COURSE TITLE : STRATEGIC SYSTEMS THINKING
COURSE CODE: ST4S39-V1-16614
“Systems thinking essentially seeks to understand phenomena as a whole formed by the interaction of parts.”
TABLE OF CONTENT
1.1 Abstract …………………………………………….. 3
1.2 Introduction ……………………………………………………. 3
1.3 Approaches to Strategic Thinking ……………………………………… 4
1.4 Systems Thinking ………………………………………………………. 4
1.5 Complexity Perspective: New Ways of Thinking About Strategy? ………… 5
1.6 Complex Adaptive Systems (CAS): Modelling Complexity ………….……… 6
1.7 The Practice Perspective ………………………………………….. 7
1.8 Conclusion ……………………………………………………… 9
1.9 References …………………………………………………………. 10
The purpose of this paper is to comprehensively evaluate the statement in relation to the changing ideas of strategic thinking by explaining how it exists within an organization’s approach to strategic management. We will delve into what systems thinking is all about, discuss on it’s approaches, provide a perspective on complexity and how this should transform our view of thinking about strategy. In line with complex perspectives, this paper will discuss modelling complexity through complex adaptive systems as well as provide the practice perspective of strategic thinking.
“Strategy is the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholder expectations.” – (Johnson, Scholes & Whittington, 2011)
In today’s dynamic world, the business environment is quite complex and multi-faceted and this environment has a far-reaching impact. Strategy as a whole has been a unique tool as every organization has systems and strategies in place in order to achieve their goals. Combined, the vision, mission and values statements provide the essential context for the development and execution of strategy.
According to Michael Porter, “Strategy means deliberately choosing a different set of activities to deliver a unique mix of value”. “It is extremely difficult to develop a unique strategy for a company, and if the strategy is truly different, it is probably highly risky. Execution really is the critical part of a successful strategy. Getting it done, getting it done right, getting it done better than the next person, is far more important than dreaming up new visions of the future” – Louis Gerstner, IBM.
Strategy is about being different. A firm’s strategy describes a way in which it will compete in the marketplace against rivals; for public sector and charitable/ NGO organizations, it serves as the roadmap to reach their ambitions. It is of course, the organization charts, the journey it imagines and the steps it will take. Strategy is built upon a range of insights, experiences, objectives, expertise and expectations. When ready, it sets forth the general direction as well as an action plan in pursuit of the identified goals.
1.3 APPROACHES TO STRATEGIC THINKING
The approaches of strategic thinking were summarized by into three (3) groups by Mintzberg (et al 2003). The first group is called the Prescriptive School. This school is a rational, structured approach which has to do with how strategy formation process should happen. The second school is the Descriptive School which seeks to understand strategy as it unfolds. The third school is the configuration which is the combination of the two schools. It is precarious to come to the conclusion that one school is better than the other as the role of context should highpoint that no two situations are precisely the same. However, it is valued to be aware of what the different Schools believe so that we can take the lessons and apply them as best we can.
1.4 SYSTEMS THINKING:
“A system is a set of resources—personnel, materials, facilities, and/or information—organized to perform designated functions, in order to achieve desired results.” (Reisman 1979, p. 2). Ackoff, R (1999) gives an example of an automobile which on its own cannot transport a person from point A to B. Similar to an automobile, a person’s body part cannot survive when separated with other parts of the body. It is paramount to understand that a system as a whole cannot be divided into two separate parts without impacting the essential properties.
Systems thinking however, “[is] a way of thinking about, and a language for describing and understanding, the forces and interrelationships that shape the behavior of systems. This discipline helps us to see how to change systems more effectively, and to act more in tune with the natural processes of the natural and economic world. (Senge, 1993).
There are many reasons why organizations fail to adopt systems thinking. Russel (2006) emphasizes on two reasons – (one general and one specific). He went forward to enlighten us that in order to understand why organizations never use mistakes as opportunities for learning, other than a disposition inherited from educational institutions, we must recognize that there are two types of mistakes – Errors of commission (which occurs when an individual or organization does something that should not have been done) and Errors of Omission (when an organization or individual fail to do something that should have been done).
In regards to errors of commission, huge emphasis was laid when Kodak acquired Sterling Drugs it made a very costly mistake. It had to be sold subsequently. Its sale involved a considerable write-off. Robert F. Bruner, in his book, Deals from Hell (Wiley, 2005, New York) cites a number of acquisitions that went sour in a big way. The Sony-Columbia merger in 1989 resulted in a $2.7 billion write-off. The acquisition of National Cash Register by AT&T, cost AT&T $4.1 billion. His champion of errors of commission is the merger of AOL and Time Warner. It resulted in a $200 billion loss in stock-market value and a $54 billion write-down in the worth of the combination’s asset.
For errors of omission, emphasis was laid when for example, Kodak failed to acquire Xerox when it was very young, or when Xerox failed to develop the small computer produced by its employees. Of the two types of error, errors of omission are usually the more important. The deterioration and failure of organizations are almost always due to something they did not do.
This deficiency can be eliminated by:
- Recording every decision of importance, whether to do something or not and this should include the expected effects of the decision, the assumptions on which the expectations are based and how the decision was made and by whom.
- There should be appropriate monitoring of all decisions to detect any deviations and determine the choice of corrective action.
1.5 COMPLEXITY PERSPECTIVE – New Ways of Thinking About Strategy:
(Deliberate vs. Emergent)
Strategy development has been presented by academics historically through two competing models (Mintzberg and Waters, 1985; Quinn, 1980). The first is formal, structured and process-based and developed through consultation within an organization, with various stakeholders through examining environmental data. It is called the “DELIBERATE/PLANNED STRATEGY”. The strategy developed through the planning process should be considered somewhat flexible. As with any other kind of plan, it is impossible to prepare for every possible contingency. During the 3-5-year duration of the typical strategic plan, much can happen. Therefore, we can assume that while an organization has worked hard to take into account various possibilities or scenario that may unfold during the time-span concerned, unexpected circumstances can arise.
The second model is strategy as an emergent occurrence, labelled logical incremental (Quinn, 1980), adaptive (Chaffee, 1985) processual (Whittington, 2001) or learning school (Brews and Hunt, 1999). This type of approach views organizations refining their strategies progressively in light of new information and opportunities. Given changing conditions and the dynamics of the marketplace, some elements of the deliberate strategy may have to be abandoned. This may happen, for example, if a planned new business line, or a targeted geographic market, becomes unexpectedly crowded with rivals. At the same time, the organization may need to react to events and adjust strategy by adding new elements to the original strategy. For instance, an acquisition opportunity becomes available, which could accelerate the growth of the organization. The new elements constitute the “EMERGENT STRATEGY” – the reactive component of strategy.
1.6 COMPLEX ADAPTIVE SYSTEMS (CAS): Modelling Complexity
An adaptive system (or complex adaptive system) is a system that makes or alters its behavior in response to its environment. Adaptive lifecycles (which are change-driven) are intended to respond to high levels of change and ongoing stakeholder involvement in an organization.
“If organisations are seen as complex evolving systems, co-evolving within a social ‘ecosystem’, then our thinking about strategy and management changes” (Mittleton Kelly, 2000). Complex adaptive system is a system with many entities interacting with each other in various ways, where these interactions are governed by simple, localized rules operating in a context of constant feedback.
When dealing with complex, multi-faceted problems, the end results are more unpredictable than predictable. If there is a right answer, it’s only with hindsight. There should be a need to explore to learn about the problem, then inspect and adapt based on what has been learned. Working in complex environments require methods that are creative, original and innovative. Routine, cookie-cutter solutions do not apply. There is a need to create a safe-fail environment for experimentation so that important information is discovered. A high level of interaction and communication is very critical when working in this type of environment. Innovative new-product development falls into this category as does enhancing existing products with innovative new features.
For example, in just a matter of months, the massive outbreak of the novel coronavirus has caused a drastic turn in the way thousands of companies carry out their day to day operations in an unprecedented manner. Evolution encompasses change as an accepted element though not necessarily one that is fully controlled. The impression of adaptive behaviour is that change becomes part of the culture rather than something that is seen as a reaction to events. In an attempt to stay afloat, the organization that I work, TD Canada Trust have had to implement some rapid organizational changes in a matter of weeks. As business owners and employees get used to the new normal, here are key ways my company (TD Canada Trust) have adapted to stay operating amid this global pandemic.
– Working from home: Virtually all our call center representatives in almost 15 different Canadian and US states are working from home in response to covid-19. Thus far, this has caused a logistical challenge to transition more than 9,000 staff to work remotely but it’s been a good measure we have implemented which is working really well and we might consider to use this procedure as an option in the future.
– Closed Branches: Temporarily, many of our smaller branches are closed while the bigger and high-trafficked branches are still operating with reduced hours except for weekends. For matters of an urgent nature that requires in-person assistance, we have dedicated the first few hours to serve seniors and/or those who need special assistance and populations with higher risk.
As a result of this current situation, we’ve been able to form adaptive behaviours by being flexible to the constantly changing eco-system by maintaining social distancing, abiding to health and safety rules in accordance to World Health Organization standards as well as being socially and personally responsible in our day-to-day lives to help flatten the curve.
1.7 THE PRACTICE PERSPECTIVE:
Source: Adapted from Jarzabkowski et al. (2007, p.11).
While the strategy-as-practice research agenda has gained significant impact over half a decade, many challenges still persist in developing it into a robust field of research. Here, we’ll define the study of strategy from a practice perspective and recommend five main questions that the strategy-as-practice agenda seeks to address which are listed below:
- What is strategy?
To answer this question, Jarzabkowski et al. (2007) suggests that one must know the concept of strategy and strategy as practice which is defined as “it includes the actions, interactions and negotiations of multiple actors and the practical situations they rely on for the performance of activities”
- Who is a strategist?
For the successful implementation of strategy, all actors in an organization should be entirely involved as top-down method or actors at the top of a pyramid is not enough any longer.
- What do strategists do?
This question can be answered through the report of specific practices such as meetings, management processes and analytical tools.
- What does an analysis of strategists and their doings explain?
This question is inspired by two contests. The first has a strong emphasis through which the strategy is built, they result therein may not be defined and the question may arise – what for?
The second context exposes strategic activities of micro level which provides explanation in a broader sense, so that strategy-as-practice also has wider implications
- How can existing organization and social theory inform an analysis of strategy-as-practice?
This is by having investigation groups channel their focus on explaining who strategists are and what and why they do it and how this is a social consequence in the realization of strategic activity.
From a strategy-as-practice perspective, “strategy is conceptualized as socially accomplished activity, constructed through the actions, interactions and negotiations of multiple actors and the situated practices upon which they draw” (Jarzabkowski, 2005).
Strategy as practice perspective is in relation to people who carry out day-to-day organizational activities. Middle managers are considered as practitioners since this is a current perspective that arises from the concept of strategy. These middle managers can be represented by coordinators or supervisors, among others who work in middle management. Strategy as practice analyses what people do in regards to strategy development in organizations, which aids in providing insights into existing issues in strategy that requires a more micro level of understanding (Johnson, Langley, Melin & Whittington, 2007).
Consequently, Anderson (2002) trusts that strategies can be formed in distinct organizational levels; which could be either top-down (deliberate) or bottom-up (emergent), depending on the need of the organization to face the environment changes.
In summary, there is an interconnection between systems and strategic thinking. A strategy cannot be set to motion if one doesn’t not have an in-depth knowledge or understanding of the systems in place. It is impossible to have a system without a developing strategy – (Zhu, 2017). We can therefore draw our conclusion that an organization will definitely require both system and strategy for it to be successful amongst its competitors but in order for that success to be achieved, it depends on how their strategies are implemented and also how the systems are interrelated.
TD Canada Trust is one of the Top 10 leading banks in North America and its success stories is attributed to strategies and systems that were and are currently being put in place. Having worked with the organization for over 4 years, we thrive consistently to stand out from our peers by having a distinguished brand which is anchored in our demonstrated business model. This has enabled us to be gain valuable recognitions such as One of Canada’s Top 100 Employers for the 12th year in a row, recognition by Forbes as a Best Employer for New Graduates in 2019, most Innovative Digital Bank award in Global Finance’s 20th Annual Best Digital Bank Awards and the list goes on. All these wouldn’t have been achieved without deliberate strategy and identifying any gaps or loopholes to reach to the top.
For any organization to guarantee a competitive sustainable advantage, systems thinking will remain a principal approach and strategic thinking will always be a powerful tool for strategic management.
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Russell L. Ackoff (2006) “Why Few Organizations Adopt Systems Thinking” retrieved from file:///C:/Users/ADAORA/Downloads/Article%204%20-%20Why%20few%20organisations%20adopt%20systems%20thinking.pdf accessed on 2020/05/10
UNICAF VLE-USW, Week 2 – “A Brief Introduction to Soft Systems Thinking and Complex Adaptive Systems” Available at file:///C:/Users/ADAORA/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/Brief%20Introduction%20to%20Soft%20Systems%20Thinking%20and%20Adaptive%20Systems%20-%20ST4S39%20(3).pdf (no date), Accessed on 23rd April, 2020.
UNICAF VLE-USW, SST Week 2 – “A Brief Introduction to Systems Thinking”- ppt (no date), Accessed on 23rd April, 2020
TD Canada Trust (2020): “Covid-19 Coronavirus Update, We Are Ready to Help ” – Online Resource Available at https://www.td.com/ca/en/personal-banking/covid-19/ Accessed on 23rd of April, 2020.
Ralph D. Stacey (2011): “Strategic Management and Organisational Dynamics – The Challenge of Complexity, 6th edition” Available Online at https://drive.google.com/file/d/1ILDndCNqUwRHkQ1J7IbkH3AZ6Mon55Xp/view Accessed On 1st May, 2020.
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