Thinking about Systems

1. Thinking about Systems The observers perceived real world Bounded , mechanistic and trabsactional I spy “systems” which I can analyse and engineer The Deming View lends itself to analysis and tends to be data driven The observers perceive real world Unbounded and messy ? I spy complexity and confusion which I can diagnose as a learning process The Systems Thinking View predicated on appropriate starting point and level of engagement

2. Open and Closed Systems: Systems and Processes • Central to the school of Lean Thinking and Six Sigmais the implicit assumption of a closed system. Deming was clear to distinguish between a system and the processes contained within it, to quote:- • "If the aim, size, or boundary of the organization changes, then the functions of the sub-components will change for optimization of the new system. Management of a system, therefore, requires knowledge of the interrelationship between all the sub processes within the system and of everybody that works in it.” • And then as the basis of systematic study and the domain for statistical analysis the process: “When the process is stable or in control, all the data points will fall within the two limits. Those points are considered to come from a process that has only common causes of variation.” • “However, if one or more of the data points fall outside the control limits (or show certain patterns), those data points are said to come from a special or assignable cause of variation acting on the process.”“It is the manager's job to know the difference. • Without this basic knowledge, any management action will be mere tampering”. Deming was thus very clear about when lean techniques are applicable and where intervention is mere tampering. This distinction is interpreted by Systems Thinkers as Open and Closed systems, linked and like stacked Russian dolls hierarchically arranged.

3. Variety and Variation • It is very easy to describe the difference between variation and variety but very difficult to diagnose this from systems behaviours. Does the scatter of outcomes around the target suggest process errors? Or is the behaviour being observed more complex than a single end point would suggest? • Deming: Variation • Disciples of Deming see variation as bad and develop a school of systematic analysis and elimination of variation down to the limit of natural variation. • Ashby: Variety • Ashby and the cyberneticists see variety as necessary for change, every system has to be responsive to its environment and it is in sustaining variety, through resources and capability, that organisations develop and grow. How do organisations balance the Deming route of standardisation with the Ashby route of sustainability? • Analysis and Synthesis • The mechanical view of an organisation assumes the complete replacement of parts, each element can be analysed, specified and replaced. The mechanics and processes are more significant than the people: the components and people are replaceable. The organic view of an organisation accepts the interdependency of parts, systems can only be understood as a whole, integrated and interlinked. The people are more important than the system & processes: it works despite the system. There is a gross asymmetry between the approaches. Too much emphasis on synthesis leads to an over-elaboration, too much on analysis can destroy a living system.

4. Effectiveness and Efficiency • Faced with the current economic crisis leaders and managers have largely focussed their efforts at reducing costs and improving efficiencies with little emphasis placed on increasing effectiveness. This is akin to surgery and an approach on radical surgery. It is the mistaken belief that an excess of efficiency will deliver a leap in effectiveness. It is proceed without design and with a blind belief of quantity over quality. • Unfortunately most the problem gets demoted to a solution - the language of innovation gets forced into a transaction - rush to a solution. I don't have to understand, the efficiency and logic of process steps I am following will insulate me from having to understand it. Our natural, and economic world, demonstrates the importance of linking sub-systems for efficiency and effectiveness. Equally past economic catastrophes own their origins to systems operating without the moderation of balanced feedback. This dichotomy lies with the interplay between efficiency and effectiveness. • Transactions and Relationships • Most of our current focus and emphasis is on lean methods and improving operational efficiency often to the detriment of improving customer relationships. We are all too well aware of the shallow unsatisfactory nature of formulaic “have a nice day” customer relations. • Whereas efficiency can be improved utilising traditional quality tools the challenge facing public and private sector organisations is to true variety in response to build the requisite relationships. In social services a good outcome may be achieved as much through a transaction less relationship as through a relationship transaction. • Consider the choices presented to the doctor: whether to dispense hope or pills?

5. Effectiveness v Efficiency • Effectiveness: Open System attributes • Tomorrow – extended decision action cycle • Unbounded – boundary can be fluid • Rule set outside of systems boundaries • Focus on requisite capabilities and resources • Not agreeable to LEAN methods (efficiency) • Focus on increasing variety and effectiveness • Focus on options for change - “Trade off” of • resources and capabilities • Relationship focus Which is your dominant system: where & when? • Efficiency: Closed System attributes • Here and now (today, hours and minutes) • Bounded • Defined rule set • Transactional activities /processes • Agreeable to LEAN methods (efficiency) • Focus on reducing variation • Focus on solutions • Task focus and analytical tools, e.g. PDCA

6. Effectiveness v EfficiencyWhich is your dominant system: why, where & when? • Efficiency: Closed System attributes • Here and now (today, hours and minutes) • Bounded • Defined rule set in operation • Transactional activities /processes • Agreeable to LEAN methods (efficiency) • Focus on reducing variation • Focus on solutions • Task focus and analytical tools, e.g. PDCA • Things dominate the problem and its setting - Non Human • activity systems machine paced production line • People doing • Convergent thinking • Reductionist / Cartesian • Mode 1 thinking (Knowledge) • Effectiveness: Open System attributes • Tomorrow – extended decision action cycle • Unbounded – boundary can be fluid • Rule set outside of systems boundaries • Focus on requisite capabilities and resources • Not agreeable to LEAN methods (efficiency) • Focus on increasing variety and effectiveness • Focus on options for change - “Trade off” of resources & capabilities • Relationship focus - People dominate the problem and its setting • People being • Divergent thinking • Diagnosis • Holism • Human activity systems and Mode 2 thinking (Knowledge)

7. Zachman Framework (Simplified) Diagnosis Divergent thinking • Scope (context) • Business model (concept) • 3. System model (logical) • 4. Technology model (Physical) • 5. Detailed representation (component) • 6. The Real system (as built) Analysis, Design & Build Convergent thinking Process Logic – six and lean sigma operates here How do you move from Diagnosis to Analysis, Design & Build?

8. Lean Systems Thinking • What do we mean by lean thinking? • What outcomes do we want from lean systems thinking? • How will we know that we have succeeded? • What are the benefits of lean thinking? • What are the issues with lean thinking? • What do we mean by systems thinking? • How does it help us with the issues of lean thinking? • What are the issues with systems thinking? • How do we go about developing lean systems thinking

9. What do we mean by Lean Thinking? (1) • It is the antidote to WASTE? • What is Waste? • Any human activity which absorbs resources but creates no VALUE • Lean thinking is a systematic and structured approach to precisely specifying Value in terms of specific products and services with specific capabilities at specific prices to specific customers • Lean thinking ignores the existing investment and re-thinks where value is created • A lean system has no resilience – it is in effect a closed couple system which is not adaptive to environmental change.

10. What do we mean by Lean Thinking? (2) • Service Excellence Involves: • Delivery Performance • Relationship Performance • Trade off of service v functional attributes

11. Service Excellence Delivery Performance Relationship Performance Define your corporate mission in terms of customer benefits Develop organisational and service/product visions Gain commitment across the organisation Select the right people Train, train and retrain Change the measure to incorporate customer service values Use technology to enhance customer satisfaction Quality is about exceeding customer expectations Use scenarios to scan for breakpointsin the environment

12. Traditional Lean Thinking (1)

13. Traditional Lean Thinking (2)

14. Assessing Context & Selecting Approach

15. Some things about Systems - Basic Principles 1 • Systems do not exists – they do not have a singular definition? See Boulding • What is your concept of systems and what are we talking about? Linked processes a la Deming or Human Activity Systems? • Systems always have to exist for a purpose or can exist for multiple purposes • There are always two systems in simultaneous operation • The problem solution system • The problem context system • The solution System can never map completely to the problem context • All Systems can be defined in terms of 1000’s of attributes – only a few mattered from a customer perspective ( re values based segmentation) • All Systems exhibit multiple views (so what view is correct – the answer is all views are correct – see the housewife and the electrician problem. • All attributes have to be fit for purpose, i.e. zero defect v customer perceptions • Only a few attributes matter from a customer perspective • All attributes can kill the systems whether defined or not • All Systems are open i.e. adaptive. • ICT systems are always closed. I.e. non adaptive - no feedback loops • All systems to survive must demonstrate requisite variety • You are part of the problem and solution space, i.e. multiple perspectives always exist

16. Systems Hierarchy

17. The concept of organization goes beyond the formal hierarchy of functionally based reporting. Relationships between people matter A closed network of recurrent interactions Relations Social relationships Stable forms of communication Organizational identity Organizational structure Raul Espejo, “The viable system model: a briefing about organisational structure,” 2003

18. Variety of Environment Variety of Operations Variety of Management » » Variety needs to be managed actively along all communication channels - adapted from Rudolf Kulhavý Operations External Environment Actions Actions Management Information Information The challenge is to balance the varieties of operations & environment and management & operations via appropriate attenuators and amplifiers.