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CONSULTING TOOLKIT     Consulting Skills:     Systems Thinking© 2007-2012 IESIES Development Ltd. All Ltd. Reserved       ...
Systems Thinking is a way to analyse complex systems  SYSTEMS THINKING:A NEW TAKE ON CAUSE    AND EFFECT                © ...
Systems Thinking takes a new perspective on business              Thinking about          business holistically, as       ...
"We cant solve problems by using the same kind of thinking we used whenwe created them."                                  ...
Dynamic complexity is hard for other management tools to     handle•DYNAMIC COMPLEXITY •Cause and effect are subtle •Effec...
Systems are everywhere in our livesYour morning shower as a system                                                        ...
You can show systems as feedback loopsYour morning shower as a system                  Water               temperature    ...
In a perfect world, the temperature will rise smoothly to reach the    perfect temperatureYour morning shower as a system ...
In reality, the temperature rise is not smoothYour morning shower as a system       Temp                                  ...
The overshoot and oscillation are caused by the delays in the      system and are characteristic of systemsYour morning sh...
What do you see?© 2007-2012 IES Development Ltd. All Rights Reserved
People are pattern-seekers         We are continually trying to         make sense of the world by       finding direct ca...
What was thecause of thecredit crisis?© 2007-2012 IES Development Ltd. All Rights Reserved
Determining causality is harder than it looksImagine a people business – Hairdresser or management consultant Sales are gr...
Systems are build from feedback loops – as well as “balancingloops” there are also “reinforcing loops”                    ...
Communicate a “reinforcing loop” by telling a story around the          loop                                              ...
Reinforcing loops have a standard pattern           What does a reinforcing loop look like over time?    Accelerating:    ...
There are many business examples of “reinforcing loops”                                                                   ...
There are many business examples of “reinforcing loops”                                                                   ...
You will now be able to spot “reinforcing loops” in manybusiness situationsIn your teams, identify and map 3 more    “rein...
“Reinforcing loops” also operate powerfully in organizationsTHE “PYGMALION EFFECT”                                        ...
“Reinforcing loops” also operate powerfully in your headSELF-FULFILLING PROPHESIES                                        ...
You will now be able to spot “reinforcing loops” in manypersonal situations In pairs, identify when you experienced     yo...
In reality, reinforcing loops don’t create exponential growthforever                                                      ...
Additional relationships kick in to brake reinforcing loops                                                              +...
For example, a “staff burnout” balancing loop could brake the    reinforcing loop, creating a “limits to growth” pattern  ...
A business with this “limits to growth” pattern will show clearsystems behaviour        What could the sales pattern look ...
The leverage is often in reducing the balancing loop, not driving    the reinforcing loop harder                          ...
Every “reinforcing loop” has several “balancing loops” that willact to brake it                             Competitor rea...
As you get more experienced spotting loops, you will see themeverywhere                 Class Exercise         For your “r...
“Reinforcing loops” and “Balancing loops” combine to create   frequently recurring systems patterns•BASIC SYSTEMS PATTERNS...
Systems Thinking is required up-front in consulting, to makesure you are addressing the right problem               Shifti...
Short term fixes can create long term problems……..               What business examples can you think of?                ©...
A “Shift the Burden” pattern consists of two balancing loopslinked by a reinforcing loop             Symptomatic          ...
A “Shift the Burden” pattern consists of two balancing loopslinked by a reinforcing loop              Promotion           ...
Class Exercise  Identify and map your own example of           “Shifting the Burden”   Is there a “shift the burden” patte...
There are many other examples of “shift the Burden” patterns in  business•Pharmaceutical mega-mergers?•Current Government ...
Systems Thinking equips you to analyse dynamic complexity in    business•Cause and effect are often widely separated in ti...
We are just scratching the surface of a major discipline                           Learn More!                         Rea...
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Consulting toolkit systems thinking

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Transcript of "Consulting toolkit systems thinking"

  1. 1. CONSULTING TOOLKIT Consulting Skills: Systems Thinking© 2007-2012 IESIES Development Ltd. All Ltd. Reserved © 2007-2012 Development Rights All Rights Reserved
  2. 2. Systems Thinking is a way to analyse complex systems SYSTEMS THINKING:A NEW TAKE ON CAUSE AND EFFECT © 2007-2012 IES Development Ltd. All Rights Reserved
  3. 3. Systems Thinking takes a new perspective on business Thinking about business holistically, as a complete system Understanding dynamic complexity, not detailed complexity © 2007-2012 IES Development Ltd. All Rights Reserved
  4. 4. "We cant solve problems by using the same kind of thinking we used whenwe created them." Albert Einstein © 2007-2012 IES Development Ltd. All Rights Reserved
  5. 5. Dynamic complexity is hard for other management tools to handle•DYNAMIC COMPLEXITY •Cause and effect are subtle •Effects are delayed •Short term effect different to long term effect •Action produces side effects in another part of the business Need systems thinking Inter-relationships not linear cause and effect See processes not snapshots © 2007-2012 IES Development Ltd. All Rights Reserved
  6. 6. Systems are everywhere in our livesYour morning shower as a system Get in, switch on Jump out, Brrrrrr! Turn up knob Jump out, Brrrrrr! Turn up more Jump out, Yowww! Turn down Too cold! Turn up a little Ahhhhhhhhhhh! © 2007-2012 IES Development Ltd. All Rights Reserved
  7. 7. You can show systems as feedback loopsYour morning shower as a system Water temperature Perfect water temperature Balancing Perceived loop gap Knob position Does the temperature control your hand, or your hand control the temperature? © 2007-2012 IES Development Ltd. All Rights Reserved
  8. 8. In a perfect world, the temperature will rise smoothly to reach the perfect temperatureYour morning shower as a system Temp Time © 2007-2012 IES Development Ltd. All Rights Reserved
  9. 9. In reality, the temperature rise is not smoothYour morning shower as a system Temp Time Why does this pattern exist? © 2007-2012 IES Development Ltd. All Rights Reserved
  10. 10. The overshoot and oscillation are caused by the delays in the system and are characteristic of systemsYour morning shower as a system Water temperature Perfect water temperature Balancing Perceived loop gap Knob position What business situations show overshoot and oscillation? © 2007-2012 IES Development Ltd. All Rights Reserved
  11. 11. What do you see?© 2007-2012 IES Development Ltd. All Rights Reserved
  12. 12. People are pattern-seekers We are continually trying to make sense of the world by finding direct cause and effect relationships…. ……even when they don’t exist © 2007-2012 IES Development Ltd. All Rights Reserved
  13. 13. What was thecause of thecredit crisis?© 2007-2012 IES Development Ltd. All Rights Reserved
  14. 14. Determining causality is harder than it looksImagine a people business – Hairdresser or management consultant Sales are growing. What is causing the business to grow? STAFF SERVICE CUSTOMER SALESMOTIVATION QUALITY SATISFACTION © 2007-2012 IES Development Ltd. All Rights Reserved
  15. 15. Systems are build from feedback loops – as well as “balancingloops” there are also “reinforcing loops” + STAFF MOTIVATION SERVICE QUALITY + Reinforcing loop + SALES CUSTOMER SATISFACTION + What is another name for this “reinforcing loop”? What direction does it operate? How do you communicate it? © 2007-2012 IES Development Ltd. All Rights Reserved
  16. 16. Communicate a “reinforcing loop” by telling a story around the loop ……which means The Barber Station they take care of staff are very + their customers very well….. happy…… STAFF MOTIVATION SERVICE QUALITY +….and since the barberswork on commission andtips, increasing salesincreases their wages andtheir motivation…… Reinforcing loop + SALES CUSTOMER SATISFACTION …..and not only come + ……and the customers are very back regularly, but also tell their friends, happy with their increasing sales over experience…… time…… Can you tell the story in reverse? © 2007-2012 IES Development Ltd. All Rights Reserved
  17. 17. Reinforcing loops have a standard pattern What does a reinforcing loop look like over time? Accelerating: Decelerating: A virtuous circle A vicious circle 1 Time Time © 2007-2012 IES Development Ltd. All Rights Reserved
  18. 18. There are many business examples of “reinforcing loops” - PRICING SALES + POLICY TO REINVEST LOWER COSTS IN PRICE Reinforcing loop + COSTS NEGOTIATION CLOUT - © 2007-2012 IES Development Ltd. All Rights Reserved
  19. 19. There are many business examples of “reinforcing loops” + NUMBER OF LISTINGS ATTRACTIVENESS TO BUYERS + Reinforcing loop + ATTRACTIVENESS TO NUMBER OF BUYERS SELLERS + © 2007-2012 IES Development Ltd. All Rights Reserved
  20. 20. You will now be able to spot “reinforcing loops” in manybusiness situationsIn your teams, identify and map 3 more “reinforcing loops” for SPECIFIC businesses Be prepared to talk through ONE © 2007-2012 IES Development Ltd. All Rights Reserved
  21. 21. “Reinforcing loops” also operate powerfully in organizationsTHE “PYGMALION EFFECT” + TEACHER THINKS TEACHER FOCUSES STUDENT IS SMART ON STUDENT + Reinforcing loop + STUDENT STUDENT GETS BETTER LEARNS MORE GRADES + Will this affect how managers treat their employees? © 2007-2012 IES Development Ltd. All Rights Reserved
  22. 22. “Reinforcing loops” also operate powerfully in your headSELF-FULFILLING PROPHESIES + I get out of breath climbing stairs “I’m not athletic” + Reinforcing loop + I get less fit I stop exercising + © 2007-2012 IES Development Ltd. All Rights Reserved
  23. 23. You will now be able to spot “reinforcing loops” in manypersonal situations In pairs, identify when you experienced your own self-fulfilling prophesy Be prepared to share with the class © 2007-2012 IES Development Ltd. All Rights Reserved
  24. 24. In reality, reinforcing loops don’t create exponential growthforever Time © 2007-2012 IES Development Ltd. All Rights Reserved
  25. 25. Additional relationships kick in to brake reinforcing loops + STAFF MOTIVATION SERVICE QUALITY + Reinforcing loop + SALES CUSTOMER SATISFACTION + What brakes our barber’s “reinforcing loop”? © 2007-2012 IES Development Ltd. All Rights Reserved
  26. 26. For example, a “staff burnout” balancing loop could brake the reinforcing loop, creating a “limits to growth” pattern - + STAFF MOTIVATION SERVICE QUALITY STAFF +BURNOUT+ Reinforcing Balancing loop loop + SALES CUSTOMER SATISFACTION STAFF + OVERTIME + SERVICE CAPACITY © 2007-2012 IES Development Ltd. All Rights Reserved
  27. 27. A business with this “limits to growth” pattern will show clearsystems behaviour What could the sales pattern look like over time?Sales Time © 2007-2012 IES Development Ltd. All Rights Reserved
  28. 28. The leverage is often in reducing the balancing loop, not driving the reinforcing loop harder - + STAFF MOTIVATION SERVICE QUALITY STAFF +BURNOUT+ Reinforcing Balancing loop loop + SALES CUSTOMER SATISFACTION STAFF + OVERTIME + SERVICE If you are a consultant, asked to reignite sales CAPACITYLtd. All Rights Reserved growth, where do you start? © 2007-2012 IES Development
  29. 29. Every “reinforcing loop” has several “balancing loops” that willact to brake it Competitor reaction? Segment saturation? - SALES PRICING + Taking short term Fragmented sales? profit? Reinforcing + loop COSTS NEGOTIATION CLOUT - Supplier policy? © 2007-2012 IES Development Ltd. All Rights Reserved
  30. 30. As you get more experienced spotting loops, you will see themeverywhere Class Exercise For your “reinforcing loop”, Identify “balancing loops” Be prepared to talk through ONE © 2007-2012 IES Development Ltd. All Rights Reserved
  31. 31. “Reinforcing loops” and “Balancing loops” combine to create frequently recurring systems patterns•BASIC SYSTEMS PATTERNS •Limits to Growth •Shifting the Burden •Eroding Goals •Escalation •Success to the Successful •Tragedy of the Commons •Fixes that Fail •Growth and Underinvestment © 2007-2012 IES Development Ltd. All Rights Reserved
  32. 32. Systems Thinking is required up-front in consulting, to makesure you are addressing the right problem Shifting the Burden: As a consultant, it is seductive to implement solutions that address short term symptoms, but make the underlying problem worse © 2007-2012 IES Development Ltd. All Rights Reserved
  33. 33. Short term fixes can create long term problems…….. What business examples can you think of? © 2007-2012 IES Development Ltd. All Rights Reserved
  34. 34. A “Shift the Burden” pattern consists of two balancing loopslinked by a reinforcing loop Symptomatic “Solution” Balancing loop Problem Side-effect Symptom Reinforcing loop Balancing loop Fundamental Solution © 2007-2012 IES Development Ltd. All Rights Reserved
  35. 35. A “Shift the Burden” pattern consists of two balancing loopslinked by a reinforcing loop Promotion Intensity Balancing loop Shoppability Sales and Image Reinforcing loop Balancing loop Customer Value Proposition If you are a consultant, asked to reignite sales growth, where do you start? © 2007-2012 IES Development Ltd. All Rights Reserved
  36. 36. Class Exercise Identify and map your own example of “Shifting the Burden” Is there a “shift the burden” pattern operating at your client?Be prepared to talk it through, as if you are explaining the problem to your client © 2007-2012 IES Development Ltd. All Rights Reserved
  37. 37. There are many other examples of “shift the Burden” patterns in business•Pharmaceutical mega-mergers?•Current Government deficit spending?•Risk Management in banks?•Using consultants? © 2007-2012 IES Development Ltd. All Rights Reserved
  38. 38. Systems Thinking equips you to analyse dynamic complexity in business•Cause and effect are often widely separated in time and space•Today’s solutions are tomorrow’s problems•Solutions to symptoms give immediate gratification, but make underlying problems worse•The harder you push, the harder the system pushes back•The cure can be worse than the disease•Cutting an elephant in half does not produce 2 small elephants•Small changes (in the right place) can produce big results © 2007-2012 IES Development Ltd. All Rights Reserved
  39. 39. We are just scratching the surface of a major discipline Learn More! Read “The Fifth Discipline” by Peter Senge © 2007-2012 IES Development Ltd. All Rights Reserved

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