“I feel an indescribable ecstasy and delirium in melting … into the system of being, in identifying myself with the whole of nature.”
JEAN-JACQUES ROUSSEAU, 18TH CENTURY PHILOSOPHER
“MAN’S MIND, ONCE STRETCHED BY A NEW IDEA, NEVER REGAINS ITS ORIGINAL DIMENSIONS.”
Oliver Wendell Holmes Sr., 1809-1894
Thinking techniques of the sort described in the last chapter – specifically, critical, strategic and lateral thinking – require a context. In fact, by developing a precise focus on ‘Think’ you are better able to gain an appreciation of the world at large and in turn, position your organization to achieve sustained profit and growth. The reason for this is revealed by two questions: Why do we need this focus on thinking, and what does it give us? The first thing we notice about the purpose of thinking is seen in the phrase ‘the world at large.’ By applying the thinking skills we have just learned to all aspects of business, including external factors and with a global perspective, we are much better able to identify and draw together relevant information and reveal new opportunities. Successful businesses cannot operate in a disjointed, separated way, with distinct and unconnected activities. It is the whole business that The matters including the external setting in which it operates. For this to happen, we need to cover the entirety of business operations, including the economic landscape at large, while also seeing the individual parts that make up the whole. Only by doing this can we fit everything together correctly and improve performance, build competitive advantage, ensure resilience and drive profitability. The time has come to merge our six Rs and critical, strategic and lateral thinking skills and enter the world of holistic business.
HOLISM: WHAT IT MEANS AND
WHY IT MATTERS
Holistic comes from the Greek term ‘holism’ which means exactly what it sounds like: Whole. According to this concept, the properties of a cohesive grouping cannot be identified or understood through their individual pieces. It is the overarching umbrella – the super structure formed by uniting the different parts – that define how the constituents behave. This notion dates back over 2300 years to ancient times. The Greek philosopher, scientist and physician Aristotle articulated the natural end point of this belief as, “The whole is more than the sum of its parts.” This view has significant implications for managing the way that individual parts of our businesses, by working together, can punch above their weight and build something that is much more than we might expect from each element in isolation.
The idea of holism, quite simply, is that when you observe the world through a holistic lens, what you see is unified and also diverse. You see how the whole structure is assembled, how all the pieces work together, and how the different parts and the whole are interrelated, with each one influencing the other. These formations are vast.
So, how should we begin to understand how large structures such as organizations, business models or strategies work: piece by piece or as a whole? Which aspect should we emphasize? Given what you have read so far, you will hardly be surprised to hear that the big picture supersedes the scope and results of the individual parts.
Why holism matters in business
So, why is there suddenly an emphasis on a holistic approach in business, and what can it accomplish? Albert Low in Zen and Creative Management explains, “A company is a multidimensional system capable of growth, expansion, and self-regulation. It is, therefore, not a thing but a set of interacting forces. When company organization is reviewed … it must be looked upon as a whole, as a total system.”
Today, medium-to-mega-sized organizations are mammoth configurations. They encompass a maze of departments, divisions, functions, products, lines of business, brands, locations and much more. Largely decentralized, companies have multiple offices, plants, satellite sites and operating units that extend across a region, country, and most likely, the globe. Each segment of the business has its own responsibilities and contributes in its own ways. Viewed individually, the parts pale in comparison to the overall effect created by an organization’s people, products and services. This clearly illustrates the principle Aristotle proposed: that the whole is greater than the sum of its parts. However, the examples given, so far, only relate to entities inside the corporate walls. This is but a shard of the holistic point of view that we are seeking to establish.
What do I mean by this? Well, businesses are fluid and success relies on Thinking Big. How big? Our scope has to be so big that it captures all the interlocking elements, interdependencies and synergies of the commercial environment. We have to see and understand the broad picture. Understanding the holistic framework and the interactions that are involved is essential. This need is so vital that it has spawned its own field of study, known as ‘systems theory.’
A SYSTEMIC VIEW
To introduce systems theory, I shall pass you over to Marilyn Ferguson, who, in The Aquarian Conspiracy (J. P. Tarcher, Inc., 1987), sums up why we have to view the business as a whole. She describes systems theory as “a related modern concept [to holism], that says each variable in any system interacts with the other variables so thoroughly that cause and effect cannot be separated. A simple variable can be both cause and effect. Reality will not be still. And it cannot be taken apart! You cannot understand a cell, a rat, a brain structure, a family, a culture if you isolate it from its context. Relationship is everything.”
If I could just defy the premise of systems theory for a moment and divide the concept into its parts, we will be able to tease out more meaning. The word ‘system’ is commonly defined as ‘a set of interacting or interdependent entities forming an integrated whole.’ Being separate and connected reveals how this theory is a formula for building, part by part, a well-functioning, interrelated entity.
Systems theory views organizations organically and studies them from a holistic perspective. To do this, it uses the following elements as a basis for analysis:
“THE SYSTEMS VIEW LOOKS AT THE WORLD IN TERMS OF RELATIONSHIPS AND INTEGRATION. SYSTEMS ARE INTEGRATED WHOLES WHOSE PROPERTIES CANNOT BE REDUCED TO THOSE OF SMALLER UNITS. INSTEAD OF CONCENTRATING ON BASIC BUILDING BLOCKS OR BASIC SUBSTANCES, THE SYSTEMS APPROACH EMPHASIZES BASIC PRINCIPLES OF ORGANIZATION.”
Fritjof Capra,The Turning Point
• It provides an interdisciplinary and multi-perspective approach that provides relevant and valuable information.
• It looks for common patterns, behaviors, properties and principles that will better inform and guide decisions.
• It identifies the configuration of parts that are connected and joined by a web of relationships.
• It operates on the assumption that all systems are dynamic and complex and interact as a structured, functional whole.
Systems theory is certainly a huge topic with a specific vocabulary and its own subsets. It views companies as ‘complex and adaptive’ organizations. They are as ‘complex’ as they are diverse and have many parts that interact both with each other and with the environment at large. And they are ‘adaptive’ by virtue of their ability to change in line with experience.
Understanding systems thinking
The perception of organizations as complex social systems that react with the environment, and modify their course accordingly, provides the basis for ‘Systems Thinking.’ This offers a holistic approach to business management, planning, and problem solving and was pioneered by Peter Senge.
In his groundbreaking book The Fifth Discipline (Doubleday/ Currency, 1990), Peter Senge introduces systems thinking: “I regard systems thinking as a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static snapshots. I also define it as a set of general principles – distilled over the course of the twentieth century, spanning fields as diverse as the physical and social sciences, engineering, and management. And, above all, I consider systems thinking as a sensibility – for the subtle interconnectedness that gives living systems their unique character.”
To understand more about this approach, we have provided a question and answer session with Peter Senge:
Q. What is the significance of systems thinking?
A. Today, systems thinking is needed more than ever because we are being overwhelmed by complexity. Perhaps for the first time in history, humankind has the capacity to create far more information than anyone can absorb, to foster far greater interdependency than anyone can manage, and to accelerate change far faster than anyone’s ability to keep pace.
Q. In light of the trends you describe, how does systems thinking help?
A. Systems thinking is a fundamental tool. In my view, it plays a major role in business strategy, especially in the area of organizational development. In case you’re wondering why, I’ll address that now. Systems thinking is the springboard for businesses to become what I refer to as ‘learning organizations.’
Q. What exactly are learning organizations?
A. They are business entities where people continually expand their capacity to create the results they truly desire. They are where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.
Q. Aren’t all organizations this way?
A. No. Learning organizations are flexible, integrative, engaging, and oriented toward long-term success. Open and receptive, they seek and obtain a continuous flow of information and feedback. They analyze and apply it. They adapt quickly and decisively. This enables them to innovate, to enhance their operations and performance.
Just to take a brief diversion from the Q&A, here’s a question for you, the reader: do you know what putting the systems thinking loop into perpetual motion actually means for companies? These organizations that do this are able to excel at what they do and are on their way to achieving sustained, profitable growth.
Now, back to Peter Senge’s Q&A session:
Q. What are the five disciplines that learning organizations implement and integrate?
A. I’ll start with Systems Thinking, which is seeing the organization as a whole and understanding the web of relationships and interactions that drive it. Personal Mastery is another, which I define as committing to the ongoing process of viewing reality objectively, maintaining learning as a lifelong goal, and seeing the world at ever-deeper levels. Moving on, Mental Models refers to continuously surfacing, challenging, testing and improving deeply held assumptions that influence understanding about how the world works and what actions to take. The discipline that I refer to as Building Shared Vision is painting a broad picture that defines the articulated future for the organization, which internal stakeholders can address together and aspire to achieve. Finally, Team Learning is nurturing an environment where people learn together and embrace the same pattern of thinking.
Figure 12.1: Peter Senge’s Five Disciplines
It’s worth noting that systems thinking is first and it is also the foremost. It forms the foundation for the other disciplines and acts as the catalyst. It binds them, so they work in concert, as a whole. From this all-encompassing perspective, Peter Senge dubs systems thinking ‘the fifth discipline’ and uses it as the title of his book.
Q. The title of the first chapter of The Fifth Discipline is a quote from Archimedes, the ancient Greek mathematician and physicist: ‘Give me a lever long enough … and, single-handed, I can move the world.’ How does this relate to systems thinking?
A. The bottom line of systems thinking is leverage – seeing where actions and changes in structures occur that can lead to significant, enduring improvements. Often, leverage follows the principle of economy of means, where the best results come not from large-scale efforts but from small, well-focused actions. Our non-systemic ways of thinking lead us to focus on low-leverage changes; we focus on symptoms where the stress is greatest. We repair or ameliorate the symptoms. But such efforts only make matters better in the short-run, at best, and worse in the long-run.
Systems thinking in practice
It is clear that relationships and connections are distinguishing features of systems thinking. Anyone who has tried to identify the many people, groups, companies, suppliers, customers, employees, events and other issues affecting an organization will appreciate how difficult a task it can be to understand the complex web of interactions. Any attempt to understand these relationships and develop strategy and operations accordingly, is likely to miss the mark, especially if they are without a sound way of identifying them (and the relationships) in the first place. Fortunately, we have a useful conceptual tool to help us identify and plot these relationships: systems maps. Systems maps are diagrams that present the main components of systems and how they interact with one another. They may also incorporate aspects of flow charts that depict processes and movements of inputs and outputs. One particularly useful tool is the stakeholder map.
Stakeholder maps
It is a core premise of this book that we should think holistically. It is fitting, therefore, to introduce another tool, namely Stakeholder Maps. These ‘living’ charts illustrate the major constituents and patterns of business systems from a holistic perspective. To build one, you have to ask a series of questions:
• Who are the key players and influencers?
• What are their roles?
• How do they participate in the business process and interact with one another as well?
The usefulness of stakeholder maps is apparent as soon as you start the process of developing them, because they will help to fine-tune your systems-thinking skills. Also, once they are created, these charts contain a stockpile of valuable information. By analyzing and acting on the complex representation of webs and flows within a system, you will derive an array of benefits. You will gain insight into how best to position your company to derive an array of benefits.
Stakeholder maps:
• Assist in understanding the holistic, big-picture view of a business in terms of who’s who
• Identify sources of power and interest, both inside and outside the business
• Include internal functions and departments, as well as those on the outside, such as:
◦ Clients, targets, alliance/strategic partners, potential recruits
◦ Academics, analysts, government/non-government organizations
◦ Industry groups, trade associations, lenders, shareholders, suppliers/vendors
◦ Media/press, opinion leaders, communities/public at large, special interest groups
• Record the effects and interactions of stakeholders on the system and each other
• Locate potential sources of support and conflict – clues about whom to engage and how
• Enable us to plan and manage initiatives, campaigns, change management programs
“EVERYTHING STARTS WITH THE CUSTOMER.”
Louis XIV,King of France, 1643-1715
Zooming in on these bullet points, two things should be noted. First, internal players occupy a single line in this description. Yet their presence, roles and influence extend far beyond this brief listing. After all, they provide crucial roles in the lifeblood of a business. From an internal perspective, stakeholder maps define and illustrate the functions and interdependencies within a company’s ‘social’ system. As a result, they are invaluable; nothing else you do will matter if you do not fully understand, manage and steer the internal players effectively.
Second, when it comes to stakeholder maps within the holistic framework of this book – and especially of this chapter – the scale tips on the side of the stakeholders identified as ‘clients’ (or customers, purchasers, patrons or patients, as the case may be). Let’s face the most basic business truth, here – those who buy products and services pump vital money into the system. They are the raison d’être for the business in the first place.
The central role of the customer or client
Clearly, the centerpiece and ever-present underlying object of attention for an organization is the client. Many questions need to be answered if an organization is to succeed with client relationships. What are the client’s needs? How do we, through specific functions as well as relationships with other stakeholders, make a positive impact on our client? Why do things happen the way they do (that is, why do clients and companies behave in certain ways)? How do we shape relationships, on a proactive basis, which will ultimately influence buying behavior? Does one isolated event create and sustain deep-rooted client loyalty? In all fairness, we shouldn’t rule that last possibility out. Nonetheless, understanding a system and how it works identifies the key relationships and activities that build an effective, client-focused business strategy. This is where our multidisciplinary, holistic approach and stakeholder maps merge – they enable us to locate and leverage advantages, point the way to create synergies and minimize risk.
“THE ONLY WAY TO KNOW HOW CUSTOMERS SEE YOUR BUSINESS IS TO LOOK AT IT THROUGH THEIR EYES.”
Daniel R. Scoggin, Founder, T.G.I. Friday’s Inc.
“TO CONSISTENTLY SERVE THE CHANGING NEEDS OF CUSTOMERS FOR THEIR CONVENIENCE.”
Mission statement, 7-Eleven, the world’s largest convenience retail chain
This process of identifying and understanding stakeholders reveals the ways to deliver value and how to take those relationships even further to create more value. What may have initially seemed a hum-drum exercise, of plotting key players on a flat, two-dimensional diagram, suddenly reveals a complex, multidimensional world of possibilities. Take a moment to think about what has been achieved. We delineated and plotted the system, key players, flows and relationships of all kinds. We studied the inputs, outputs and feedback loops to distinguish the threads, drivers, hot buttons and landmines. Peer at it closely and pockets and paths of impact begin to emerge. Put it together and the stakeholder map serves as the blueprint for generating value on a broad scale. It’s not value in the linear or static sense. It’s the panoramic ‘value constellation.’
From value chain to value constellation
Is the value constellation the same as the ‘value chain’ mentioned earlier? Yes, in essence, but there is a significant difference. The value constellation greatly expands the concept to a systems level. It uses the backdrop of the ever-exploding arena of global commerce and wide-ranging connectedness to develop an entire value-creating network. In their book, Designing Interactive Strategy: From Value Chain to Value Constellation (Wiley & Sons, Inc., 1998), Richard Normann and Rafael Ramírez put it this way: “Strategy is no longer a matter of positioning a fixed set of activities along a value chain. Successful companies do not just add value, they increasingly reinvent it. Their focus of strategic analysis is not the company or even the industry but the value-creating system itself, within which different economic actors – suppliers, business partners, allies and customers – work together to co-produce value. Their key strategic task is the reconfiguration of roles and relationships among this constellation of actors in order to mobilize the creation of value in new forms and by new players. And their underlying strategic goal is to create an ever improving fit between competencies and customers.”
“SUCCESSFUL COMPANIES CONCEIVE OF STRATEGY AS SYSTEMATIC SOCIAL INNOVATION: THE CONTINUOUS DESIGN AND REDESIGN OF COMPLEX BUSINESS SYSTEMS.”
Richard Normann and Rafael Ramirez, Designing Interactive Strategy: From Value Chain to Value Constellation
So, where does a holistic approach actually take us? Everything we have looked at in this chapter leads us to the intersection of Think and Holistic, and this is where our six Rs come back center stage. Like both Think and Holistic, the six Rs of Reason, Revenue, Rouser, Reputation, Relationships and Resilience are separate in that each is important in its own right, but they also draw even greater power when combined and integrated. When the six Rs combine with Think and Holistic, working in tandem as a system, the sum of the parts is so much greater than the whole.
Figure 12.3: The Six Rs Matrix
The case studies we have looked at in the book illustrate this point. When companies think holistically in terms of their Reason, Revenue, Rouser, Reputation, Relationships and Resilience, they derive success in every aspect of their business. When resolving problems and developing strategy successfully, these companies generally excel in all of the six Rs. In fact, in some instances, it can become difficult to discern which R predominates. This proves, yet again, the benefit of both the six Rs and the Think Holistic framework on the journey to sustained, profitable growth.
It is vital, therefore, that we see the six Rs as a whole and understand their interdependencies: identify them, leverage them and find and create synergies, so we can push our thinking further and achieve our desired goals and vision. The importance of this approach is clear. In the view of the late W. Edwards Deming in his book, The New Economics for Industry, Government, Education (MIT, 1994), “A system is a network of interdependent components that works together to try to accomplish the aim of the system. A system must have an aim. Without an aim, there is no system … A system must be managed. The secret is cooperation between components toward the aim of the organization. We cannot afford the destructive effect of competition.”
Business strategy is multidisciplinary and spans many different functions and ways to create and derive value. It demands many new and different ways of thinking – in particular, we have to think as a whole and then act. And it is to this last point we now turn our attention, the next part of our THAP framework: Taking Action.