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How to Apply Systems Thinking in Running and Managing a Business

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Why “Systems Thinking” is the only way to manage modern organizations

The business world is filled with advice on integrating best practices into your organization. In fact, many consultants make their livelihoods off of teaching organizations to copy techniques that have worked in other organizations. In theory, this sounds like a great idea. However, in actual practice, it is often not.

Best practices are undoubtedly useful principles to consider. However, you need to be able to put them into practice without wondering whether they will actually work in a particular organization or situation. This is an inherent problem. Instead of simply utilizing best practices, organizations should strive to take a systems-level approach to analyzing problems and finding solutions.

A Case for Systems Thinking: The 2004 “Dream Team”

USA’s Olympic basketball efforts have been relatively historical in nature. The conventional thinking has been to take the twelve best players in the NBA and put them on a team. Winning naturally ensues, right?

This best practice has not always worked out well, and the 2004 men’s Olympic basketball team is the ideal case study. The team included many future NBA Hall of Famers such as LeBron James, Allen Iverson, Tim Duncan, Dwayne Wade, and Carmelo Anthony. However, the team performed abysmally when they actually got on the court.

Despite having top-tier talent far above their competition, the sum was less than the parts. This team consistently performed poorly throughout the Athens Olympics, going 5–3 (USA basketball was 110–2 all-time before 2004). This included being blown out by Puerto Rico in USA basketball’s worst loss ever.

Why did the team perform so poorly? Several reasons range from poor guard play to a lack of chemistry that was easy to see and even poorly executed strategy on the court. Despite having the top talent, the team did not work well together and could not effectively respond to challenges. They had individual talent but lacked a functioning system.

Best Practices: a Word about Reductionism

When you think about best practices, you view organizations rooted in reductionism. This manner of thinking can originally be traced back to the realm of physics. Reductionism essentially consists of breaking down large systems into smaller parts than using them to understand how the system works.

Keep in mind that reductionism is undoubtedly not without value; it has its place in several areas. For example, it served an important purpose in understanding the functioning of atoms, cells, and business. Furthermore, during the Industrial Revolution, a reductionist approach to business allowed organizations to copy leading processes, enabling them to succeed. However, it is essential to realize that today’s environment is more complex than it used to be.

Today’s organizational environment goes far from assembly lines and linear manufacturing. The modern world is incredibly complex. Within organizations, you have complex interactions happening at the same time and place — interactions that make the environment of Apple different from that of Amazon. Simply copying practices from one to the other ignores many considerations.

This is why a reductionist approach cannot be guaranteed to work in the modern era. In fact, it is likely due to blind luck in situations where it does work. Unfortunately, most consultants still apply a reductionist approach in their assessment of organizations, working to instill best practices from leaders. In many cases, this turns out to be trying to force a square peg into a round hole. The result is often a failure to address a problem or even worsen it.

An Alternative Method: Systems Thinking

Modern organizations are complex systems and require a systems thinking approach. But what does this mean? First, let’s look at an example of health. It is well-known that the human body is highly complex, which is why it is prone to facing issues with health, including mental health. So, for example, when someone is diagnosed with depression, they’re often treated with medication.

Does this treatment work? Sometimes! But not always. The reason is that, with complex systems, a one size fits all solution isn’t the best solution. If someone’s depression is caused solely by an imbalance of specific brain chemicals, a medication that addresses this issue may work. However, depression can be affected by other different factors. Depression can be caused by past trauma, side effects from other medications, drug or alcohol abuse, underlying health issues, and often combinations of multiple factors.

This is why depression remains a problem. It is a complex situation that requires careful analysis to find the optimal solution for each individual. The same applies to organizations.

Four organizations facing the same problem may have four completely different causes, indicating four different solutions. For example, a lack of innovation in the market may result from poor leadership, lack of talent, internal conflicts, ineffective use of data, poor communication, etc. Understanding the problem requires looking holistically at the organization. It requires systems thinking.

A Key Question: Is It a Complex or a Linear System?

A critical question that should be asked first when experiencing a problem is whether the system is complex or linear. Linear systems are governed by independent behavior and can have relatively predictable outcomes. Many processes are linear systems; they include clear inputs and outputs. As a result, problems can usually be isolated by examination and can be easily modeled and understood.

In contrast, a complex system has many components that often interact with one another. This makes it incredibly difficult to model. Furthermore, it is impossible to separate the parts from the whole due to these interactions. Therefore, you must have a holistic approach to problem-solving. Examples of complex systems include an ecosystem, the human brain, organizational climate, and communication.

Problem-Solving in Complex Systems

Although it may seem intimidating to problem-solve in a complex system, in truth, it is a complex process that is simply applying best practices often fails. Navigating problems in complex systems requires zooming out and viewing the systems holistically. This will help you understand how all the interrelations serve to influence the system.

Fortunately, there are many ways to problem-solve in complex systems. You may need to implement feedback loops, experimental processes, agile problem-solving methods, etc. You may also have to acquire deeper insight and analysis to find an optimal solution.

Best practices work well with linear systems but typically fail with complex ones. Unfortunately, this is a lesson that many businesses have yet to learn because it leads them to waste too much time and money on problem-solving attempts that are doomed to fail. What is truly needed in the modern business environment is a holistic systems thinking approach.


Amissah, M., Gannon, T., & Monat, J. (2020). What is Systems Thinking? Expert Perspectives from the WPI Systems Thinking Colloquium of 2 October 2019. Systems8(1), 6.

Grohs, J. R., Kirk, G. R., Soledad, M. M., & Knight, D. B. (2018). Assessing systems thinking: A tool to measure complex reasoning through ill-structured problems. Thinking Skills and Creativity28, 110–130.

Lundstedt, S. (1972). Consequences of Reductionism in Organization Theory. Public Administration Review32(4), 328.

Maisonet, E. (2017, September 5). The Miseducation of the 2004 U.S. Men’s Olympic Basketball Team. Bleacher Report.

Penn, E., & Tracy, D. K. (2012). The drugs don’t work? antidepressants and the current and future pharmacological management of depression. Therapeutic Advances in Psychopharmacology2(5), 179–188.

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