Complete Introduction To Systems Thinking (For Practical People)

When people hear about systems thinking, they usually listen up. It seems that people understand intuitively that systems are crucial for living a structured and successful life.

And indeed, the importance of systems thinking is easily explained: Literally, everything in your life is a system. Your household, your job, your finances, your relationships. This fact leads to a simple thought:

If you improve your system thinking skills, you will be able to improve all areas of your life.

Here are some examples:

  • If you improve your finance system, you will have more money.
  • If you improve your household system, your house will be cleaner while wasting less time cleaning.
  • If you improve the systems at your job, you will get more done in less time.

But not only that – the vision of living a systems-based life sounds exciting (at least for me). Imagine a life where all of your life areas sorted out. Everything is optimized, structured and automated. With having all these systems in place, you will gain more time, money and energy. Which means more time for hobbies, passion, and creativity.

Sounds amazing, doesn’t it?

The Harsh Truth About Systems Thinking

The promise of systems thinking may sound great. However, learning systems thinking is a struggle.

But why is that?

Most systems thinking advice on the internet is very academic. When you start to research this topic online, you will find complex concepts like feedback loop diagrams, dynamic simulations or computer-based modeling tools.

While this is all nice and good, you won’t be able to put this directly into action. Or put differently, you won’t improve your life with this kind of theoretical advice.

Don’t get me wrong, all of these concepts have their rights to exist. But with all of this theory, it’s hard to understand the practical value of systems thinking.

Actionable, easy-applicable advice is missing. So obviously, there is a large gap between theory and practice.

So, how does a normal human implement systems thinking in its life?

Why You Need Practical Systems Thinking

To end this confusion, I came up with my own term. I call it Practical Systems Thinking.

Practical systems thinking has two primary goals:

  1. Improve the systems in your life to get more done using less of your resources (time, money, energy)
  2. Understand the systems around you to gain more system knowledge and shape your future.

Practical systems thinking is heavily based on the Pareto principle. The Pareto principle defines that 20% of your effort leads to 80% of your results.

The same is true for systems thinking. 20% (actually much less) of the systems thinking knowledge enables you to be a better systems thinker than 80% of the population.

However, this principle only works if you know to navigate through the endless systems thinking resources on the internet. You have to know which resources are important and in which order you need to consume them. Otherwise, all these ideas, concepts and examples about systems thinking won’t full sense to you. You will always wonder how these things fit together into a bigger picture.

About This Web Guide

I created this web guide to teach practical systems thinking. It’s based on simple a process which guides you through the best systems thinking resources on the web. It shows you all the necessary steps to learn practical systems thinking. Every concept has a practical reference to your life. You will be able to see, analyze, design and optimize systems for you and the people around you.

Here’s a navigation of this web guide:

  1. Get the System’s Mindset
  2. Learn Basic Concepts
  3. Learn Advanced Concepts
  4. Apply

Enjoy.

1. Getting The Systems Thinking Mindset

a) What Is A System?

Before we go any further, let’s define the term system. In our context, two definitions will be helpful:

„A set of detailed methods, procedures and routines created to carry out a specific activity, perform a duty, or solve a problem1

The second definition deals with the question “What needs to be done to achieve a goal?”.  It focuses on the result of a system by following a repeatable process.

The second important definition of the term system is this:

„An organized, purposeful structure that consists of interrelated and interdependent elements. These elements continually influence one another (directly or indirectly) to maintain their activity and the existence of the system, in order to achieve the goal of the system 2

This definition is more abstract than the previous one. It focuses on the parts of a system and hence on its structure. In reality, these parts could be humans, machines, or organizations.

These two definitions should be enough to start with this systems thinking guide. But if you want to dive a little deeper into systems theory,  have a look at this short video about complex systems. It contains a detailed description of the term system and describes the characteristics of complex systems.

b) Systems Thinking 101

Systems thinking has many definitions. A good one for practical systems thinking is this one:

Systems thinking is the ability to identify, model, create and improve systems to make your life and other people’s lives better  

A more detailed explanation by the systems thinking legend Peter Senge can be found in this 2-minute video. If you want to understand systems thinking with the aid of an example (improvement of the health care system), then please check out this 5-minute video.

The benefits of the systems thinking approach have already been mentioned in the introduction, but here’s a more detailed list (if you’re still skeptical):

c) System’s Mindset

Let me tell you a secret about systems thinking: Identifying systems is already half the battle. Once you are able to see the system, you can improve it. It’s easy as that. This skill is also called a system’s mindset. 

But how do you get it? I found two videos to be really helpful.

The first video is by Leo Gura in which he looks at systems thinking from a philosophical perspective. He dives deep into systems thinking principles and how you can use them to improve your understanding of life. He also talks about the characteristics of systems thinkers and why systems thinking is the highest form of self-actualization. This video is definitely worth checking out:

Another great video to get a system’s mindset is by Sam Ovens. He takes a more practical approach than Leo Gura and breaks down why success in life and business depends hugely on your systems thinking abilities. Among other things, Sam teaches you how to view everything in life and business a system, how systems thinking works and shows real-life examples. Don’t miss this video.

2. Systems Thinking Concepts

a) How To Apply Systems Thinking?

If you want to put systems thinking into practice, you first need to build a mental toolbox of systems thinking models. In other words, learn you have to learn some theory.

In this way, you have a tool belt of systems thinking concepts which can be applied successively when being faced with a complex problem.

The motto of this section is simple: The more you read, the better.

The following concepts have no direct logical dependencies, meaning that you can learn them in any order you like.

b) Basic Principles

„As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” – Harrington Emerson

Systems thinking is based on a core set of principles. Once you understand these principles, systems thinking will be far easier to grasp. You will get a better “feel” for systems and you will build a deeper understanding which helps you to learn new systems thinking concepts quicker.

A great blog post about systems thinking principles is written by Leyla Acaroglu. She breaks down the 6 most important systems thinking concepts with epic inf graphics. This blog post is a must-read:  The 6 Fundamental Concepts of Systems Thinking 

Two other interesting articles about systems thinking principles are „10 Useful Ideas On Systems Thinking” and „15 Systems Thinking Guidelines To Live In A World Of Uncertainty”.

If you want to see systems thinking principles in action, check out this short video. It’s an amazing illustration of complex systems thinking topics.

c) Systems & Goals

„You do not rise to the level of your goals. You fall to the level of your systems.” – James Clear

Humans are obsessed with their goals. But when it comes to the implementation of our goals, we get overwhelmed. Why is that?

People overestimate the importance of goals and underestimate the power of systems. Ever heard of New Year’s resolutions?

Put simply, if you want to achieve a goal, you better have a system in place. Otherwise, your pursuit will produce random and chaotic results. You need the consistency, automation, and focus of systems.

In his blog post „Systems Over Goals”, James Clear describes the shortcomings of goals. He argues that systems are the most important cornerstone of success.

However, systems are no end in itself. Systems are built to achieve goals. Nat Eliason reminds us about this fact in his blog post„Systems Without Goals Is A Path To Mediocrity”.

So in essence, you need both, systems and goals. But how can they be aligned with each other?

A solution is presented by Flavio Rump in his Medium article „Systems Versus Goals”. He breaks down an 8-step process to translate your life or business goal into an applicable system. Two powerful concepts he mentions are„social contracts” and „measurability”.

d) The Environment

„It’s inevitable your environment will influence what you do.” – Duncan Sheik

Let’s perform a short thought experiment: Imagine you are in the process of starting a new business. You have supportive investors, an amazing product and a perfect founder-team. Sounds great, right? And now let’s add just a last small detail: Your business operates within a sluggish and unprofitable market. This fact changes everything: Sales will be much harder because customers won’t have the money and mindset to invest in your new product, even if it’s useful.

The example above shows how a system is significantly influenced by its environment. In other words, a system won’t produce good desired results if its environment doesn’t have a positive influence.
Two helpful blog posts highlighting the power of the environment are „How To Improve Your Health And Productivity Without Thinking“ and „Motivation Isn’t Enough. Environment Literally Shapes Your Life“. Both posts show practical examples and tips which can help you in your day to day life.

Here’s another small example: Suppose you are building a system for your finances. You want to save and invest your money. If you start investing without considering the environment (global economy), there’s a big chance for failure. Because let’s suppose we are in the midst of a recession, and you are investing in high-risk technology startups. There won’t be any money to finance the growth of these startups.

But how do you use the power of the environment to improve your system?

Next time you create or improve a system, take a step back. Look at the environment surrounding your system. Where are the interfaces between your system and its environment in terms of structure, process, and communication?

It can be a challenge to differentiate between a system and its environment. Where to draw the line? There’s an easy guideline to solve that problem: A system can be controlled, an environment can only be influenced. So if you are the CEO of a company, your company is the system. The market (competitor, partners, customers) is your environment because it can only be influenced.

Once you understand how the environment affects your system, it’s time to act. There are basically three ways to do it:

  • Adapt – Create a symbiosis between your system and its environment.
  • Protect – When we talk about protection, we have to talk about Donald Trump (building a wall & US-China Trade War)
  • Change – It’s also possible to change your environment completely. Two good examples are the companies are Yelp and Slack. Both companies became successful by changing their market.

e) Iteration

„It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward” – Louis Sachar

Every beginning is difficult. We all know that. From a system’s perspective, this phenomenon is summarized by Gall’s Law.

„A complex system that works is invariably found to have evolved from a simple system that worked. The inverse proposition also appears to be true: A complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a working simple system.” – John Gall

Gall’s law has a wide range of applications, whether we talk about human evolution, business or learning a new skill.

Another great example of Gall’s Law is described by Justin Jackson in his blog bost „I wasted 4 years of my life doing this”. He explains how he built his business by starting small by applying Gall’s law and Just in Time Learning.

What does Gall’s Law mean for you?
Next time you start a new project or have a goal (aka build a system), start small. Build a tiny system. Keep tweaking and get feedback by defining and measuring a success metric. Once it works reliably, it’s time to increase its complexity. This concept is also described as the Build-Measure-Lean cycle. A detailed explanation can be found in „How The Build-Measure-Learn Cycle Really Works”.

f) Bottlenecks

„Having no problems is the biggest problem of all” – Taiichi Ohno

A key idea of systems improvement is maximizing throughput. Throughput is defined as the  „productivity of a … system over a unit period, expressed in a figure-of-merit or a term meaningful in the given context, such as output per hour, cash turnover, number of orders shipped.“ 3

For different systems, this could mean different things:

  • If you are a writer, this could be the amount of word you write within an hour.
  • If you are a car salesman, this could be your sales can within a day.
  • If you are a manufacturer, it could the number of units you produce within a month.

However, the biggest enemy of improving throughput is called bottleneck or constraint:

„A bottleneck is a hindrance to productivity, efficiency and speed. The term is an analogy to the shape of a bottle that that narrows at the neck. A bottleneck is typically a component of a process that is slower than anything than everything that depends on it.” 4

One good example is a company with an amazing product and a great company culture, but with a slow and inefficient sales process. In this case, the sales department is the bottleneck because it affects the success of the whole organization in a negative way.

The sales example illustrates how a bottleneck can take down your whole system, even if the rest of the system works perfectly. Thus, it’s important to provide downside protection by eliminating bottlenecks before making radical changes within a system.

In case of simple systems, identifying a bottleneck is straightforward because people intuitively know what brings them down:

  • In your social circle, it could be a toxic friend.
  • In your job, it could an inefficient process.
  • If you try to get fit, it’s often nutrition.

But once a system gets too complex, you have to take a more methodical approach. I found two guides to be very helpful to achieve this. Both are web resources based on the “Theory Of constraints“ method by Eliyahu Goldratt:

g) Leverage Points

„Give me a place to stand and with a lever I will move the world“ – Archimedes

As a child, most of us learned about the lever concept.  In a nutshell, „a lever amplifies an input force to provide a greater output force, which is said to provide leverage.“ 5. The best way to explain leverage is this:

Put simply, good leverage multiplies your initial effort and leads to a far better result.

The power of leverage doesn’t only apply to physics, but to every aspect of your life. Here are some examples of good leverage:

  • Making 1000$ from 100$.
  • Loosing 30 kilos in 6 months by working out twice a week.
  • Building a profitable business by investing 1 hour a day.

When it comes to systems thinking, the lever effect is described with the term leverage point:

“Leverage points are places within a complex system where a small shift in one thing can produce big changes in everything” 6

A great way to understand leverage points is to think about the domino-effect. The fall of one single domino brick leads to a chain-reaction and eventually triggers a change in the whole system.

But how can such high leverage points be found?

Basically, a notable change within a system occurs when a leverage point targets the root cause of a problem. This is only achievable by ignoring symptomatic solutions and short-term thinking.

A great example of a symptomatic solution can be found in our global financial system. When our global economy slows down, central banks tend to lower interest rates to fuel growth and wealth. However, this approach only works short-term and will eventually lead to inflation and devaluation.

High leverage points can be identified by analyzing deep-rooted structures of problems. This isn’t always fun. In fact, people avoid this like the plague but wonder why they always get the same results.

As a rule of thumb: the deeper the leverage point within the iceberg model, the better the leverage point. The relation between leverage points and the iceberg-model can be found in this video:

Leverage points can be divided into different subtypes. Donella Meadows, a systems thinking legend, extracted 12 different types of leverage points, ordered by their effectiveness. An explanation of these 12 types can also be found in this Medium post.

A final note: Bottlenecks and leverage points seem to be very similar. However, bottlenecks focus on protecting the downside by removing the biggest constraint, while leverage points are about positive change and creating „limitless“ opportunity.

h) Feedback Loops & Circular Systems

Systems thinking is based on a circular design. Cycles and loops ensure that a system gets constant feedback. This feedback can be used to monitor and improve the current state of the system:

4. Apply Systems Thinking

a) Application Advice

Theory without practice is useless. The following web resources summarize the most important tips and concepts which have to be considered when you start out with systems thinking:

b) Examples

All beginnings are difficult. In order to keep your learning curve short, the following examples show you how real-life systems thinking looks like. It serves as motivation to build your own systems:

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