of them.

Mutual trust can't be mandated or imposed. It develops over timeit's earned, by all parties to themutuality, and that doesn't happen overnight. Einheit is more than simple camaraderie, though it includesthat, too. It's knowing that other team members will be in the right place at the right time to do whateverthe situation dictates in fulfilling their responsibilities for mission accomplishment.

Fingersptizengefhl. (pronounced finger-SHPITZ-in-geh-fyool) Literally fingertip feel, or touch,it really implies intuitive skill. This is the consummate skill in doing something that comes from havingdone it so many times, or for so long, that, as the song of the same name goes, nobody does it better. It'sthe kind of expertise that world-class musicians such as Yitzhak Perlman or Yoyo Ma have. They don'tneed to read the music and consciously translate it to hand movements; the music just flows from theirheads, where they hear it in all its detail, through their fingertips to the instrumentinstinctively andinherently correct the first time.

Fingerspitzengefhl is inextricably tied to einheit. As a team works together over time, they becomebetter at what they do, both individually and collectively. This breeds confidence in one another, which isfundamental to realizing mutual trust. Who would you trust more: a world-class performer with whomyou'd worked regularly, or a newcomer you've never seen before and know only by their rsum or pressnotices?


Auftragstaktik. (pronounced OWF-trags-TACtic) This is a virtual or implied contract betweensuperior and subordinate. Simply put, the superior tacitly avoids ordering a subordinate to do something.He or she asks the subordinate to accept the responsibility for getting it done. Einheit andfingerspitzengefhl figure prominently into the auftragstaktik. Because the team has worked togetherrepeatedly for a long time, they have developed an intimate knowledge and respect for each other's skillsand capabilities. Superiors know what subordinates are capable of and where their limitations lie. Fortheir part of the contract, superiors avoid asking subordinates to take on responsibilities beyond theircapabilities without having a valid, justifiable reason. For their part of the contract, if they accept thesuperior's charter, subordinates agree to accomplish what has been asked of them, applying the steel self-discipline that comes of fingerspitzengefhl and every last ounce of their effort to get the taskaccomplished as the superior expects it to be done. The subordinate implicitly trusts the superior not toask more of him or her than they are capable of doing. The superior implicitly trust the subordinate todeliver what he or she has agreed to do without continually having to be checked or prodded.

Schwerpunkt. (pronounced SHVER-punked) Literally, hard or difficult point, the real meaning ismore like center of gravity, or focus point-the place where the majority of effort is directed. For theGerman panzers, this was the target of the main thrust of combat efforts. In the practice of constraintmanagement [3], this is the system constraint. Two underlying assumptions are inherent in the concept ofschwerpunkt. The first is that in a complex operation, some parts of the organizationthe ones mostdirectly responsible for the schwerpunktare more critical to immediate success than others. But goinghand in hand with the schwerpunkt is the idea of nebenpunkt, or essential supporting activities.

The classic (and most successful) example of the military application of the blitzkriegand schwerpunktand nebenpunkt as wellis the German attack on France in 1940 through the Ardennes Forest. WithFrench and Belgian troops massed in the Belgian plains against German Army Group A, German ArmyGroup B moved quickly through the narrow roads of the Ardennes toward the city of Sedan. Thinkingthis approach improbable, the French defended Sedan with third-rate troops and reserves. As the Germansslashed through the Ardennes, the French defenders broke ranks and ran, even before the panzerscompleted their crossing of the Meuse River. Army Group B wheeled around to the north and envelopedthe French and Belgian armies from the rear. (Turn this whole layout 90 degrees clockwise, and youessentially have General Schwarzkopf's left hook maneuver with the VII and XVIII Corps in OperationDesert Storm.)

In the conquest of France, the schwerpunkt was the Ardennes penetration. The nebenpunkt was thesupporting role played by Army Group A, whose primary function was to draw the attention of Frenchand Belgian forces (which it did most successfully) while Army Group B circled around from behind.We'll examine this concept of schwerpunkt and nebenpunkt more in the fourth installment of this series.

Leading by Intent

The immediate benefit in einheit, fingerspitzengefhl, auftragstaktik , and schwerpunkt accrues primarilyto the senior commander (the CEO, if you will). Rather than having to specify in detail everything hewants each subordinate to do, the commander can lead by intent . The leader of a blitzkrieg-orientedorganization can describe the desired outcome and assign the resources to trusted team members, who, byvirtue of their mutual trust, intuitive skill, and complete understanding and acceptance of the missioncontract, can be utterly depended on to deliver the results. Subordinates are comfortable exercising theirown initiative in their pursuit of the mission, and superiors are completely comfortable letting them do so.

Summary

What do the blitzkrieg and its underlying concepts have to do with a systems approach to management?As we saw in the first installment, the increasing complexity and size of the economic and politicalorganizations in our world make an authoritarian control model impractical. No leader of such a systemcan possibly keep tabs on everything. In as unstable and dynamic an environment as we live in today,


changes are demanded faster than their impacts can be analyzedsometimes even faster than informationabout the need to change can be passed.

Success depends on responsiveness and agility, which in turn depend on the independence of teammembers to act without constantly requiring approval. Such independence depends on their willingness totake initiative, which in turn rests on a climate of mutual trust (einheit), intuitive skill and capability(fingerspitzengefhl), the confidence and assurance of an implied mission contract (auftragstaktik), and anunswerving focus on the most important effort (schwerpunkt).

In the future, all organizations will have to become faster, more responsive, more agile, and moreunpredictable (to their competitors) or risk being relegated to loser status. And we know what losersdothey let things happen, or watch things happen and wonder what happened! We don't want that to beus, do we?

Tactical agility is the ability of a friendly force to react faster than the enemy. It is essential to seizing,retaining, and exploiting the initiative. Agility is mental and physical. Agile commanders quicklycomprehend unfamiliar situations, creatively apply doctrine, and make timely decisions. [4]

Endnotes

1. Richards, Chet. Certain to Win. Xlibris Corporation, 2004.2. Macksey, Kenneth. Guderian: Creator of the Blitzkrieg. New York: Stein and Day Publishers. 1975.3. Goldratt, E.M. The Haystack Syndrome: Sifting Information from the Data Ocean. Great Barrington,MA: The North River Press, 1990.4. U.S. Army Field Manual 3-0, Operations


This is the third of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 3

Destruction and Creation:Analysis and Synthesis

H. William Dettmer

Let us not lose sight of the fact that the etymological root of the word analysis is anal.Unknown

The word analysis has been overused, to the point becoming a clich. We have environmental analysis,business analysis, financial analysis, cost-benefit analysis, metallurgical analysis, spectrographic analysis,and systems analysis (which has come to refer too narrowly to information systems). Even these are onlya partial list. We're virtually awash in analyses. The concept of analysis is deeply embedded in our lives,but where did this concept come from? And why should you care about it?

Since the Renaissance, analysis has been the foundation of problem solving. But as we move from the20th into the 21st century, it's becoming clearer that analysis alone is an incomplete, suboptimal way ofunderstanding and functioning in our world. Worse, without the next stepsynthesispracticing analysisalone is a dangerous way of operating.

Analysis Equals Reductionism

What, exactly, is analysis? Simply put, it's a process of reducing a complex whole, or system, into itscomponent partsmanageable bites, if you willand dealing with those parts in isolation. Take anautomobile, for example. The engine is a complex system made up of many components. If the engineruns roughly, the analysis approach is to mentally deconstruct the engine into carburetion (or fuelinjection), fuel supply, fuel transport system, and combustion chamber (cylinders). The person repairingthe engine analyzes the situation: he or she examines and tweaks each of these parts individually.Fuel injectors are checked, and perhaps cleaned. The fuel pump is checked for proper operation and thefilter replaced. Spark plugs are cleaned or replaced, and timing may be adjusted. Then the components arerejoined again. Often the car is returned to the owner with all these things done (accompanied by asubstantial bill!), and the owner finds that the engine doesn't run substantially more smoothly. The reasonmay be that the repair person failed to synthesize the system againto ensure that all the adjustedcomponents actually function well together.

The assumption underlying the concept of analysis is reductionism, the idea that all the reality of ourultimate experience can be reduced to indivisible parts. [1:9] From the 15th through the 19th centuries, areductionist philosophy predominated all scientific inquiry and the expansion of human knowledge. Itwas assumed that if a phenomenon was deconstructed sufficiently and the parts examined, understandingof the phenomenon was assured. In fact, this thinking is embodied in one of the basic axioms of analyticgeometry: the whole is equal to the sum of its parts. But a funny thing happens with complex systems:interdependence among the parts rears its ugly headwhat some have called synergy comes into play!

The reductionist, or analytic approach reached its culmination with the concept of scientific managementin the early 20th century. The father of scientific management, Frederick W. Taylor broke down(analyzed) complex industrial activities into component tasks, sought to make those tasks more efficient,and glued the more efficient components back together again. The expected result was a more efficient,effective system. Taylor's disciples, including Frank and Lillian Gilbreth and Henry Gantt, extended andrefined Taylor's analytic approach to management well into the 1950s essentially unchanged.


Deficiencies in Analysis

Because early organizational (specifically, industrial) systems were simple, the analytic approach wasmuch more effective than the alternativewhich was more or less ad hoc. But as the complexity oforganizational systems increased to the point where no one person could have complete visibility on allcomponents simultaneously, the cracks in the plaster of the analytic approach began to show. Analysiscould no longer explain the difference between the whole-equals-the-sum-of-the-parts and observedresults that were disproportionately higher (or lower) than expected. In other words, the success of ananalytical approach topped out.

The problem is that parts of systems have properties that they lose when separated from the whole system,and the whole system has essential properties that none of its parts does. Ackoff provided an effectiveanalogy: The eye detached from the body can't see, yet the human body as a whole can run, play piano,read, write, and do many other things that none of its parts can do by themselves. [1:16]

What does all this mean? Basically, that the essential properties (and thus the ultimate performance) of asystem derives from the interactions of its parts. And these essential properties are lost when the systemis taken apart. In other words, a system is a whole that cannot be understood by analysis alone.

Synthesis: The Second Half of the Equation

What, then, is the key to resolving this deficiency? The answer is synthesis. Simply put, synthesis isamounts to putting things together. Sometimes these are pieces known to be part of a system, forexample, the rebuilding of an automobile engine from its disassembled parts. In other cases, it may be thecombination of things never thought of as going together before, to create new concepts, solutions, orrealities.

Synthesis is not a new idea; it's as old as analysis. As Ackoff has pointed out, Aristotle dealt with both.[1:17] But in our current world of complex systems, synthesis becomes more important than most peoplerealize. Analysis and synthesis are complimentary processes; though they can be considered separately,they can't really be separated. Systems thinking doesn't deny the value of analysis, however. Rather, itemphasizes the fact that there is another side to the system equation that has, until recently, been ignoredor overlooked.

In 1976, John R. Boyd, a retired U.S. Air Force colonel whose chief claims to fame had been hisdevelopment of the energy-maneuverability theory and the latest-generation fighters (the F-15 and F-16),tackled the issue of analysis versus synthesis in a paper entitled Destruction and Creation. [3]

The core of Boyd's argument was that creativity was essentially the outcome of a process of analysis andsynthesis, which he referred to as destruction and creation. Boyd suggested that new ideas andbreakthrough solutions to particularly challenging problems resulted from mentally deconstructingmultiple known existing concepts or processes, then selectively reassembling key elements to form acompletely new conceptthus, the characterization as destruction and creation.

Creativity and Synthesis: Building Snowmobiles.

In the mid-1980s, Boyd offered an analogy to illustrate this process of analysis (destruction) and synthesis(creation). [4] He challenged people to think of four seemingly unrelated mechanical systems: a set ofsnow skis, a boat with an outboard motor, a bicycle, and a military tank or tread-type earthmover. Each ofthese is a discrete device with its own purpose. Boyd suggested mentally deconstructing these into theircomponent parts and selectively re-combining parts from each to for a new whole that would nototherwise exist. He discarded the bindings and poles from the snow-skis, retaining only the boards.From the outboard boat, he retained only the gasoline-powered motor; from the bicycle, the handlebars,and from the earthmover, a tread. He recombined these concepts (the functions of the different parts) toforma snowmobile!


The snowmobile concept became Boyd's short-hand analogy for characterizing the domain ofcompetition. He separated people into two types: those who could conceive and build snowmobiles, andthose who couldn't: [5:156]

A loser is someone (individual or group) who cannot build snowmobiles when facing uncertainty andunpredictable change; whereas a winner is someone who can build snowmobiles and employ them inappropriate fashion, when facing uncertainty and unpredictable change. [5:182]

Hand in hand with being able to build snowmobiles, Boyd suggested, is adaptabilitythe capability torespond to a situation with variety and rapidity. Variety is an outgrowth of analysis and synthesis.Rapidity implies the ability to analyze and synthesize quickly.

Paradigms

Let's briefly consider a concept seemingly unrelated to Boyd's destruction-and-creation process: the ideaof paradigms. The term was coined by Thomas Kuhn in 1962, in his seminal book, The Structure ofScientific Revolutions. [6:x] Kuhn's original treatise dealt with the evolution of scientific theories,particularly the physical sciences. Through the later work of others, primarily Joel Barker [2], it has sincecome to be applied more widely (and broadly) to the realms of business management, societaldevelopment, and social interaction.

Grossly oversimplified, a paradigm is a model, a set or rules, or a pattern of behavior that defines current,accepted (and acceptable) thinking about a domain or subject. For example, the game of baseball is aparadigm operating within the confines of a stadium and the organizational structures behind thecompeting teams. Behavior of those within this paradigm is largely prescribed within relatively welldefined boundaries. Concepts associated with other paradigms (e.g., football, tennis, or aviation) areexcluded from baseball thinking.

Likewise, at the higher economic and political levels, capitalism and democracy are also paradigms.Thinking within these paradigms is somewhat constrained by the traditional, the accepted, or commonpractice.

Kuhn introduced the notion that paradigms change over time, as more and newer information isdiscovered. In most cases, this change is evolutionary, rather than revolutionary. As Barker has pointedout, however, paradigm shifts can often be dramatic. The Internet and its many and varied uses is anexample of such a rapid paradigm shift. A key characteristic of paradigms and their associated shifts is theidea that they naturally evolve or happenthey're not consciously directed.

Summary: Our OWN Synthesis

To summarize what we've seen so far, let's do a little destruction-and-creation of our own.

Ackoff, Churchman, and other system thinkers maintain that the widespread current practice of analyzingsystems and issues alonethat is, breaking them down into their component parts and maximizingperformance of the discrete partsis a flawed practice, because it ignores the central role ofinterdependencies.

Kuhn and Barker suggest that the rules of the meta-game change over time, sometimes with dramaticshifts that must be discerned and accommodated. Failure to do so can leave one behind the powercurve. That's an aviation term implying that the pilot has allowed the aircraft enter a condition wheremuch more power is required just to maintain or arrest a deteriorating flight condition. Or, in managementterms, Have you seen them? Which way did they go? I must be after them, for I am their leader!


And finally, Boyd maintains that the kind of destruction-and-creation process (analysis and synthesis, inAckoff's terms) he recommends produces the ability to dictate rules and results of an engagement. Thepeople and organizations that become really good at doing this can achieve a much greater degree ofinfluence over their environment. (Boyd referred to this as improving their capacity for independentaction. [3]

So, what does our snowmobile look like? If paradigms govern conventional thinking about how thingshappen, or must be done, and if our organizations are arrangements of systems, sub-systems, and meta-systems that can't be effectively managed analytically, then the application of a conscious, pro-activemethod of destruction-and-creation (analysis and synthesis),systemically applied, can put practitioners ofsuch methods at a tactical advantage over competitors. It can also keep them ahead of the environmentalchanges that evolve over timeand perhaps be in a position to drive or lead revolutionary paradigmshifts. Which position would you rather be in: chasing after a changing environment, or leading thechange?

In our next installment, we'll examine the O-O-D-A loop, a prescriptive approach to applying analysis andsynthesis to secure the high groundBoyd's improved capacity for independent actionin our chosenfields.

Endnotes

1. Ackoff, Russell L. Ackoff's Best: His Classic Writings on Management. New York: John Wiley &Sons, 1999.2. Barker, Joel. (http://www.joelbarker.com)3. Boyd, John R. Destruction and Creation. An unpublished paper. (http://www.goalsys.com/id17.htm)4. Boyd, John R. Revelation, part of the August 1987 version of the larger unpublished briefing, ADiscourse on Winning and Losing. Cited in Hammond, Grant T., The Mind of War: John Boyd andAmerican Security, Washington, D.C.: The Smithsonian Institution Press, 2001, p.182.5. Hammond, Grant T. The Mind of War: John Boyd and American Security. Washington, D.C.:TheSmithsonian Institution Press, 2001.6. Kuhn, Thomas S. The Structure of Scientific Revolutions. Chicago: The University of Chicago Press,1962.


This is the fourth of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 4

Operationalizing Sun Tzu: The O-O-D-A Loop

H. William Dettmer

Those who win every battle are not really skillful-those who render others'armies helpless without fighting are the best of all.

Sun Tzu, The Art of War [1:67]

By now most people have heard of the ancient Chinese general, Sun Tzu, and his writings about militarystrategy called The Art of War. Sun Tzu lived about 2,400 years ago. What many may not realize,however, is that The Art of War is a compendium of cogent military thought that has been amplified andexpanded upon through the 12th century AD by other skillful Chinese generalsthe best of Chinesemilitary genius, one might say.

Somewhat fewer people (but still a significant number) are aware that principles articulated in The Art ofWar can be translated to the domain of business. Some business schools even require students to read TheArt of War as part of their curriculum. However, though they may have done such required reading, veryfew business students of Sun Tzu are really adept at translating those precepts to practice. Some authors(McNeilly, for one) have done so and written about it. [2]

Clearly, there are parallels between military engagements and business, or, for that matter, withcompetitive sports, or other comparable activities where winning or losing (however one defines those) ispossible. The principles in The Art of War can be effectively applied to such situations, whether theopponent is a specific adversary or even just an unforgiving environment itself.

The Art of War is replete with useful information, both strategic and tacticaltoo much to analyze atlength here. That's not the purpose of this installment in any event. For our purposeshowing how tomake that application leap that so many haven't been able to doit's sufficient to select a few of SunTzu's key principles. Here are the ones we'll address:

1. If you know others and know yourself, you will not be imperiled in a hundred battlesif you do notknow others and do not know yourself, you will be imperiled in every single battle. [1:82]

This principle addresses the importance of understanding your own system-its capabilities, needs,objectives, and values-as well as those of your opponents.

2. Unless you know the mountains and forests, the defiles and impasses, and the lay of the marshes andswamps, you cannot maneuver with an armed force. [1:116]

This principle emphasizes the need to fully understand the external environment in which youand youradversariesoperate in. In business, this is more than just the market conditions or the regulatoryenvironment. It includes the political and cultural environment as well.

3. I have heard of military operations that were clumsy but swift, but I have never seen one that wasskillful and lasted a long time. It is never beneficial to have [an] operation continue for a long time. [1:58]

In this observation, Sun Tzu points out the importance of speed in commencing and concludingoperations and activitiesof not allowing things to drag on.


4. Act after having made assessments. The one who first knows the measures of far and near wins.[1:119]

The emphasis here is on making assessments. This is another way of saying synthesize all yourinformation into a clear picture of what is going on and where you stand in the situation; then act.(presumably with the speed advised in 3, above!)

5. Generals who know all possible adaptations to take advantage of the ground know how to use militaryforces. If generals do not know how to adapt advantageously, even if they know the lay of the land theycannot take advantage of it. [1:126]

6. Adaptation means not clinging to fixed methods, but changing appropriately according to events, actingas is suitable. [Zhang Yu] [1:125]

7. A military force has no constant formation, water has no constant shape: the ability to gain victory bychanging and adapting according to the opponent is called genius. [1:113]

These three precepts are all about flexibility and the capability to adjust (or adapt) to new situationsagain, quickly.

8. In battle, confrontation is done directly, victory is gained by surprise. [1:94]

Here Sun Tzu makes the point that the most visible or obvious engagement is not where war is actuallywon. In other words, the direct engagement is no more than a way of fixing the adversary's attentionwhile the decisive engagement is concluded at a point where the enemy is weak-and not as well prepared.In other words, Hit `em where they ain't.

The O-O-D-A Loop

John Boyd, a retired Air Force colonel whose concept of destruction and creation we examined in the lastinstallment, conceived a four-step prescription to guide the prosecution of military operations to swift,ultimate victory. Boyd called this prescription the O-O-D-A loop. And in the same way that Sun Tzu'sprinciples are applicable to business operations, so too is Boyd's O-O-D-A loop. Moreover, the O-O-D-Aloop provides highly focused guidance for effectively applying the specific Art of War principles citedabove. It can be considered a command-and-control loop. [3:165]

O-O-D-A is an acronym that stands for observe, orient, decide, and act. These are sequential activitiesthat guide leaders to effective decisions. The act step that culminates this process ultimately produceschanges in the environment that merit a new, subsequent round of observations, followed by a secondcycle of orientation, decision, and action. Boyd suggested that individuals or groups that could cyclethrough these four steps faster than their adversaries had a tactical advantage. To the extent that theycould execute the cycle two or more times faster than their opponents could complete one, they wouldactually increase the opposition's confusion about the competitive situation to such a degree that theopponent's efforts might totally collapse. The accompanying figure provides a detailed picture of the O-O-D-A loop.

It's worth examining these steps in somewhat more detail.

Observe

Observation, the first step in the O-O-D-A loop, is a search for information. The information that shouldbe sought is, first and foremost, the nature of unfolding circumstances-the tactical situation. Only slightlyless urgent is what Boyd called outside information. This could include the environment; the behaviorand tendencies of oneself and one's opponents; the physical, mental, and moral situation; and potential


allies and other opponents. [4:62] It must be emphasized that this is not a passive step-it requires aconcerted, active effort to seek out all the information possible, by whatever means available.

Moreover, bad news is the only kind that will do you any good. [4:63] What you're looking forwhatyou can best capitalize onare data that don't fit with your current orientation, or worldview (andespecially the worldview of your opponent). It is these mismatches that offer the potential for learningsomething that your adversaries don't know, thereby creating a tactical advantage that you can exploit.

Orient

Orient is the big O in the O-O-D-A loop, as you can see from the complexity of that part of theillustration above. Notice that there are three arrows leading out of the orient block, but only one leadingin, reinforcing the notion that our orientation to the world shapes the decisions we make, the actions wetake, and what we choose to observe-what we look for-in the world around us.

Our orientation is a synthesis of multiple contributions, including cultural traditions, previousexperiences, genetic heritage, and new information based on unfolding circumstances. Thesecontributions are then analyzed and synthesized (remember the snowmobile analogy from the lastinstallment?) into a new, updated picture of realitya worldview. To the extent that a tactician orstrategist is able to synthesize a more accurate picture of reality than his or her opponent, the quality ofdecisions and the effectiveness of actions improve, sometimes dramatically. To the extent that thetactician/strategist can deny that accurate picture to the adversary, the quality of the opponent's decisionsand the effectiveness of his actions deteriorate. Boyd referred to this analysis-and-synthesis process asmany-sided, implicit cross-referencing. [4:62]

It's orientation, however, that drives everything else. The faster we can orient ourselves, the greater thecongruence with objective reality that we can make our orientation, the better and more effective ourobservations, decisions, and actions will be.

Decide

In concept, this is an explicit step, meaning a discrete, conscious activity following hard on orientation.However, Boyd also realized that intuitive understanding of the situation and one's own capabilities (thefingerspitzengefhl discussed in our first installment) makes the decision step implicit, rather thanexplicit. This is a highly desirable situation, because it speeds the cycle time of the O-O-D-A loop. Asearly as the 17th century, the quintessential samurai, Musashi, emphasized the need to practiceincessantly until this fingerspitzengefhl (not Musashi's word, obviously!) made the sword an extensionof the warrior's arm and action instinctive, without having to think about it. In other words, implicitdecision and action.

Act

The act step is largely self-evident. Action is the whole reason for going through the O-O-D steps in thefirst place. But it's crucial to keep in mind that the very action we attempt to execute will, itself, influencethe environment in which we act. The environment will change, possibly only slightly, but more likelydramatically. This change in the playing field renders our orientation, or worldview, invalid to somedegree: it introduces a mismatch between reality and our perception of it. The quicker we realize that thismismatch is developing, the sooner we can adjust our orientation to more closely approximate the newreality and act again. And this is the cyclic nature of the O-O-D-A loop.

Speed

A final word about speed. The more factors there are to consider, the more difficult it is to analyze andsynthesize them all quickly. Knowing what to focus on and what can be ignored is crucial. Speed comes


from the implicit ability to do this, rather than from the explicit step. With experience and skill, anexplicit decide step can be bypassed, and action becomes an implicit outcome of orientation, as Musashiintended. Moreover, the decision on what indicators to look for, or observe, in the external environmentalso becomes implicit (thus faster).

Conclusion

In the next installment, we'll see how the observe and orient steps constitute the heart of what Peter Sengehas called learning organizations. And the following installment will introduce the concept of systemconstraints as a means of separating what's important to synthesize from what isn't in the mass of data thatobservation produces.

The one who figures on victory at headquarters even before doing battle is theone who has the most strategic factors on his sideThe one with many strategicfactors in his favor wins, the one with few strategic factors in his favor loseshow much more so for one with no strategic factors in his favor. Observing thematter in this way, I can see who will win and who will lose.

Sun Tzu, The Art of War [1:56]

Endnotes

1. Sun Tzu. The Art of War (translated by Thomas Cleary). Boston, MA: Shambhala Publications, 1988.2. McNeilly, Mark. Sun Tzu and the Art of Business: Six Strategic Principles for Managers. NY; OxfordUniversity Press, 1996.3. Hammond, Grant T. The Mind of War: John Boyd and American Security. Washington, D.C.: TheSmithsonian Institution Press, 2001.4. Richards, Chet. Certain to Win. Xlibris Corporation. 2004.


This is the fifth of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 5

The Learning Organization:Adapt or Die!

H. William Dettmer

How can a team of committed managers with individual IQs above120 have a collective IQ of 63?

Peter Senge [7:9]

An interesting question Peter Senge poses. I've seen the phenomenon myself, and other prominentinstances abound. For example, consider an excerpt from a recent article in USA Today about DeltaAirlines:

On Monday [Delta] will launch an updated Delta.com [web]site that has streamlined features, including afocus on core consumer services such as booking trips, checking flight information, viewing itineraries,and monitoring frequent flier mileage..."This is our primary focus of our marketing for the second half ofthe year," chief marketing officer Paul Matsen said...The troubled airline hopes to cut costs by luringmore travelers to its websiteand away from its telephone reservations lines. [2]

If Delta is fishing for more customers, they're not using very persuasive bait. The day before, Delta's chiefexecutive officer, Gerald Grinstein, warned employees that cost-cutting efforts so far are not enough tokeep Delta out of bankruptcy. Wall Street was so thrilled at this news that Delta's shares immediatelyplummeted 26 percent. [1]

This isn't a unique situation. Delta has had hard times before. Other airlines (United comes to mind) havehad worse. Still other airlines (Eastern, Braniff and Pan American) have even failed to survive. In otherwords, there is no shortage of lessons out there about how not to run an airline, and at least one example(Southwest) of how to do it right. As Yogi Berra once said, You can observe a lot just by watching.You'd think that airline executives would learn something. But apparently, you'd be wrong. As GeorgeSantayana once said, those who cannot learn from history are condemned to repeat it. (There's that wordlearn again!)

The Learning Organization

In The Fifth Discipline: The Art and Practice of the Learning Organization, Peter Senge defined alearning organization as one that is continually expanding its capacity to create its future. That's anintriguing definition, but one that says more about the outcome than the process.

Senge suggests that organizations aspiring to create their futures need to be able to learn in ways thatDelta and the other airlines in financial trouble obviously haven't. The airlines are trying to survive. Butsurvival learning, also referred to as adaptive learning, while necessary, is reactive rather thanproactive. Creating futures requires what Senge calls generative learning--a horse of a distinctly differentcolor.

According to Senge, a successful learning organization satisfies five indispensable criteria: [7:6-10]

1. It practices system thinking.2. Individual employees and leaders strive for personal mastery in all their activities.


3. Employees and leaders alike have a shared mental model of the worldthe organization, itsmarkets and competitors, and environment.

4. Its leaders have a vision of where they want the organization to go.5. Team learning is central to its activities and success.

Senge maintains that systems thinking and team learning are incomplete without shared vision, personalmastery, and mental models. I can't dispute that. But for the purposes of this discussion, we'llacknowledge the importance of the middle three and focus on the first and last.

Team Learning: What is it?

The concept of teams inherently assumes that the coordinated efforts of many are more effective than theisolated effort of any individualor even a collection of individuals. Anyone who has listened to a goodsymphony orchestra or watched a world-championship sports team intuitively understands this.

Organizations are composed of teams. In small companies, a single team may be the organization. Largerorganizations may be comprised of many discrete teams. Either way, the concept of team learning issomewhat of a non sequitur. Since team is an abstract classification of a group of individuals, it's a littledifficult to understand how learning can occur at an abstract level. Individuals can learn, and if a group ofindividuals that don't constitute a team learns the same lesson, it's difficult to justify that team learninghas occurred.

I submit that the concept of team is inherent in how its members operate and interact with one another,not in how they learn. Senge himself makes the following observation:

"Team building" exercises sent colleagues whitewater rafting together, but when they returned home, theystill disagreed fundamentally about business problems. Companies pulled together during crises, and thenlost all their inspiration when business improved. [7:15]

When individual faces on the team (or in the company) change, expertiseprevious learningis residentonly in the remaining individuals, whether they are executives, managers, supervisors, or line employees,not in the team. Any learning subsequently transferred to new team members comes from individuals, not"the team."

Collective learning occurs at multiple hierarchical levels: individual, group, organizational, societal. Witheach increasing level of complexity, the challenge of learning (and institutionalizing that learning)becomes more difficult. It requires more conscious, concerted effort, and sustainability at the organizationlevel is uncertain at best.

This kind of learning is usually driven by one person (or a few committed individuals). Individuallearning becomes team or organizational learning only when leaders institute a conscious efforteitherby personal example or by directed policyto seek out new information that could potentially change thenature of the operating environment, or the interactions of those who operate within it. In other words,establishing effective organizational learning is a responsibility of leadership.

Team Learning Versus Teamwork

The point here is that the operative word is learning, not team. The important activities associatedwith learning are capture, retention, recall, and applicationin other words, how the learning is used toenhance teamwork. The distinction is important, because in the final analysis, all that is important fromthe team perspective is that team members recognize the need to aspire to learn (individually), to sharewhat they've learned with other members of the team, and to internalize themselves the learning of othersthat is shared with them.


So, if learning occurs at the individual rather than at the team level, where does the team concept fitinto the scheme of things? Effective teams are like well-oiled, finely-tuned machines. The variousmembers work seamlessly with one anothervirtually without friction. This doesn't happen naturally.It requires concerted effort and practice, practice, practice. In 1645 Miamoto Musashi, the prototypicalsamurai warrior, wrote A Book of Five Rings in which he described what it took to become a samurai:"Practice is the only way that you will ever come to understand what the Way of the warrior isabout...Words can only bring you to the foot of the path." [5:94]

The team learning that Senge refers to [7:9] is not functional expertise. It's composed of two distinctlydifferent domains: teamwork and systems thinking.

We've already touched on the idea of teamwork in this installment, and if you recall, we've seen it earlier,too, in the second installment, Business and the Blitzkrieg. Remember the essential tenets of theblitzkrieg: Einheit (mutual trust), fingerspitzengefuhl ("fingertip feel"), auftragstaktik (moral contract),and schwerpunkt (focus point)? [6:52-58] Trust and the moral contract are the bedrock upon whicheffective teamwork is built, and they must be learned. They may be introduced to individuals, but theycan only be learned as a team.

What about fingertip feel and the focus point? The former is equivalent to Senge's criterion of personalmastery. And the focus pointschwerpunktrequires a systems thinking perspective, another key Sengecriterion.

Systems Thinking: The Key to Effective, Efficient Teamwork

Systems thinking must also be learned on an individual basis, but it must be applied by teams to beeffective. Whether that team is a small, cohesive unit or a large organization, or even society as a whole,systems thinking is a team function in successful organizations. (Refer to the first installment, SystemsThinking for a more detailed review of systems thinking.)

How does one (or an organization) apply systems thinking? In the last installment, Sun Tzu and the O-O-D-A Loop, we examined the maneuver warfare philosophy of John Boyd and its elegantly simpleexpression, the O-O-D-A loop. [3:190] The O-O-D-A loop has direct impact on both individual andorganizational learning.

Observation and Orientation

Recall that the first two O's in O-O-D-A stand for observe and orient. [3:163-164] Their relationship toorganizational learning is crucial.

According to Boyd, the observation step is a process of gathering information, from both within andwithout. This information can come from a variety of sources: the media, research, direct observation,experimentation, or clandestine intelligence activity, to name just a few. What are the potential targets ofthese activities? Generally, they fall into three classifications: our own operations, the actions andactivities of others (e.g., competitors), and the external environment (e.g., politics, economics,international developments, technology advances, catastrophic events, etc.).

Observation might be characterized as situational awarenessan aviation term that means payingattention to everything that's going on around you. But obviously at some point paying attention toeverything indiscriminately can lead to sensory overload. Leaders and teams need a way of separatingwhat's important from what isn't; otherwise, they can drown in data.

This is where orientation comes in. The orient step can be described as a process of interpretation andsynthesis. (Refer to the third installment, "Analysis and Synthesis.") By analysis and synthesis, the


separation of the important from the trivialand the integration of the important parts into a usefulwholetakes place.

Boyd described orientation as one's "world view," or how we visualize what's going on around us. Inother words, our understanding of the world, how it affects us, and how we affect it. To the extent that ourperception of the world actually matches reality, we're confident in our ability to function effectively in it.To the extent that reality diverges from our view of how things are, or ought to be, we experiencedifficulty and confusion, which normally show themselves as failures.

How do we come to our orientation (world view)? Boyd suggests that it's the integration of many factors:cultural traditions, previous experiences, our own analysis and syntheses, new information, and even ourgenetic heritage, from which we derive our psychophysical skills. [3:189]

The chief problem: people's world view becomes entrenchedstaticwhile at the same time reality isanything but static. To the extent that there is a mismatch between an organization's orientation andreality, policies or practices based on that orientation become increasingly invalid or even irrelevant.Performance deteriorates and failures occur.

Such failures are hard to miss, even by busy leaders and manages. And naturally, they try to correct theseproblems. In other words, they react to a deteriorating situation. But inevitably, without a systemsthinking perspective, these reactions are based on the aforementioned invalid policies or procedurestheresult of an entrenched world viewso those reactions are often not effective. They may even exacerbatean already unfavorable situation. As reality diverges further from the organization's orientation, reactionsbecome progressively less effective.

The Solution

The solution should be obvious: make a concerted effort to seek out new information (observe), then tryto fit it into our world view, adjusting (orient) the world view as required to logically accommodate thenew information. Done properly, effective orientation reduces the mismatch between perception andreality, pointing leaders toward revising policies and procedures that are more effective in the real,competitive world.

Richards points out that since what you're looking for is mismatches, a general rule is that bad news isthe only kind that will do you any good. [5:63] What this means is that we must be actively gatheringinformation, looking for mismatches between it and our orientation, and adjusting our world view, andthe policies that spring from itand do this faster than our competitorsin order to gain tactical or evenstrategic advantage. Thinking about all this "learning business," is it clear now how Delta, United,American, and the other airlines have failed to observe and orient properly?

So, how is your organization doing at learning?

You live and learn. Or you don't live long.Lazarus Long [4]

The ability to learn faster than your competitors may bethe only sustainable competitive advantage.

Arie de Geus [7:4]

Endnotes

1. CEO's cost-cutting memo sends stock into dive, USA TODAY, Thursday, July 28, 2005, p. 3B.2. Delta hopes fliers will flock to new web site, USA TODAY, Friday, July 29, 2005, p. 6B.3. Hammond, Grant T. The Mind of War: John Boyd and American Security. Washington, D.C.:The


Smithsonian Institution Press, 2001.4. Heinlein, Robert A. The Notebooks of Lazarus Long (illustrated by D.F. Vassallo). San Francisco:Pomegranate Artbooks, 1995.5. Musashi, Miamoto. A Book of Five Rings (Victor Harris translation). London: Allison and Busby,1974.6. Richards, Chet. Certain to Win:The Strategy of John Boyd Applied to Business. Xlibris Corporation,2004.7. Senge, Peter. The Fifth Discipline: The Art and Practice of the Learning Organization. NY:Doubleday, 1990.


This is the sixth of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 6

Systems and Constraints: The Concept of Leverage

By H. William Dettmer

Give me a lever long enough and a place to stand, and I can move the world.Archimedes, 287-212 BC

If he didn't actually discover it, Archimedes certainly popularized the concept of leverage. In the thirdcentury BC, he designed war machines exploiting the lever for the armies of Greece in their pursuit ofempire in the Mediterranean. As the quotation above implies, an understanding of leverage can enableone to apply force to something far out of proportion to one's individual strength.

The concept of leverage applies to systems, tooparticularly to organizational systems. But before wesee how, let's revisit the concept of a system.

Deming characterized a system as a network of interdependent components that work together toaccomplish the aim of the system. [1:50] As soon as we acknowledge the idea that a system is composedof multiple component parts, a question immediately arises: Are all the components equally important, orare some more instrumental than others in striving for the goal of the system? In most organizations,people act as if all components are equivalent. For example, everybody is considered an "equal memberof the team." But is this really the case? Does every component contribute equally to the system'ssuccess? As George Orwell observed in his classic allegorical novel, Animal Farm, "all animals areequalbut some are more equal than others." [5:Ch.10]

The Pareto Principle

In 1906, Vilifredo Pareto, an Italian economist, observed that 80 percent of Italy's wealth was owned by20 percent of its population. [6] In the 1930s, Joseph Juran observed a similar relationshipwhat hereferred to as "the vital few versus the trivial many." Though he didn't cite Pareto in particular, hisobservation of the "80/20 rule"meaning 20 percent of a system is responsible for 80 percent of itsresultsbecame known as Pareto's Principle. Howard Gardner uses the Pareto Principle as a teachingexample, and in the process, he points out that "it is important to be judicious about where one placesone's efforts..." [2:9]

The wisdom of the Pareto Rule is generally accepted. What is less commonly understood is the keyunderlying assumption behind it, which Gardner hinted at and Orwell said somewhat more explicitly: notall of the system's components are equally important in achieving its goal.

The Concept of a System Constraint

All systems, whether open or closed, are limited (or constrained) in some way. Organizational systems areno exception. What, exactly, is a system constraint? It's some factor that limits what the system canachieve. Were it not for this limiting factor, the rest of the system might be able to achieve much more inrealizing its goal. The limiting factor may be internal or external to the system. It may be a physicalcomponent, a condition, or an imposed policy of some kind. Whatever it is, however, it does frustrateefforts from within the system to achieve better performance.


Goldratt has characterized constrained systems as chains, and a system's constraint as the weakest linkin that chain. [3:53] Conceptually, this is an adequate analogy, but it does tend to imply a linear nature ofprocesses that might oversimplify some systems. The important point of the analogy, however, is thatsome identifiable factor or component restricts the system's ability to perform.

The System Constraint: An "Archimedes Point"

Let's synthesize a few concepts. The first is the idea of a system constraint, or limiting factor. The secondis the Pareto Principle20 percent of the system is responsible for 80 percent of its results. And the thirdis the mental model of a system as a chain with one weakest link. (By definition, there is only one in achain, or we'd have to call it only a weak link, not the weakest link.)

The hybrid result might be something like this. Since systems are composed of many interdependentparts, all working toward a common goal, and since the 80/20 rule generally applies to most systems, itfollows that not all system components are equally capableor equally crucial to the success of thesystem. And since the least capable part of the systemthe "weakest link"determines the maximumperformance of the whole chain, it follows that this weakest link (the system constraint) should representan "Archimedes Point"a leverage point that if force is properly applied, offers the greatest potential forsystem performance improvement.

The Myth of Efficiency

According to the Pareto Principle, 80 percent of a system's performance results from only 20 percent ofthe system. But E.M. Goldratt, widely credited with conceiving constraint theory, suggests that the ratiomight be more like 99-to-one. [3:53] In the early 1980s, when he was focusing almost exclusively on theapplication of constraint theory to manufacturing, Goldratt articulated nine principles for optimizingproduction technology (OPT). [4] While they refer to bottlenecks rather than constraints, three of theseprinciples have significant implications for systems thinking:

1. The level of utilization of a non-bottleneck is not determined by its own potential but by someconstraint in the system.

2. An hour lost at the bottleneck is an hour lost for the total system.3. An hour saved at a non-bottleneck is a mirage.

If we substitute the word constraint for bottleneck, these three principles make a powerful statement aboutefficiency in systems. Recalling that the system's constraintthe "Archimedes point"representsPareto's critical 20 percent (or, as Goldratt maintains, the critical one percent), the implication of the firstprinciple, above, is that efficiency really doesn't matter much in 80 percent (or 99 percent) of the system!The third principle, concerning the insignificance of saving time at a non-constraint, reinforces this point.The second principle, concerning the criticality of efficiency at the system constraint, is the converse ofthe first and thirdit emphasizes the importance of ensuring efficiency at the system constraint.

The conclusion we can draw from this discussion of the Pareto Principle, leverage points, and non-constraints is crucial in simplifying management's primary job: ensuring overall system success. It's thatwe must worry about efficiency really at only one point in the system: the constraint or leverage point.The efficiency at non-constraintsalmost all of the rest of the systemmatters only when a non-constraint's inefficiency puts it in danger of becoming the system constraint.

Consider how important this could be for overstressed managers. It's not necessary to watch everything inthe system with equal attention or intensity. In other words, when the system constraint is known, only avery few key metrics must be closely monitored to ensure system success. And by extension, only a fewkey nodes of the systemin most cases just onerequire rapid response to deviations or variances. Byfocusing on the critical few at the expense of the trivial many, the quality of management improves andthe probability of system success increases.


Breaking Constraints: How Much Improvement?

What is required to actually increase the performance of a system? Clearly, based on what we've seen sofar, efforts to do this should be aimed at the "Archimedes point"at least in the short term, or it's likelythey'll be wasted. But how much system improvement can we expect?

Say, for example, we know that our system constraint is the capability of the sales department. If wedouble the size of the sales force, can we expect to see overall system performance double? Possibly insome circumstances, but only up to the level of the next constraining factor. If the production process hadbeen only 80 percent utilized before the sales force was doubled in size, the increase in systemperformance could be no more than 20 percent, at most. The production process capacity would constrainsystem performance before all of the added sales capability could be effectively used.

So there's another lesson here: when a system constraint is broken, the system's performance improves,but only up to the level of the next most restrictive factor. That factor becomes the new system constraint,which brings up still another lesson: it's not possible to completely eliminate all constraints, so thesystem's leverage point moves every time a constraint is broken. Consequently, it's crucial for systemleaders to know where the system's leverage point lies, where it will move to when the system's constraintis broken, and what the best choices of action are for maximizing the leverage at that new point.

Five Focusing Steps: A Prescription for Maximizing System Performance

E.M. Goldratt created a five-step process for managing system constraints: [3:58-63]

1. Identify the system constraint. Determine the factor that most limits the system's ability to perform.This factor could be internal (a resource, knowledge or competence, financial condition, or policy). Or itcould be external (market demand, competitive environment issues, materials and suppliers, orgovernment regulations and laws).

2. Decide how to exploit the current constraint. What action is required to wring the most efficiency andeffectiveness from the current leverage point? This action will differ depending on what that limitingfactor is. Sales constraints require different actions to break than production or supply constraints.

3. Subordinate all other parts of the system to the exploitation of the current constraint. This is a short-or medium-term tactic. The objective is to maximize system performance while working on a longer termstrategy to break or eliminate the constraint from its current location. It requires all non-constraintsallelements of the system other than the leverage pointto subordinate (or sacrifice) their own efficienciesin the interest of maximizing the efficiency of the leverage point. In other words, this is the tacitrecognition that the Pareto Principle applies to all systems. It's pertinent to mention that exploitation andsubordination normally don't require the expenditure of more moneyusually the only thing required isto change the way current assets or resources are used.

4. Elevate the constraint. "Elevation" in this case means to increase capacity. Whether that meanspurchasing more equipment, hiring more people, or expanding facilities, elevating the capability of theleverage point requires spending more money. But notice that this does not happen until after maximumsystem performance has been realized through exploitation and subordination. This is where many(most?) organizations make a serious mistake of omission: they ignore the opportunities to wring themaximum performance out of their existing leverage point before they run out and spend more money(sometimes a lot of money!) on more physical capacity.

5. Go back to the first step. It's possible that the exploit and subordinate steps may change the leveragepoint. But if they don't, the elevate step certainly will. Thus, leaders must be constantly on watch for ashift in the leverage point from one point in the system to another. Knowing that in different locations, theleverage point requires different tactics for exploitation and subordination, it's absolutely critical for


leadership to actively search for a shift in leverage point location and change their system improvementtactics accordingly.

Cycling through these five Focusing Steps should be a continuous process for all systemsa never-ending systemic continuous improvement process. This is the only way to ensure that a system isperforming to its highest potential levels.

Summary and Conclusion

All systemswhether commercial, government agency, not-for-profit, or socialare constrained in someway. That constraint represents a leverage point in each system, a point at which a measured amount ofeffort will produce a disproportionate benefit to the system. But a system constraint exists with non-constraints in a Pareto Principle-type relationship: there are far fewer leverage points (probably only one)than non-constraints. Capitalizing on this knowledge requires the application of a structured, repetitivecontinuous improvement processthe Five Focusing Steps.

In our next installment, we'll begin a systematic approach to system management by exploring a logicalway to analyze complex systems.

The only things that evolve by themselves in an organization are disorder,friction, and malperformance.

Peter Drucker

Endnotes

1. Deming, W. Edwards. The New Economics for Industry, Government, Education. Cambridge, MA:MIT Center for Advanced Engineering Study, 1993.2. Gardner, Howard. Changing Minds: The Art and Science of Changing Our Own and Other People'sMinds. Boston: Harvard Business School Press, 2004.3. Goldratt, E.M. The Haystack Syndrome: Sifting Information Out of the Data Ocean. Great Barrington,MA: The North River Press, 1990.4. Robert Lundrigan, "What is this thing called OPT?", Production and Inventory Management, SecondQuarter 1986.5. Orwell, George. Animal Farm. (http://www.online-literature.com/orwell/animalfarm/)6. http://management.about.com/cs/generalmanagement/a/Pareto081202.htm


This is the seventh of a series of 12 articles on systems thinking, a way of understanding complexorganizations and society offering significant promise for improving the leadership and management of


Part 7

Logical Thinking: The Categories of Legitimate ReservationBy H. William Dettmer

Most people make decisions based on emotional rather than logical reasons.Only after they've decided emotionally, perhaps even unconsciously, do theylook for rational support for their decisions.

Unknown

W. Edwards Deming maintained that real, lasting improvement was not possible without profoundknowledgeof one's system. In order to achieve that level of knowledge, Deming said, it was critical tohave a thorough understanding in four major areas: [2:96]

Systems Theory of Knowledge Variation Psychology

This is a well-known taxonomy. Over the past two decades or more, the quality community has leanedvery heavily on the variation aspect. Deming himself in later years emphasized appreciation for a systemand psychology. But beyond saying bring data, few practitioners of continuous improvement haveindicated a real understanding of the second bullet: the theory of knowledge.

Epistemology

Another term for theory of knowledge is epistemology. Even people who are even familiar with the wordaren't clear on its meaning. Epistemology is the branch of philosophy that studies the nature ofknowledge, its presuppositions and foundations, and its extent and validity. [6] In other words, how do weknow what we know about the world we live in, our part in it, and the interactions between ourselves andothers?Why is the issue of epistemology important? Because our understanding of what we know and how weknow it is vitalcrucial, evento the quality of our decisions in life. And everybody makes decisionsdaily, sometimes very important ones.

The Three Decision-Making Conditions

Anybody making a decision generally does so under one of three mutually exclusive conditions: certainty,uncertainty, or risk.

If you know that a particular outcome of your decision is a sure thing, you'll be making your decisionunder a condition of absolute certainty. For example, if you're contemplating jumping off the top of a 12-story building, you can be absolutely certain that, barring divine intervention, the sudden stop at the endwill kill you. Decisions like this are usually very easy to make, because you have extremely highconfidence in the inevitability of the outcome.

Some kinds of decisions can be evaluated by mathematical probability. These are considered decisionsunder a condition of risk. The typical example of decision under risk is gambling, say poker or blackjack.(Gambling is really a misnomer. It's certainly no gamble for the house, which is really playingstatistical probability over a large number of individual instances.) Decision under risk depends on beingable to assign, with confidence, a mathematical probability to every possible outcome. Obviously, it'spossible to determine that probability for, say, taking a card or passing at sixteen in blackjack.


(Statistically, seventeen is the magic number, the point at which your odds of winning are better whenyou stay with what you already have rather than taking an additional card.)

Decision under uncertainty is the tough nut to crack. Unfortunately, this is the situation in which mostpeople find themselves most oftencertainly in the decisions that matter most: a person's career, a majorfinancial investment, whether to marry a particular person, or a business decision. Making decisionsunder conditions of uncertainty means that there are serious doubts about the outcome and that you can'teffectively assign discrete mathematical probabilities to the possible outcomes. In other words, it's worsethan a crap shoot. If most of our decisions are made under uncertainty, how can we possibly make them,particularly the critical ones, with any degree of confidence that we're doing the right thing?

Intuition

One way is to use intuition. Everybody has heard of intuition. Many people absolutely depend on it tomake the right decisions. Intuition is the act or faculty of knowing or sensing something without the useof rational processes. In other words, immediate cognition or a perceptive insight. It can also beconsidered having a sense of something not evident or deducible, maybe an impression. [6] When thehair on the back of your neck stands up, it may well be your intuition telling you that something is notquite right. It serves some people very well. But unless you're reliably clairvoyant, intuition can lead youwrong as often as right.

Mathematical Models or Simulations

One of the most seductive aids people (and businesses) use to help them make decisions is models orsimulations. A number of companies (particularly software companies) have made a lot of money sellingthe idea that a computer is better at making complicated decisions than humans are. When these are fairlyroutine decisions, this is certainly truecomputers can usually make such decisions much faster andmore reliably over time than humans, especially for repetitive decisions.But models and computer simulations have a major shortcoming: they require that all the relevantvariables in any decision be mathematically quantifiable or at the very least, that mathematicalprobabilities be assignable. Deming once said, ...the most important figures that one needs formanagement are unknown or unknowable. [1:121] He recognized that many important things that mustbe managed can't be measured. In other words, you can't measure everything of importance tomanagement, but you must still manage them.

Computers and simulations are capable ofgreat precision, but as Goldratt once observed,it's often better to be approximately correctthan precisely wrong.

Making Better Decisions UnderUncertainty

Decisions under uncertainty will alwaysbe...well, uncertain. But there are ways toreduce uncertainty to a reasonable level. Oneapproach is to combine verifiable facts orevidence, to the extent that it is available, withlogically verifiable causality. Most people arecomfortable with the idea of basing decisionson facts or evidence, but they're less certainabout how logic and facts combine to providethe best available basis for decision making.

In the mid-1950s, Luft and Ingham conceivedof the Johari window to help explain how members of groups learn to interact. With a little adaptation, the


Johari window can be used to explain the state of our knowledge about the world around us. (Figure 1)[5:85]

The upper left pane of the window (A) represents the domain of our certain knowledgewhat we know,and know that we know. The lower left pane (B) represents identified gaps in our knowledgewhat weare aware of that we don't know. The upper right pane (C) represents knowledge that we possess, but thatwe are unaware of, or the significance of it. And the lower right pane (D) is that domain of knowledgethat we don't know, and we're ignorant of our own ignorance.

Our search for facts or evidence seeks to move the contents of B to A. Blue sky research seeks toreduce the size of D and move some of it to A as well. Our search for relationships among known factsseeks to move some of the contents of C to A. But facts alone are not of much use unless and until theyare connected in a causality relationship.

Rules of Logical Causality: The Categories of Legitimate Reservation

The validity (or invalidity) of the causal connections among facts, hypotheses, and conclusions isgoverned by a finite set of rules called the Categories of Legitimate Reservation (CLR). [4: 34-56] Mostof these have their roots in Aristotle's logical fallacies. [3:57-58] There are eight of these rules:

1. Clarity (the complete understanding of a word, idea, or causal connection)2. Entity Existence (the verifiability of a fact or statement)3. Causality Existence (the direct-and-unavoidable connection between a proposed cause and a

particular effect)4. Cause Sufficiency (complete accountability for all contributing, dependent causes in producing an

effect)5. Additional Cause (existenc

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