Systems Thinking - A Perspective..

What is System Thinking?  

Organization is a web of complex structure, departments and processes.  

Systems thinking is a way to study and unearth the complex organization from the higher-level perspective and the inter connectedness of various events taking place in the organization. If we don’t get the perspective of systems thinking, then you will only see / perceive an isolated event in the organization and create localized improvement or you may tend to ignore the same as unimportant and not critical.

Here, am sharing a case study to unearth the Value Chain and System Weakness by applying Systems Thinking.

Recently I did a diagnostic study of a Crane Rental Organization. It’s a simple value chain to understand and as follows:

•        Customer Acquisition
•        Agree on rates as per specification
•        Deliver cranes and operate
•        Invoice – Bill the customer
•        Collection

The value chain seems to be so simple, but the problem is not so simple. When I met the GM of the organization, he stated “we are not able to collect money as per the due dates (Approx. 2.6Mn USD).

Reason being that customers don’t have money, fund issue at the customer end, customer delaying tactics etc., otherwise we have no other issue apparently in our organization.

If I go by GM’s conclusion then the only solution is to appoint a debt collector and increase, follow up with the customer to collect money due for collection. But I felt otherwise.

So, I applied systems thinking to unearth the sub systems issues and inefficiencies and not to attack the symptom. I took the challenge of big picture issue “not able to collect money on time (as per the terms)” and drill down the sub systems.

At the organizational level the following are the weaknesses.

• Lack of accountability
• Process Disconnects
• Lack of leadership amongst process owners
• People working in silos
• Lack of Key Result Areas (KRA) and Key Performance Indicator (KPI)

At the subsystems level you will find lot inefficiencies as below:

Purchase order: many jobs were taken without any formal approved Purchase Orders. Due to which even if you execute you will not be able to collect money till the PO is received. Sales wanted to close the order some how and instruct Execution team to start (Sub systems failure) rolling out the equipment without any PO.

Machine delivery: Equipment not delivered as per the date and time committed to the customer. Reason, equipment still under maintenance. No coordination between execution and sales but confirmed customer order (sub systems failure).

Quality of operator: There are few equipment needed a qualified operator. But order is received without having a qualified operator in place or operator not available.

Crane availability: Availability of the crane is tracked by the Technical team. But commitment date given to the customer by Sales not considering the availability of crane by the committed date. Sales doesn’t check / coordinate with Technical team neither Technical team updates the system provided to equipment tracking (Sub system failure).

Equipment Breakdown: Often equipment breaks down at the client site. Naturally customer not happy with this and hence withhold the payment. This is purely either operator issue (untrained) or maintenance problem (again Sub System failure)

If I had acted only on the collection issue by accepting GM’s version then I would have designed process for Collection, defined role for collection and recruited only Debt Collector. But applying system thinking you will find sub systems failures and inefficiencies which will lead to fixing the root cause of the problem (it is internal process weaknesses / inefficiencies leading to collection issue) not the symptom (Money due for collection).

The reason for sharing this case study is to drive home the importance of Systems Thinking. If not, then it’s like group of blind people touching an elephant and describing the animal.

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