Name: Kingrosse Tembo

Student Number: R1807D5634186

Module Title: Strategic Systems Thinking

Module Code: ST4S39

Tutor: Leonidas Efthymiou

Date: 23 December 2018

Assignment Title:

“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.
According to (Ritson, 2011), there is a great need for organizations to come up with

strategies in order to achieve the agreed goals and objectives in this modern business

environment. The modern business environment is affected by changes in form of

technology, social changes, and rivalry from other organizations and so on. In this case

strategy gives an organization a sense of purpose and direction. In order to come up

with great strategies for an organization, the practice of strategic management has to be

implemented constantly. In recent years, there have been changes to the idea of

strategic thinking. A new concept of systems thinking has emerged in strategic

management practice and according to (Stacey, 2011), involves understanding an

organization as a whole that if formed by the interaction of its departments. This is

referred to as systems thinking. According to Ackoff (2006), the idea of systems thinking

has not been adopted or has not yet been fully incorporated other contingent

organizations. This includes ABBA Financial Services, an organization situated in

Windhoek, Namibia and also my place of work.

Strategic Management

Ritson (2011) defines strategic management as the organized development of

resources of the functional areas in an organization such as manufacturing, marketing,

finance, information technology and so on so as to attain its desired objectives.

According to (David, 2011), strategic management emphasizes on incorporating ideas

from the main departments of the organization that include production or operations,

marketing, finance or accounting, , research and development, information systems and

management in order to achieve organizational success. Ritson (2011) also indicated

that strategic management considers the environment in which the organization

operates. Therefore, it involves a set of policies adopted by senior management in order

to provide a purpose and direction to the organization in the same environment (Ritson,

2011).

David (2011) stated that the idea of strategic management focuses on achieving and

maintaining competitive advantage for an organization. He also defined strategic

management as the art and skill that involves formulating, implementing, and evaluating

the cross-functional decisions that enable an organization to realize its desired goals.

Approaches to Strategic Thinking

Organizations need a purpose and direction to guide them through their operations and

this is achieved through strategy. According to (Hofer and Schendel, 1979) cited in

(Ritson, 2011), a strategy is an intervening force between and company and its

environment. Johnson et al, (2011), defined strategy as a long term direction and scope

taken by an organization in order to attain advantage for the organization. According to

(Johnson et al, 2011), organizational strategy is conducted through the structuring of

resources within a dynamic atmosphere to accomplish the stakeholder expectations and

the need of the markets.

Jarratt and styles (2010) highlighted two types of strategies namely deliberate and

emergent strategies. According to (Jarratt and styles, 2010) deliberate strategies are

mainly formalized. The deliberate strategies are process-based, planned and enforced,

and established through consultation with stakeholders within the organization. As

stated in Cardoso and Lavarda (2011), deliberate strategies represent a formal practice
of strategy; in this case the strategy is developed top-down and involves only top

management. Ritson (2011) also indicated that these strategies are formulated where

there are precise intentions drafted and enforced by the central leadership.

Cardoso and Lavarda (2011) indicated that emergent strategies are related to

processes from daily activities and decisions. In emergent strategies, the whole

organization participates and strategy is developed bottom-up. According to (Johnson et

al, 2011) emergent strategies are not developed on the basis of long-term planning. The

strategies emerge over time as a series of decisions. This generally develops a pattern

which becomes clear over time and are said to emerge when deliberate strategies have

failed to meet the desired outcomes.

Strategic thinking has evolved due to the dynamic nature of the business environment.

As strategy seeks to improve the performance of the organization as a system, (Stacey,

2011)’s idea of systems thinking basically seeks to appreciate phenomena as a whole

formed by the interaction of parts.

Systems Thinking

Ackoff (2015) supports the idea of (Stacey, 2011) by defining a system as a whole that

contains two or more parts. According to (Ackoff, 2015), in this system, each part can

affect the behavior of the whole and a system is a whole that cannot be divided into

independent parts. In an organizational context, and looking at my place of work, ABBA

Financial Services, a Microfinance institution situated in Windhoek, Namibia. The

organization has five departments namely, Finance, Credit Risk, Loan Officers, Debt

Collection and Sales Departments. The important targets of ABBA Financial Services
such as efficiency, profitability, continuous existence and so on develop out of how its

departments interrelate and not how they act discretely. In this case, as stated in

(Ackoff, 2015), the significant properties of ABBA Financial Services as an organization

are properties of the organization which none of its departments have. This idea defines

the concept of systems thinking which has not been fully adopted by ABBA Financial

Services in its practice of strategic management.

Ackoff (2015) further emphasized that between any two parts of an organization; there

should be a direct and an indirect path. Basically, if one groups the parts of an

organization into subdivisions, then each subdivision will have an effect on the

properties and the behavior of the entire organization and none will have an

independent effect. At ABBA financial services, the organization is subdivided into

different departments that perform interrelated tasks in order to facilitate the operations

of the organization. However, this is not the case at ABBA Financial Services where not

all the departments affect the performance of the organization as a whole.

Ackoff (2015) also supported this view by stating that the most common rule of

management in the Western countries is ‘divide and conquer’. In this case, the

organizations are sub-divided into departments and each department is managed as

effective as possible. He stated that this is done on the supposition that through

effective management of the departments, the entire organization will be as efficient as

possible. However, at ABBA Financial Services, the divide and conquer management

approach does not always work. This is evidenced in the year 2017 when the company

achieved the highest profitability since it was formed although the debt collection

department was poorly managed and underperforming. The company mainly focused
on the effective management of the sales department, loan officers department, finance

department and credit risk department.

Ackoff, (2015) also confirmed the relevance of the 2017 profitability results at ABBA

Financial Services. In his view, the effective management of the departments does not

result in the entire organization being as efficient as possible. According to (Ackoff,

2015) when an organization is functioning as healthy as possible, none of its

departments may be. He emphasized that most modern corporations or universities

hardly appraise the performance of their departments in terms of their contribution to the

entire organization as a whole but instead are always assessed based on their own

performance. This is also the case at ABBA Financial Services as the departments are

appraised in terms of their short term plans (STPs) or targets. Just like ABBA Financial

Services, (Ackoff, 2015) indicated that some organizations are operated anti-

systematically and subdivided into self-governing independent entities referred to as

departments.

Instead of focusing on departmental performances like, (Ackoff, 2015) indicates that it is

necessary to explore different views around a difficult organizational situation. The

practice of systems thinking enables organizations to identify a combination of

arguments that offers the best possible solution to organizational difficulties. In this

case, nobody owns a difficult as every difficult situation is universal and affects the

entire organization as a whole.

The idea of systems thinking stipulates that no problem ever stays solved as every

solution results in new problems. As a result, according to systems thinking, it is

essential to solve a problem by de-solving it. This is achieved through re-designing the
system that has the problem so that the problem no longer exists (Ackoff, 2015). This

view of systems thinking has partly been practiced by ABBA Financial Services as some

of the organizational departments, rules and policies, culture has where re-designed in

in 2017 in order to improve the performance of the organization and survive the rivalry

from other competitors. In relation to (Ackoff, 2015)’s view, a department of an

organization should not be reformed unless it makes the entire organization enhanced.

In systems thinking, organizations should not change departments because it makes

the departments better but need to consider the impact of changing a department on the

entire organization as a whole.

In the view that an organization is in a mess, systems thinking requires organizations to

formulate a design. This is because it is only by design that an organization deals with

the whole and moves to its departments. In this case, the whole is dealt with before the

parts are created to fit the whole (Ackoff, 2015). However some organizations including

ABBA Financial Services mainly design their departments to fit the whole, which is he

entire organization and that is not the correct idea.

Complexity Perspective: New Ways of Thinking about Strategy?

According to (Uhl-Bien at el, 2007), the leadership models of the last century have been

products of top-down, bureaucratic standards. As stated in (Uhl-Bien at el, 2007), these

models are very effective for an economy premised on physical production. However,

they are not well-suited for a more knowledge-oriented economy. In this dynamic and

globalized world of business, a different model for leadership referred to as complexity

has emerged. This model structures leadership as a complex collaborative dynamic

from which adaptive outcomes such as innovation, learning and adaptability develop.
Mitleton-Kelly (2001) further indicated that in a complexity perspective, organizations

are seen as complex changing systems, co-evolving within a social atmosphere.

Basically this notion changes the organizational thinking about strategy and

management. The complexity perspective can also be related to the organizational

systems thinking perspective. This is because organizational complexity is linked to the

sophisticated inter-relationships of individuals, of individuals with artifacts such as IT

and with ideas, and with the effects of communications within the organization, as well

as within institutions in a social ecosystem. According to (Ackoff, 2015), in a complex

modern organization such as ABBA Financial Services, all the interrelated components

of the organization should be affected by the idea of systems thinking, as an

organization as a system should be viewed as a whole. In some cases, this therefore

changes the way management view strategic thinking in the process of strategic

management.

According to (Mitleton-Kelly, 2001), complexity theories provide a method of thinking

and a way of seeing the world. An example of a complexity theory is connectivity and

interdependence, where (Mitleton-Kelly, 2001) states that complexity arises from the

inter-relationships, inter actions and inter connectivity of elements within a system and

between a system and its environment. This therefore supports the idea by (Stacey,

2011) that none of the parts in a system has an independent effect on the whole. In

relation of ABBA Financial Services, there are limited views on this idea as the

departmental performance is mostly appraised in relation to the respective departments’

desired or expected performance.

However, the idea that how one department affects the entire organization depends on

what other departments are doing applies at times in terms of the operations at ABBA

Financial Services. As stipulated by Ackoff, 2015), this is because the components and

departments within an organization are all interconnected. Therefore the connectivity

and interdependence theory of complexity promotes the idea of systems thinking and

affects the way that strategic thinking is viewed within organizations. However, some

organizations such as ABBA Financial Services have adopted the notion of systems

thinking to a lesser extent.

Mitleton-Kelly (2001) indicated that in a human system, connectivity refers to the idea

that a decision or action made by any individual, organization, institution or group has

an effect on all other related individuals and systems as they are interconnected. This

was also supported by (Ackoff, 2015) in his idea of systems thinking where he indicated

that when a whole is dissembled, it loses its vital properties and so do all of its parts

because they lose their connection. As an example (Ackoff, 2015), indicated that if an

automobile is to be dissembled in a room and all its parts are retained, the result will not

be an automobile, instead it would just be a collection of the parts. This is generally

because the automobile in this case is the product of the interaction of its parts and not

the sum of the parts taken separately (Ackoff, 2015). This idea applies to modern

organization which includes ABBA Financial Services. If the departments at ABBA

Financial Services are to be separated so that they exist and operate on their own, the

whole organization in form of ABBA Financial Services seizes to exist as the

departments will no longer be interrelated or interconnected. The result will just be a

number of existing departments that may fail to operate independently as the drive

which is the organization would have seized to exist.

Another idea of systems thinking in relation to connectivity and interdependence was

explained by (Ackoff, 2015). In his argument, he stated that an important implication in

management is that in any system when one improves the performance of the parts

taken separately, the performance of the whole does not necessarily improve and

frequently gets worse. He gave an example of an automobile as he stated that if the

best parts of different auto mobiles are gathered in order to combine them to make a

new and improved auto mobile, the result would not be an automobile because the

parts do not fit. The whole idea is that it is basically the way the parts fit together that

determines the performance of a system and not on how they perform taken separately

(Ackoff, 2015). However, this view has not been considered at ABBA Financial Services

as little concentration and practice has been done in relation to systems thinking.

However according to (Mitleton-Kelly, 2001), the idea of complexity does not support

ever-increasing inter-connectivity in an organization. This is because a high connectivity

among departments implies that they would be a high interdependence. According to

(Mitleton-Kelly, 2001) the larger the interdependence among related systems the more

the disturbance of a move or action by any entity on all other related entities. This idea

supports the notion of systems thinking as it suggests that when an entity attempts to

increase its position, this may result in a deteriorating conditions for other entities. This

is probably because the move by the entity may be costly on entities with in the same

system or other related systems.

In the complexity perspective, the principle of co-evolution emphasized by (Mitleton-

Kelly, 2001), suggests that connectivity relates not only to components inside an

organization but also to related organizations in an environment. In this approach, the

adaptive moves of each entity alter the landscapes of its neighbors. According to

(Mitleton-Kelly, 2001), a single entity alters the context of others therefore co-evolution

between teams needs to be facilitated as it involves learning and transfer of information.

The systems thinking approach also applies to this idea of co-evolution in form of the

principle of degree of connectedness which implies that contribution made by one entity

will depend on related individuals. This also applies to ABBA Financial Services where a

contribution by the Finance or Sales department depends on and also has an effect on

the related departments within the same organization or other competitor organizations.

Complex Adaptive Systems: Modeling Complexity

According to (Uhl-Bien et al, 2007) complex adaptive systems are open and

evolutionary aggregates whose components are dynamically interconnected and who

are cooperatively bonded by mutual drive. Complex Adaptive Systems basically consist

of interacting agents that evolve. One guiding principles of complex adaptive systems

are that order is emergent as opposed to predetermined, the system's history is

irreversible, and the system's future is often unpredictable.

In complex adaptive systems, representatives, proceedings, and ideas bump into each

other in an unpredictable way, and alteration arises from this dynamic interactive

process. This is because of this unpredictability, and the fact that complex dynamics

can display sensitivity to small alarms (Lorenz, 1993). According to (Mitleton-Kelly,

2001), a complex system is not simply constituted with a collection of many interacting
parts. Basically, a number of entities are capable of interaction together and create

complex interrelationships, whose details cannot be anticipated. This applies to system

thinking in an organization such as ABBA Financial Services where the interaction of

departments can create complex interrelationships that cannot be predicted hence the

need for emergent strategies. These entities are capable of alteration and development

and can generate new order and consistency and this is one of the keys features that

define complexity (Mitleton-Kelly, 2001).

According to (Mitleton-Kelly, 2001) an individual acting at random can work effectively

with a group or an entire company as they create coherence which is a key significant

feature of complexity. They can create new ways of working, new structures and

different relationships and also change their rules of interaction. Therefore this generally

defines systems thinking which supports the re-design of the organization as a whole in

order to solve a problem.

The Practice Perspective

According to (Jarzabkowski and Spee, 2009) strategy-as-practice is concerned with the

undertaking of strategy. It focuses on issues like who does it, what they do, how they do

it, what they use, and what insinuations this has for determining strategy. Strategy as

practice is defined ‘as a situated, socially proficient activity. According to (Jarzabkowski

and Spee, 2009), strategizing includes the actions, communications and consultations

of several actors and the situated practices that they draw upon in realizing that activity.

Basically, in recent years, they have been changes in strategic thinking and this has

affected the process of strategic management. As stated by (Stacey, 2011), a view of

systems thinking was developed and focuses on understanding organizations or

systems as a whole formed by the interaction of its parts. However, according to

(Ackoff, 2006), not many organizations have adopted the notion of systems thinking.

Through observation at ABBA Financial services, it is also clear that the idea of systems

thinking has been adopted on a lesser extent. The main reasons for lack of adoption

expressed by (Ackoff, 2006) being natural resistance to change and that most

organizations are afraid of making mistakes in their quest to practice systems thinking.

According to (Ackoff, 2015), once adopted, systems thinking promotes the success of

an organization and can be a driving force in strategic thinking and management.

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