People
who have attended Masters Forum sessions for its entire ten year,
100-plus-speaker history cannot recall another speaker who giggled. But that's
what Rick Ross did, frequently and enthusiastically, throughout his April 8
presentation.
From
the moment Ross took the stage, he was zigging and zagging, leaping from topic
to topic and trick to trick. When he had a sentence whose beginning was more
important than its end, he would trail off with nonsense syllables. People in
examples were all cartoon shorthand: Henry Humptydump, Barbara Bungadunga, etc.
Like a
water strider, a creature so light it cannot sink, he shot off in all
directions, looping this way and that, but never looping so far that he forgot
he had an audience he could not afford to lose. At one point in his
presentation he even joked about "water walkers" employees so good they can rise above a
lousy system. Clearly, Ross himself is a water walker, and his personal mastery
includes surface tension.
He
begged for, and grudgingly got, a score or so of nodding heads whenever he
needed corroboration that people had understood a point. If a handful of people
"got it," that was enough for Ross, who sped on to the next thought
station, with the handful in tow.
He
would interrupt himself, and streak from one concept to a related one like hotlinking on the Internet located far away, and zap back like before
people knew where he had just been.
And
through it all was the giggle, just this side of Ed Wynn.
It was
the sound of a man who was having fun thinking. It was all amusing, even if he
didn't quite get, in the afternoon session, to the skill set he had promised to
teach: causal loop diagrams, an omission we will set aright here. But do not
expect giggles here, or even typographical smiley faces. For systems dynamics
is, as we all know, a serious thing. K
Ross
began by saying that system dynamics is a subset of system thinking, which is
the linchpin of the theory espoused in Peter Senge's groundbreaking 1990 book
The Fifth Discipline. Ross met Senge in Cambridge in the 1980s. The main
speaker did not show up, so Ross, Senge, and several other out-of-town
consultants met to try to salvage their trip. The session was so valuable they
have continued to meet twice a year for a "data dump" of information
about practices that were actually doing clients some good. Years later Senge
and Ross are still collaborating. Each has appeared at past Masters Forum
sessions. Perhaps their most significant joint project was The Fifth Discipline
Fieldbook (Doubleday Currency), a valuable resource for creating a learning
organization that describes, among other tools, causal loop diagrams.
The
idea of the learning organization itself quickly blurred, as people climbed
onto the bandwagon and twisted the idea to suit them. But the core insight of
systems thinking, and the tools that make up system dynamics, and the uses they
could be put to in an organization seeking to enhance its powers of transformation,
have not lost their edge. Ross' session was a tour through some of the most
useful tools in the set, with special focus on causal loop diagrams.
Learning
organizations are merely one way to achieve large- scale change, Ross said, one
facet of many leading into the diamond. Other facets include TQM and teaming.
The learning organization idea focused on the notion that the greatest
challenge to an organization is not speed of doing but speed of understanding
and adaptation. To achieve these speeds, organizations must learn to think all
over again, bringing to the surface the assumptions and indisputable
truths what Senge and Ross call mental
models that contribute to
organizational stupidity.
Ross
showed participants a "ladder of inference," adapted from the
writings of organizational psychologis Chris Argyris, showing what mental steps
underlie our actions. Every action stems from a belief about what is true,
which is based on conclusions drawn from assumptions based upon meaning that we
extrapolate from raw data. The point is that there are many submerged mental
processes between the things we do and the raw unvarnished data that the world
presents us with. Proper learning requires that we become aware of the mental
processes that are hidden from view but play important roles in determining our
behavior, and our ability to change that behavior.
Argyris
teaches that people have at their disposal three skills to discern what is
real:
·
reflection
(slowing down our thinking in order to bring our assumptions to the surface for
examination);
·
advocacy
(defending what we believe to be true); and
·
inquiry
(learning what is true through dialogue with others).
Ross
had three cartoons that aptly summed up what we mean by mental models. The
first showed a sinking rowboat. At the sinking end people were bailing
furiously, but to no avail. At the other end one person said to the other,
"I'm sure glad the hole isn't in our end."
In the
second is a seated man who has just pushed over a domino. The domino falls into
another, and the path obviously leads in a loop back to the seated man. He
thinks he is safe from his own actions, but he isn't.
In the
third, a "Far Side" cartoon, several Ice Age people are standing
around a fallen mammoth, with a tiny arrow sticking out of its posterior. One
cave man says to another, "Maybe we should write that spot down."
The
point of these cartoons is that we often think we are seeing the whole picture,
but we usually aren't. The idea of systems thinking is to learn how to see the
whole picture, whether the boat is sinking despite our denial, and whether
today's answers create tomorrow's problems. The point of system dynamics is to
create leverage points that, like the dart in the mammoth's behind, achieve an
important objective with a minimum of firepower.
Ross
introduced an old trick he still finds helpful. On his office wall he keeps a
graph describing the five kinds of decision making. They are arrayed in orfer
of decreasing leader control, or increasing team member freedom:
Tell
("Here's what we're going to do.")
Sell
("Here's what I think we ought to do.")
Test
("This is what I think. What's your opinion on it?")
Consult
("Here's an idea. I'm interested to hear what you think of it.")
Joint
("We're going to decide this as a group.")
None of
the five modes is wrong, Ross said. Different tasks are decided best in
different ways. The problem arises when the leader thinks he is in Consult
mode, building consensus, and the team is certain he is in the dictatorial Tell
mode. That's why Ross keeps the chart up in plain sight, so team members can
point to it and say, "Well, what is it?"
Ross
described two kinds of ineffective managers: those who know only one decision
mode always dictating or always
collaborating and those who change
modes willy-nilly, so the team is constantly guessing what today's flavor will
be.
Ross'
funniest contribution of the day was gray stamps. A gray stamp is something you
give colleagues when you make them feel bad
overruling them, embarrassing them, underestimating them, excluding
them, taking them for granted. Each slight is a stamp, and people save these
stamps. And when they have a book full of them, they present them to you for
redemption.
The
theory is that bad feelings have to go somewhere. "Gray stamps are highly
negotiable," Ross said. "You can acquire them at work and cash them
in at home, or vice versa."
Needless
to say, gray stamps are very, very bad. When you start awarding them to people,
expect them to come back to you when have the least need of them.
Ross
told the story of how he once gave a talk, and throughout the talk he noticed
one individual in the audience staring back at him in an odd way. No matter how
interesting Ross thought he sounded, the man in the audience responded with the
same dull stare. In his mind, he wrote the man off as an imbecile. After the
talk, however, his hostess told Ross he had to meet an important colleague,
Steve Novotny. Novotny turned out to be, of course, the staring man, a
perfectly sentient and capable person. Moral: what you think you see is not
always what is there.
Ross
led people through an interesting exercise. People paired off to arm-wrestle,
with one rule: each time one person pushed the other's arm over constituted a
win. Most people struggled to win, because they hadn't considered the objective
apart from their own assumptions. The big assumption was that only one of the
two could win. The approach yielding the most wins was one in which people took
rapid turns winning, with neither side offering resistance.
In our
businesses an assumption is that production and quality are in tension with
another: the more of a product or service you produce, the greater the
likelihood you will have quality problems. Ross drew his first causal loop
diagram (see previous page) to visualize the thinking.
This is
not rocket science. A causal loop diagram describes chronological dynamics: A
happens, then B happens, then C happens. This diagram explains how U.S.
managers perceive the interplay of quality and demand. As demand for a product
increases, pressure to produce the product also increases. Ask manufacturers
whether quality then goes up or down, and most will say down. As quality goes
down, demand gradually decreases as well, lessening the pressure to produce,
presumably causing quality to improve.
This
kind of loop is called a balancing loop because it contains things that increase
(S) as well as decrease (O). The other kind of loop is called a reinforcing
loop, meaning the dynamic is constant, either increasing or decreasing.
Ross'
sample loop is also a myth, because it simply isn't true that increased
production necessarily drags quality down. That is the lesson of Japanese
manufacturing and kaizen (continuous improvement). Processes do not inevitably bog down as volume increases.
Problems can be anticipated and "thought around." But to do this we
need to think, and to see what we have trained ourselves not to see.
Ross
described reality as an iceberg, in which only the most cursory events are
visible. While we rush about attending to the demands of events (and heroic
managers make reputations doing this), we tend to miss the more powerful
realities lurking just below:
·
the
patterns that provide a broader picture than isolated events can provide;
·
the
underlying structure that explains why these events are happening.
Good
system thinking, Ross said, takes us below the waterline, where problems, not
symptoms, can be addressed.
Structure,
Ross said, consists of anything that makes the system what it is, and forces it
to behave the way it does: its hierarchy, policies and procedures, rules and
regulations, reward systems, plus intangible elements such as organizational
norms, values, beliefs, and roles.
Many
managers and many workers don't like to deal with structure. They prefer
thinking in terms of individuals hiring
the best, weeding out the bad apples, motivating everyone, avoiding personality
conflicts. But it is a canon of systems thinking that people are seldom the
problem; structure usually is.
Diagrams
like Ross', along with many of his other gimmicks and devices, are ways of
getting at the structural level of problems, where our (often false)
assumptions and mental models lie hidden.
The
next diagram Ross created ("Engine of growth or kiss of death?") turned on a problem many young companies
have. A company starts with a bright engineering staff churning out great new
products (bottom). This productivity results in revenue, much of which is
channeled into research and development. Left to itself, this reinforcing loop
might translate directly into more good new products, and the company would be
off to the races.
Unfortunately,
a balancing loop interferes. New revenue leads to greater size and bureaucracy.
Happy engineers faced with lots of administrative work quickly become unhappy
(top), which leads to a negatively reinforcing loop of high turnover and
lengthier product development cycles.
With
the whole system in mind, however, managers are free to find fixes. Ross
facetiously suggested giving frustrated managers Vallium, thus reducing their
frustration. Participants had other ideas: hiring nonengineering managers to
handle the administrivia, or artificially restraining growth.
Before
skittering off to his next destination, Ross drew a final causal loop diagram
("When vision fails," next page). This one, which looks like a
bisected peach, is about vision. It is about an organization with a powerful
vision, but the organization has been growing rapidly, and the vision has not
been taking root on the fringe of growth.
Look at
the left side of the peach first, the reinforcing loop. The vision is handed
down and aligned from the top. This vision is deployed into the organization,
increasing morale and motivation -- the pit of the peach. From there it goes on
to improve organizational performance, and improve individual satisfaction,
which in turn further intensifies alignment with the vision (top).
But
good things don't last. As the organization succeeds, a balancing loop is
created on the right side of the peach. Sure, performance is roaring (bottom).
But as the organization succeeds, it grows, in this case creating numerous
locations around Southern California. As locations proliferate, the sense of
alignment with the original vision starts to fade. This misalignment heads down
to the pit of the peach, harming morale, hampering performance, and eventually
stalling growth.
The
answer? It's your call. You see where the opportunities are because you are
looking at the complete picture.
Some
people said, instead of growing as a core corporation, consider franchising, so
that the organization can keep a tighter rein on the culture of faraway
centers.
Other
said, intervene at the top, by training new employees, the way McDonald's and
Disney do. An intensive four-day training regimen works whether the outposts
are in Point Barrow or Patagonia.
The
"correct" answer (Ross' favorite) is to intervene at the pit of the
peach. Increase motivation and improve morale with the modern manager's
subtlest tool increased pay.
Have
you noticed that over the past few months the billionaire founder of
Blockbuster, Wayne Huizenga, has been buying his way into nearly every retail
aspect of the automotive industry, spending billions of dollars to acquire
car-rental companies, new- and used-car dealerships, and parts suppliers? In
February, he told a gathering of shareholders, "Just think of it a trillion-dollar industry. There's a lot of
room for any competitor. We just want our share: 50 percent!"
Huizenga
may not be your everyday business executive, but if you listen to Adrian
Slywotzky describing the principles of value migration to The Masters Forum in
May, you will see more clearly than ever the ways in which anyone can
anticipate and seize tomorrow's opportunities. And you will recognize, more
clearly than ever, the dangers of failing to do so. For, make no mistake,
there's a Huizenga or a Huizenga wannabe out there eyeing your customers at
this very moment.
Huizenga
is making his move because he sees customer values changing. He believes that
there will be great demand for fairly priced, no-haggling, recent used cars,
especially if a wide selection is available and there is some assurance that
the car is reliable. That is, he is anticipating a value-migration pattern
within this industry, and in doing so, he is acting like the companies that
Slywotzky studied in writing his best-seller, Value Migration: How to Think
Several Moves Ahead of the Competition.
Slywotzky
will show you seven ways to anticipate migrating values. Then he will show you
how the most successful companies respond to such opportunities by developing
comprehensive, nimble business designs that allow them to dominate the
competition for those markets.
It is
the quality of a company's business design that determines its staying power in
competitive new arenas. Slywotzky says, "A Southwest Air or a Microsoft did
not just offer another airplane seat or another computing product. They offered
a new way of doing business and, as such, redefined the rules for everyone
doing business in their industry."
That
Huizenga is an industry outsider threatening to pull the rug out from under the
entrenched powers makes his story more interesting, but not surprising.
Slywotzky repeatedly warns that big, successful companies usually become so
inwardly focused that they are blind to the critical changes among their own
customers. He says, "At best, only 2 percent to 3 percent of today's
established players are eagerly, earnestly, rigorously looking for the next
wave in their own industry. They will pay a heavy price for this."
On May
6, join Adrian Slywotzky at The Masters Forum and learn about the systems and
practices that could lead to some blockbuster breakthroughs for your company.
Before someone else beats you to it.'
by
Jerry de Jaager
On
pages 15-17, I have recapitulated the methodology for creating and using causal
loops as a tool for systems thinking. Below
minus a few unga bungas and duly euphemized are seven other practical ideas from Rick Ross.
Ross
said that change is "external," something that happens outside of
individuals: a billing process is restructured or a new compensation system is
introduced, for example. Transformation, on the other hand, is
"internal," requiring that individuals think or act differently.
He said
there are four ways of categorizing people in terms of their posture toward
change. "Techies" love to try new things, so they are constantly
inciting change; "visionaries" see the potential in new ideas, and
push or pursue them because they will improve the organization;
"pragmatists" take to new ways of doing things when they see that
they will be beneficial but are not in the forefront of those favoring change;
and "skeptics" hold back from change. Pragmatists are the largest
group in most organizations. Ross suggested that those who want to see change
happen will do better to enlist the pragmatists to their cause, because techies
and visionaries make people uncomfortable. Leaders of change may tend to seek
support from techies and visionaries because they are more open to new ideas,
easier to convince but their support
may backfire by causing resistance from others.
Ross
insisted that "beliefs exist below the level of awareness but drive the
conscious behavior. Beliefs and assumptions and attitudes that you hold, of
which you are unaware but which drive your behavior, are dangerous to you.
Dangerous to your career, deadly in companies." On several occasions, he
urged the participants to just be aware of what they were thinking or feeling,
as a beginning step in surfacing and facing up to their subconscious
motivations. When he asked the participants to prepare to arm wrestle, for
instance, he said, "What's your reaction if someone asks you to do
something and you don't know what's coming? Just think to yourself, am I going,
'Hey, I might learn something,' or are you going, 'What the hell is this guy up
to?' Always notice what your reactions are to the world, because you're going
to go back and ask a lot of people to do things and they don't know what's
coming. So, just note your reaction, I don't care bad or good." Later, he
said, "Always notice what you notice, and ask why?"
After
conducting the "left-hand column" exercise on page 7 of his handouts
(in which he asked participants to discuss which of the two actors in the
dialogue might be the "boss" of the other), he said, "This is
meant to make you exquisitely sensitive to all the little interpretations and
all the added stuff that we construct so the story makes sense to us."
He then
referred to the "ladder of inference" as a structured way of
remaining sensitive to our own interpretations. He said that "Data"
at the bottom of the ladder should be understood to mean "what people
notice," and "Meaning," the next rung, should be understood as
"how people interpret what they notice." He stressed the importance
of the four "tips" at the bottom of that page, particularly of asking
"What is it that leads you to say that?" instead of "What's your
data?"
He said
that the lower on the ladder that you begin to ask questions for clarification
and deeper understanding, the more likely you are to avoid reaching inaccurate
conclusions or acting on erroneous beliefs.
Ross
said that it is not really possible (for him, at least) to define and then
change an organization's "culture." He said the best thing to do is
to "tweak the unproductive norms," and he recommended the following
process for doing so.
At the
top of an 8 1/2" x 11" sheet of paper, write the words, "Around
here . . . " Then list the topics you want to find out about (not more
than five or six topics, he cautioned). Ross said that the three most
interesting topics to him are decision making, telling the truth (which he also
called "speaking the truth to power"), and handling disagreement.
Then ask people to complete the sentence beginning with "Around here . . .
." for each of the topics; they can provide as many sentence-completing
phrases as they wish. He said that in making this request you should say that
you are looking for unproductive norms, not all norms. He suggested saying,
"I'm trying to figure out some things that get in our way. I know there
are some good ones, that help us do things better, but I'm really looking here
for the ones that get in our way." Do not attempt to prescribe the kinds
of things people write "They put
whatever they put," was the way Ross put it.
Then
collect the responses, type up a collated list, and distribute it. "The
patterns will be unmistakable," Ross said. Then give the collated lists to
the participants and hold a meeting to pick one unproductive norm that people
are willing to work to change. Continue to work on the lists as long as there
is value in doing so. In summary, Ross said: "It's not rocket science:
Nail the five or six, collect it, type it, give it back, read it, sit down and
work it out."
Ross
urged the attendees to show the chart on page 9 of his handouts to those they
manage and explain the five "degrees of participation" at the bottom.
("Tell" is a unilateral pronouncement from the boss; "sell"
is a unilateral decision, but the boss explains his or her reasons for making
the decision in such a way that it should persuade the others of the
correctness of that decision; "test" involves another unilateral
decision in which the others are asked to contribute ways to make sure the
decision is successful; "consult" means that the boss asks for input
but eventually makes the decision. "Joint," according to Ross, means
that the decision is made by consensus.)
Once
the chart is understood, he recommended using it to clarify the nature of any
decision process about to be undertaken. This allows people to structure their
own involvement in the decision, and to exercise some influence over making
others' involvement as productive as possible.
He made
two related points: first, managers who rigidly use only one of these styles
are likely to be ineffective and so are
managers who use them all, but use them erratically or inconsistently. Second,
many managers do not allow enough time for joint decision making to unfold, or
do not make clear how much time is available so that people can gear their
participation accordingly.
Referring
to page 16 of his handouts, Ross said that one way to apply the principles of
systems thinking is to look beneath "events," which are really the
tip of an iceberg, to see the underlying patterns and structure. He said,
"My plea to you would be to try to see much more of what we call
structure. . . . Ninety percent of my clients, 95 percent of the time, define
their problems as personal. But 80 percent of the time it's not personal, it's
structural."
He
continued, "Structures channel energy, like a ditch channels water.
Structures influence behavior and performance. I actually believe structures
determine behavior and performance. . . Different people, enmeshed in the same
structure, produce qualitatively similar results. . . Structure is the forces
at play that are really making things happen."
Do not
confuse "structure" with the organization chart, he cautioned.
Hierarchy is just one of many elements that make up the
"structure" structure also
includes tangibles and intangibles such as norms, beliefs, and roles. The
intangible elements are usually more powerful than the tangible ones.
Some of
the tools that he provided earlier, such as the method for surfacing
unproductive norms and the skills for greater awareness of mental models, can
be applied to recognizing and altering structure. The "organizational
learning disabilities" discussed next may also be considered as
correctable structural dysfunctions.
On
pages 29-32 of his handouts, Ross lists nine beliefs, assumptions, values, and
attitudes that impede organizational learning. He suggested that you have your
staff use the simple rating system on page 29 to rank the disabilities that
afflict your organization, and then set about correcting the most onerous
ones.%
The
following is an introduction to the creation and use of causal loop diagrams,
based on Dr. Ross' handout materials and on aspects of his presentation.
As
shown on page 18 of Ross' handouts, the building blocks of causal loops are
straightforward: arrowed lines connecting variables, with a letter over the
line showing how the second variable changes in response to changes in the one
that precedes it. Two variables and their connecting arrow comprise a
"link."
The
middle loop on the left side of handout page 19 shows three such connections in
a stock-market example. As market optimism increases or decreases, buying of
stock moves in the same direction (hence the "S" over the line). That
is, stock buying increases as market optimism increases, and decreases as
market optimism decreases.
Similarly
(note the "S" again), as stock buying increases or decreases, stock
prices move in the same direction they
increase as buying increases; they decrease as buying decreases. As stock
prices increase or decrease, market optimism moves in the same direction. This
loop is a reinforcing loop (indicated by the "R" in its center)
because all the changes are in the same direction.
The
graph at the bottom of page 19 shows how reinforcing loops result in
exponential growth patterns. As Ross said, "A reinforcing loop takes
whatever is happening and pushes it to the wall."
In the
loop at the bottom of the left side of Ross' page 20 is an example of variables
moving in opposite directions (indicated by the "O") quality decreases as pressure to produce a
product increases, and increases as pressure to produce the product decreases.
The loop is a balancing loop (shown by the "B" in its center),
because it seeks equilibrium. In this case, demand for the product rises and
falls in relation to changes within the loop. Ross said, "To figure out a
balancing loop, count the O's. If there are an odd number of O's, you have a
balancing loop."
The parallel
lines intersecting the connecting arrow between the "pressure to
produce" variable and the "quality" variable indicate a time
delay. Changes in quality do not occur instantaneously with pressure to
produce, but rather they occur over time. The graph just above this loop shows
the oscillating pattern created by balancing loops.
On page
21, Ross lists six steps for creating causal loops and using them for
system-based problem solving. (Although the list is numbered 1-7, there is no
number 4.)
In his
talk, he said, "System dynamics allows you to find where the real leverage
is to change things." For the first step
telling the story and identifying key variables Ross said, "What you are trying to be
able to do this morning is sit down with your team and get it up on a big
flipchart or whiteboard so everyone's assumptions and viewpoints become clear.
. . . You just want to get four to seven of the key variables; that's enough to
work with." He added, "All this is more powerful if you are doing it
with four or five or six or seven or eight people. It's even more powerful if
you have the guts to bring in people who connect to you but are not in your
group, because what you'll get is people whose perspective is colored by their mental
models, which are totally different from yours."
He
urged that people not skip step two, charting the pattern of behavior over
time: "If you plotted these variables directly on the wall, you would
learn a lot. But it really helps to take the five minutes for step two,
graphing them as patterns over time."
You
then draw the links and loops. As illustrated conceptually on page 24 and with
a practical example on page 25, more than one loop is usually necessary to
capture the whole process.
Step
number 6 on handout page 21 calls on you to determine where to make structural
changes. As the handout says, this step is primarily conceptual, concerned with
the "what" but not the "how." Among the available
structural changes are adding links, breaking links, and adding loops.
In the
subsequent discussion, I will combine the steps numbered 6 and 7, because it is
much easier to talk about these things concretely than conceptually.
The
example on Ross' page 25 depicts an organization in which, in the reinforcing
loop, people's talking about the organization's vision and beginning to pursue
that vision move in the same direction as their enthusiasm toward that vision,
and the clarity of shared vision in the organization moves in the same
direction as the talking-about and pursuit of that vision. When each of these
is growing positively, the company has exponentially growing strength.
When
the company's growth leads it to hire many people, a balancing loop is set in
motion. As those new people talk about the vision and begin to pursue it, a
diversity of views about the vision emerges
not everyone fully shares or fully understands the vision. Conflicting
visions increase in proportion to the diversity of views, and polarization
increases consistently with the increase in conflicting visions. Clarity of the
shared vision moves in the opposite direction as polarization: the more
polarization, the less clarity of shared vision.
As
clarity of shared vision declines, so does enthusiasm for the vision. The
reinforcing loop, instead of working in the organization's favor, works against
it.
One
possibility (out of many) for adding a link to this diagram would be to add a
"training" or "indoctrination" link between "People
talking about vision and beginning to pursue vision" and "Diversity
of views," indicating that training or indoctrination activities move in
the same direction as the former, but that the latter moves in an opposite
direction from the training or indoctrination. (That is, as more training or
indoctrination is provided, diversity of views goes down. Note that this link
could be added just about anyplace.) Ross suggested that Disney has mastered
this strategy.
The
training or indoctrination strategy would also serve to break some of the
links. A loop might be added at the beginning addressing human resources
practices, so that the organization did a better job of hiring people who
already share the organization's vision. This loop would change the nature of
many of the subsequent links. Or a link or loop relating to standardized
practices could be added in an attempt to ensure that whatever vision
individuals might hold, their activities would still be consistent with the
organization's vision or the key mechanisms by which that vision is
implemented. McDonald's might be an example of this approach.
Ross
also suggested that growth, especially in a reinforcing loop, may not be the
most appropriate strategy for an organization. In this example, the company
could manage its growth process so that it would not be dealing with so many
"unaligned" or misaligned individuals. Ross said, "You ask my
clients how much they want to grow, they say as much as possible. Which is
stupid."
Finally,
Ross mentioned that the loops have different strengths, and therefore provide
more or less opportunity to leverage the intervention you make. "The
purpose of all this," he said, "is finding where the leverage
is." He recommended a computer program called "I Think," from
High Performance Systems in Cambridge, Massachusetts, which he said allows one
to assign weights to the loops.
Note:
You can find good information about causal loops and systems thinking,
including some nice real-world application examples, at the Home Page of the
MIT Organizational Learning Network. http://learning.mit.edu Q
On the
following pages, we provide three excerpts that may deepen your understanding
of the topics discussed by Dr. Ross.
1.
"Systems Thinking and the Environment" demonstrates the application
of all the concepts Ross discussed. This is the beginning of a very lengthy and
steadily fascinating interview.
2.
"Down the Path of Total Chaos" is excerpted from Mike Finley's 1994
report on the Masters Forum presentation by Meg Wheatley. Wheatley is a leading
proponent the application of chaos theory to organizations.
3.
"Bonds of Anguish, Bonds of Love" presents excerpts from a 1993
Masters Forum presentation by Terry Warner. Warner addresses some of the
underlying assumptions and beliefs that were discussed by Ross as important
constituents of our mental models.
from
"Systems Thinking and the Environment:
An
Interview with Frederic Vester"
in
McKinsey Quarterly (Spring 1993), n2, page 153.
McKinsey:
What is your approach to environmental work?
Vester:
The first thing I would say is that you can never separate environmental issues
from the other parts of a business. Ecology means that an individual and an
industry belong to the same ecosystem. The moment you separate things out here is ecology, this is nature, that is
industry there is a risk of harming
nature when you are trying to protect it. But if you are part of the same
ecological system, you can pick up the feedbacks. You are a member, not a
master.
Second,
I think we can only get people to behave in an ecological way compatible with nature when we give up the idea of making
sacrifices and being ascetic. Egoism is one of the strongest forces in the
living world. We should appreciate what is important to people money or whatever and use this understanding to make reasonable behavior seem more
appealing than unreasonable. Achieve that, and people will change.
I see
the ecosystem as an organism. I am a biologist; I worked for twenty years in
cancer research, where I tried to find analogies. I discovered that what you
see in a cell is also in the whole organism, and what you see there is also
present in a firm. The same principle applies in bigger organisms too, like
towns or countries. If such an organism is not working, the first priority is
to establish a good communications system. Take cancer cells: they do not obey
signals from the organism, but if you can reestablish the connections through
immunology, everything works again.
Some
people behave like tumors. They forget that success for them will eventually
mean suicide. When they destroy the host organism, they die along with it. Part
of my work is to make people aware that they are members of the ecosystem.
McKinsey:
Using your metaphor, is the host organism still sane and healthy? More and more
we hear ecologists and now even
business leaders saying that they doubt
it.
Vester:
I think the organism is in wonderful order. If our species continues to disturb
this order, it is us who will be thrown out, we who will disappear.
In
ecology, this succession of the species happens all the time. If a species
becomes dominant, it can stay that way so long as it is aligned with the rest
of the system. But the moment the species transforms its environment changes the conditions that made it dominant
in the first place it will lose its
dominance, and another will take its place.
This is
a kind of appeal to egoism. Our task is to save not nature, but ourselves. We
should be aware that nature is powerful, and could reject us by viruses or
epidemics or climatic change or whatever, feedbacks from our own behavior. If
we choose to deal with nature, we can stay in the game; if not, we will be
thrown out. Nature will change, but it will survive, whatever happens.
McKinsey:
How do you control human egoism in a practical way so that on the one hand,
consumers do not have to sacrifice anything, and on the other, what they do is
good for the environment?
Vester:
Right now I am working on traffic problems
a good example. First you have to find out why people travel. Some need
to be somewhere else; others have to fetch or carry something. But many people,
about 30 percent, travel not to arrive somewhere, but to escape from where they
are. They seek more contacts, or perhaps more anonymity. Almost a third, then,
travel for purely psychological reasons. Now, it is fatal for a system to
fulfill psychological needs with means that are not psychological, but involve
lots of matter kerosene, airports,
whatever.
So what
can we do? If you have a business concerned with travel, you could try to make
your usual money, or even more, by doing something different to satisfy the
same need. Get people not to travel; make staying where they are more
attractive than traveling; sell them something; give them some service messages, for instance. In theory, you could
replace a lot of travel by satisfying primary psychological needs in ways that
do not consume matter and resources. You go back to the real need and replace
the objects, the cars, the traveling with something that satisfies it without losing money.
McKinsey:
If 30 percent of people travel for psychological reasons, what does that mean
for industries and corporations and the way they understand their markets?
Vester:
Companies are meeting needs, but often with the wrong means. Say an automotive
company is working on a new generation of cars. We recommend that they should
not be fuel powered, but electric: very light, slow, short range, and capable
of being powered by one battery set. Such cars can be driven with regenerative
energy that need not be taken from a power plant.
But if
these cars are going to be interesting, it is vital they do not have the
"muesli touch" that is, fit
current stereotypes about the environment: eating cereals, being green,
whatever. They must be elegant, have good electronics, include extra features,
so that people are proud to own them. Companies must build up an image, perhaps
by showing the car in some fabulous location, driven by a film star who is
saying great things about it. That is how they will get people to buy it only a few at the beginning, maybe, but then
more and more.
The
other way offering a car with the
muesli touch would fail. People who
drive cars for prestige would never buy it.
McKinsey:
With the car, the last hundred years have brought marginal improvements that
cumulatively made a tremendous difference, but basically it is still the same
vehicle that was invented a century ago. Why have large, technically advanced,
economically powerful automotive companies not come up with a concept better
suited to our time?
Vester:
For one thing, no one is able to construct a whole car any more. The axles, the
motor, the different parts, yes but
each in a separate department. Yet changing one part affects all the rest. The
transformations these companies can make are only marginal. Changing the whole
car is impossible; all they can do is alter it very slowly, part by part,
optimizing what already exists.
Another
reason is that cars are made in vast numbers, by mass production, so every
machine and every production line would have to be changed. At one company I
found that to update a popular model just once, making only marginal changes,
cost over 2 billion Deutschemarks. If you were to ask the firm to make a
completely new car, they would start multiplying and say it will cost 30
billion Deutschemarks. So it seems they cannot invent a whole new car, only
parts of cars.
The
market is another factor. The bosses sit in their firm and look outside. What
are the Japanese doing? What are the new laws about the environment? What does
the government require? They want to know so that they can cope and plan, but
what they learn is never how their own system will behave in reality. In a
complex system, one cannot predict the future, except for a very short time
ahead.
When a
firm does look into its own business, it may discover a lack of
flexibility that it is inseparably
bound to its present product. There is a sort of incest engineering. Managers
should be able to initiate changes, but as long as they are looking at their
competitors in Japan or in other firms, they can only copy what they see. So
they will never change and neither will
their competitors. They are fixed to one another as though hypnotized; one
makes a small change and they all follow. They can never really step back and
look at their own firm to see what it can do.
In one
automotive company I visited, there was a department that optimized valve
heads. They employed fantastic engineers who had discovered mixes of metals
such that, even if a cylinder were hotter on one side by, say, a hundred
degrees, this side of the valve would not dilate more than the other, and the
valve would remain completely closed. It was an engineering masterpiece, famous
the world over, and top secret.
Imagine
going there to talk about an electric car or a motor that has no valves at all.
There are psychological barriers. Perhaps you could convince the bosses:
"Fantastic. Yes, we should produce a new generation of cars. We shall ask
our engineers, and they will approve." But what answer can you really
expect? That this project is nonsense; it can never be made. And then the
bosses will say they rely on their engineers; they are the best in the world,
and if they did not recommend it . . .
And so
the whole thing stays the same. It is a hard structure to crack.
N
McKinsey & Company Inc. 1993
from
"Down the Path of Total Chaos"
by
Michael Finley
The
Masters Forum Application Kit, July 19, 1994
Want to
make a hit at your next board meeting? Announce a major change initiative with
the words "Let's take this organization down the path of total
chaos."
And say
it like you mean it. Your colleagues will spew coffee across the table at the
words. People who have known you for years and have every reason to trust you
for your experience and usually sage counsel will bolt from their chairs and
demand your resignation.
Everyone
present will shake their heads, close their eyes, and picture an orderly
organization pushed off the cliff of all that is reasonable, plummeting, all
hands screaming, down, down into the abyss of the unknown.
It's
the word. Chaos has historically been everything any sensible manager would do
anything to avoid. In terms of knee-jerk negativity, it is right up there with
bolshevism, kryptonite, and Barney the dinosaur.
So why is organizational theorist Meg Wheatley
suggesting we inoculate our organizations with a healthy dose of chaos?
Wheatley
believes that the way we have been thinking about organizations (indeed, about
everything) for the last three hundred years is simply wrong. The modern view
of the world, which was formed in the 17th century by such scientific worthies
as Newton, Kepler, and Galileo, is predicated upon the geometric symmetries of
the ancient Greeks pure circles,
perfect squares, and absolutely straight lines.
The
problem with this "scientific" view of the world is that it is not an
empirical, observable one. Pure circles, pure squares, or straight lines work
elegantly in the abstract realm of mathematics, but in the real universe they
are conspicuous by their absence.
Twentieth-century
science has been gradually correcting the 17th-century view. But to
nonscientific ears, the findings of science sound like the complete opposite of
science:
Relativity
has made hash of the what-goes-up-must-come-down common sense of Isaac Newton's
physics.
Quantum
mechanics, the study of the behavior of matter and energy on a small scale, has
illuminated a baffling universe of paradoxes and riddles, right at our
fingertips.
Chaos
theory, the discovery of patterns and rhythms within even the most random forms
of nature, has found analogous recurring rhythms in our social structure and
our economic cycles.
These
new ways of looking at the world were the crux of Meg Wheatley's provocative
1992 study Leadership and the New Science. The book was a tour de force that
critiqued the Newtonian view, introduced readers to the gamut of 20th-century
scientific insight, and then proposed ways in which the new science is relevant
to and can be applied to mundane organizations.
For her
Masters Forum session, however, she chose to emphasize not subatomic particles
and black holes but living biological systems, the ways in which they embody
the emerging theory of chaos, and why it is incumbent upon people in management
to model their organizations not after Euclidean shapes the boxes, circles, and right angles of the
organizational flowchart but from the
naturally occurring, sometimes breathtakingly beautiful structures of living
things.
"I
was addressing a conference on change at Carnegie Mellon University several
years ago," Wheatley said, "and it occurred to me that no one really
understands why organizations change
only that they do.
"It
was one of those insights that you know is true but you also know is not really
helpful. I wanted to come up with something better.
"We
talk about what kind of organizations we want," Wheatley said. "They
should be resilient, learning, intelligent, boundaryless, adaptable, constantly
changing. It doesn't occur to us that what we are describing is a living
system.
"Organizations
are not machines, to be engineered or reengineered. They are living systems. If
anything, they should be deengineered
allowed to stop trying to act like machines, and to start acting like
human beings."
v
Chaos
does not mean lawlessness, Wheatley said. Indeed, within chaos within systems allowed to find their own
way there is a natural tendency to
create repeatable, observable patterns. Thus the meandering of a river, the
rhythm of water permitted to find its own path, creates over time, from a
distance, an unmistakable ripple pattern.
v
What we
call disorder or wilderness, Wheatley suggested, is simply a higher order of
order than our Newtonian mindset allows for. Chaos is really order of an
arguably divine sort, uninhibited by primitive notions of boxes and spheres.
v
Wheatley
described an episode she witnessed during a change management presentation at
the Frito-Lay headquarters in Plano, Texas, that shed light on the nature of
the machine. Frito-Lay has a good reputation in its industry as
forward-thinking.
But
during a question-and-answer session with managers, one young woman looked an
executive in the eye and said to him, "You care more here about how many
chips fall to the floor than how many people walk out the door."
It was
one of those moments of abrupt truth that managers encounter too seldom in the
course of running an organization. And at some level it had to be true all companies in pursuit of a profit care
more about potato chips than people. This valuation is inherent in the
definition we have of organizations
that they are money-making contraptions in which people sometimes
function as machine parts.
Wheatley
proposed a new vision of the
self-organizing organization. One that acknowledges that it, like a pear tree
or an anthill, is a living system with its own natural footprint or pattern and one that will benefit from understanding
that fact and work with its rhythms and contour, instead of against them.
A truth
like Wheatley's is almost necessarily greeted with denial. The 300-year regime
of scientific management (using the term in its broadest possible sense) is
built on the bones of a native reality. Deny that its rationality is
reasonable suggest that people properly
outweigh potato chips, say the emperor is walking around in his birthday suit
and doesn't realize it and you will
make a ready enemy of the establishment.
"Every
organization, below the surface, is already ordered by a deep shared
understanding," Wheatley said. "But we don't trust that underlying
order. We seem to regard it in fact as the enemy, and we try to counter it at
every opportunity with a host of rules and regulations."
The self-organizing
organization listens to its own breath and observes its own intermittent
rhythms. It may have a policy and procedures manual, but it does not wear one
around its neck. It is open to its own creativity, open to its own quirky
logic.
In the self-organizing
company, hierarchies may be stood on their head. Wheatley described a company
where an employee, challenged by her team leader, declared, "You're not my
leader any more." And he wasn't.
She stayed, he went. $
from
Terry Warner's
1993
Masters Forum presentation,
"Bonds
of Anguish, Bonds of Love."
Note:
Each quoted section is a brief excerpt from Warner's presentation.
"Unless
the defenses that we carry with us unawares against profound change are melted
and abandoned, then every other improvement that we make will be merely
cosmetic."
"We
rely on the offerings of organizational and operational improvement because of
our pain, not because they work. In fact, there's very little by way of
resounding success that we can point to, and the reason is that the defenses
against profound change that we carry about with us unawares persist, and we
find subtle ways to defeat change. This is true even when you get a powerful,
shared vision. So it really matters how we change ourselves so that we are
available for change in our working relationships with people."
"What
I want to share is an outlook, a discovery or rediscovery of things we know
deep down. Martin Buber defined the two kinds of people as 'I-it' other people are instrumentalities to get me
where I want to go; other people aren't real
and 'I-you.' These are paradigms in the true sense: you can't take them
off and try on other ones."
"Our
natural condition is to have the capacity to sense what others want from us, to
feel their hopes, dreams, fears, and needs, and to either squelch that real
part of ourselves, or to open ourselves up to others. What puts us in this I-it
box, and why would anyone reside there?"
"Self-betrayal
occurs when I have a sense of how other people call upon me to respond to them,
and I violate that sense. Because who I really am is this person with a
capacity to connect. So I betray myself. I may betray them, too, but mostly I
betray myself."
"We
use so many tricks to justify ourselves and shift responsibility for betraying
ourselves elsewhere. Our negative emotions come not from others mistreating us,
but from ourselves, because we are mistreating others and ourselves. The more we injure others, the more we have to
find fault with them."
"Life
for us is like the constant cobbling together of a kind of story. If we see
life from within the I-it box, then our story is always about me at the center.
But we can see that there develops a kind of collusion, in which each party is
reinforced by, and reinforces, the other's actions. People read the manager's
making decisions for them as a lack of trust, and collusion develops: more
resistance, more control; more resistance, more control. He or she thinks, 'If
I got sick for a week, this place would fall apart.' And the manager will never
know what these people are really like unless he or she releases control."
"Doing
this analysis in the workplace will tend to solve more problems in the
workplace than any redesigning or restructuring ever could. In fact,
restructuring and redesigning is only cosmetic, and it will only be brought
down, unless it is built on real relationships that aren't collusive, that
aren't resistant, that aren't defensive."
"We
see these other people as something to be fixed or coped with, but as long as
we see them accusingly, the effort to try to change them or even just to cope with them will backfire.""Our natural
condition is to have the capacity to sense what others want from us, to feel
their hopes, dreams, fears, and needs, and to either squelch that real part of
ourselves, or to open ourselves up to others. What puts us in this I-it box,
and why would anyone reside there?""Our natural condition is to have
the capacity to sense what others want from us, to feel their hopes, dreams,
fears, and needs, and to either squelch that real part of ourselves, or to open
ourselves up to others. What puts us in this I-it box, and why would anyone
reside there?"
"All
the behavior in the world won't close the gap between your actual attitude and
your behavior. If you don't really feel that way, if it isn't who you are,
nothing will be convincing. Let's be sure that we are very clear about the
difference between a change in behavior and a change of heart."
"We
have two resources to change from I-it to I-you. One is the constant signal of
discomfort that we have when we're in the box, and the other is the constant
appeal people make to us to treat them as real human beings."
"The
apparent issue is never the real issue. After observing hundreds of
organizational decisions, from board level on down, I know that they leave the
meeting and nothing ever gets fully implemented. You know why it never gets
fully implemented? Because they never talk about the real issues. What's the
real issue? The real issue is personal, between us. We may talk about policies
and structures and strategies and rewards, wages, benefits, positions,
perks everything but not the real issue. But as long as we
never address the real issue guess
what? the problem will come back again.
Nothing will ever come of those activities until our reason for resisting
change is gone. You are connected to other people through your whole being, not
just your intellect. What most people are saying to you is very simple. They
are shouting, "I'm being snuffed out here! That's the issue!"
Preview
May 6:
Adrian
Slywotzky
"Value
Migration," p. 10
NEW!
Hot
News / Hot Links, p. 12
Review
Rick
Ross
"A
Systems Thinking Toolbox," p. 3
Travels
with a Water Strider
Rick Ross
Skitters the Surface of System Dynamics
by
Michael Finley
REVIEW
Mental
Models
The
deeply held beliefs and assumptions we have about every aspect of ourselves,
others, our organizations, our product and marketplace, our lives, and how the
world works.
Ross
used family therapy as an example of systems thinking. Where psychologists once
imagined that you could take children out of their element, provide
"therapy," and return them to their families, it is now obvious that
the entire family must often be addressed.
Mike
Finley can be reached at mfinley@skypoint.com
Book
Review
Know
thy customer: lessons in value.
by
Leslie Wines
Avoid
the trap of corporate self-absorption, a top strategy consultant urges.
In
today's economy, value the profit
center of an industry is a moving
target. What customers cry for today may not interest them tomorrow. Wait too
long and you'll miss your chance to make money. Master how to monitor
industries for value shifts and reposition companies in a flash, and you're in
the win column.
That's
the message Adrian J. Slywotzky, the Boston-based strategy consultant, brings
to corporate executives battling for market share at the end of the 20th
century. His farsighted new book, Value Migration: How to Think Several Moves
Ahead of the Competition, is likely to shake up the way executives look at
their priorities.
Value
migration is the movement of growth and profit opportunities from one segment
of an industry to another. "Take the computer industry," Slywotzky
explains. "In 1980 many companies concentrated on producing mainframe
systems. That's where the market was. But in less than a decade, growth
opportunities moved to the personal computer market. While there was still a
need for mainframes, they weren't the center of the industry anymore."
Students
of computer history will recall that when value migrated to the PC market, IBM,
the long-time leading producer of mainframes, temporarily found itself on the
outside of the industry it had developed, looking in at upstarts like Apple. In
this case, the value shift proved very costly to IBM, but was a tremendous
profit opportunity for the shrewd entrepreneurs who had seen change coming.
The key
to being in a position to capitalize on value migration, Slywotzky says, is
"moving with the customer." He points to a maker of business forms as
an example of a company unable to grasp a sea-change within its industry
because it lost touch with buyers. The company became so caught up in internal
efforts to improve its paper products that its executives failed to notice that
a number of customers were turning to electronic bookkeeping systems and no
longer needed its goods.
"Our
firm is unusual in that we spend much time with our clients' customers,"
Slywotzky, a vice president at Corporate Decisions, says. "We bump into
many situations where their customers tell us: 'What used to be important to us
no longer is. Now we need something else.' We've worked for many companies with
product lines that were once very profitable, but became less important to
customers. We realized how critical it is to understand what customers want and
will pay for."
Slywotzky's
central message to senior executives is to understand their customers'
priorities before the competition figures them out, and then find ways to match
their companies' goods and services to those needs. The idea is to not
concentrate exclusively on internal matters, like market share and delivery
cycles. Dwell instead on the customers' operations and take on their strategic
challenges. P
Journal
of Business Strategy, Nov.-Dec. 1995
new
Some thoughts across the ages
that
may apply to systems thinking:
"We
think in generalities, we live in detail."
Alfred
North Whitehead
"Consciousness
is a disease."
Miguel
de Unamuno
"Sooner
or later, false thinking brings wrong conduct."
Julian Huxley
"We
cannot unthink unless we are insane."
Arthur
Koestler
"The
fatal tendency of mankind to leave off thinking about a thing when it is no longer doubtful, is the cause of half
their errors."
John
Stuart Mill
"A
good mind is a lord of a kingdom."
Seneca
"Where
all men think alike, no man thinks very much."
Walter
Lippmann
"Change
your thoughts and you change the world."
Norman
Vincent Peale
The
Masters Forum
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Intelligence
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Forum Review/Preview is written and edited by Michael Finley and Gerald de
Jaager.
The
School of Management receives a portion of your tuition to fund research.
Two questions
that never gets you in trouble, and that always improve the quality of
understanding:
"What
is it that leads you
to say that?"
"When
you say ____, what do you mean?"
Rick
Ross
May 6
Adrian
Slywotzky
"Value
Migration"
PREVIEW
Adrian
Slywotzky
"Value
Migration"
May 6,
1997
The
Masters Forum
Ted
Mann
Recital
Hall
8:30
a.m.-Noon
and
1:30-5 p.m.
HOT
NEWS / HOT LINKS
Companies
are meeting needs, but often with the wrong means, Vester said.