University of South Wales
Business School
Strategic Systems Thinking (ST4S39-V1)
Lecturer: Christodoulos Kakouris
Literature Review
“Systems thinking essentially seeks to understand phenomena
as a whole formed by the interaction of parts.” (Stacey, 2011)
Itai Madzivanyika
21 July 2017
1 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Contents
Introduction........................................................................................................................................................3
Approaches to Strategic Thinking, System Thinking and Complex Adaptive Systems......................................4
Systems Thinking...............................................................................................................................................4
Complexity Perspective: New Ways of Thinking about Strategy?.....................................................................6
Complex Adaptive Systems: Modelling Complexity..........................................................................................7
The Practice Perspective.....................................................................................................................................8
Conclusion..........................................................................................................................................................9
References........................................................................................................................................................11
2 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Introduction
With the increase in globalisation and the insatiate demands by the customer, organisations are faced
with myriad challenges of formulating the suitable business model for satisfying the customer. The
endogenous (internal politics, human capital capability) and exogenous (competition, regulatory
framework, buying patterns) organisational dynamics determines the extent to which the organisation
leaders engage themselves in formulating necessary change. To address the novel demands that arise
from time to time strategic decision makers apply strategic thinking and systems thinking to adapt to
capricious changes in the business demands.
During the execution of these strategies a social discourse takes place. The norms, repetitive pattern
of activities, tools employed form a strategic intend. Strategy in this case looks at long term goals
which are aimed at meeting the needs of the customer which are unparalleled by the competitors.
The organisation has to continuously scan at the ever changing business environment and adjust to
the endogenous and exogenous shocks that arise from time to time. In this analysis system thinking
and strategic thinking will be looked into and way they are employed by strategic decision makers
when they face a plethora of situations to deliver superior value to the customer. As described by
Ackoff (2015) a system refers to individual agents which work to accomplish the purpose as a whole,
with no agent having standalone effect on the whole. The agent functions to contribute to the whole
hence systems need to be analysed by looking at the combined effect of the individual agents.
Strategic thinking looks at the whole value chain hence a system as a whole from the planning cycle
of the methodologies needed to deliver superior value to the customer than that of the competitors.
Over the years the subject has evolved to adequately address the complexity associated with the
agents involved in the function of the system as whole. This analysis seeks to provide the link
between systems thinking, complex adaptive systems and strategic thinking in the performance of the
whole as used by strategists in a business setting for the benefit of the organisation as a whole.
3 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Approaches to Strategic Thinking, System Thinking and Complex Adaptive Systems
In analysing systems of work it is important to highlight that organisation do not exists as standalone
units or systems. They interact with other systems in an ecosystem for mutually beneficial
relationships. If relationships cease to accomplish the intended goals such relationships are severed
and new relationship are formed. The intermittent disturbance results in organisations adjusting to
suit the ever changing business environment. As Mitleton- Kelly (2001 p. 3- 4) highlights the co-
evolution which takes place and adaptation to a new space of possibilities. Mitleton-Kelly (2001 p.4)
noted that,
“Within this perspective no individual or organisation is powerless – as each action
permeates through the intricate web of inter-relationships and affects the ecosystem’’
The above statements highlights the organisation fit in a complex web of relationships. Each new
action by the individual or organisation introduces a disturbance which results in other individual or
agents in the system adjusting to a new web of relationships. For an organisation to fit in this
network of intertwined ecosystem it has to look into its operations from a holistic approach for
example in the beer industry which I work strategies are formed from inbound logistics, raw material
supply chain, manufacturing, finance, marketing, sales and distribution, waste management, research
and development. These activities and processes are aimed at meeting unmatched demands of the
customer which are a distinguishing feature from other competitors as noted by Virgo (2017). As
highlighted by Mitleton-Kelly (2001) complex adaptable human systems should be analysed
systematically to produce strategic plans which contribute to the smooth function of the whole.
Systems Thinking
Systems thinking entail the analysis of an organisation’s operations in structured way to conduct
problem solving operations and meet the demands posed by the internal as well as the external
environment. The summative interactions between individuals or departments define the
performance of the organisation as a whole. The analysis of the summed up effect can only be
analysed through systems analyses of the inter-activities. The defining effect on the organisation is
through the repetitive patterns of activity which may be modified and developed with time to suit the
ever changing environment.
4 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Ackoff (2015) uses the analogue of a car used to describe how a system works. It highlights that a
system consist of individual entities which cannot exist on their own. The individual entities function
for the holistic performance of the system. If an entity is removed and fitted to another system it is
not likely to perform since it does not fit into that system as it was not designed with the
consideration in which the other system functions. Individual parts do not have an autonomous effect
to the system as a whole. In systems of work the top management do not conduct the operations in
isolation they have to sell the idea to the system of the whole so that individual efforts are directed
towards the performance of the organisation as whole. This analogue is used in systems design so
that the individual parts dovetail with other parts for the summative performance of the system as a
whole. In work systems the individual departments are supposed to perform by harmonising entity
goals with the organisation goals for the summed effect of the organisation as a system. Improving
the performance of an individual department in isolation does not contribute to the summed effect of
the achievement of the organisation hence the need for concurrence rather than of improvement of
departments to improve organisational performance. (Virgo 2017)
In my firm systems thinking is used to relate the follow of activities from procurement, inbound
logistics, manufacturing, sales and distribution, research and development. In conducting problem
solving the root causes are identified by critically analysing the value chain such that systematic and
human issues can be looked at differently. The countermeasures then point to ways of curbing future
recurrence from a systemic point of view. In my organisation we utilise various control systems for
checks and balances on our operations. We have Safety, Health and Environmental (SHE) systems
such as ISO14001:2004, OSHAS 18001:2007, and quality management systems (ISO9001:2015).
The success of these systems hedge on the fact systems thinking is understood from the shop floor
and the duties of everyone are spelt out for the success of the system as whole. Whilst individual
successes are recognisable the overall effect which the company is assessed on by external auditors
depends on the collective effort of the every stakeholder including services that are supplied by
external contactors.
Complexity Perspective: New Ways of Thinking about Strategy?
5 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
The importance of strategic planning cannot be underestimated. It gives a company the ability to
continuously satisfy the customers in an ever changing environment. It gives a competitive edge over
competitors and improve market share as supported by Stacey (2011 p. 264). A firm utilises the
resources it has to meet a particular need of a market segment(s). In my company one such deliberate
strategy which has been employed is the use of the Boston Consulting Group (BCG) Matrix.
Due to economic meltdown in Zimbabwe, the beer market was not spared by the crisis as such
drinkers tend to quench their thirst with traditional brews and cheap sprits. However due to the
quality issues which had bedevilled the production of the commercial opaque traditional favours
drinkers had become sceptical of the product. As such an improvement on the product was made
which made it more appealing and acceptable to the local market. A question mark was changed into
a market contender by changing the formulation, production equipment, preservation method and
hence improvement on shelf life. As I speak the traditional Chibuku brew is a market contender
acceptable to the local and neighbouring market in Zimbabwe. The contribution earnings have
increased to over 30%. This is the case of a deliberate strategy employed to improve a question mark
product as described by the BCG matrix into a market contender. It is important to note that
emergent strategy has also been used in my firm to increase the product mix by introducing
flavoured traditional beer borrowed form similar strategies to the clear beer industry. This was an
extension of the already stable demand on predecessor products to consolidate market share.
For the engineering department, maintenance strategy such tribology testing, vibration monitoring,
thermography have been deliberately introduced to match best global practises by forming external
partnerships with original equipment manufacturers (OEM). Key performance indicators are used to
benchmark key performance indicators (KPIs) with sister companies in the beer industry. This has
ensured control of maintenance activities to contain maintenance costs hence contribution to the total
cost of manufacturing. KPIs are tracked daily so that out of control parameters have countermeasures
put in place so that they are not recurrent. KPIs are reviewed continuously so that they match the
new developments that will have been introduced such as technological upgrade or increased
capacity.
6 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Complex Adaptive Systems: Modelling Complexity
Adaptive systems at work are organisational systems which function in such a way to fit to a
business landscape as highlighted by Stacey (2011 p. 264). The adeptness is to fit to an ever
changing business environment as envisaged through the development of the micro-computers and
the operating systems which has become indispensable to the work and school application today as
discussed in Stacey ( 2011 p. 265). This is also analogous to my work environment where research
and development, manufacturing, marketing, sales and distribution and finance work hand in glove
to improve products and market share superior to that of the competitors.
The emergence of the adaptive behaviour above results from feedback from the business
environment which is far from equilibrium for exploitation of a space of possibilities as highlighted
by Mitleton-Kelly (2001 p.26) The departments co-evolve and are self-referring for epistatic
interactions to fit into the business landscape by forming endogenous as well as exogenous
relationship to meet organisational goals. New products are developed and quality is improved from
feedback to both the research and development and the manufacturing team, with finance team
providing the necessary financial resources for the continuity of operations as supported by
Mitleton-Kelly (2001 p.7)
It is also important to note that external relationships are crucial for the success of the business.
Service Level Agreements (SLA) has been signed by the organisation with original equipment
manufacturers (OEM) to provide reliable backup service to machinery. To comply with national
legislation the company only distributes liquor to licensed outlets and does check to verify
compliance with the national legislation. Contract farming has also been crafted to provide critical
raw material for the beer manufacturing process to ensure reliable supply of raw materials (Virgo
2017). This is a co-evolution which has enabled my company to survive in a harsh economic
environment to ensure continuity of operations by maintaining amicable relationships which are
mutually beneficial to the organisation and its key stakeholders. Implication being the organisation
need to function as a whole and no individual part in this value chain survives or has single influence
to the whole.
7 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
The Practice Perspective
“….the essence of strategy is choosing a unique and valuable position rooted in systems of activities
that are much more difficult to match.” Porter (2015)
The above statement highlights the importance of developing a strategy which cannot be imitated by
the competitors hence uniquely associated with the originator of such a strategy. It also ensures that
there is continual revision of the customer needs.
As highlighted by Jarrate and Stiles (2010) activity research figured out that there is no standalone
method of application of strategy. Strategic option employed hinges the on stage and the depth of
detail needed to scan the competitive environment. Strategy in case implies the tools,
methodologies, practises, frameworks which an organisation employs to gain unrivalled
competitiveness which is difficult to match. Historically there have been two methodologies which
have been employed in formulating strategy which are deliberate and emergent strategies. Deliberate,
formal models are straightforward, structured and imposed on the organisation; they form a linear
hence predictable model to strategy development. SWOT, PEST, BCG and Ansoff matrices fall in
this category. Emergent models form a reflective sense making, pattern matching and puts less
emphasis on constraints and historical norms as quoted from Bharadwaj, Clark and Kulvinwat (2005)
and Weick (1995).
Traditionally deliberate and emergent techniques have been studied independently of the operating
environment which they are conducted in as quoted by Jarrate and Stiles 2010 (p. 29-3) in Johnson,
Melin and Whittington, 2003; Whittington, 2003). The migration towards a new framework of
analysis strategy brought about the strategy as practise (SAP) whose objective is tangible evidence of
how strategizing work as supported by pioneers to ( SAP) (Jarzabkowski, Balogun and Seidl 2007)
From this inference Jarrate and Stiles deduced three hybrids to strategy as a practise which are
routinized, reflective and imposed strategic methodologies. These methodologies reflect a change
from the traditional approach to the formulation of strategy.
8 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
Routinized practises just like in the traditional deliberate methodology uses the tools such SWOT,
Porter’s five forces analysis, PEST, BCG and Ansoff matrices in analysing the competitiveness of a
firm in a business environment. This technique is non-reflective and direct, the notion being the
business strategy is an extension of the current environment. In reflective practise the managers form
a strategy around how an organisation might meet or influence future challenges since there might be
operating environmental shocks. This is done through stakeholder involvement by forming
partnerships with customers and consumers. External collaboration form part of the strategy.
Lastly imposed strategy is enshrined in the leader’s perspective of the operating environment
complimenting the two other frameworks in extending competitive advantage in a stable operating
environment.
Conclusion
The top management in today’s organisation are faced with the challenge of an ever changing
environment. They have to adapt to the internal as well as external environment and continue to
provide superior value to the customer than the competitor. This can only be achieved through
analysing the system as a whole to comprehend the myriad of interactivity which define the
organisation a whole. It is only the combined effect of individual efforts which defines what the
organisation is able to achieve. No individual efforts can single headedly define the performance of
the whole organisation. Managers therefore have system thinking at their disposal to plan strategies
that define where the organisation wants to go continuously evaluate the difference between the
desired and the intended goals. Re-evaluation of the efforts is made to give either positive feedback
for the sustenance of the efforts or negative feedback for the adjustment of the efforts to drive the
organisation towards a common goal. Analysing systems as complex system of interactivity allows
managers to define and adopt patterns of behaviour (strategic practises) which propel organisations
to greater heights. Organisation need to adjust to new space of possibilities which arise due to the
ever changing environment by planning and adopting new strategies which continuously satisfy the
customer needs. The stage of strategic planning which the organisation is at determines the tools
which may be needed to analyse the business environment, with traditional approaches being used
mostly at the infancy in assessing the competitiveness of the organisation. Success of an organisation
9 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
is only defined by the integral effect of the whole organisation hence strategic planning; practice
should be aimed at improving the organisation of the whole rather than individual success credited to
the strategic practitioners. Strategic practitioners have the role to play by providing the necessary
resources for the realisation of the planned strategies. It also implies stakeholder involvement across
the whole business unit to ensure business success hence every activity is aimed at the performance
of the whole.
10 Itai Madzivanyika Strategic Systems Thinking (ST4S39-V1)
References
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