Systems Thinking Opportunities for Leadership Innovation

Systems complexity results from the interdependence of its parts. Each part of the system has the ability to impact and ease change across, and within, other areas of the system. The result is that the impact of one action, or choice, on the system can become lost as the inter-dependencies increase. This can make it difficult to resolve issues in systems performance as the cause and effect relationships across the system are non-linear. The deterministic model that implies A-causes-B is no longer a luxury. Costs increase and quality decreases as the business team attempts to find a solution.

Systems inter-dependencies can introduce the following vectors that can be good or bad depending on the results:

• Increase: This can include an increase in profits, costs, risk, visibility, engagement, or relevance, etc.
• Decrease: This can include a decrease in quality, market share, value, or responsiveness, etc.
• Growth: This can include growth of the business size, industry competition, number of lawsuits, or customer demand, etc.
• Constraint: This can include constraints to business production capacity, learning, or evaluation, etc.

A useful definition of systems has been offered by Tezpur University (n.d.):

“System: A system is an orderly grouping of interdependent components linked together according to a plan to achieve a specific objective.”

“The study of system concepts has three basic implications: 1. A system must be designed to achieve a predetermined objective. 2. Interrelationships and interdependence must exist among the components. 3. The objectives of the organization as a whole have a higher priority than the objectives of its subsystems.”

Understanding systems dynamics is crucial towards developing Leadership Innovation and identifying the most effective paths to strengthen your teams, business, and satisfy customers. There are many reverse engineered models for Leadership, Emotional Intelligence, and Innovation but the key is how to develop these competencies within a unique industry, environment, and constraints?

The risk of using a Complete Off The Shelf (COTS) leadership, EI, or innovation model is that it may not be a good fit for your business environment. What these reverse engineered models describe are ideal performing constructs that will likely represent characteristics and resources different from the environments and resources your team is starting with. The strength of these models is that they can be used to provide a vision, when properly aligned with the leadership team’s understanding of the business environment’s constraints, to both pursue and justify the pursuit of stretch goals.

Because systems are often poorly understood the results of corporate strategies and efforts become unpredictable. Using Complete Off The Shelf (COTS) models can help explain where strategy went amiss after-the-fact but struggle to find what is suggested during the planning stage before the strategy is identified or implemented. Nothing can replace the leadership, teams, and employees’ understanding of the business environment during the planning stage. Using this knowledge, informed with a vision of ‘what can be’ in the future, supports the articulation of strategies and processes that are uniquely tailored to each situation.

The infinity symbol (above) is often used to graphically depict the interdependence of components within a system. The change in one system part creates ripples throughout the system; some intended, and others unintended. Understanding these inter-dependencies can create a significant competitive advantage for the business with the will to leverage these insights.

The following template can be used to evaluate the understood sequences within a system. Policies, procedures, and strategies are often implemented in stages or steps. Identifying these steps, and their potential (or actual) negative consequences, is the first step towards identifying opportunities for Leadership Innovation. Leadership Innovation seeks to leverage competencies for innovation and drive these throughout the business enterprise. Innovation does not occur sustainably without the leadership to and business infrastructure to support it.

The first blank template provides boxes to identify each step in your business process, policies, procedure, or strategy. Using this journey mapping approach the leadership team members gain a better understanding of how current efforts are performing and impacting collateral system components.

The first completed example depicts the journey map for ordering airline tickets. When reviewing this map focus on the symptoms attached to each step and think about what innovation opportunities exist to resolve that symptom?

The second completed example depicts the journeys map for applying for government benefits. When reviewing this map focus on the symptoms attached to each step and think about what innovation opportunities exist to resolve that symptom?

The third completed example depicts the journey map for receiving a referral for services. When reviewing this map focus on the symptoms attached to each step and think about what innovation opportunities exist to resolve that symptom?

The fourth completed example depicts the journey map for reporting a traffic accident. When reviewing this map focus on the symptoms attached to each step and think about what innovation opportunities exist to resolve that symptom?

When reviewing these examples what interdependencies would you emphasize? What solutions would you introduce first? There is no one-size-fits-all suggestion for supporting Leadership Innovation or resolving conflicts between interdependent systems components. The template above is going to be the most useful, and effective, when representatives from throughout the supply chain are included in the discussion. Interventions can include:

• Social
• Technological
• Materials
• Human Resources
• Strategic
• Values/ Vision
• Customers
• Information/ Knowledge
• Training
• Financial/ Revenue/ Costs

An Essential Step for Corporate Strategy

Innovation drives what goals are identified in the financial plan. The goals are quantified and translated into financial terms. Business reporting then seeks to evaluate the implementation and thus success of the strategy. Strategy seeks to achieve the innovation goals. The process, strategies, and resources leveraged to realize these innovative products/services require a firm (operations) foundation that is aligned with the company’s competitive advantages. A lack of integration almost guarantees the company’s competitive advantages (and thus customers, revenue, etc.) will be lost.

The integrative management approach that harnesses innovation, and avoids the pitfalls of the static strategic plan in an ever-changing and intricately interdependent global economy, must include an ongoing appraisal of the company’s key business drivers.

Sustaining the company’s competitive advantage requires an integrated working structure that supports the allocation, use, and efficient leveraging of the company’s competitive assets, resources, and technologies.

Once the key business drivers have been identified the company then decides, depending on their size, ability, and resources whether to insource or outsource (in part or in full). Ideally, the company has internal expertise in their industry’s key drivers but it is recognized that startups, and companies that are entering new or high-risk ventures (possibly unsure if they want to fully to commit to the new market niche) may prefer to outsource.

If the company is unable to adequately address a key business driver (such as, engineering high tech aircraft engines for military applications) in their industry of choice then the company has the option of either outsourcing the specific part (in the case in which the majority of a specific project can be delivered internally and address the key business drivers) or choose to not pursue this particular industry niche altogether. This concern is particularly salient in new industries or during times of merger or acquisitions since the key business drivers, and thus areas of ability that differentiate leaders from followers, still lacks clear specifications.

By identifying what are the core drivers of your business increased efficiency and quality can be achieved in time, cost, and scope (for further review consult the Project Management constraints model). The value chain in each industry will differ. For example, using Michael Porter’s Value Chain Model, this may include human resources, production, staffing, transportation & logistics, technology, marketing & sales, infrastructure, and services.

Time, cost, and scope efficiencies is often produced in the not for profit sector through job sharing, job rotation, team building, leadership development, acquisition of service lines and/or contracts, increasing staff retention, regular plan and performance reviews, metrics driven service evaluations, monthly and quarterly stakeholder meetings, partnerships and outsourcing, and recently a move towards a for profit planning and oversight methodology.

The challenges faced by the not for profit sector in integrating operations with the company’s competitive strategy (I’m thinking here more in terms of being able to leverage the strategies, resources, and technologies of advanced competitors in the same and different industries) is aptly described in a Ted Talks video by Dan Pallotta: “The way we think about charity is dead wrong.”

When the obstacles and risks to innovation initiatives are accurately identified, evaluated, and addressed the next step is for the company’s operations and competitive advantages (assets, strategies, and technologies) to be aligned and integrated. This includes the alignment of the company’s infrastructure, reporting hierarchy/organizational chart, job descriptions, compensation schedules, data collection assets, resources, competitive strategies/assets, and mission/vision statements.

The service industry is already well aware that the environment is always changing. This includes the economic, political, and social environments. What is often missing is a systemic and integrative approach that integrates the operations and competitive strategies, which harnesses this awareness to better serve the company’s customers and stakeholders while sustaining (and building upon) the company’s competitive advantages.

How is your team using a Systems Thinking Approach to Support Leadership Innovation? Share your comments below.

Read more:

• A System Thinking Model of Leadership Innovation