SISTEMS THINKING BASICS

From Concepts to Casual Loops

Virginia Anderson

Lauren Johnson

SECTION 1
What Are Systems?

PEGASUSU COMMUNICATIONS, INC.

WALTHMAN

SECTION 1
What Are Systems?
Welcome to the world of systems and systems thinking! You may be asking yourself, Why
is it important to explore systems? One reason is that we live in and are influenced by
systems all around us, from the natural environment to healthcare, education, government,
and family and organizational life. Understanding how these systems work lets us function
more effectively and proactively within them. The more we build our understanding of
system behavior, the more we can anticipate that behavior and work with the
system to shape the quality of our lives.
This section introduces you to the idea of systems and what makes them unique. In the
learning activities at the end of the section, you will have the opportunity to identify some
major systems in your own work life and to think about typical system behavior.

WHAT IS A SYSTEM?
A system is a group of interacting, interrelated, or interdependent components that form a
complex and unified whole. A system's components can be physical objects that you can
touch, such as the various parts that make up a car. The components can also be
intangible, such as processes; relationships; company policies; information flows;
interpersonal interactions; and internal states of mind such as feelings, values, and beliefs.
In an organizational setting, for example, the R&D group is a system made up of people,
equipment, and processes that create new products to be manufactured by the production
system and sold by the sales system. The components of the R&D group have to interact
with one another to perform their function and thus are interdependent. In turn, the R&D
group interacts and is interdependent with other systems within the company. A system
such as the R&D group always has a specific purpose in relation to an even larger systemin this case, the entire organization (Figure 1.1, "Interdependent Systems Within
Interdependent Systems").
Your body is another example. Within it, your circulatory system delivers oxygen, nutrients,
hormones, and antibodies produced by other systems and carries waste to the excretory
system. The circulatory system is made up of the heart, veins and arteries, blood, and a
host of supporting elements. All of these components interact to carry out their purpose
within the larger system-your entire body.

Both of these examples raise an intriguing point about systems: We can think of all
systems as nodes embedded in a giant network in which everything is connected. For
example, the company described above, with its interdependent R&D, production, and
sales systems, is itself a large system that is interdependent with an even larger systemindustry as a whole.
FIGURE 1.1 Interdependent Systems Within Interdependent Systems Company

Company

Sales

And industry is interdependent with an even larger system-the economy-and so on. The
more we widen our view in this way, the more we see that everything-from the tiniest
subatomic particle to the universe (and maybe beyond!)-is intertwined.
We can also distinguish between natural systems and human-made, nonliving systems.
Natural systems-a living being's body, human society, an ecosystem such as a prairiehave an enormous number and complexity of components and interactions among those
components. They also ha virtually an infinite number of connections to all the systems
around the Human-made systems-cars, for example-can also be quite complex, these
nonliving systems are not as intricately linked to systems around them. If a car breaks
down, the impact of this event is not nearly as if reaching as if a species were removed
from a prairie ecosystem (although, you may disagree if it's your car that breaks down!).

Put another way human-made nonliving systems are more self-contained than natural
systems, which we can think of as more open in their connections to surrounding systems.

Defining Characteristics of Systems

Systems have several essential characteristics:
4. A system's parts must all be present for the system to carry out its purpose
optimally. If you can take components away from something without affecting
functioning and its relationships, then you have just a collection, not a system. For
example, if you remove a cashew from a bowl of mixed nuts, y have fewer nuts, but
you have not changed the nature of the collection components. Therefore, a bowl of
mixed nuts is not a system.
Similarly, if you can add components to a collection without affects its functioning and
relationships, it's still just a collection. So, if you a pistachios to your bowl of mixed
nuts, you have more nuts and you have different mix, but you still have just a collection
of nuts.
However, if you assign new tasks to an R&D group or redefine the job descriptions of
its staff, you will likely change the group's functioning a relationships-whether for the
better or worse. The R&D group is not just an assortment of people, equipment, and
processes; it is a system.
2. A system's parts must be arranged in a specific way for the system to carry out
its purpose. If the components of a collection can be combined in any random order
then they do not make up a system. For example, in a bowl of fruit, the oranges can go
at the bottom, in the middle, or on the top without changing the essential nature of the
collection of fruit.
However, in a system such as a company, imagine what would happen if the parts
shifted around randomly-if, for instance, the accounting specialists suddenly decided to
work on the production line, and the production specialists decided to write marketing
copy. Of course, people change jobs within their companies, but only after training and
much transition time. Most companies function best when people are working in jobs
that match their skills and experience, and when the staff is organized according to a
specific plan.

3. Systems have specific purposes within larger systems. All systems have a specific
purpose in relationship to the larger system in which they're embedded, as we saw in
the examples of the R&D department and human circulatory system above. Because
each system has its own purpose, each is a discrete entity and has a kind of integrity
that holds it together. In other words, you can't force two or more systems together and
get a new, single, larger system. Nor can you subdivide a system and automatically
end up with two smaller identical, functioning systems.
As the saying goes, if you divide an elephant in half, you don't end up with two smaller
elephants. And if you put two small elephants together, you don't have a new, single,
larger elephant (although some day you may end up with a new system-known as a
herd!).
4. Systems maintain their stability through fluctuations and adjustments. Left to
themselves, systems seek to maintain their stability. Your organization does its best to
maintain a designated profit margin just as most human bodies work to maintain a
temperature of about 98.6 degrees Fahrenheit. If you examined your organization's
revenues against expenditures every week or graphed your body temperature every
five minutes, you would probably draw a wobbly, fluctuating line that nevertheless
holds steady overall. Margins appear and disappear as a company pays its suppliers
and collects checks from customers. Your body temperature rises and falls depending
on your mood and your level of physical exertion. On average, however, your body
temperature remains stable. And, with reasonable management and no cataclysmic
change, your organization's margin also remains stable overall.
Systems achieve this stability through the interactions, feedback, and adjustments that
continually circulate among the system parts, and between the system and its
environment. Let's say a corporation receives an unusually large stack of suppliers'
invoices (external stimuli) in the mail. The accounts payable department responds by
paying the bills. As the checks go out the door, the accounting department, alarmed,
compares revenue versus expenditures and gives feedback to management:
Expenditures are up and revenues aren't covering them. Management then adjusts the
system by reminding key customers to pay overdue invoices. Similarly, if you go for a
run, your exertion warms your body. The sensation of heat is fed back to your sweat
glands, which begin to work. Over time, sweating readjusts your temperature back to
the norm.

5. Systems have feedback. Feedback is the transmission and return of information.

For example, imagine that you are steering your car into a curve. If you turn too
sharply, you receive visual cues and internal sensations that inform you that you are
turning too much. You then make adjustments to correct the degree of your turn. The
most important feature of feedback is that it provides the catalyst for a change in
behavior.
A system has feedback within itself. But because all systems are part ( larger systems,
a system also has feedback between itself and external systems. In some systems, the
feedback and adjustment processes happen quickly that it is relatively easy for an
observer to follow. In other system it may take a long time before the feedback is
returned, so an observer, would have trouble identifying the action that prompted the
feedback. For example, if you sunbathed a lot in your teens, you may develop skin
problems after age 40-but because so much time passed between the two events, you
may not recognize the connection between them.
Finally, feedback is not necessarily transmitted and returned through the same system
component or even through the same system. It may travel through several intervening
components within the system first, or return from an external system, before finally
arriving again at the component where it started. For instance, imagine that the
company you work for is suffering financially and decides to lay off 20 percent of the
work force. That quarter, the layoff does indeed improve the looks of the financial
bottom line. On this basis, the upper management might decide that layoffs are a
reliable way to improve the financial picture.
However, let's say you survived the layoff; how would you describe your state of mind
and that of your other remaining colleagues? Besides cutting costs, layoffs are also
famous for damaging morale and driving people "jump ship" in search of more secure
waters. Eventually, as low morale persists, you and your colleagues might start coming
to work late and leaving early, and caring less and less about the quality of your work.
Productivity could drop. In addition, everyone who leaves-whether voluntarily or I being
laid off-takes valuable skills and experience with them, so the over all capability of the
work force goes down, further hurting productivity. Lowered productivity leads to
expensive mistakes and lost sales from disgruntled customers. All this eats away even
more at the company's revenue tempting management to think about having even
more layoffs to cut costs.

In this example, the feedback that made layoffs look like good polio was returned
quickly-probably within one quarter. The feedback about the long-term costs of layoffs
went through more steps and took a lot longer return. Yet this information was
essential for the management team to see the full impact of their decisions.

EVENTS, PATTERNS, STRUCTURE

In reading all this information, you may be wondering what actually gives rise to systems.
Systems are built on structures that leave evidence of the presence, like fingerprints or tire
marks, even if you can't see them. But what is structure, exactly? The concept is difficult
to describe. In simplest terms, structure is the overall way in which the system
components a interrelated the organization of a system. Because structure is defined,
the interrelationships of a system's parts, and not the parts themselves, structure is
invisible. (As we'll see later, however, there are ways to draw our understanding of a
system's structure.)

Why is it important to understand a system's structure? Because it's system

structure that gives rise to-that explains-all the events and trend that we see
happening in the world around us. Perhaps the best way to grasp the role of structure is
to explore the Events / Patterns / Structure pyramid, shown in Figure 1.2.

Events
We live in an event-focused society (Figure 1.3, "The "Tip of the Pyramid") A fire breaks
out in the neighborhood; a project misses a deadline; ; machine breaks down. We tend to
focus on events rather than think about their causes or how they fit into a larger
pattern. This isn't surprising; in our evolutionary development as a species, this ability to
respond to immediate, events ensured our very survival.
But focusing on events is like wearing blinders: You can only react to each new event
rather than anticipate and shape them. What's more, solutions designed at the event level
tend to be short lived. Most important they do nothing to alter the fundamental structure
that caused that evens For example, if a building is burning, you would want local
firefighters to react by putting out the fire. This is a necessary and essential action. How
ever, if it is the only action ever taken, it is inadequate from a systems thinking
perspective. Why? Because it has solved the immediate problem but hasn't changed the

underlying structure that caused the fire, such as inadequate building codes, lack of
sprinkler systems, and so on.
By uncovering the elusive systemic structure that drives events, you cal begin identifying
higher-leverage actions. The next step to comprehending systemic structure is to move
from thinking at the event level to thinking at the pattern level.

Patterns
Whereas events are like a snapshot, a picture of a single moment in time, patterns
let us understand reality at a deeper level (Figure 1.4, "Moving from Events to
Patterns"). Patterns are trends, or changes in events over time. Whenever you see a
pattern of events for example, sales have to, declining over the past few years, or twothirds of the department's projects have gone over budget in the last year, or several
senior engineers have the company recently, most of them in the last six months-you're
getting one step closer to grasping the systemic structure driving that pattern. In each of
the above examples, you could draw a simple graph to represent the trend (Figure
1.5, "Graphs of Patterns").
What is the advantage of thinking at the pattern level, as opposed to event level?
Detecting a pattern helps you put the most recent event in the context of other,
similar events. The spotlight is then taken off the spec event, and you can focus on
exploring how the series of events are related and begin thinking about what caused them.
In the end, to anticipate events and ultimately change a pattern, you need to shift your
thinking 1 more time: to the level of structure (Figure 1.6, "The Complete Pyramid)

FIGURE 1.5: Graphs of Patterns

Structure
To move to this deeper level of understanding, let's reconsider the above example of the
senior engineers' exodus. You might begin digging for the structure behind this pattern by
asking, "What's causing more and more senior engineers to leave?" In this case, suppose
a change in corporate policy has cut both the budget and the number of administrative
assistants the engineering group. The engineers' workloads have ballooned, they've
begun grumbling more and more about their job pressure. Worse yet, as some of them
leave, those left behind get even more upset as their workloads expand further. It's a
vicious cycle that you might sketch as shown in Figure 1.7, "The Engineering Exodus," p.
FIGURE 1.6: The Complete Pyramid

FIGURE 1.7: The Engineering Exodus

Whenever we ask questions like, "Why is this pattern happening?" or "What's causing
these events?" we are probing at structure. Thinking at the structural level means
thinking in terms of causal connections. It is the structural level that holds the key to
lasting, high leverage change. Let's return to our example about a house catching fire, to
see how this works. To fight fires at the event level, you would simply react to quell the fire
as soon as possible after it broke out. You would probably then repair any smoke and
water damage, and put the incident out of your mind.

How would you fight fires at the pattern level? You would begin anticipating where other
fires are most likely to occur. You may notice that certain neighborhoods seem to suffer
more fires than others. You might locate more fire stations in those areas, and staff them
based on past patterns of usage. By doing these things, you would be able to fight fires
more effectively by adapting to the patterns you have observed.

However, your actions haven't done anything to reduce the actual occurrence of fires. To
address the problem at this level, you need to think about the structure that gives rise to
the pattern of fires. At the system structure level, you would ask questions like, "Are smoke
detectors being used? What kinds of building materials are least flammable? What safety
features reduce fatalities?" Actions that you take at this deep level can act ally cut down
the number and severity of fires. Establishing fire codes with requirements such as

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automatic sprinkler systems, fire-proof materials, fire walls, and fire alarm systems saves
lives by preventing or containing fires.
Here's where the real power of structural-level thinking comes in:
Actions taken at this level are creative, because they help you to shape a different future,
the future that you want. Does this mean that high-leverage; actions can be found only at
the structural level? No, leverage is a relative, concept, not an absolute. Our ability to
influence the future increases as we move from event-level to pattern-level to structurallevel thinking, but sometimes the best action we can take must remain focused on the
present at the event level, for example, when a building is aflame, the highest leverage
action in the moment is to react by putting out the fire. Any other action would be
downright inappropriate. But, if that's all we did, the actions would be considered low
leverage from a long term perspective. The art of thinking at the systemic structure level
comes with knowing when to address a problem at the event, pattern, or structural level,
and when to use an approach that combines the three.

Figure 1.8, "Levels of Understanding," depicts the richness of these three levels of understanding.

Action

Time

Way of

Questions You

Mode

Orientation

Perceiving

React!

Present

Witness event

Would Ask
"What's the

Events
Measure or track

Adapt!
Patterns
Create
Structure

Future

Change!

patterns of events trends or patterns of

Causal loop
"What structures
diagrams and

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fastest way to
"What kinds of

are in place that is

A NOTE ABOUT DIAGRAMMING SYSTEMS

As we saw earlier, all systems are part of larger systems, so it's impossible to capture any
system in its entirety on paper.

Nevertheless, there are ways of depicting parts of systems in a diagram, in order to

glimpse how a system works and how you might alter its behavior.

One such way is to create a 'causal loop diagram, or CLD. (Figure 1.7 is an example of
this kind of drawing.)

These diagrams provide a starting place for discussing and thinking about problematic
events or patterns, and for opening the door to addressing problems differently.

In particular, they help you gain insight into systemic structures, and they identify ways
you might change the system's behavior.

After all, it is changes made at the system level, rather than at the pattern or event
level, that often prove to be the most long-lasting and self-sustaining.

It's important to remember, however, that graphic representations of systems are just
that: representations.

As you will see later in this book, there is no one right way to draw a causal loop
diagram or even to describe an entire system.

Any diagram that you draw reflects your own assumptions about the system, and is
limited to what you define as the most pertinent part of the system you're studying.

This is why working in groups is so beneficial-you gain insights from the multiple
perspectives.

Later in this book, you'll have the opportunity to practice drawing CLDs. As with all the
activities in this book, we encourage you to work as a group whenever possible in creating
CLDs. A causal loop diagram generated by a group is especially valuable because it
reveals the interplay of each group member's perspective on the system in question. The
process of constructing the drawing encourages group members to share their assumptions
and understandings about the issue at hand. The more this kind of sharing happens, the
more insights get sparked.

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