This document discusses problem handling and organizational competence. It defines a problem as a discrepancy between what is and what should be. The problem phase involves finding problems, shaping problems, solving problems, and practicing problem solving. Problem finding leads to innovation. Problem shaping involves defining and restating the problem in terms of costs, environment, and public reaction. Problem solving techniques include trial and error, brainstorming, root cause analysis, and model simulation. Root cause analysis focuses on identifying the underlying causes rather than superficial solutions. System thinking notes that solutions can cause more problems if interrelatedness is not understood, and that simple questions require complex reflection to find good solutions. It is better to manage by design than default.