Systems Thinking – BONUS

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What It Is

Systems thinking is a way of understanding reality that emphasizes the relationship and connections among a system’s parts, rather than the individual parts themselves.[1] 

For example, consider a person with a cold. While you can treat the symptoms, systems thinking would require that you look at the entire person, and try to understand the root cause of the illness.  


Why It Matters

If you have ever felt like you spend far too much time putting out little fires at work, systems thinking may allow you to fix the underlying issues and prevent the fires from ever occurring. A key insight to systems thinking is understanding that systems, to a large extent, cause their own behavior.[2] You can try to fix all the problems that surface, but unless you change the underlying behaviors and patterns, the same problems will continue to surface. Seen more positively, if you are able to setup a system to produce satisfactory results, then success may take less effort than you would expect. 

If you have heard of “lean” production, you have probably also read about Toyota’s production system. In short, Toyota revolutionized the way that cars are produced by changing multiple links in the production process. The entire process became faster, cheaper, more reliable, and more efficient. It took American car manufacturers many years to begin to catch up. What you may not realize, however, is that systems thinking underpins the Toyota system, or any lean management for that matter.[3] Understanding the entire system, and how the individual links affected all the others, was critical to improving the process.


Getting Started

Systems thinking is very different from the way that most of us have learned to think.  But if you embrace systems thinking, you may begin to see yourself surrounded by – and part of – many systems. Below are the steps you should follow in order to begin thinking as part of a system.

    • Step One: Understand what systems are.
    • Step Two: Understand stocks, flows, and feedbacks.
    • Step Three: Apply these ideas to your company.


Step One

Many systems will be obvious, but the first step to thinking in a system is understanding exactly how a system works. Donella Meadows, a pioneer in systems thinking, defines a system as “a set of things – people, cells, molecules, or whatever – interconnected in such a way that they produce their own pattern of behavior over time.”[4] A key point here is that systems have inherent behaviors that produce certain results. All systems have three things:

  1. Elements
  2. Interconnections
  3. A function or purpose


To illustrate this, an example of a system could be an old city neighborhood, in which people know one another and communicate regularly in a social system. The people, buildings, and stores are the elements; the relationships are the interconnections; and the purpose may be to create a safe environment to raise children, or just a sense of community. On the other hand, a brand new apartment block is not yet a system, not until new relationships form and a system emerges (that is, not until the interconnections form).


Step Two: Understand stocks, flows, and feedbacks.

Once you see something as a system, the next step is to identify its stocks, flows, and feedbacks

    • Stocks are the foundations of systems. They are the elements that you can see, feel, count, or measure. It can be the water in a sink, the data on a server, the people at your company, or the money in your bank account.
    • Flows are the actions that change the stocks of a system. For the examples above, the amount of water in a sink (stock) changes depending on how much water is poured in or drained out (flow); the money in your bank account (stock) changes as a result of your spending or saving (flow).
    • Feedbacks or feedback loops, are mechanisms that create consistent behavior in a system. There are two kinds of feedback loops, stabilizing loops and runaway (or reinforcing) loops.
      • Stabilizing Loops: If you’re a coffee drinker, you can see your habit as a stabilizing loop. The stock in this case is your own energy level; the flow is the rate at which you get tired, or get your energy back. Since you cannot nap at work, as your energy declines, you drink more coffee to give your energy levels a boost. In other words, drinking coffee is meant to replenish your energy levels (stocks). Since the action is meant to keep your energy levels fairly even, this is a stabilizing loop.
      • Runaway Loops: These loops can be good or bad. A simple example of this is your own bank account. The more money you have in there (stock), the more interest you will earn (flow). The more interest you earn, the more money gets deposited in your bank account. And so on, and so on. This loop will continue until a different behavior is introduced.


Step Three: Apply these ideas to your company.

Begin to think about how your own company is a system, and how existing loops may be influencing behavior. For example, how is the company culture influencing behavior? And how is that behavior then influencing the culture? 

A good example of how systems thinking can apply to a company is what’s called “drift to low performance.” Many company’s measure performance against past results. If an employee boosts his or her sales compared to last year, he or she are rewarded. If sales have been declining, though, even slight improvements are seen as positive.  However, this degradation in performance then leads to a degradation in company goals, as the yardstick gets lower and lower. There are two antidotes to this type of runaway loop. Keep standards absolute, regardless of performance, make goals sensitive to only the best performance of the past, not just the past year or poor performance. 

Another example of how systems thinking can benefit a business can be found in energy efficiency. Upgrading light bulbs one at a time may not seem worth it, but savings can really add up when you tackle multiple projects at once, as improvements in one area can positively affect other areas. For example, sealing leaks in your air ducts can not only make your HVAC more efficient, but also lower your electric bills while making your office more comfortable for your employees. More comfortable employees may be more productive, which can increase their performance, which can boost revenues, and more revenues can fund retrofits for a more comfortable office.


Case Study

Systems thinking can be applied to many industries. The Lean Enterprise Research Center in Wales applied systems thinking to the public sector in 2010, and carefully tracked performance. The full report can be found here. A brief summary is below.

Summary of Neath Port Disabled Facilities Service: A disabled care service faced very high demand, and very slow end-to-end times in delivering its service. With an external team of consultants, the facility took a long look at all the elements in its system – its employees and training, its physical facilities, its processes, etc. – as well as the interactions between elements. It took some time for all employees to embrace this new way of thinking about how to perform daily operations, but as people came on board with systems thinking the organization was able to make deep changes to its services. As a result of the changes made to the system (which were also changes to the underlying behaviors of the system) the organization saw improvements across the board.

A key point in this case is that employees began by trying to speed up the rate at which they processed customers. But after applying systems thinking, they began to address how they could prevent some of those needs in the first place, which resulted in much faster end-to-end times. In other words, before systems thinking they were trying to treat the symptoms; after, they treated the causes.


Resources for More Information



Systems thinking allows you to view things not just as separate entities, but as interconnected parts of a system. With this understanding, businesses can become more efficient, more reliable, and more profitable.  


[1] “What is Systems Thinking?” Pegasus Communications,, accessed 7 August 2013.

[2] Donella Meadows, Thinking in Systems: A Primer (London: Earthscan, 2009), 1-2. Preview available at:

[3] John Seddon and Simon Caulkin, “Systems thinking, lean production, and action learning,” Action Learning Research and Practice 4, no. 1 (2007). Abstract available at:

[4] Donella Meadows, Thinking in Systems: A Primer (London: Earthscan, 2009), 2. Preview available at:

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