Honors Thesis

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THE SYSTEMS THINKING MANAGEMENT FRAMEWORK:
EFFECTIVE ORGANIZATIONAL MANAGEMENT IN A COMPLEX, RAPIDLY
EVOLVING ENVIRONMENT
Alexander Kahle
ISF 190: Senior Thesis | Professor Rakesh Bhandari
December 8, 2014

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TABLE OF CONTENTS
Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
I. The New Environment, Organizational Management, and Systems Thinking . . . . . . . 4
II. The Systems Thinking Management Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
III. Systems Thinking Management evaluation of Scientific Management . . . . . . . . . . . 27
IV. Systems Thinking Management evaluation of the Lean Startup Method . . . . . . . . . . . 30
V. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

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ABSTRACT
The subject of this thesis is organizational management in the context of a complex, rapidly
evolving environment. The world is transforming at an unprecedented rate and is growing
increasingly complex, yet many organizations continue to use management frameworks that
were designed to handle the needs of a different context. This is problematic because every
management framework contains values and assumptions that bias an organization toward
certain kinds of knowledge and activities, and if an organization operates within an environment
that is fundamentally different than the context their management framework was designed for,
their ability to function effectively will likely become compromised by an ideology that is
incompatible with reality.
This thesis will propose a new management model called the systems thinking management
framework, which integrates the following systems thinking principles: stocks and flows,
reinforcing and balancing feedback loops, self-organization, emergence, system constraints,
delays and oscillations, continual learning, and the systemic perspective. The systems thinking
management framework facilitates the following three outcomes, which are conducive to the
success of an organization operating in a complex, rapidly evolving environment:
(1) the organization will improve its capacity to learn and generate valuable knowledge
by removing the epistemological limitations that inhibit a holistic understanding of the
organization’s context,
(2) the organization will improve its capacity to make better decisions,
(3) the organization will improve its capacity to evolve concurrently with the needs of the
environment by creating the necessary structural conditions for self-organization to
occur.
After proposing this new management model, I will then use it to evaluate scientific management
and the lean startup method, in order to demonstrate how the systems thinking management
framework contrasts with two established management frameworks.

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I. The New Environment, Organizational Management, and Systems Thinking
The evolution and proliferation of complex technologies are causing society to transform
at an unprecedented rate, thereby perpetuating a state of flux and variability that makes it
increasingly difficult for many organizations to accomplish their objectives (refer to Appendix
A). 1
In order for an organization in this context to survive, they must continually innovate and
adapt to the needs of the environment, or else fall victim to the changing circumstances that
render them obsolete. Though countless organizations are subject to this new environment,
which is characterized by complexity, interconnectedness, and rapid change, many continue to
operate by way of management frameworks that are designed to handle the needs of a different
context. The cost of using an inadequate management framework is high, for every management
framework contains values and assumptions that bias an organization toward certain kinds of
knowledge and activities, which strongly influences how the organizations operates. If an
organization operates within an environment that is fundamentally different than the context their
management framework was designed for, their ability to function effectively is compromised by
an ideology that is incompatible with reality, which creates epistemological filters that blind the
organization from understanding the needs of their environment. Although there is insufficient
research to prove that organizations are failing today as a result of outdated management
frameworks, as there are inherent methodological difficulties with disaggregating management
from other factors that influence the outcome of an organization, it is true that an inadequate
1
Braden R. Allenby and Daniel R. Sarewitz, The Techno-Human Condition (Cambridge, MA:
MIT Press, 2011), 36-37.

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management framework can at least partially cause an organization to fail if it is not updated to
match the needs of its context.
The goal of this thesis is to propose a new management framework that will improve an
organization’s ability to achieve its goals in the context of a complex, rapidly changing
environment. The systems thinking management framework, as I am calling it, will facilitate the
following three outcomes, which will allow an organization to effectively adapt to the needs of
its environment:
occur.
Though there is no generalizable management framework that is appropriate for every
organization to follow dogmatically, for each organization has a unique context and the most
effective management model must be customized to address the specific needs of that context,
there are certain management properties that are conducive to an organization’s success when
operating in a complex, capricious environment. I will identify those properties and show how
they can be integrated into a management framework to improve an organization’s ability to
understand and adapt to its environment. Many management frameworks that have been
developed are nothing more than hollow fads that only change the rhetoric of an organization’s

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existing management framework, but I intend to show that the management framework I am
proposing fundamentally restructures how an organization operates.
This new management framework will integrate principles from the field of systems
thinking, which is an interdisciplinary framework that is designed to examine and generate
insights about complex, interconnected issues from a holistic perspective.2
Before I can show
how systems thinking applies to the domain of management, I must first explain what systems
thinking is. The systems thinking paradigm emerged in Europe in the 1920’s in response to the
mechanistic paradigm. The mechanistic framework, which was advocated by Descartes,
Copernicus, Galileo, and Netwton, perceives the whole world to be a chain of causally
deterministic, reducible atoms that can be quantified and measured objectively. A mechanist
breaks down the various parts of an object’s structure into the smallest elements that constitute it,
and then analyzes the properties of those parts, which enables the observer to gain a sufficient
mechanical understanding of the object in its totality.3
If an observer is able to understand those
elements, he will then be able to fully understand any higher-level property, such as the structure,
which is equivalent to the combination of the constitutive elements. Any changes in an object
will simply be a rearrangement of those reducible particles, as the motion of physical particles is
strictly governed by the deterministic cause-and-effect principle, and therefore the observer can
acquire full omniscience of the system in past, present, and future states with proper mechanical
analysis.4
This philosophy of reductionism can be summed up through the statement: ‘the whole
is equal to the sum of its parts.’
2
Fritjof Capra and Pier Luigi Luisi, The Systems View of Life: A Unifying Vision (New York,
NY: Cambridge University Press, 2014).
3
NY: Cambridge University Press, 2014) 5-12.
4
Francis Heylighen, The Newtonian World View, (Principia Cybernetica, Brussels).

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The systems thinking paradigm, by contrast, contends that ‘the whole is greater than the
sum of its parts.’ The roots of systems thinking began with the work of biochemist Lawrence
Henderson (1878-1942) who regularly used the term ‘system’ to develop his theory on living
organisms, a word which etymologically stems from the Greek words syn + histanai (meaning to
place together), in order to represent the indispensable relationship of parts embedded in the
greater context of an integrated whole.5
This term systems thinking emerged to describe this
way of understanding phenomenon by assuming a holistic perspective that does not break an
object down into its smallest constitutive elements, but rather keeps those elements in tact as part
of the original structure, as it is believed that certain properties only exist in virtue of the
interconnections between those elements (refer to Appendix B). For something to be considered
a system, the following conditions of satisfaction must necessarily be present: (a) elements, (b)
which are interconnected (c) in such a way that they constitute a structure (d) that reproduces a
particular pattern of behavior, (e) in order to serve a function or purpose.6
This is the rationale
underlying the systems thinking framework, which views the world as a complex series of
irreducible relationships between elements on varying levels of analysis, rather than as a set of
deterministic relationships between reducible elements.7
Today systems thinking is used in a
variety of disciplines including biology, gestalt psychology, cybernetics, nonlinear mathematics,
cognitive science, ecology, quantum physics, and sociology.8
5
NY: Cambridge University Press, 2014) 64.
6
Donella H. Meadows, Thinking in Systems: A Primer (River Junction, VT: Chelsea Green Pub,
2008), 2.
7
8
NY: Cambridge University Press, 2014).

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A mechanist might critique the systems thinking framework through the following
position. Approaching an object through a holistic lens, in which the observer maintains the
structural integrity of the object, will pointlessly complicate the analysis, as ultimately all
structures are a deterministic function of their smallest constitutive elements, and therefore all
insights can be made via analyzing the mechanical operation between those reducible elements.
All material in a system is composed of reducible parts of matter that are differentiated solely by
their spatiotemporal location, so if the observer can develop a sufficient understanding of those
parts and apply causal analysis, the observer will be able to understand the system in its entirety.
Maintaining the complexity of the system is useless and does not reflect a sufficient ontological
understanding of the material world, for all significant properties can be deduced through a
reductive analysis at the atomic level, and therefore no meaningful insights can be made through
the systems thinking framework that could not be arrived at otherwise through the mechanistic
framework.
I believe that the mechanistic critique of the Systems Thinking framework is invalid. The
perspective that all phenomena are reducible to their elementary parts is erroneous, for there
exists multiple properties on higher levels of analysis that cannot be sufficiently accounted for in
a mechanical description. It is true, as the mechanist would state, that all physical structures can
be broken down into elementary parts that are subject to the deterministic laws of cause-and-
effect. It may also be true that the only distinction between those parts is their spatiotemporal
position. But it does not follow from these statements that all properties in a structure are
reducible to constitutive parts, for there exists a multitude of emergent properties that are distinct
from the smaller parts that constitute them. Consciousness, for example, is a property that
cannot be reduced to the neurons of the brain. It emerges from these physical parts, yet the

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phenomenon itself is not physical.9
The mechanistic framework is forced to deny the existence
of consciousness, or at least marginalize it in their analysis by framing it as ‘epiphenomenal’; I
reject this position. Consciousness is an irreducible, qualitative property that is epistemically
subjective, yet ontologically objective.10
Consciousness, along with a myriad of other properties
such as color, are phenomena that cannot be understood through the mechanistic framework
because they do not exist on the level of their constitutive elements, but rather emerge in virtue
of the interconnections between those elements. For issues of this nature, those that are complex
and interdependent, systems thinking is valuable because it is designed to take higher level
properties into account while also examining how the parts function on lower levels of analysis,
which removes the epistemological limitations that prevent the mechanistic framework from
understanding those emergent properties.
I have chosen to apply systems thinking to the field of management because the
environment for many organizations today is characterized by irreducible complexity and
connectedness, which is the exact kind of subject matter that systems thinking is designed to
examine. Systems thinking has been applied to the domain of management before by
organizational theorists and business managers, though the literature on this topic is sparse and
outdated. I believe that the management framework I create adds a significant contribution to
this field because it rigorously applies systems thinking principles, it is designed for the modern
context, and it is a cohesive framework that can be customized to the needs of any organization; I
am of the opinion that there is no theory out there that satisfies these three conditions. That
being said, I am grateful for the work of theorists such as Peter Senge, Dennis Sherwood, and
9
John Searle, The Rediscovery of Mind (Cambridge, MA: MIT Press, 1992) 112.
10
John Searle, The Rediscovery of Mind (Cambridge, MA: MIT Press, 1992) 136.

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Russell Ackoff who have shown that systems thinking does indeed have great application to the
domain of management. I will now highlight some of the key points of Peter Senge to
demonstrate this relationship between systems thinking and management.
Peter Senge is an organizational theorist and systems scientist who argues that
organizations should integrate systems thinking into their management frameworks so that they
can maximize their capacity to learn and become a ‘learning organization’, which he articulates
in his book The Fifth Discipline. The value that Senge places on learning is very high, as
reflected in his statement: “The only sustainable competitive advantage is an organization's
ability to learn faster than the competition.”11
This philosophy follows the Warren Bennis school
of thought, which states, “Success in management requires learning as fast as the world is
changing.” To become a learning organization, Senge argues that an organization needs to
integrate five disciplines into their management structure, which are systems thinking, personal
mastery, mental models, building shared vision, and team learning.12
Systems thinking is the
fifth and most important discipline because it is “the discipline that integrates the (other)
disciplines, fusing them into a coherent body of theory and practice.”13
Senge contends that
systems thinking applies to organizational management because an organization is a system, a
complex one that is “bound by invisible fabrics of interrelated actions,” and by using the systems
thinking approach to examine the organization’s system, the organization will increase their
capacity to learn.14
According to Senge, systems thinking allows for the maximal learning of
11
Peter Senge, The Fifth Discipline: The Art & Practice of the Learning Organization (Random
House Inc., 1990) 2.
12
House Inc., 1990) 6-10.
13
House Inc., 1990) 12.
14

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both endogenous and exogenous knowledge when the situation is complex and irreducible to
cause-effect analysis, and since the business context is growing increasingly complex in ‘the
information age’ and the ‘age of interdependence,’ an organization should integrate systems
thinking principles into their management framework so that they can better manage
their system, the complexity of the environment, and their knowledge.
“Today, systems thinking is needed more than ever because we are becoming
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… Organizations break down, despite individual brilliance
and innovative products, because they are unable to (deal with this complexity). Systems
Thinking is the antidote.”15
By integrating systems thinking into the management framework, it shifts the lens from a
reactive cause-effect analysis of events (i.e., sales dropped last quarter, which must mean the
sales team were negligent), to a responsive understanding of the patterns of behavior (i.e., sales
dropped last quarter, but management forced the sales team to work weekends during the product
launch in the previous quarter, so the sales team suffered from burnout and could not perform at
the same standard), and even more effectively to a generative lens that examines the systemic
structure responsible for creating the pattern of behavior (i.e., sales dropped as a result of
employee burnout due to the demand of management, but management was under pressure to
deliver exceptional results to the executives, and so really the issue lies in the structural
relationship between the executives, management, and sales).16
Doing this changes the focus
from isolated parts (i.e., Human Resources and Product Development perform independent
House Inc., 1990) 10.
15
House Inc., 1990) 69.
16
House Inc., 1990) 52.

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functions) to the interrelationships between those parts (i.e., Human Resources and Product
Development perform different functions, yet both influence one another), as well as from
viewing events in short ‘snapshot’ time frames (i.e., analysis of events by quarter) to events in
patterns over long time frames (i.e., looking at how events unfold over multiple quarters).17
The
utility of shifting from an analytic management framework to a holistic systems thinking
framework lies in the latter’s capacity to understand how the organization’s system is affecting a
particular event, which generates new knowledge that allows management to make more-
informed, better decisions, thereby increasing the likelihood that the organization will be
successful.
One could argue that a systems thinking approach to management distracts an
organization from improving the quantifiable metrics (i.e., the bottom line), which will only have
a negative impact on the organization’s performance in those areas. I would respond that there
are plenty of important properties in an organization that cannot be reduced and measured by any
single metric, yet those properties still have the potential to significantly impact the baseline
metrics, and therefore they should be taken into account in the management framework. The
quality of teamwork is one such property of a functional organization that is irreducible to any
single metric, as you cannot measure it by looking at the quantitative output of any one single
individual, yet “teamwork can significantly improve performance, effectiveness, efficiency,
morale, job satisfaction, unity of purpose, communications, innovative thinking, quality, speed in
getting things done, and loyalty to an organization.”18
There is validity in the viewpoint that
17
House Inc., 1990) 65-66.
18
Warrick, D. D. 2014. "What Leaders Can Learn About Teamwork and Developing High
Performance Teams From Organization Development Practitioners." OD
Practitioner 46, no. 3: 68-75. Business Source Complete, EBSCOhost (accessed

13
excessively focusing on certain properties at the expense of baseline metrics can have a negative
impact on the organization, but emergent properties also impact the baseline metrics, and so if
the goal is to optimize the performance of those metrics, management needs to account for all the
significant and influential factors in their system, as well as find the appropriate balance between
those factors.
One might also content that The Fifth Discipline places too high a premium on
knowledge, and that ultimately an organization’s performance is determined primarily by factors
outside of their control, such as the strength of the competition, and therefore redesigning an
entire organization’s management structure will have a negligible effect on those stronger
determinants. I concede that there is legitimacy in this position, as there are a myriad of factors
other than knowledge that determine how effective an organization will be at achieving its goals,
and in many situations, increasing knowledge will not change the inevitable outcome that will
occur in virtue of those factors. Yet the value of knowledge cannot be understated in its
potential to positively influence a situation, for it can reveal a pathway to success that would not
be otherwise accessible. This in itself makes knowledge a hugely important asset to an
organization, even if it does not always provide immediate utility, as it could be the saving grace
that allows an organization to circumvent an imminent threat or leverage a latent opportunity. At
the very least, making more informed decisions will not hurt the organization, and it will likely
help. Therefore, though I agree that Senge is at times overly emphatic regarding his views on the
value of knowledge, I ultimately agree with him that redesigning the management structure to
maximize the capacity to learn is critically important for organizations in an environment
characterized by complexity and rapid change.
December 9, 2014).

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Having now provided an overview of how systems thinking relates to the field of
management, I will now propose what I am calling the systems thinking management
framework. This new management framework will integrate a multitude of systems thinking
principles that are relevant to the domain of management and can potentially transform the way
that organizations operate in a complex environment for the better. This includes the systems
thinking principles of stocks and flows, reinforcing and balancing feedback loops, self-
organization, emergence, system constraints, delays and oscillations, continual learning, and the
systemic perspective. After that, I will examine two existing management frameworks, scientific
management and the lean startup method, from the perspective of the systems thinking
management framework in an effort to show their strengths and weaknesses. My intention with
this process is to further concretize the systems thinking management framework by
demonstrating how its principles contrast with two established management methods. I will
conclude by sharing some final thoughts on the application of systems thinking to organizational
management.
II. The Systems Thinking Management Framework
The first principle in the systems thinking management framework is to understand the
business as a series of stocks and flows. A stock is essentially the baseline of the system that is
being measured and manipulated; it can be thought of as the system’s dependent variable. The
effort to understand all other parts of a system generally traces back to how they influence the
stock, which usually changes in a nonlinear way due to the complex nature of the interrelations
between the various other elements that affect it. 19
In an organization, a stock could be the total
19
2008), 17-19.

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profit, the number of customers, the inventory supply, or any other quantifiable baseline metric
that affects the outcome of the organization. A stock changes through flows, which are the
processes of change that directly determine the level of the stock. For a stock that measures the
number of customers, the inflow is the number of new customers, as it directly increases the
stock value, and the outflow is the number of defected customers, as it directly decreases the
stock value. Flows are often imbalanced and switch off as to which flow is dominating the other
flow, thereby causing the stock to reside in a state of continual flux.20
The primary value of
integrating stocks and flows into the management framework is that it allows management to
improve their understanding of how their baseline metrics are impacted by rates of change. This
knowledge also allows an organization to understand how other mechanisms, such as feedback
loops, work in conjunction with the flows to affect a particular stock, which can reveal key
leverage points that an organization can manipulate to optimize the stock.
The next systems thinking management principle is feedback. Feedback loops are the
processes by which a stock regulates itself based on its current level, via a mechanism that
modifies its inflows and outflows.21
The two primary forms of feedback loops are called
balancing feedback loops (negative) and reinforcing feedback loops (positive). A balancing
feedback loop is a mechanism that attempts to keep a given stock constrained to a particular
value range. “Balancing feedback loops are equilibrating or goal seeking structures in systems
and are both sources of stability and sources of resistance.”22
In regards to an organization, if a
20
2008), 18-24.
21
2008), 25-27.
22
2008), 30.

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business gains excess surplus of a product in its inventory, it will cut prices, which will lead to an
increased demand for that product, thereby diminishing the supply of that product until it reaches
the desired inventory level; this entire process is a balancing loop with goal-seeking behavior. A
reinforcing feedback loop is a mechanism that causes a stock to dramatically increase or decrease
by magnifying the value of the stock that currently exists, which gives rise to exponential growth
or decline patterns over time. A reinforcing feedback loop will generally result in the destruction
of the system if there is no negative feedback loop to counterbalance the pressure of the
exponential growth. An example of a + feedback loop is a price war between two competitors,
whereby each business reduces a product’s price in an effort to prevent customers from defecting
to the other business, which causes the product prices to continually spiral downwards until one
business can no longer continue. 23
Feedback is an important principle in a management
framework because it allows management to understand how certain processes repeatedly affect
their organization’s system over time. Though the major feedback loops in an organization are
often identified, if feedback loops are not the focus of a management framework, it is easy to
overlook certain feedback processes that strongly influence the organization for better or worst.
An organization that understands its feedback loops can strategically intervene to minimize the
effect of undesirable feedback loops and optimize the effect of desirable feedback loops.
Another principle of central importance to the systems thinking management framework
is self-organization. Self-organization is the capacity of a system to “structure itself, to create
new structure, to learn, to diversify, and complexify,” which serves as “the strongest form of
system resilience (because) a system can evolve to survive almost any change, by changing
23
2008), 30-34.

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itself.”24
Self-organization breeds chaos, unpredictability, fluctuations, heterogeneity, and
dynamic growth. Though this may sound undesirable, these unstable conditions serve as a
catalyst for innovation, self-renewal, and the creative destruction of obsolete processes that
inhibit an organization from evolving. Self-organization often produces an organizational crisis,
which is valuable because “some form of crisis is needed to generate an entirely new, innovative
product concept or to abolish a company’s existing patterns and replace them with a new
order.”25
The tension created by a crisis introduces new energy into the system that serves as the
roots for the transformation of the complex system. The energy may destroy existing parts of the
organization, but it simultaneously allows for transition from the existing systemic balance to a
new systemic balance, whereby structures bifurcate and novelty emerges.26
Despite the chaotic
nature of this systemic property, management can strategically generate self-organization in
specific areas of the organization that need new energy and a fresh approach, yet not introduce
self-organization into the areas of the organization that require functional reliability and stability.
For instance, management might facilitate self-organization in the product development team for
the sake of creating an innovative new product, but refrain from doing so in accounting, which
must deliver a consistently reliable outcome.
There are specific structural conditions that must exist for self-organization to take place.
For self-organization to emerge in an organization, employees at all levels must have a high
degree of autonomy to creatively experiment, free from the control of top-down hierarchical
24
2008), 190.
25
Biggiero, Lucio. 2001. "Self-organizing processes in building entrepreneurial networks: a
theoretical and empirical investigation." Human Systems Management 20, no. 3:
209.Business Source Complete, EBSCOhost (accessed December 9, 2014).
26
(SVOL, 84)

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power. 27
A management structure that defines every employee task inhibits the employees from
organizing themselves to pursue work-related ends that they perceive to be valuable, which
discourages the system from reinventing itself from the bottom-up. Management can further
enhance the capacity for self-organization by constructing cross-functional teams, thereby
inhibiting the groupthink tendency of homogeneous functional teams. This allows for generative
conflict and creative crisis to emerge, which creates new energy that catalyzes innovation and
transformation.28
The value of self-organization in a management framework is profound, for it
facilitates innovation, growth, and adaptability. This is especially important for organizations in
complex, rapidly changing environments because self-organization allows an organization to
destroy obsolete processes and find new ways to grow in harmony with the environment.
The next systems thinking management principle, which is closely tied to self-
organization, is emergence. Emergence refers to the phenomenon whereby certain properties can
only be found on higher levels of analysis, yet those properties manifest in virtue of the lower-
level parts, based on the system’s particular pattern of configuration.29
There are many emergent
properties in an organization’s system. For instance, total revenue and the cost of production
exist on one level of analysis, for they are quantifiable baseline metrics that can be measured
through a single, reducible number, whereas the quality of teamwork exists on another level, as it
cannot be understood by looking at any one metric, but rather is a qualitative property that
emerges from the interconnections between the various employees.30
Other examples of
27
(TFD, 2)
28
Biggiero, Lucio. 2001. "Self-organizing processes in building entrepreneurial networks: a
theoretical and empirical investigation." Human Systems Management 20, no. 3:
209.Business Source Complete, EBSCOhost (accessed December 9, 2014).
29
30
Dennis Sherwood, Seeing the Forest for the Trees: A Manager’s Guide to Apply Systems

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emergent properties in organizations include the level of innovation, collaboration, and capacity
to learn. Each emergent property has specific structural conditions of satisfaction that must be
present in order to manifest, and if management does not value these properties or create a
structure that allows them to flourish, but rather assumes a reductionist approach that only
focuses on optimizing the parts on lower-levels of analysis, it will impede the organization’s
ability to understand, improve, and leverage the power of these emergent properties31
.
A management framework that accounts for emergent properties gains valuable
knowledge that can contribute to better decision-making because it increases the organization’s
capacity to understand the inherent value and influence that emergent properties have on their
organization’s system. Sometimes it is more valuable for an organization to improve an
emergent property over a baseline metric, for emergent properties directly affect the health of the
organization. By integrating this knowledge of emergent properties into their decision-making
framework, management can make beneficial decisions for their organization that would not
otherwise be possible in a framework that discounts the value of emergent properties.
Another important systems thinking principle to understand in management is called a
system constraint. A system constraint is a boundary condition, a certain threshold, which
cannot be exceeded without triggering a balancing feedback loop that will restore the system to a
specific level or cause the entire system to break down.32
A system that has physical parts, as is
the case in virtually every organization, cannot grow forever because all physical parts have
inherent system constraints, and each part of a system reacts differently when its constraint is
Thinking. (Yartmouth, ME: Nicholas Brealey Publishing, 2002) 15.
31
32
2008), 158-159.

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exceeded. Management needs to identify these system constraints for each part of the
organization’s system, whether that is the number of machines the employees can maintain or the
minimum number of hours the employees must work, so that they can design the most effective
and sustainable system given their organization’s context. Another prominent example of a
system constraint in an organization is the limit to growth.
“For most American business people the best rate of growth is fast, faster, fastest. Yet,
virtually all natural systems, from ecosystems to animals to organizations, have
intrinsically optimal rates of growth. The optimal rate is far less than the fastest possible
growth. When growth becomes excessive- as it does in cancer- the system itself will seek
to compensate by slowing down; perhaps putting the organization’s survival at risk in the
process.”33
An organization that remains ignorant to its system constraints is at risk of triggering a
chain of destructive events that has disastrous consequences. For instance, suppose a business
builds an online communication platform that shows signs of becoming a huge success based on
its popularity with early adopters. Management fails to recognize that they have an inherent
system constraint in the number of users they can support with their current network
infrastructure, and so they continue to actively expand their user base until they surpass the
critical threshold, which causes their system to crash. Consequently, a large number of users
lose patience as the company tries to fix the problem and defect from the communication
platform because they believe that the service is flawed and unreliable. This proves to be a
devastating blow that tarnishes the reputation of the network during a critical growth period,
which the organization cannot recover from. If the business had instead recognized the system
constraint for the amount of users the servers could support before crashing, they could have
completely avoided this disaster by limiting the growth of their user base until they could build
33
House Inc., 1990) 62.

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the necessary server infrastructure to handle the demands of their network. This example
demonstrates the value of understanding the system constraints that exist within an organization.
If an organization can integrate this systems thinking principle into their management
framework, they will gain valuable knowledge that allows them to make better and more
informed decisions.
The next important factor to consider in the systems thinking management framework is
the principle of delays. Depending on the complexity of an organization’s system, the stock will
take time to change in response to the inflows, outflows, feedback loops, and other elements that
influence the stock; this process is known as a delay. Delays cause balancing feedback
mechanisms to continuously operate under the circumstances of old system data, rather than on
how the system is responding in the present moment.34
This is important because negative
feedback loops directly intervene on the system in an attempt to bring the stock back to its goal-
seeking constraints, and so if the balancing mechanism is working with delayed information, it
will impose an effect that is designed for the past needs of the system, rather than the needs of
the system in the present moment.35
As a result, the balancing mechanism will cause the stock to
overcorrect and miss the goal, and upon receiving updated information, the (same or different)
balancing mechanism will try to correct for the new incongruence between goal and reality,
thereby restarting the cycle.36
The system will therefore move back and forth between polarities
as the negative feedback loop tries to offset past system imbalances, which usually causes
34
2008), 51-58.
35
System Oscillation (System Dynamics Society).
36

22
imbalances in the other direction; this process is known as oscillation.37
If we track the system
over a period of time to observe the effects of this oscillation process, we will see something like
this38
:
If an organization fails to account for delays and oscillations in their management
framework, it can disrupt their entire operation and send the organization’s system into turmoil
as it continuously feels the repercussions of past interventions. “Throughout studies (on delays
and feedback) runs a common theme: as the time delays grow longer and the feedback more
powerful, performance deteriorates markedly.”39
This effect of delays is well documented in the
now infamous MIT ‘Beer Game’, which shows how time delays significantly impact the
distribution dynamics of supply chains. As demonstrated in the simulation, if a business does
not account for the 4-6 week delay it takes a B2B supplier to deliver a particular product, but
instead places orders based solely on their customers’ current demand for that product, they will
fall victim to an extreme oscillation cycle that can cause the collapse of the business.40
Though
37
2008), 54-57.
38
39
Peter Senge and John Sterman, "Systems thinking and organizational learning: Acting locally
and thinking globally in the organization of the future." European journal of operational
research 59, no. 1 (1992).
40
House Inc., 1990) 45-55.

23
delays are often factored into management frameworks, an organization that examines how their
system’s delays and balancing feedback loops work together will gain important knowledge that
can facilitate better decision making.
The next important systems thinking principle to account for in a management framework
is that of continual learning, which closely parallels the philosophy of the learning
organization.41
By engaging in a process of continual learning, management is able to avoid
getting stuck in fixed ideological positions that are incongruent reality, and instead gain new
knowledge that “continually expands (the organization’s) capacity to create its future.”42
Without a management structure that promotes continual learning, an organization will grow
increasingly ignorant about the needs of its environment, which will cause the organization to
make poorly informed decisions based on false assumptions. Continual learning is especially
important for organizations that are subject to a rapidly transforming environment, for an
organization that fails to embrace this principle will quickly become obsolete and surpassed by
more knowledgeable competitors that can respond and adapt more effectively to the changing
needs of the context. By integrating the principle of continual learning into the management
framework, an organization will improve its capacity to generate valuable knowledge, which will
enable the organization to make better decisions that allow the system to evolve concurrently
with the needs of the environment.
To promote continual learning, all members of the organization must engage in a
continual process of explicating and challenging the dominant ‘mental models’ that guide the
41
42
House Inc., 1990) 14.

24
organization, which are the “deeply ingrained assumptions, generalizations, or even pictures or
images that influence how we understand the world and how we take action.”43
This requires an
organizational structure that facilitates an ethos of trust and openness, whereby workers feel safe
enough to contest management directly, if they perceive “inconsistencies between assumptions
about the structure of the system and (it’s) likely behavior.” 44
It also requires management to
impartially evaluate each perspective’s validity and modify the mental models of the
organization according to the most accurate representation of reality, rather than maintain the
mental models set by the individuals at the top of the power hierarchy. By embracing this
method, “The managers become experimentalists practicing the scientific method: formulating
hypotheses, designing tests, and conducting the experiments which may invalidate their beliefs
and lead to improved understanding of the structure and dynamics of their organization.”45
This
ongoing, rigorous process ensures that continual learning becomes a fundamental guiding
principle of the organization.
The last systems thinking principle that needs to be accounted for in the management
framework is the systemic perspective. The systemic perspective examines the relevant system
from a holistic perspective that takes into account all the parts and properties, interconnections,
and function(s) on each level of analysis, rather than dissecting the system into its isolated
parts.46
Embracing the systemic perspective is an important practice because it can enable
43
44
research 59, no. 1 (1992).
45
research 59, no. 1 (1992).
46

25
management to understand how a particular action can reverberate through a chain of events that
results in a particular consequence.47
This knowledge, which would not be available to a
management framework that applies causal ‘event-event’ analysis, can then be used to
make better decisions regarding which actions an organization should take. For
example, suppose an organization conducts a price analysis of their flagship product,
from which they determine that reducing the price of that product by 5% will to lead to a
15% sales increase, which will increase the company’s total revenue by 10% by the end
of the quarter. This seems like a smart strategic move if we are only looking at the
situation from a causal perspective (price reduction → greater sales → greater
revenue). But, as Dennis Sherwood argues in Seeing the Forest for the Trees, “the
event of dropping the price is not bounded, but has ripple effects extending over space
and time almost indefinitely,” because “the context in which your prices are dropped is
highly complex- a complexity driven by connectedness.”48
In this example, when the
organization reduces the cost of their product by 5%, it leads to that 15% increase in sales
2008), 2.
47
Thinking. (Yartmouth, ME: Nicholas Brealey Publishing, 2002) 1-6.
48
Thinking. (Yartmouth, ME: Nicholas Brealey Publishing, 2002) 4-5.

26
volume as predicted, but that then starts a price war with a competitor, which further increases
the demand and attention given by the public, which catches the attention of an even larger
competitor that decides to build an even less expensive version of the same product, which
causes all of the customers to switch to that cheaper product, which ultimately leads to the
downfall of the original organization as they quickly lose their entire market share. This
example is intended to show the consequences of complexity and connectedness, and how a
failure to examine an organization from a systemic perspective, whereby all the connected
variables are accounted for in the analysis, can potentially lead to disastrous consequences. “So
if we want to understand systems, to discover what is going on to make the whole greater than
the sum of its parts, then we must preserve that connectedness and study the system as a whole,
in its entirety.”49
Similar to The Fifth Discipline, in which Senge ties together his other management
principles (personal mastery, mental models, building shared vision, and team learning) with
systems thinking (the fifth principle), I am using the systemic perspective as a way to connect
stocks and flows, self-organization, emergent properties, system constraints, delays, and
continual learning, along with the other fundamental elements of an organization that need to be
accounted for. Every organization is in a unique position that requires a different management
approach, and there is no generalizable management framework that is optimal for every
organization. For instance, a business that produces high-volume standardized products, such as
the fast-food industry or a cable company, would likely yield more harm than benefit by
integrating self-organization into their structure, whereas a business in an industry that mandates
49
Thinking. (Yartmouth, ME: Nicholas Brealey Publishing, 2002) 5.

27
continual innovation and transformation, such as an IT or nanotechnology company, would
likely prosper by integrating self-organization into their structure. Ultimately, choosing the most
effective management framework depends on the context of the organization, as well as the
desired utility. This process if no doubt difficult and complex because it concerns the
organization’s system in its entirety, which requires management to account for all the relevant
elements, interconnections, and functions that affect the organization before determining what
form the management structure ought to take. Herein lies the value of the systemic perspective,
for it is designed to do just this. By embracing the systemic perspective in a management
framework, it not only improves the capacity of the organization to generate valuable knowledge
about their specific context, but it also improves the organization’s capacity to make better
decisions because management assumes a holistic lens that takes all important factors into
account.
Having now proposed a management framework that addresses the needs of an
organization in a complex environment, I will now critique two existing management
frameworks, scientific management and the lean startup method, from that position in an effort to
show the strengths and weaknesses of those management theories, as well as demonstrate how
the systems thinking management framework contrasts with them.
III. Systems Thinking Management evaluation of Scientific Management
Scientific management, also known as classical management or Taylorism, originated
from the theory of Frederick Taylor in his monograph Principles of Scientific Management in
1911.50
Scientific management was originally designed to deal with the needs of the Industrial
50

28
Revolution, in which it was thought by leading intellectuals (such as Fayol, Weber, and Taylor)
that workers needed to “leave parts of their self, e.g., their emotions, feelings, and desires, at
home and turn into rational emotionless entities,” in order to maximize the utility of the
business.51
Today, scientific management remains structurally embedded in countless
organizations throughout the world, especially in highly standardized businesses such as fast-
food chains, though the “cornerstone of management theory” has begun to decline in its
influence.52
The philosophical roots of Taylorism are grounded in the metaphor of the organization as
a machine, and as the popular approach grew into the dominant management framework across
many industries, it gave rise to the bureaucratization of organizations and the imposition of
machine-like management systems. The scientific management system is designed to make
organizations function as efficiently as possible, whereby all the inputs of the organization
(workers, machines, processes) are optimized to maximize the desired output (profit). An
organization’s capacity to generate profit is its primary function, and every part of the
organization should be optimized to maximize this function above all other considerations; “The
work process is most important and the value of the person is and should be minimized.” 53
All
decisions come from the individuals at the top of the organization’s hierarchy, who completely
determine every activity that the employees on the lower levels perform; the power structure is
51
Alla Heorhiadi, John Conbere, and Chato Hazelbaker, Virtue vs. Virus. OD Practitioner 46,
no. 3 (Summer2014 2014). Business Source Complete, EBSCOhost(accessed December
9, 2014).
52
53
Alla Heorhiadi, John Conbere, and Chato Hazelbaker, Virtue vs. Virus. OD Practitioner 46,
9, 2014).

29
absolute and operates through clearly defined processes. The employees perform highly
specialized tasks, and those who perform different tasks are isolated from one another, especially
the managers from the general workers. These are the general principles of scientific
management.54
I will now examine them from the perspective of the systems thinking
management framework.
The strengths of scientific management lie in the structure of the framework. If we look
at Taylorism from a systemic perspective, we can see that the structure produces a homogenous
pattern of behavior that is conducive for certain kinds of organizations, particularly well-
established enterprises that operate on large economies of scale. Scientific management is a
particularly effective framework for organizations that operate in a context where (a) there is a
high barrier to entry for new entrants, (b) there are a limited number of competitors who
dominate the market, (c) day-to-day operations entail highly predictable, mechanical processes,
(d) knowledge has a marginal effect on the organization’s chances of success, (e) the context is
relatively static and slow to change, (f) there is a low risk of disruptive innovation, and (g) the
only goal of the organization is to maximize profit. Examples of organizations that operate in
these circumstances are Chevron and Comcast. The structure of scientific management is
designed to manifest its function- to maximize company profit through creating highly
standardized products and fixed power hierarchies. If an organization exists within this context
and shares similar values, then Taylorism is a beneficial management framework.
54
Huang Kai-Pai, et al. "A REVIEW AND CRITICAL ANALYSIS OF THE PRINCIPLES OF
SCIENTIFIC MANAGEMENT." International Journal Of Organizational Innovation 5,
no. 4 (Spring2013 2013). Business Source Complete, EBSCOhost (accessed December
9, 2014).

30
The weaknesses of classical management, as critiqued from the position of the systems
thinking management framework, are as follows. The first problematic condition is that
scientific management structures the organization as a mechanistic system, whereby
management assumes a reductive, causal ‘event-event’ analysis of the system’s parts, through
only focusing on how each input affects the intended output. This framework imposes
epistemological limitations that blind management from understanding the value of emergent
properties, such as teamwork and collaboration. By keeping the workers separated, it even seeks
to actively discourage these emergent properties. It also inhibits an organization from
identifying important systemic patterns, thus limiting the amount of available knowledge, which
can cause management to make worst decisions that end up hurting the organization. Finally,
this condition objectifies workers by framing them as cogs in a machine, which can manifest in a
variety of negative ways that make for poor working conditions. This not only has the effect of
making the workers dislike their work, but it also discourages their passion and creativity (also
emergent properties), which are properties that can significantly benefit an organization if they
are encouraged.
The next problematic condition of scientific management is the power hierarchy, in
which there is absolute top-down control of all processes and a complete absence of autonomy
for the workers. This condition stifles self-organization because it obstructs the structural
conditions that are necessary for self-organization to emerge, such as providing employees with
the freedom and agency to experiment in their work, which is further inhibited by the specialized
functional roles and isolation of workers. A management framework that suppresses the capacity
for self-organization restricts the production of novelty and innovation, which impedes
organizational transformation and maintains the status quo. Furthermore, the strict power

31
hierarchy discourages an ethos of openness and trust between workers and management. This
inhibits the organization from engaging in continual learning because the workers do not have
the freedom to challenge the mental models that guide the organization, which is neither
welcome nor rewarded in a rigid power hierarchy. The resulting effect is that the assumptions
and generalizations that govern the organization are dictated by the subjective perceptions of the
individuals at the top of the hierarchy, and as the inconsistencies between their mental models
and the real behavior of the system grow larger, so does the likelihood that management will
make negative business decisions in virtue of that ignorance.
Ultimately, Taylorism is a poor management model for any organization that is operating
within the context of a complex, rapidly-evolving environment that demands continual growth
and innovation; and for smaller organizations that do not have the resources or security of
wealthy corporations operating on large economies of scale; and for organizations that do not
produce highly standardized products or services; and for organizations that have goals other
than just maximizing profit and treating their workers like cogs in a machine.
IV. Systems Thinking Management evaluation of the Lean Startup Method
The lean startup method is a business management framework created by successful
entrepreneur Eric Reis in his 2008 book The Lean Startup. The management framework claims
to create successful, sustainable businesses through an approach centered on ‘continuous
innovation’.55
The principles underlying the lean startup method are based on Reis’s personal
experience as a Silicon Valley entrepreneur and founder of online virtual simulation platform
55
Eric Reis, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to
Create Radically Successful Businesses (New York, NY: Crown Business, 2011) back
cover.

32
IMVU, a company that grew to 50 million regular users and $40 million in annual revenue.56
Numerous businesses have since utilized the lean startup method and testified to the efficacy of
the framework, including Wealthfront, Grockit, Votizen, and Aardvark. Dropbox, which
increased its registered user base by a factor of 40 (100,000 to 4,000,000) in 15 months, attribute
their success to the lean startup method.57
Though these testimonies are not staggering, the lean
startup method is still fairly new and is quickly growing into a popular management framework,
particularly in Silicon Valley.
Reis developed the lean startup method in response to the failing principles of traditional
management frameworks, which he argues are now obsolete in the modern context: “As the
world becomes more uncertain, it gets harder and harder to predict the future (and) the old
management methods are not up to the task.”58
Reis is especially critical of scientific
management, which he believes, “has led to two problems: (1) business systems become overly
rigid and thereby failed to take advantage of the adaptability, creativity, and wisdom of
individual workers, and (2) there has been an overemphasis on planning, prevention, and
procedure, which enable organizations to achieve consistent results in a mostly static world.”59
Reis designed the lean startup method to avoid these problems by creating a set of management
principles that enable an organization to move fluidly toward goals that are aligned with the
needs of the customer.
56
Create Radically Successful Businesses (New York, NY: Crown Business, 2011) 38-40.
57
The Lean Startup Case Studies (The Lean Startup).
58
Create Radically Successful Businesses (New York, NY: Crown Business, 2011) 10.
59
Create Radically Successful Businesses (New York, NY: Crown Business, 2011) 278.

33
The principles underlying the lean startup method are as follows. First, employees are
divided into cross-functional teams that each deal with a particular phase of product
development. When a team finishes with their phase, employees can choose whether to continue
working on the same product, or move onto the next product. The cross-functional teams
organize themselves so that employees can naturally gravitate toward the positions that
maximize their strengths and minimize their weaknesses. The organization continuously
challenges the core assumptions behind the strategy, what Reis calls the leap-of-faith
assumptions, because the validity of those assumptions ultimately determines how successful the
organization will be in executing that strategy. 60
The primary leap-of-faith assumptions are the
value hypothesis, which “tests whether a product or service really delivers value to customers
once they are using it,” and the growth hypothesis, which, “tests how new customers will
discover a product or service.”61
If it turns out that an organization’s assumptions are flawed, it
will likely cause the particular strategy to fail, which is why the foremost priority of the startup is
to test those assumptions. This process is known as validated learning, which is a rigorous,
empirical method for testing whether the leap-of-faith assumptions are true or false. According
to Reis, everything a startup does should be designed to achieve validated learning about the
leap-of-faith assumptions, and if it turns out that those assumptions are invalid, then management
needs to immediately change the strategy to reflect the most accurate representation of reality
available.
60
61

34
To achieve validated learning, an organization builds a Minimum Viable Product (MVP),
which is a prototype designed to include nothing but the minimal amount of features that will
allow management to learn about their strategic assumptions. The MVP moves through the
Build-Measure-Learn Feedback loop (BML), which is a continuous process that allows
management to rapidly produce multiple prototypes, gain feedback, and learn about the validity
of their assumptions and the needs of the customer (refer to Appendix C).62
By gaining this
knowledge, management can determine how to proceed in a way that maximizes value for the
customer. If it turns out that the MVP receives sufficient negative feedback to refute the
strategic assumptions underlying it, then the organization should pivot from the current strategy,
in which case they create a new MVP with a different set of strategic assumptions that integrates
the new knowledge. On the other hand, if the prototype receives sufficient positive feedback and
confirms the leap-of-faith assumptions, then the organization should persevere with the current
strategy, in which case they continue to optimize the original MVP. This management
philosophy, according to Reis, is a scientific approach to product development because it is
guided by a process of experimentation and measurement that generates empirical knowledge,
rather than by a set of rigid, pre-determined goals. 63
Now that I have provided an overview of
the lean startup method and its underlying principles, I will examine it from the perspective of
the systems thinking management framework.
The strengths of the lean startup method are as follows. The management structure
allows for emergent properties to flourish, such as creativity and collaboration, by creating cross-
62
63

35
functional teams of employees with high degrees of agency, and by judging those employees
based on their ability to learn and create value. This also allows for self-organization to occur, as
the structure gives employees the autonomy to pursue the objectives that they determine will
maximize their capacity to learn and create value, rather than forcing employees to perform
standardized tasks dictated by individuals at the top of the power hierarchy. Self-organization is
further facilitated through the cross-functional composition of teams, in which heterogeneous
viewpoints generate constructive tensions and creative crises that allow for the emergence of
new energy, which enables organizational transformation. Furthermore, lean startup
management fully embraces transformation and strives to continuously adapt to environmental
changes by integrating the feedback from the MVPs in the BML loop, which organically
facilitates an even higher degree of self-organization.
The lean startup also integrates continual learning as a core guiding principle, as one of
the primary functions of the method is to achieve validated learning about the organization’s
strategic assumptions. Validated learning involves explicating and challenging the dominant
mental models of the organization for the sake of increasing knowledge. Regardless of rank, any
employee who learns something that could benefit the organization can advocate for their
position, and if it turns out that their reasoning trumps the wisdom of the prevailing norm, then
management will change or modify the dominant mental model to reflect that new knowledge.
In other words, there is no power hierarchy that obstructs the acquisition of new knowledge, for
continual learning is seen as an intrinsically valuable and necessary process that supersedes any
other organizational dynamic. A lean startup organization therefore encourages continual
learning, teamwork, collaboration, and self-organization in virtue of the structural conditions that
(1) allow employees the agency to experiment and collaborate with one another in cross-

36
functional teams, in which employees are judged in terms of their capacity to learn and create
value, (2) create a work environment that encourages all employees to challenge the dominant
norms and mental models for the sake of maximizing knowledge, so that better decisions can be
made, and (3) embrace organizational transformation through feedback for the sake of adapting
to the evolving needs of the environment.
Now I will address the problems with the lean startup method from the perspective of the
systems thinking management framework (see Appendix D). The first critique I have of the
management structure is that it does not account for the system constraints within the
organization. The method places too great an emphasis on perpetual growth and evolution, but it
fails to recognize that there are inherent boundary conditions that, if crossed, can jeopardize the
health of the organization. An organization that continuously evolves to match the needs of the
customer may succeed for a while, but if management lacks the foresight to understand that
certain directions of evolution might cause critical system constraints to trigger, they risk the
potentially devastating repercussions. Not only is evolution in the wrong direction an issue, but
the rate at which the organization evolves can also trigger further system constraints. In the
systems thinking management framework section, I provided an example of a communication
platform that grew too quickly and surpassed the system constraint of the number of users that
their server infrastructure could support, which caused a chain of events that eventually lead to
the downfall of the organization. An organization that fails to account for system constraints in
their management structure, as is the case with the lean startup method, discounts an important
factor that partially influences the success of the organization.
The next critique I have of the lean startup method is that it allows for self-organization
to an excessive degree, for the management structure enables self-organization in all domains of

37
the organization. Employees are allowed full autonomy to choose what they work on and
management does not have the authority to delegate or routinize tasks, which means certain tasks
are at risk of not being completed. Yet even organizations in the most rapidly evolving
environments need to consistently complete certain key tasks, and if those tasks are not done, it
has the potential to significantly damage the organization. Self-organization needs to be directed
and controlled according to the specific needs of the organization, and a failure to restrain self-
organization in certain areas can result in potentially disastrous consequences.
The final critique of the lean startup method is that it does not sufficiently account for a
systemic perspective. The management framework places great emphasis on validated learning
and continual transformation, but it does not balance those factors out with all the other
important factors that determine the success of an organization. An organization needs to take
all relevant factors into account when making decisions, and not dogmatically follow a
management ideology that perceives certain activities to be intrinsically more valuable than
others. Though I agree with many of the principles behind the lean startup method, it is still
critically important that a management framework embraces a systemic perspective that takes all
factors into account given their organization’s context, for a failure to do this can create
cognitive biases that inhibit management from making the right decisions.
Scientific management is a poor management model for organizations that are operating
in a relatively static environment, and especially for organizations that are expected to deliver
standardized products or services. It is also a problematic framework for organizations that do
not need to continuously transform to match the needs of their customers. Though it has its
flaws, the lean startup fulfills its intended function of creating a management structure that helps
organizations flourish in conditions of extreme uncertainty, for it allows an organization to

38
quickly identify the needs of customers, as well as the flexibility to adapt to those needs.
Ultimately, the power of the lean startup method lies in its capacity to promote continual
transformation and innovation in an organization, but if those qualities are not balanced out with
a systemic perspective that accounts for all the other important factors in an organization, then it
can potentially be destructive.
The last two sections served to explain and evaluate scientific management and the lean
startup method from the perspective of the systems thinking management framework. The
intention with this process was to further concretize the systems thinking management
framework by demonstrating how its principles contrast with two established management
methods. Having done this, I will now finish the thesis with some concluding remarks.
V. Conclusion
Throughout this thesis, I have covered a wide-variety of topics including: the new
environment, organizational management, systems thinking, The Fifth Discipline, the systems
thinking management framework, scientific management, and the lean startup method. The goal
of thesis was to propose a new systems thinking management framework that is designed to
make an organization more effective at achieving its goals in a complex, rapidly changing
environment. The systems thinking principles that constitute this new management framework
are stocks and flows, reinforcing and balancing feedback loops, self-organization, emergence,
system constraints, delays and oscillations, continual learning, and the systemic perspective. By
integrating these principles into the management structure, an organization can facilitate the
following three outcomes:

39
occur.
The systems thinking management framework contrasts with many other management
models, such as Taylorism, for it embraces uncertainty, disorder, learning, and continual
transformation at the expense of predictability, control, efficiency, and stability. Though this
shift in values may seem precarious, it is necessary for an organization that operates in a
complex, rapidly evolving environment to embrace these values because they facilitate
innovation and adaptability, which are the prerequisites for survival in this context.
Organizations subject to this new environment cannot afford to use inadequate management
frameworks, or their capacity to learn, evolve, and make the right-decisions will be compromised
by an ideology that is constructed to handle the needs of a different context, which will promote
a pattern of behavior that is incompatible with the demands of reality and will likely cause the
organization to fail. The systems thinking management framework is, by contrast, designed for
this new environment, though I recognize that many of its principles contradict the conventional
wisdom of organizational management. Despite this, I am confident that this new management
method will allow an organization to prosper in a context of complexity, connectedness, and
rapid change because it is grounded in the principles of systems thinking, a framework
specifically constructed to understand circumstances of this nature. Though I am by no means

40
the first person to apply systems thinking to the domain of management, I believe that my
contribution to this field of research is significant because my management framework
rigorously applies systems thinking principles, is designed for the modern context, and can be
customized to the needs of any organization; I am unaware of any previous work that fulfills
these three conditions.
Ultimately, the systems thinking management framework is not some cheap management
fad because it fundamentally restructures how an organization operates in an environment
characterized by complexity, interconnectedness, and perpetual change for the better. As is the
case with all management methods, the framework I am proposing is not suitable for every
organization. For those organizations that the framework does apply to, the principles should not
be followed dogmatically, but rather should be customized to the context of the organization to
maximize the intended utility. Having said that, the systems thinking management framework
has lasting value because it can be modified to match the needs of any organization that is
operating in a complex, rapidly evolving environment, and as the world continues to move in
that direction, its principles will only grow in relevance.

41
Appendix
Appendix A: This note will describe how the world is evolving by drawing from the theory of
Allenby and Sarewitz in The Techno-Human Condition. The modern world can be theoretically
divided into three distinct levels concerning the relationship of man to technology, which differ
in their complexity and implications for how we engage with the environment64
. It is relevant to
discuss the role of technology because we live increasingly in a world dominated by the
proliferation of new technologies. This is a critically important phenomenon because,
“technologies destabilize the world, changing cultures, worldviews, power relationships, and
ethical, moral, and theological systems.”65
On the first level defined by Allenby and Saretwitz, known as Level I or the shop-floor
level, there is clearly defined cause-and-effect relationship between man and technology.66
There is minimal complexity in Level I because the system is simple and straightforward. The
system is strictly deterministic and predictable because “the necessary relationships among goals,
means, and causality have already been captured in a physical system that can be used with
confidence that a given input will produce a desired output.”67
Due to its simplistic nature, we
are easily able to create and configure Level I technologies to meet our needs and solve specific
social problems.68
64
MIT Press, 2011), 36-37.
65
MIT Press, 2011), 71.
66
MIT Press, 2011), 51, 63.
67
MIT Press, 2011), 107.
68
MIT Press, 2011), 63.

42
Level II technologies are much more complex than in Level I because they typically
operate within complicated network structures, thereby making it difficult for us to understand
and predict how their causal inputs and outputs function. Examples of technology residing in
Level II include biotechnology, nanotechnology, robotics, and applied cognitive science69
.
“We can see what (Level II) technologies do, and we can recognize what is in the system
and what is not, even though acting to achieve a particular intended outcome is often
difficult because the internal system behavior is too complicated to predict.”70
Another primary example of Level II technology is information and communication technology
(ICT). ICT creates virtual worlds whereby physical structures are replaced with information
structures that impose order in cyberspace.71
This technology serves as a framework to navigate
through virtual worlds via these information structures, thereby facilitating the emergence of
mankind’s “migration of functionality to information rather than physical structures,” which
“also, and critically… catalyzes complexity.”72
An example of ICT is the transformation of
money from coins and paper, which are physical materials, to online saving accounts, whereby
money is represented through virtual electrons in cyberspace.73
An amazing feature of ICT and
other Level II technologies is their ability to build off one another, thereby exponentially
increasing the rate of each technology’s development. As Level II technology rapidly evolves,
69
MIT Press, 2011), 80.
70
MIT Press, 2011), 63-64.
71
MIT Press, 2011), 80.
72
MIT Press, 2011), 80.
73
MIT Press, 2011), 80.

43
humanity is taken along for the ride as the societal landscape transforms at an unprecedented
pace. 74
The third level of technology (Level III) is what Allenby and Sarewitz call the Earth
System, which is a “complex, constantly changing and adapting system in which human, built,
and natural elements interact in ways that produce emergent behaviors which may be difficult to
perceive, much less understand and manage.”75
Level III technology is the supervenient product
of aggregated Level I and II technologies, as well as the myriad of human institutions and other
socio-cultural forces that constitute society, which also includes the impact imposed by the
ecological systems we inhabit. 76
The amalgamation of these factors generates emergent
behaviors on the highest level of analysis (Level III), which in turn influences the development
of humanity. The inherent complexity of the Earth System is too complicated to understand or
grasp through human cognition because there is no clear causality between inputs and outputs.77
Rather, Level III is a sea of symbolic and existential factors that are constantly in flux due to the
ever-evolving nature of the lower-level forces that enable its emergence.78
The inconceivable
complexity of Level III cannot be comprehended through traditional frameworks because there is
no way to define the boundary conditions of each relationship, as the emergent Level III
behaviors are constituted by endless elements existing on multiple levels of analysis that are
74
MIT Press, 2011), 81.
75
MIT Press, 2011), 64.
76
MIT Press, 2011), 63-66.
77
MIT Press, 2011), 63-66.
78
MIT Press, 2011), 64.

44
influencing one another and evolving at an exponential rate.79
The effect of this phenomenon is
that it “creates a context for continually shifting, never-stabilizing meanings and beliefs. Of
course such shifts have always been with us; the challenge now is that they are occurring in time
cycles that are decoupled from out institutional and psychological ability to understand them and
adjust accordingly.”80
Having now provided a framework to understand mankind’s relationship
to the world as understood through the three levels of technology, we can now discuss the
evolutionary process that society is undergoing.
Due to the exponentially increasing evolution of Level II technologies, which compound
to further increase complexity and fluctuations in the Earth System, the world is rapidly
complexifying.81
Society appears unwavering in its trust and endorsement of the newest Level II
technologies, despite the fact that these technologies are embedded in a complex network of
other Level II technologies. Very few people understand how Level II technologies function in
themselves, even fewer know how they work in conjunction with each other, and no one can
grasp the complexity that emerges on a systemic Level III scale as a result82
. Humanity is
pervasively ignorant about, yet curiously faithful to, these Level II technologies, even though
their stability and resilience is dangerously precarious in virtue of their structural entanglement.
This creates a 'house of cards’ effect, whereby if one significant technology fails, it could cause
a vicious feedback loop that destroys the entire system.83
Mankind operates in this new
79
MIT Press, 2011), 63-66.
80
MIT Press, 2011), 81.
81
MIT Press, 2011), 107-109.
82
MIT Press, 2011), 71.
83

45
environment, which continues to rapidly complexify as existing technologies support and
improve one another, yet we humans have not updated our paradigm to understand the modern
world.84
We need to continually update our mental models to align with this new complex
world, so that we are not blinded by ignorance to the forces that govern society. To do this, we
must keep returning to the question: 'what is the most useful framework to understand this
rapidly changing and complexifying world?’
MIT Press, 2011), 64-65.
84
MIT Press, 2011), 81-85.

46
Appendix B: Below I have constructed a model of my ‘weight system’ in an effort to show how
a systems thinker would approach holistically approach a system.

47
Appendix C: This note will explain how the Build-Measure-Learn loop functions by using the
following example.

48
85
Suppose an entrepreneur named John founds a startup called Startup X, which has the vision of
creating a new kind of wireless solar panel that is small enough to be carried around inside a
backpack, yet powerful enough to charge any laptop within an hour from 100% renewable
energy. John decides that to realize this vision and turn Startup X into a successful and
sustainable business, he will embrace the Lean Startup management method. John recognizes a
leap-of-faith assumption underlying the idea: the benefit of having a renewable energy source
that will quickly charge a customer’s laptop will outweigh the inconvenience cost of carrying
around a solar panel inside their backpack. To test this assumption, Startup X designs a MVP
that is a bulky, heavy solar panel made to fit inside a backpack, as well as a basic android app
where customers give direct mobile feedback to the company about their user experience. This
MVP lacks many key features that the ultimate product would have, such as a slick design, but it
is cost-effective and quick to develop this crude model. The startup builds 25 of these solar
85

49
panel MVPs and then and then gets a group of customers to test out the product for a one-week
interval for free and report back on their experience each night through the app.
Startup X measures the incoming quantitative data each night as the week progresses to
learn about their assumption, and then conducts interviews with each user to acquire qualitative
data. After the testing period ends and all the data is in, the quantitative feedback reports that 7%
of users found the product to be useful, as calculated through a function of various compounded
metrics that measure product utility. The qualitative feedback reports that the reason for the
dissatisfaction is that a large percentage of customers use their laptops while sitting inside a
room with an outlet, and therefore they find it much more convenient to plug in a wired laptop
charger that does not need to be pre-charged unlike the solar panel. Almost half of the users also
report they would prefer the solar panel to power their phones instead, because phones are used
more commonly in transition and it is inconvenient to have to stop and charge them at indoor
outlets. After assessing the data, John learns that there is a flaw in his leap-of-faith assumption
(people do not want a solar panel laptop charger) and so he decides it is time for Startup X to
pivot.

50
Based on the feedback from the first cycle, John decides that the best pivot is to sell a
solar panel that fits inside a backpack and wirelessly charges cell phones (instead of laptops),
which in turn has the strategic assumption that the value created from this product will outweigh
the cost of carrying the product inside a backpack. Startup X then builds a new crude model of a
solar panel cell phone charger, produces 25 MVPs, and measures the feedback. The business
keeps the same experimental design and uses the same group of customers that tested the first
iteration, in order to be maintain a scientific approach. This time the quantitative data reports
that 31% of users find the product to be useful. The qualitative data consistently reports
feedback about a design flaw- the customers are annoyed that they have to charge the solar panel
prior to putting them in their backpacks in order for it to charge their phones. Having learned
this new information, John decides that the assumptions underlying the strategy are sound and so
Startup X will persevere, though the next iteration will address the design flaw.
For the next MVP, Startup X designs the solar panel to directly attach to the outside of a
backpack. This way the solar panel can charge from the sunlight when the user is walking
around outside while simultaneously charging the cell phone, therefore addressing the problem

51
from the customer feedback in the last MVP. Startup X now builds 25 new MVPs, once again
releases the product to the same early adopters under the same experimental conditions, and
measures the feedback. This time the quantitative data reports that 72% of the users find the
product to be useful. The qualitative feedback this time is overwhelmingly positive about the
product itself, and now the customers are saying that they want a sleeker, slimmer, more
aesthetic solar panel. Having learned this information, John once again decides that the
assumptions underlying the product are valid, and he can now persevere with creating a product
that is more expensive to develop but a higher quality design. The BML process never ends
though, as Startup X will continue to run through the cycle no matter how successful they
become.

52
Appendix D: Below I have modeled out the entire lean startup system from a systems thinking
perspective.

53
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