After folks start to learn the ins and outs of systems thinking, one of the next questions asked is “When can I use systems thinking in my business?”
Before I get into the answer, let’s do a quick recap of what systems thinking is and what a system is.
Systems Thinking is using a “systems” lens to look at the things that you or your business does.
In this context, a system is simply a collection of process steps, technology and/or people that are used to get something done.
All systems have key attributes.
Process steps that take you from the beginning of the system to the end.
Inputs that are used by the various process steps.
Outputs that are created by the various process steps.
One or more system products that live beyond the system (these often go to another system as inputs).
Metrics that allow you to measure the performance of the system.
Outcomes and Desired Outcomes that result from the system operating. (Desired outcomes are what you wanted. Outcomes are what you get… not always the same).
Systems thinking in your business is about applying mental models and tools to better understand and improve your business.
The Quick Answer
The quick answer to the question “when should I use systems thinking” is ALWAYS.
The key here is the second word, thinking. Systems thinking is a way for you to think differently about what it is your business does. It’s a way for you to frame what it is you do.
As long as you’re doing something… anything… you can do it through a lens of systems thinking.
As you get more and more familiar with the different concepts of systems thinking and how to apply it to your business, it will more and more become the way you think about everything in your business.
While that’s the quick answer, I realize for someone relatively new to systems thinking, that’s not a very helpful answer, so let me go into some more specific use cases on when and how to apply systems thinking to your business.
One of the best ways to use systems thinking is to solve problems in your business.
When something isn’t working right, no matter what it is or where in the business it is, taking a systems thinking approach can help you understand the root cause of what’s really happening, make improvements, and ensure that what you’ve changed has fixed the issue.
By thinking about your business in smaller pieces, you’ll gain a focused perspective on what’s happening and what’s not happening around the problem that you’re experiencing.
Using a mental model like the 5 whys will allow you to look past surface level symptoms and uncover deeper causes. This will allow you to better understand your problems which will lead to better solutions.
Scaling Your Business
Scaling is another area where systems thinking can prove invaluable to helping you and your business. Scaling is in fact how a lot of conversations start with the folks I work with one on one.
Scaling is difficult for many businesses because good systems are not in place. Having good systems means you have good processes that can be repeated over and over again. When your processes and systems are efficient, you can do more and more with what you have, i.e. scale your business.
If you don’t have repeatable processes, or if your processes are inefficient, scaling is difficult and expensive, if not impossible.
Another great way to use systems thinking is to increase your profits.
With systems thinking, you don’t even need to sell more to increase your profits (although it could be used to do that too).
One of the fundamental applications of systems thinking is to make what your business does more efficient which will lead to greater profits.
A quick sidebar on efficiency, as it’s a misused/misunderstood term that gets thrown around to mean many things in business.
Any system has key attributes including inputs, process steps, and outputs. In a system, inputs are used in process steps to create outputs. The idea is that the process steps change the inputs, making them more valuable in the form of the outputs that come from the system.
Think about a system used to make cars. You have inputs in the form of steel, rubber, glass, etc. that go into a manufacturing process that turns those raw materials into a car (the output). The car is worth more than the raw materials used to create it, and the business is able to charge extra for the value that it’s created.
Efficiency of systems is about understanding the inputs going into the system and the outputs coming out of a system. A system is made more efficient by improving the ratio of inputs to outputs. This can manifest in a few different ways –
Fewer inputs are used to make the same or more outputs.
The same inputs are used to make more outputs.
The same inputs make the same outputs but in a shorter time.
If we applied that to making cars –
Using less steel to make the same or more cars (by eliminating waste or otherwise improving the manufacturing process).
Using the same amount of steel to make more cars.
Using the same amount of steel to make the same number of cars but reducing the time it takes to make the car (requiring less labor and lower operating expenses).
In all of these cases, the ratio of inputs to outputs improves, making your system more efficient.
It could also be said that in any of these cases, the ratio of costs to revenue in your business will improve, increasing your profits.
Note that while a manufacturing example was used, this same thinking applies to any system in any business.
Designing New Products
Another way systems thinking can be applied is in designing new products.
There are a few different ways to think about this one.
First, you can think through about what system or systems your Customers will need in order to use your product. Depending on what you sell, this could look very different from one business to the next, but undoubtedly there is something being “done” with your product once the Customer has it.
Second, you’ve got to deliver your new product to the Customer. This delivery will require one or more systems to make it happen.
If you have physical products, how will you get the physical product from its place of manufacture to the Customer? Do you have distributors in the middle?
If the Customer has a problem with your physical product, how will you support that?
If your product is a service, what is needed to deliver that service? Same question if your product is digital. How will you deliver it to your Customer?
How will Customers pay for the product? If you have existing distribution and payment collection, this might be a very easy answer. If you’re moving into different types of products, you will need to build a system to facilitate Customer payments.
Any question you have about “how will I do ‘x'” when it comes to designing and building a new product can be answered with systems thinking.
Improving Any Part of your Business
The last use case I’ll cover is a general one. Anytime anything in your business isn’t working as expected, or if things are working as expected but you want things to be better, you can use systems thinking to analyze what’s happening, develop some possible improvements, and iterate through the solutions to identify what works best.
It doesn’t matter where in your business you want to make improvements. Whether it’s how you generate leads to how you do accounting. It could be how you gather feedback from Customers or how you hire new staff.
Remember that a system is how you do anything, and systems thinking can help you do it better.
I’m publishing regular articles on systems thinking on my website. Check back each week to learn more.
If you’re looking for extra guidance on how to apply this or other tools in your business, you can book a 15 minute call with me for $95 here.
If you have a bigger need, please email me and we can discuss how I can best help you Optimize for Outcomes.