Innovation North

What Are the Benefits of Systems Thinking?


When astronaut Bill Anders went to the moon on Apollo 8 on December 21, 1968, he reflected: “We had come all the way to the moon to study the moon, and what we really discovered was the Earth.”

People who think in systems are not only able to see their work in the big picture; they are also able to see their world from different perspectives.

Systems thinking requires innovators to see the implications of their actions on both the long term and society, and to see how their current actions need to change to create the desired future. This ultimately leads to improved innovations, more effective organizations, thriving societies, and a healthier planet.

Systems thinking offers businesses a different approach to innovation that is particularly suited to turbulent environments. Most organizations tend to look inwards, rather than out, which stifles innovation. Systems thinking offers the ability to attract and retain talent, sustain profits, and to invest in initiatives that benefit their communities and the planet.

This article describes how systems thinking makes almost everything better, especially in today’s turbulent business environment.

Better Innovations

More Creative

According to Theresa Amabile, creativity is the development of novel and useful ideas. Systems thinking fosters a collision of ideas and inspires novelty that would not otherwise occur.

Systems thinkers are highly creative because they are good at zooming in and out – seeing the big picture and then focusing in on what’s important. Because systems thinkers can zoom out to see the big picture (instead of just the parts of the system), they also tend to be exploratory and curious, which drives creativity.

Systems thinkers are also able to connect ideas, even disparate ones, which helps them notice things that others might miss.

More Radical

Often the most radical ideas are also the most simple. These ideas might make you wonder: “Why didn’t I think of that?”

Do you remember your first suitcase with wheels, so you didn’t have to carry heavy bags on your shoulder? Or, buckets with wringers, so you could more easily squeeze the mop without getting your hands messy? The list of simple yet radical ideas is endless.

These examples are called systems innovations because 1) they make sense across a range of systems, including users, society and the planet and 2) the ideas are simple and cost-effective.

Some systems innovations are not so simple, but change the way we do things. For example, think about the transformation to society and work catalyzed by calculators, digital cameras, or even cell phones. Although older versions of these devices still exist, they have largely been discarded.

Further, it’s a mistake to think of these examples as single devices. They are actually different components that were assembled in new ways. It’s the assembly of the components, not the individual parts, that make the devices radical. And, sometimes a change in just one part can catalyze a radically different device.

But, these radically new devices need an audience. Almost all systems innovations fail at the outset, as they are ahead of the market. Systems innovators recognize that they need to create the market, not just ‘satisfy existing customer needs’.

Even though most people attribute the success of the electric car to Tesla, at least five different major brands had tried to market an electric car before Tesla came out with the Roadster in 2008. But, Tesla did not just innovate a new car, they also improved the battery technology, created a network of SuperChargers, and appealed to a high-priced ‘influencer’ market rather than the environmental market.

So, innovations generally tend to be incremental and only in hindsight are recognized as radical. Most systems innovators know that it’s not just about good ideas, but shaping the market (or system) to make the ideas spread and stick.

It is important to note that systems thinkers don’t look for moonshots – innovations that will transform the system. They look for small adjustments in what they are doing, and with persistence and luck, the innovations ultimately disrupt the system.

More Scalable

If you have read this article, you will know that systems are nested in systems and the elements of a system interact with each other towards a common purpose.

Innovations that are consistent with these systems become easily scalable. These innovations are not only desirable to the target market, but benefit others in the system. Because of this, systems innovations tend to generate more market demand than innovations that are not developed with the system in mind.

Systems innovations also benefit from network effects. Since they are desirable across a number of systems, they are more likely to generate positive attention through social media or word-of-mouth. People who like and share the ideas across their networks can save on marketing and promotion costs.

Better Companies

More Adaptive

In The Fifth Discipline, Peter Senge describes two types of complexity. There is complexity where there are lots of variables or moving parts involved (detail complexity) and complexity where the cause and effects are more subtle (dynamic complexity).

Systems thinkers can see dynamic complexity by scanning the environment for the information they need and then adjusting their actions to get them there.

For example, a baseball player does not apply physics and mathematics to calculate the ball’s trajectory when they go to make a catch. Instead, they move to where they think the ball is going and adjust in real-time by sensing the ball and adapting quickly.

Organizations that apply systems thinking know what they want and where they are relative to what they want. When faced with complexity, organizations are able to be even more adaptive, as the difference between where they want to go and where they are is in constant flux.

More Engaged Employees

Engaged employees bring their whole selves to the job – they bring their physical self, their minds, and their emotional energy to work.

For this to happen, employees need to find meaning in their work. They need to believe they are personally contributing to the goals, values, and success of the organization.

Organizations that apply systems thinking have a North Star. (This article describes what a North Star is, and how to find it.) The North Star guides the organization and illuminates how they fit within other systems, such as society and the natural environment. Organizations with a North Star recognize that they are a system and must work within systems to navigate to a desirable future.

A North Star offers employees a sense of purpose and gives them the latitude to work towards a long-term vision instead of short-term demands. It also offers them empowerment, job safety, and personal resources to reach their goals, resulting in more engagement, creativity, and collaboration. There is considerable evidence that a North Star contributes to more satisfied, more motivated, and more productive employees. 

More Profitable in the Long Run

Organizations that apply systems are more profitable in the long run. Because they are more adaptive, they have higher revenues from innovating products, services, and processes that are intended to anticipate where the market will be, not where it is now. Because employees are more engaged in these organizations, they are also more profitable because of lower employee turnover.

A study by Caroline Flammer, a researcher at Columbia University, showed persuasive, causal evidence to support the idea that organizations committed to corporate social responsibility (CSR) fare better in the long run. CSR requires systems thinking. The study showed that CSR policies led to higher share prices, return on assets, net profit margin, labor productivity, and sales growth over the long run.

Better Societies, Better Planet

Organizations that apply systems thinking inevitably contribute to better societies and a better planet through more sustainable and resilient social and ecological systems.

Some recent systems-level challenges facing society include access to education, public health, inclusion, biodiversity, better air quality, and soil health. These challenges have emerged over time, as the systems nested within these systems created imbalances. Organizations that apply systems thinking can reconcile tensions and find solutions.

Co-operators is a leading Canadian financial services co-operative. By using systems thinking, Co-operators recently recognized the escalating costs that they were experiencing from insurance claims are related to the increasing number of weather events. They also saw that their approach to restoring houses was even contributing to more weather events by filling landfills with waste materials and stripping natural resources to create new ones.

Co-operators could have taken the easiest solution by increasing insurance premiums to cover their increasing costs. Instead, they chose to use systems thinking to figure out how to build resilient and sustainable homes – innovations that would lead to stronger communities and a better planet. Read this project overview to learn more about how Innovation North partnered with Co-operators to apply systems thinking.

Reflect: How does your organization’s North Star give meaning to your work?

Recap: In today’s turbulent business environment, systems thinking offers many benefits. Systems thinking leads to better innovations that are more creative, more radical, and more scalable. It leads to better companies that are more adaptive, have more engaged employees, and are more profitable in the long run. Organizations that apply systems thinking inevitably contribute to better societies and a better planet through more sustainable and resilient social and ecological systems.