CHAPTER TWO

THE MIRACLE OF SYSTEMS

SPARSE SNOWFLAKES COASTED ON THE sharp wind of a December 16 evening. The familiar seaport odor hung in the air, commingled with the wood smoke of a thousand fireplaces, night soil, and garbage. The waterfront was a hard place, and it was cold. But the men who crowded Boston’s Congress Street were not cold. They were heated, loud, and single-minded. These passionate but responsible men would not be swayed from their purpose. A full-blown protest was under way, and the fire showed no sign of burning out soon.

Taxes were as polarizing a topic in 1773 as they are today—more so, even—but in Colonial America, no avenues remained for peaceful disagreement. The citizens of Boston represented the extremes of colonial politics: loyal supporters of the King, on one hand, and the radicals known as the Sons of Liberty led by Samuel Adams, on the other. And, no mistake, Adams’s fingerprints were on the civil disorder this night.

The crowd roared, taunted, and shouted epithets against the King and his minister, Lord North. These men were angry, and some were drunk. The crowd was intent on having its message heard clearly in the Parliament. Quite beyond the madness of the moment, there was a feeling of having been betrayed by their King and his ministers, who seemed to regard them as property of the crown rather than free men in loyal service of their King.

The object of their anger tonight was tea, East India Company tea. Parliament had canceled the hated Townshend Acts, retaining only the duty on tea, to demonstrate its unlimited right to tax the colonies. The Tea Act was supposed to bolster the faltering East India Company by granting, among other things, a monopoly on all tea exported to the colonies. A haughty, uninformed, and unconcerned Parliament was incapable, it seemed, of civil behavior toward England’s loyal, if thin-skinned, colonies.

Emerging from the crowd, cheered on by the shouts of angry neighbors, about sixty patriots rushed toward three ships loaded with tea, the Beaver, the Dartmouth, and the Eleanor. In a matter of minutes, these odd-looking men, clad in blankets and feathers, overpowered the sparse ships’ watches and cast the much-prized cargo over the side. Soon, 342 boxes of tea were steeping in the cold, filthy saltwater of Boston harbor. There would be no duty paid on this shipment.

Such were the makings of history. Such were the workings of the English colonial system. It was a system of complex relationships and distant reach, a system strained to the limit and on the brink of catastrophic failure. At this moment, the system was providing feedback to its King and his Parliament, but the feedback was being ignored. Well, not ignored, actually. Rather, the mother country’s response was reprisal in the form of the Intolerable Acts of 1774. The system was spinning irretrievably toward revolution.

Had the King had the benefit of today’s understanding of the behavior of complex systems, he might have redesigned his colonial system to work more smoothly. He might have repaired the damage and put things to right. He might still have a colonial system.

SYSTEMS THINKING

BUT THE KING and his ministers had no knowledge of complex systems. Unfortunately for them, the discipline of systems thinking is relatively new. Systems thinking pretty much began in 1948, when Norbert Wiener published a book called Cybernetics (MIT Press, 1948). Both the name cybernetics and the formation of the discipline itself can be traced to this work. (Actually, our choice of 1948 as the beginning of systems thinking is not entirely accurate. The earliest work in systems has its roots in early 20th-century biology, but Wiener’s book is usually thought of as the beginning of systems thinking as we know it.) Some of the most important discoveries in the field of systems thinking can be traced back to only the mid-1980s. Anyone who did graduate work in business in the 1970s probably heard not a single word about the amazing and powerful field of systems thinking.

It’s really only been since 1990, when Peter Senge’s best-selling The Fifth Discipline brought the principles of systems thinking to the business press, that the business community has taken up the topic to any appreciable degree.¹ Prior to this time, most of the work in systems thinking had been applied to areas other than business organizations (mostly scientific and technical). It’s hard to overstate the inherent power of the shift or the significance for business organizations. However, despite Senge’s best-seller, systems thinking has still not found the common acceptance it deserves.

Our treatment here will be brief and is by no means complete, but we hope it will be enough to encourage you to seek out more detailed material for study. The Bibliography lists some of the more approachable sources for those wishing to continue their study of this powerful tool. For now, let’s talk a little about what systems thinking is.

A WORLD OF SYSTEMS

SYSTEMS ARE IMPORTANT because we live in a world of systems. Tiny systems are nested inside small systems that are nested inside larger systems, which are in turn nested inside really large systems, which are in turn nested inside enormous systems. Everything, from subatomic particles to the earth’s ecosystem, behaves according to the basic principles of systems. If that’s not sufficient reason to be interested, what is?

Our focus here is specifically innovation and how it can be more mindfully managed to contribute to the vitality and dynamic health found in the best business organizations. Healthy and dynamic organizations are creative, continuously reinventing themselves and their products and processes to better serve customers. Innovative behavior is, at its root, creative behavior. At whatever level of magnitude the innovation occurs, the innovator is bringing forth some thing or idea that did not exist before. And creative behavior is integrated behavior, carefully woven into the web of the larger system. Even if innovation took place on a desert island with only one human being present, the innovation would still have been sparked by some interaction with the environment, some need, stimulus, or perceived application. As such, creative behavior is complex behavior.

Business organizations are complex systems. The systems related to the management of innovation are complex systems, and systems thinking is currently our most formidable tool for explaining this kind of behavior. If we pursue this line of thought, we can conclude that innovation is a specialized, particular, and fragile system that requires conscious nurture, careful management, and continuous encouragement if it is to thrive.

THE IMPORTANCE OF INTERRELATEDNESS

SYSTEMS THINKING REQUIRES that we take a different view of the world. Sir Isaac Newton provided us with a vision of the world that consisted of “parts.” In Newton’s view, we could study and understand any entity by first dissecting the object of analysis into its parts, then subjecting each individual part to rigorous examination. Scientists and philosophers spent the next two hundred years breaking our world up into parts and analyzing each part in an effort to understand how the larger entity “works.” We have learned a lot. Unfortunately, though, it became an article of faith that anything and everything could be understood by this mechanical approach of division and analysis. However, not everything can be understood in this way.

Recently, this mechanical approach to understanding our world has been recognized to be incomplete. Our long love affair with the study of “parts” has given way, in some cases at least, to the study of “the whole.” From subatomic physics to the study of biology to the study of manufacturing processes, we have come to understand that studying parts is insufficient if we wish to understand even the most common behaviors and things that surround us.

A central feature of a system is its integrity. In a collection of parts, one can simply remove one or two and still have a collection of parts, or a heap. Not so with the system. If you remove one element, the system is irrevocably changed. If you divide a system in two, you do not get two smaller systems. You get one damaged system, and it probably won’t function. Likewise, it makes no difference to the heap or pile of parts how they are organized. Organize them any way you want, and you still have a heap or pile of parts. It is distinctly not so with a system. In a system, the organization of the elements is critical to the nature and function of the system. Finally, the behavior of a system depends on how the parts are connected, the specific relationship between them. The behavior of the pile depends on the size of the pile for its behavior, if there is any behavior at all. A pile of auto parts will not function as an automobile, but will do little apart from permitting bacteria to migrate from one to another.

In a marvelous and magnificent way, researchers are finding that the interrelatedness of the parts is what actually drives the myriad systems within which we live and work. It seems that everything is connected to something else in an apparently endless web of relationships, and understanding, predicting, and managing such “systems” requires both a different view (that the parts are all connected) and a suitable tool or theory to guide our action. Systems theory is currently the best tool available.

We have a long and glorious business tradition of oversimplifying complex relationships and tinkering with the parts while the whole disintegrates. If we are to manage innovation successfully, we have to incorporate a comprehensive understanding of the interrelatedness of our systems and learn to pass on the quick fix, the apparently obvious common wisdom that often asserts itself in the urgency of the moment. We need to look for the connections, the feedback loops and the relationships in our system—our organization.

FEEDBACK LOOPS:
THE KEY TO UNDERSTANDING SYSTEMS

AT ITS SIMPLEST, a system is a collection of related elements that must function in concert to achieve a desired result. This definition can be enhanced by adding that a system also contains one or more feedback loops, which are central to system behavior. Feedback loops permit a system to function in a self-managed, self-sustaining way.

For example, the water-control mechanism in your toilet tank is a simple and highly efficient system. When the tank is flushed, the water goes down and a float descends, turning on the water inlet. As the tank fills, the float rises to its prior height and switches off the inflow of water (feedback). This repeats day after day, year after year, with virtually no attention required. With each flush, we personally experience an effective and well-designed system. In addition, when we push the lever, we even become part of that system.

The human circulatory system also functions according to precisely the same feedback principles. We exert ourselves, and the body calls for more oxygen. The heart speeds up, capillaries expand, and an increased flow of blood delivers the extra oxygen being called for. The respiratory system is similar. When exertion takes place and the body needs more oxygen, the breathing rate accelerates to provide it. When the need declines, the respiration rate slows down again to normal. We are cooled by perspiration in much the same manner. When we overheat, because of exertion or high summer temperature, our body receives the message that we are too hot, and perspiration is then released, cooling us through evaporation.

As yet another example, the sprinkler system in your front yard is similar, differing only in that the feedback device is usually an electric timer. At the determined time, it turns on. Then, when the preset amount of water is delivered (the preset time has expired), it automatically turns off. Some sprinkler systems today also include a sensor to measure rainfall or monitor the moisture in the soil. In both cases, these enhancements are just additional feedback loops in the larger system. Beats standing there watering with a hose.

Just as researchers made great strides in recognizing that the interrelated parts drive systems, they made another key breakthrough with the realization that systems and feedback loops are circular rather than linear activities. We have been conditioned for centuries to think in linear patterns, but when our problem is a systems problem, understanding requires us to see things in a circular, balancing, or reinforcing way. For many, this concept is difficult to grasp. However, to truly understand systems, we must overcome our overreliance on cause and effect by first recognizing that things aren’t that simple.

Mistakes are virtually guaranteed to occur when we discuss organizational issues and the problems are circular but the logic is linear. Let’s look at some related activities frequently encountered when exploring systems. Then we’ll return to systems thinking itself.

RELATED DISCIPLINES

SYSTEMS ENGINEERING IS a general term referring to the application of engineering skills to the design and creation of a complex system. Any engineer acts as a systems engineer when responsible for the design and implementation of a total system. The major steps in the completion of a major systems engineering project are:

•Arriving at a problem statement

•Identifying objectives

•Generating alternatives

•Analyzing these alternatives

•Selecting one alternative

•Operating the system

Systems engineering principles were developed to create and manage large space and construction projects such as the lunar landing mission. Systems engineering is interesting but is not the focus of our present discussion. In this book we are mainly concerned with social systems—the management of innovation—rather than mechanical systems.

Webster’s New Universal Unabridged Dictionary defines a systems analyst as someone who conducts the evaluation of an activity to identify its desired objectives and determine procedures for efficiently obtaining them. The systems analyst is commonly encountered in the information technology industry, developing and implementing complex information processing systems. As with systems engineering, systems analysis offers many valuable contributions but is not of primary interest in a discussion of innovation.

Systems thinkers can come from anywhere. The systems thinker has progressed beyond simply seeing events to seeing patterns of interaction, and further to the underlying structures responsible for those patterns. The systems thinker has moved beyond simplistic explanations for complex behavior, but moreover, she has at hand a method for understanding and addressing that behavior. The systems thinker is a valuable asset, and one with many applications.

APPLYING SYSTEMS PRINCIPLES

COMPLEX SYSTEMS, SUCH as a company with thousands of employees, are correspondingly more complicated but actually function according to the same principles as our toilet tank example. For some, this may seem hard to accept. Admittedly, the similarities between AT&T and the toilet tank seem a stretch, but the underlying systems principles are the same—action, feedback, adjustment, action, feedback, adjustment, action, feedback, adjustment, and action again—repeated, over and over again, as often as necessary. Continuously interacting—continuously communicating—continuously adjusting.

The key characteristic of systems thinking and applying it is a fundamental shift in thinking, from a focus on the parts to a focus on the whole. In business school many of us were taught to break problems and opportunities down into pieces on the premise that we “eat an elephant one bite at a time.” That sounds good, but it doesn’t work in reverse—i.e., we can’t take all the bites and reassemble an elephant. What we would get is compost, not a new elephant. And when we cut our elephant in half, we again get compost, not two cute little elephants.

Managers trying to build and grow their organizations have found the same situation. It is more effective to manage the whole. We use the parts, to be sure, but always with both eyes on the whole. Physicist and author Fritjof of Capra says it this way: “Systems thinking is ‘contextual,’ which is the opposite of analytical thinking. Analysis means taking something apart in order to understand it; systems thinking means putting it into the context of a larger whole.”²

Systems thinking is an essential tool in the process of understanding organizational behavior. Innovation, and the management of innovation, are clearly organizational behaviors. Analysis of parts is helpful in many problem-solving situations where the parts are the source of the problem and the problem is isolated. But analysis cannot explain how the whole system operates, or how the system should operate, or how the system might be improved.

Figure 2-1 shows a simple system diagram based on Norbert Wiener’s example of a steersman to demonstrate the feedback loop. In Wiener’s example, the person steering the boat observes his course and notes any deviation from his desired direction. Noting the deviation from course, he countersteers the boat in the opposite direction of the deviation, thus bringing the boat back on course. He again returns to observing the course, and should any deviation remain or a new one occur, the process of countersteering begins again. The boatman thus snakes his way back and forth till he reaches his destination. The process of innovation is often very similar. As we find an answer that moves us forward, we pursue it—we devote resources to it. When an exploration comes to a dead end, we steer back. We add resources to those activities that produce results.

FIGURE 2-1.A SIMPLE SYSTEM DIAGRAM USING WEINER’S EXAMPLE OF A STEERSMAN.

Circular system diagrams are useful tools for understanding organizational phenomena. Many of us find visual pictures of such behavior much easier to understand than verbal descriptions.

Let’s look at another system diagram in Figure 2-2. Systems researchers have developed a series of “archetypes” to explain commonly encountered situations. Archetypes are generic models that can be applied to a multitude of specific situations. The archetype in Figure 2-2 applies specifically to a perceived deficit of innovation in product development.

In the example, management perceives a problem in the development process for an important new product. Let’s say the perceived problem is a lack of ideas about how to solve a difficult technical dilemma. We see two sets of pressures: the first to bring in outside help, and second to develop internal capability. Often, the decision is made to bring in the outside expert—an innovation specialist. The decision to bring in outside help is justified on the basis of the delay necessary to develop internal capability.

FIGURE 2-2.THE ARCHETYPE OF “SHIFTING THE BURDEN.”

Because we shift the burden to the outside specialist, whether she is successful or not, we have only temporarily addressed the problem. We come right back around to the problem on the next product when a similar situation arises. “Shifting the Burden” is the name of this particular archetype, and it demonstrates that shifting the burden is a temporary solution at best, attractive though it may be at the time. (There are numerous archetypes describing common business problems. We encourage readers to study them and become fluent in their use.)

DEVELOPING A STRUCTURE
FOR MANAGING INNOVATION

WE HAVE DEVOTED these early pages to the discipline of systems thinking because we feel it is central to understanding and managing innovative behavior. In Chapter 3, we introduce a model to guide our understanding and structure the discussion throughout the remainder of the book. Simply offering an extended list of “how-to” anecdotes salted with do’s and don’ts offers little real help. It is necessary to reach deeper, in this case penetrating the mantle of systems understanding, to find ways to describe and better manage innovative behavior.

SUMMARY

•Systems thinking is a powerful but relatively new and little used tool in the management of business.

•Complex organizations are complex systems that are described accurately by the tools of systems thinking.

•Systems thinking represents a distinct move from analyzing the parts to understanding the whole.

•Feedback loops are the vehicles that permit systems to be self-sustaining and self-managing.

•Innovative organizations are dynamic systems, continually changing. Stable, unchanging systems cannot be innovative. The stable state of equilibrium seeks to preserve stability. It does its best not to change, to innovate.

NOTES

1. Peter M. Senge, The Fifth Discipline (New York: Currency Doubleday, 1994).

2. Fritj of Capra, The Web of Life (New York: Anchor Books, 1997).