The document discusses systems thinking and its application in understanding complex systems, including the distinction between linear and network systems. It emphasizes the importance of feedback loops, nested hierarchies, resilience, and stability in systems analysis, highlighting how interconnected elements can influence overall behavior and outcomes. Additionally, the document illustrates concepts through examples like Rani's tale of rice and feedback mechanisms within ecosystems and businesses.

1. System characteristics
Circular Economy in the Cloud

2. Systems Thinking
Learning to see the world systemically
Encourages us to see the whole as well as the parts.

3. Topics
System Thinking
Linear & network
systems
Feedback
loops
Exponential growth
Nested
hierarchies
Resilience &
stability
Techniques for
system thinkers

4. System Thinking

6. SYSTEM THINKING APPROACH
Traditional analysis Systems thinking
Traditional analysis focuses on
the separating the individual
pieces of what is being studied; in
fact, the word “analysis” actually
comes from the root meaning “to
break into constituent parts.
Systems thinking, in contrast,
focuses on how the thing being
studied interacts with the other
constituents of the system—a set
of elements that interact to
produce behavior—of which it is a
part.

7. System thinking = Network thinking

8. Linear & Network Systems

9. Linear systems: linear causality
• While the 17th century was a time of intense
religious feeling, Isaac Newton, an
experimental and a mathematical genius,
found the new mechanics in the 18th century.
• Mechanics came to be regarded as the
ultimate explanatory science: phenomena of
any kind, it was believed, could and should be
explained in terms of mechanical conceptions.
• Newtonian physics was used to support the deistic view that God
had created the world as a perfect machine that then required no
further interference from Him, the Newtonian world machine or
Clockwork Universe.

10. Simple cause-effect relationships
• At their simplest, linear systems are
those that display the common cause-and-
effect relationships that we see
around us, for example shooting a
billiard ball on a pool table
• One characteristic of linear systems are
that input is proportionate to output:
how hard the ball is shot has a clear
relationship to how quickly it accelerates
and how it will come to a standstill.
• The clockwork can be understood in a similar fashion: by looking
at the parts. The relationships are deterministic and, therefore,
predictable and controllable.
• There are no surprises…

11. ‘Boxed thinking’ 1/2
Stephen Sterling described it as ‘boxed thinking’ as opposed to more
connective or systems thinking. Here are five assumptions of boxed-thinking:
1. ‘To every problem, there’s a solution’ belief in the power of problem-solving
approaches
2. ‘We can understand something by breaking it down into its component
parts’ understanding a complex whole by looking at the detail
3. ‘The whole (of something) is no more than the sum of its parts’ there are
no emergent properties
4. ‘Most processes are linear’ events and phenomena have a definable
beginning and finishing point
5. ‘Most issues and events are fundamentally separate or may be regarded
as such, and may be dealt with adequately in a segregated way’ issues
are essentially unrelated

12. ‘Boxed thinking’ 2/2
6. ‘It is acceptable to draw your circle of attention or concern quite tightly,
as in ‘that’s not my concern’ we do not need to look beyond our
immediate concerns as an individual, a householder, a consumer, a
businessman, etc.
7. ‘We can define or value something by distinguishing it from what it is not,
or from its opposite’ a belief that economics is separate from ecology,
people are separate from nature, facts are separate from values, etc
8. ‘Objectivity is both possible and necessary to understand issues’ it is
important to exclude our feelings and values in our analysis and
judgment
9. ‘We can understand things best through a rational response. Any other
approach is irrational’ we need to downplay our intuition and non-rational
knowing
10. ‘If we know what the state of something is now, we can usually predict
future outcomes’ a belief in certainty, prediction, and the possibility of
control

13. Network systems explained

14. Network systems: network causality
• Opposite to the clock metaphor of linear system, network
systems are more complex in their behavior
• Links between the components can change the state of the
system (enhance or diminish the stability)
• Like in the video, unforeseen effect occured on Borneo after
spraying the DDT
• While a linear cause-effect relations was assumed (DDT would
kill the musquitoes and thereby decrease malaria – problem
solved)...
• ... it had severe side-effects that caused other problems (a
typical example of #5 in ‘Boxed Thinking’)

15. The Borneo Food Web

16. Living systems
• Within living systems - like an
ecosystem - life is sustained by the
interactions of many different
organisms, functioning together, and
interacting through their physical and
chemical environment
• One species is affected by the
evolution of another species
• And species are affected by changes
in the environment

17. Web of Life

18. The butterfly effect?
• The butterfly effect shows how a small change at one place in a
nonlinear system can result in large differences in a later state.
• Edward Lorenz, who coined the term, illustrated the effect with a
theoretical example in which a hurricane (exact time of formation,
exact path taken) was being influenced by the flapping of the wings
of a distant butterfly several weeks earlier

19. Exponential Growth

20. Rani’s Tale
“A long time ago in India a raja demands that his villagers turn over almost all their
rice for safe storage, leaving them just enough to get by on. When a year of drought
arrives, famine and hunger ensue and his people beg him to release some of the rice
from the royal store but he refuses. As his people become more and more famished,
the Raja decides to have a feast at his court. As a parade of elephants returns from the
royal storehouses loaded down with sacks of rice, Rani, a clever village girl, walks
behind them, collecting falling rice in her skirt. When she is caught she explains that
she is collecting the rice to return to the Raja.
The Raja, striving to be wise and fair, decides to reward her for returning his rice. He
tells Rani: “Ask me for anything and you shall have it.” To the Raja’s surprise, Rani asks
for just one grain of rice. When the Raja says that is not enough of a reward, she
acquiesces and asks that he give her one grain of rice on the first day, then each day,
for the following 30 days, he is to give her double the rice he gave her the day before.
The Raja considers this to be a modest request and readily agrees. By the end of the
30 days, Rani has more than a billion grains of rice and the Raja has no more to give.
The Raja, having learned an important lesson both about math and about fairness,
promises to only take as much rice as he needs from now on.”

21. Growth of Rice in Rani’s Store

22. Reinforcing feedback
• Feedback describes the situation when
output from an event in the past will
influence the same event in the present or
future. You can see from this example above
how Rani’s next delivery by the Raja is
determined by the rice last received from the
Raja.
• Each time Rani’s delivery doubles from 1 to 2
to 4 to 8 to 16 to 36 and so on until by the
30th doubling Rani has actually accumulated
more than one billion grains of rice. This type
of exponential growth, triggered by
reinforcing feedback is widespread in Nature.

23. Exponential growth

24. Population growth
The world population is currently growing exponentially driven by a
similar reinforcing feedback.

25. Options for sustained growth
• Population growth suggests that
there is a need for an exponential
increase in most resources,
including food, water and metals.
• Coupled with this is the
exponential increase in waste
production and loss of natural
capital.
• How stabilizing feedback
mechanisms can be more actively
employed to impact on
unsustainable growth is a key to
understanding a circular economy.

26. Feedback Loops

27. Feedback loops
• It’s clear that components of a system
don’t exist in isolation: they are linked
• These links are called couplings and they
are important for the regulation of a
systems state
• Like a heating system in a house, there’s
an exchange of information (feedback
loop) between the components (the
room, thermostat and heater)
• And they keep the room on a
predetermined temperature (state)
room
heater
21oC
thermostat
19oC
on/off

28. Example simple heating system
• Two couplings create a ‘round trip’ or feedback
loop between components
• Feedback is a continuing mechanism of change
(disturbance) and the response to that change
• So, if you open a window in the room and it’s
cold outside, the re-action to your action will be
that the thermostat will ..... the heating
• There are two types of feedback loops
– Balancing: this will diminish the effect of the
disturbance
– Reinforcing: this will amplify the effect of the
disturbance
• The thermostat opening the heating, is a
............... feedback loop

29. Types of feedback loops
Reinforcing and balancing loops are the building blocks of complex systems
• A reinforcing loop (+) produces a
result which influences more of
the same action thus resulting in
growth or decline…
• … for instance your savings
account interacts with the
interest rate. Interest added will
increase the capital and this will
result in higher interest
• Balancing loops (-) generate
factors that resist further
increases in a given direction…
• … for example current state of a
company is low profit and it
focusses on more sales
• This action taken then adds to
the current state

30. Example: DDT sprayed on Borneo
• Here we saw that the issue was regarded in a
separate way without any prior attention for the
interrelated context
• The problem (malaria) was solved by spraying
DDT (quick fix), with immediate positive effect.
Nonetheless, the ‘side effects’ of this solution
turned out in the future.
• This is described by a circles of causality: one is the balancing
feedback loop B1 of the corrective action, the second is the
reinforcing feedback loop R2 of the unintended consequences.
• These influence the problem with a delay and therefore make it
difficult to recognize the source of the new rise of the problem

31. Causal Loop
R= Reinforcing
B= Balancing
B
R B C
A

32. Causal Loop
R= Reinforcing
B= Balancing
Stress
B1
R2
Alcohol Use
Productivity Health

33. Nested Hierarchies

34. Nested hierarchies
• Every living system is made up of subsystems
and in turn holds membership in one or
more larger systems, forming a kind of
‘nested hierarchy’
• The concept of nesting is easy to understand
with the eample of the Russian Matryoshka
dolls. Each doll is encompassed by another
doll and so on
• In 1978 James Grier Miller constructed a
general theory on living sytems in which he
posits that the mutual interrelationship of
the components of a system extends across
the hierarchical levels
• Miller identified eight levels within living
systems

35. Eight levels of living systems
1. cells
2. organs
3. organisms
4. groups
5. organizations
6. communities
7. societies
8. supranational systems

36. So, what’s the benefit?
• First of all, being aware of nested hierarchies
helps you to see different levels and their
connections
• Second, broadening your world view and
awareness enables offers you a more realistic
picture of the situation your studying
• Let’s take a look at the following examples
how the world view changed the last
decennia...

37. Typical world view
ECONOMY
Society
Environment

38. Sustainable world view?
This is how the relationship
between people, planet and
profit is mostly visualized
However, this is a more realistic
way of looking at it, taking the
interdependent hierarchic
relations into account (system
nestedness)

39. Other examples
• A person is part of a company, a company is part of a
sector, a sector is part of the market and the market is
part of the global economy.
• Compare this to a tree, which is part of a group of trees,
the group of trees is part of the forest, the forest is part
of an ecosystem and the ecosystem is part of planet
Earth’s climate system
• Are you already capable of identifying different system
levels in relationships with your clients company?

40. Resilience & Stability

41. Resilience
• Resilience is a characteristic of natural systems: its the capacity of
an (eco)system to tolerate disturbances without collapsing into a
different state
• Diversity is a key issue in maintaining and restoring resilience
• In an evolutionary sense, for instance, a higher diversity of species
increases the resilience of a food chain/web
• If resilience is low or weakened, then smaller or briefer
disturbances can push the (eco)system into a different state, where
its dynamics change
• Differentiation is also a strategy used by companies to adapt to a
moving environment

42. Business relevance: case-study
• On the July 8th 2014, Crumbs Bake Shop - the
New York cupcake chain, closed its 50 stores
after a decade riding the wave of popularity
• Lesson: a one-product business has its pitfalls
• Companies that only offer one item have a
number of risks.
• For one, trendy products tend to attract
competition from big and small players, in
this case Starbucks that tried to capitalize on
the cupcake trend
• Or shifting consumer demands…

43. Differentiation & Innovation
• In general, sticking to one business line can be risky, especially in an
fast-changing industry
• At market level, differentiation is the way through which the quality
of goods is improved over time thanks to innovation
• Launching new goods with entirely new performances is a radical
innovation, often leading to changes in market shares and industry
structures
• In an evolutionary sense, differentiation is a strategy to adapt to a
moving environment
• Differentiation is stimulated in Nature by evolution and natural
selection, thus increasing resilience
• The same is true for businesses: innovation and differentiation are
crucial to stay alive in a moving market environment

44. Resilience in a food web
Biodiversity is an important component of resilience, and is therefore
important even if the types of biodiversity have no market value

45. Resilience in a computer network
What would happen if...?

46. Stability
• Stable doesn’t mean static
• Stability and change are interrelated
• The human body has a dynamic
stability, maintaining equilibrium - of
your temperature for instance - in
interaction with the environment
• Stability is measured in how quickly a
system will return to its original
equilibrium position, like a pendulum

47. Stable system: the Pendulum
• The pendulum is a
stable system
• If disturbed it will
swing left and right
until gravity returns
it to its original
position
• Gravity dampens
the force that
caused the
pendulum to move

48. Stability
• Stability defines the collective states of the
system (human being, an organization, a country,
etc) assessed by its resistance to change
• Fluctuations – dynamic activity – are the source of
new forms of behavior and development
• The context and conditions determine the
stability of a system in time, as well as the
properties determine its state
• Each state is dependent on the previous state
(incremental innovation)

49. Homeostasis

50. Homeostasis
• Homeostasis is the property of a system in which variables are
regulated so that the internal conditions remain stable and
relatively constant.
• It’s a process that maintains the stability of the human body’s
internal environment in response to changes in external
conditions
• Example from technology: cruise control to keep a car’s speed
stable in response to different road conditions
(uphill/downhill)
• Example from ecology: evolution of biodiversity (species
population) on an island from start to climax

51. Techniques for System Thinkers

52. Techniques for system thinkers
• Systems thinkers use visual diagrams to identify issues in relation
with their context:
– The Fishbone diagram
– Process flowcharts
– Process models
– Correlation diagrams
– Network diagrams
• Visualizing issues helps to enhance understanding and to
communicate it in a way that can be easily remembered