University of South Wales

Faculty of Business and Society

SUMMATIVE ASSESSMENT - ESSAY 1

Strategic Systems Thinking (ST4S39)

TASK: “Systems thinking essentially seeks to understand phenomena as a whole formed by the interaction
of parts.” (Stacey, 2011)

Critically Appraise The Above Statement in Relation to Changing Ideas of Strategic Thinking and
Explain How it Exists Within YOUR Company’s Approach to Strategic Management.
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Introduction

Every process that takes place is within and surrounded by ‘systems’, thus there are obvious reasons and
need to study them. But first, what is a ‘system’? To answer that, Reisman and Oral (2005) quote Reisman
(1979, p. 2) that the word system is defined as “a set of resources—personnel, materials, facilities, and/or
information—organized to perform designated functions, in order to achieve desired results”.

Discussions about systems cannot be separated from concepts related to strategy and complexity.
Strategizers (people who do the strategy) are advised to approach complex problems while thinking about
the whole systems, rather than isolating problems from the systems (Jarzabkowski, 2005). According to
Metcalf and Benn (2013, p. 371), a complex problem is one that has three characteristics; entities that are
relevant to the problem-solving process are huge (complexity), and they are interrelated (connectivity),
unpredictably and continuously changing (dynamics),and the target solutions to the problem are completely
clear.

Although complexity is inevitable and beneficial (Gunaratne, 2003), Mitleton-Kelly (1998) warns that high
extents of interdependence in complex systems normally lead to deleterious effects at the macro levels.
Whenever one component tries to improve itself it may result in weakening the position of other
components, so that improvements in one entity may pose a threat to another related entity which will
consequently cause instability to the system as a whole. Application of systems thinking in organisational
practices has been discussed by Mingers and White (2010), by giving three mains examples, which are;
complex adaptive systems thinking as the sociological base of organisational theory, in designing
organisational structures and processes specifically for complex environment, as well as organisational
redesign or restructuring.

This review highlights on systems thinking, taking into consideration key concepts including; approaches to
strategic thinking systems thinking, complexity and a modern ways of thinking about strategy, Complex
Adaptive Systems (CAS), and Systems Thinking (ST) in practice perspective. It also discusses the application
of those concepts in the writer’s work environment.

Approaches to Strategic Thinking

Approaches to strategic thinking have been changing in the past few decades, from the previous perspective
whereby the contribution of human agency was not considered as part of strategy (Jarzabkowski, Balogun
and Seidl, 2007). Jarzabkowski, Balogun and Seidl explain further that the major concept of strategy had
been that of bureaucratic, top-down formulation which focused only on top managers in organizations.

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Basing on that outlook, strategy could simply be defined as the activities that are induced by certain strategic
practices. But this definition lacks the necessary incorporation of human action as part of the strategy. In
recent years, a renewed understanding of strategy has allowed to accommodate the actions and interactions
of human beings in strategizing, whereby strategizing means the doing of the strategy. Jarzabkowski,
Balogun and Seidl (2007, p. 4) adapted a ‘humanized’ definition of strategy from Jarzabkowski (2005), as
“socially accomplished activity, constructed through the actions, interactions and negotiations of multiple
actors and the situated practices upon which they draw”.

Human action as part of strategy process can be discussed through the theory of practice, as Whittington
(2006) highlights three elements of the theory namely; praxis, practices and practitioners. Reckwitz (2002)
proposed the respective definitions of the named elements as follows; Firstly, praxis is “an emphatic term to
describe the whole of human action” (p. 249), practices are defined as “routinized types of behaviour which
consist of several elements, interconnected to one another: forms of bodily activities, forms of mental
activities, ‘things’ and their use, a background knowledge in the form of understanding, know-how, states of
emotion and motivational knowledge” (Reckwitz, 2002, p 249), and, finally, practitioners are the actors;
those individuals who draw upon practices to act. (Reckwitz, 2002, p 250). Praxis can be static (embedded at
various operational levels from macro to micro), or dynamic through the different levels.

According to Jarzabkowski and Spee (2009), Strategy-as-Practice studies the interrelationship of practitioners
(human beings) with practices and praxis. Practitioners do the practices applying their knowledge, actions,
behaviors and emotions according to what they've learned or experienced in the past, while adapting all
these to specific circumstances of their social and economic environments. Practitioners may be from within
an organization or from outside, they may act as single individuals or in groups, and are therefore
categorized practitioners into three categories; internal individuals; internal aggregate practitioners; and
external aggregate actors. Jarzabkowski and Spee elaborates further that employees at other organizational
levels other than top-managers also need to be considered as strategy practitioners, due to their important
contribution in survival and performance at macro levels of organizations.

Strategies can be formed in distinct organizational levels; that the process of strategy formation can be
either top-down (deliberate) or bottom-up (emergent), depending on the need of the organization to face
the environment changes Andersen (2000). Cardoso and Lavarda, (2011) agrees that strategy formation is
shaped on the actors' perceptions on the environment; that it can be shaped as deliberate(top-down) or
emergent (bottom-up), and can be operationalized at different organizational levels.

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Systems Thinking

Reisman and Oral (2005, p. 165) defines Systems Thinking (ST) as “basically thinking systemically and paying
attention to the dynamic, often nonlinear or stochastic processes of interaction among the resources and
the environment within which the system operates.” This above definition of ST has succeeded in including
both hard and soft approaches of systems thinking. Reisman and Oral (2005) also explain that Soft Systems
Thinking (SST) seeks to identify the correct problem in early stages of the process of enquiry, and Soft
System Methodology (SSM) is a systemic methodology which starts with the desire to improve a vaguely
understood system by learning about the state of a problem in the system. Moreover, they argue that Hard
Systems Thinking (HST), on the other hand, reacts to adapt to the changes in the environment (mostly in
later stages of problem solving) in favour of the system’s goals, therefore Hard Systems Methodology (HSM)
is a structured methodology which systematically responds to real world variations that are comparatively
well defined.

In order to learn more about systems thinking, it is better to look at its traits or properties. Kaspary (2014)
highlights on several properties of systems thinking, which include; interactions (i.e. internal cohesion of
individual units or groups in the wholesome system), interdependency (i.e. a system is formulated by
interaction of its parts or subsystems), autonomy and dependency (i.e. energy and information for survival of
one system that operates independently, depends on the environment in several ways, and on other
systems), organization (that is, cycles of disorder-order movements in the system) and self-production (this
means unexpected interactions of the parts with the whole system that produce themselves). These are
therefore the qualities that can be used in the analysis and identification of processes which involve Systems
Thinking.

The car example that was presented by Professor Russell Ackoff (Awal Premi, 2015) is a very useful
description of systems thinking. The car is taken as an example of a whole system, made of numerous
interrelating parts. No single component is capable of fulfilling the purpose of the whole system (i.e. moving
objects from one place to another), and also we cannot resolve the characteristics of the whole system just
by taking a simple summation of the properties of the containing units. The automobile example instructs
about considering a system as a whole instead of discussing its individual components, because every single
component of a system is only significant when it fits and delivers along with other components. That means
any improvement in a certain part of a system is not meaningful if it does not improve the system as a
whole. Professor Ackoff explained further that one cannot be able to improve a system by dealing separately
with disassembled parts of a system. He meant that Systems thinking is therefore against the conventional

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‘divide-and-conquer’ methodology which tries to solve problems in separate components of a system (e.g.
departments in an organization) – because that traditional methodology does not necessarily improve the
overall situation of the systems and is more likely to make it worse.

Complexity Perspective

Complexity occurs due to inter-relationship, inter-action and inter-connectivity of components within a

system and between a system and other systems, including its environment (Mitleton-Kelly, 1998). The
interrelation comes from interaction between individuals inside the system (i.e. human agency) and also the
between the other systems of objects and ideas. One fact about complexity, which can be deduced from the
term ‘complexity’ itself, is that there is no single dominating theory that satisfactorily explains it. According
to Mitleton-Kelly (1998), various sciences of complexity (such as evolution, chemistry, computer simulation,
etc.) give rise to several different ‘theories of complexity’.

Mitleton-Kelly (1998) shows that when a system is forced to shift away from equilibrium, it survives and
grows but when it stays at equilibrium it dies. The explanation given to this scenario is that the systems are
forced to search for other possibilities to compensate the shift, until they discover new relationships
patterns and structures. The same applies to human systems that are diverted from usual routes,
practitioners experiment their space of possibilities to find alternative routes towards their goals. Although
working in far-from-equilibrium is desirable and beneficial – which contrasts the classical idea of system,
when a system is driven too far from the mean position it may turn out to be completely unstable (Mitleton-
Kelly, 1998).

When a complex system is in a far-from-equilibrium state it becomes very sensitive to environmental

changes, whereby a minute disturbance can create huge ripples enough to break the structures of the whole
old system and replace it with a new one (Gunaratne, 2003). On the other side of the coin, a near-to-
equilibrium system is comparable to a closed system in which the system loses energy as fast as it gains, so
nothing much happens.

Metcalf, L. and Benn, S. (2013) developed a general eight-steps-cycle model of complex problem solving that
begins with recognizing a complex problem, then engaging with it using personal and interpersonal human
capabilities, generating its conceptual model, followed by creative theorizing and decision making. The last
two steps are the action or communication of the solution, and testing of the solution in operation. The
solution is continuously refined during the repetitions of those steps (Metcalf, L. and Benn, S., 2013).

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Gintis (2006, p. 3) accounts for the distinguishing characteristics of complexity economics, as compared to
neoclassical economy. Firstly, the complex economy is thermodynamically open and generally far from
equilibrium, dynamic, nonlinear, while the Walrasian economy is the opposite case. Secondly, the
practitioners of the complex economy have limited amount of information on their practices and are force to
incur high costs for information processing, but they rely on uncertain but efficient heuristics to adapt to
complexity under proper conditions, while agents of neoclassical economy have optimum information which
they can acquire at no cost. Thirdly, there are complex interwoven networks in which the agents of complex
economy take part in attempt to solve the shortcoming of having limited information and save the costs of
information processing. Agents in the complex economy participate in sophisticated overlapping networks
that allow them to compensate for having limited information and facing formidable information processing
costs. Fourthly, it is a property of complex systems that the macro-level traits are emergent of micro-level
properties and features. That means that the properties of a complex system cannot be directly derived
from the properties of its separate components. On the side of Walrasian economy, all macro properties can
be analytically derived from its micro properties. Finally, evolution: restitution and growth of complex
systems in terms of order and complexity is brought about by differentiation, selection and amplification,
while neoclassical systems remain static and at equilibrium.

Complex Adaptive Systems: Modelling Complexity

Mitleton-Kelly (1998, p. 7) defines organizational complexity as the complicated interconnections of

individuals, of people with objects and ideas, and also the effects of interrelations within and/or between
organizations (systems) within their environment. Complex adaptive systems (CAS) can be studied as a sub-
part of the Complexity Leadership Theory, a theory that depicts an encompassing framework that explains
administrative leadership, adaptive leadership and enabling leadership (Uhl-Bien, Marion and McKelvey,
2007). Enabling leadership enhances adaptive dynamics and assists in managing the entanglement between
the other two leadership practices. The difference of administrative from adaptive leadership is that;

Administrative leadership to refer to formal acts that serve to coordinate and structure
organizational activities (i.e., the bureaucratic function), and adaptive leadership refer to the
leadership that occurs in emergent, informal adaptive dynamics throughout the organization
developing a model of leadership grounded not in bureaucracy, but in complexity. (Uhl-Bien, Marion
and McKelvey, 2007, p. 302).

Chung and McLarney (1999) present a lesson on CAS learnt from history; half a century ago in the Battle of
Midway, when a small American force subdued a larger enemy (Japanese) by using an informed adaptive

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strategy, which highly affected the trend of the Pacific war. The victory of the US over the Japanese was
mainly contributed by former’s adaptive responses to varying real-life scenarios, and the Japanese
commanders lacked a shared understanding of their own strategic direction (they had several wrong and
unshared objectives which diverted them from the objective- which escalated into a deadly threat).

The Practice Perspective

Jarzabkowski, P. and Spee, A. P. (2009) argue that it is difficult to identify a single practice from a complex
network of interconnected practices, because practices appear together entangles components of activity.
Jarzabkowski and Spee also elaborate that among the common approaches to practices, the most common
is perhaps the linguistic approach that looks into talks and discussions of strategy actors (Alvesson and
Karreman 2000). Another approach is considering the structuring of ritual acts such as meetings and
workshops, as episodes of practices within the praxis (e.g. Hodgkinson et al. 2006). There is also a more
practical approach, which deals the actual experimentation of the strategy practices and how praxis evolves
as the result of the practice.

Writes Mittleton-Kelly (1998) in a case study covering a multinational U.S. based private corporation -
SENCORP. The corporation had been forging and applying theories of complexity in their management
practices for over fourteen years, which allows for system’s survival and growth. As opposed to traditional
models, the SENCORP model sustains interrelation between the management of adaptive learning in an
organization with the management of operations.

Complexity in the modern economy has made managers and corporate leader to rethink about strategizing
methodologies (Jarzabkowski and Spee, 2009). Actions of strategy leaders when they deal with unique
economic environments and the variation in their strategizing tools are necessary in the discussion about
competitive strategies (Strategy-as -Practice). Jarzabkowski (2005) says that ‘Strategy-as-Practice’ emphazes
on the activities leading to knowledge creation and its re-formulation by the agents of change in
organizations.
Jarratt, D. and Stiles, D. (2010) developed the following three frameworks which clearly guide the various
competitive strategy outlooks, and thus, the strategizing tools applied;

Routinized Practice - In this framework, traditional strategic tools are applied while always considering
normative collaborative structures of the company. In defining collaborative structures, Jarratt, D. and Stiles,
D. (2010, p. 31) writes; “We define collective organizational structures to be strategy history, formal and
informal organizational structures, culture, strategy systems and processes and normative strategizing

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behaviour.” Here, strategic methodologies are generally applied without needing to adapt to new emerging
situations, such as SWOT, PEST and BCG matrices through which; Strengths, Weaknesses, Opportunities and
Threats are discussed to identify internal and external environments, forming the information platform for
strategizing. In later stages, risk analysis, portfolio analysis, McKinsey’s 7Ss, Ansoff’s matrices and value
streaming are applied to formulate knowledge which is useful for the strategy.

Reflective Practice - This framework models dynamic interaction between managers, collective
organizational structures and practices, which allows continuous reflection on the practices and operating
systems of the strategy as it unfolds. In this case, strategy leader use learning and creativity as well as an
envisioning scenario system to aid brainstorming about potential futures.

Imposed Practice - Competitive strategy in this framework is cumulatively woven through adjusting the
existing strategy towards the desired targets, regardless of the company’s collaborative structures, or any
fixed stakeholder-oriented options.

According to Jarratt and Stiles (2010), routinized practice is generally practiced where the future situation is
predictable, and leaders who applied this activity framework. Managers who consider their environment as
dynamic and complex, generally prefer reflective practice as they focus on “meeting the challenge of moving
outside current issues and stakeholder engagement, and driving change” (Jarratt and Stiles, 2010. p. 34)
Imposed practice is chosen by managers who face stable environments in a perspective of competitive
strategy as incremental change. However, strategy leaders can choosing multiple and/or adapted traditional
methodologies (e.g. SWOT analysis) so as to avoid the shortcomings associated with traditional or individual
tools, and also there is no single ‘universal’ strategic practice that links directly to successful corporate
managers.

Discussion and Conclusions

Theories of complexity, such the Theory of Complexity Leadership, help strategizers to find ways of thinking
and formulating their perspectives about operations in their evolving systems Mitleton-Kelly, E. (1998).
Strategy leaders and lower-level practitioners are expected to solve problems that happen in the systems
that surround them. Metcalf and Benn (2013) suggested a general model of complex problem solving that
begins with recognizing a complex problem, then engaging with it using personal and interpersonal human
capabilities, generating its conceptual model, followed by creative theorizing and decision making. The last
two steps of the model are the action or communication of the solution and testing of the solution in
operation, the obtained solution is continuously refined during the repetitions of those steps.

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Considering my personal work environment, adaptive systems are evident in various manners; one example
being Quality Management System in soft drinks manufacturing. This system informs employees about the
desired targets in terms of product quality, and guides them towards accomplishments.

As Gintis (2006) writes about adaptive systems, adaptive behaviour roots from substantial deviations in
systematic variable like prices and quantities, which in turn lead to shifting of the system from mean
position. In another case, adaptive behaviour is seen in evolution, whereby out of an extensive selection of
possibilities, an option that is thought to be the best is chosen.

In this era when complexity surrounds the decision making process, competitive advantage is gained through
“increased ability to review, challenge and change opinions and decisions” (ISO, 2015, p. 14). Evidence-based
decision making is thus an unavoidable choice for an FMCG (Fast Moving Consumer Goods) company like
ours. We perceive communication as an important manifestation of adaptive behaviour, which consequently
enhances thinking of employees. Human elements are taken as adaptive thinkers (assisted by computer
software e.g. SPC Infinity QS and SAP) who strive to improve the overall ‘payoff’ by learning from their
multinational occupational networks, and imitating successful undertakings from others.

A paper by Uhl-Bien, Marion and McKelvey (2007, p. 300) explain how complex systems thinking varies in
practice depending on levels of the economies in particular environment. They argue that organizations in
less developed countries deal mostly with manufacturing activities as subsidiaries or subcontractors of larger
firms in countries with stronger economies. They add that, big companies are more engaged in promoting
faster learning and innovative services, therefore they need relatively more adaptability which in turn
determine their competitive advantage. That means that firms in developed countries are superior
practitioners in the Systems Thinking, and the third world economies have no choice but to follow their
trails. That scenario should be taken as a challenge to third world countries; they should strive harder to
keep up with the pace of learning, flexibility and adaptability.

Complexity is therefore an inevitable reality, basing on satisfying evidence mentioned earlier in this text that
Complex Adaptive System is a system which aligns with ever-changing proceedings of nature.

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