Leading a business is like running a control center. Every switch, gauge, and flashing red light represents decisions, external forces, and a network of human relationships. It’s tempting to jump from crisis to crisis, putting out fires. But without stepping back to see the whole system, leaders risk missing the bigger picture. Problems persist, and root causes remain untouched.
Systems thinking shifts focus from firefighting to foresight. It reveals hidden bottlenecks, delays, and inefficiencies. It helps leaders make smarter decisions by understanding how changes ripple across an organization.
My introduction to systems thinking came when I decided to attend an elective course at university. What I learned about seeing the bigger picture and inter-connectedness has shaped my thinking ever since. This mindset has helped me always consider how decisions ripple through organizations over time.
The Core of Systems Thinking
To start thinking in systems, you only need a few key concepts:
- Stocks: Resources that build up or deplete over time, like cash reserves or employee expertise.
- Feedback loops: Reinforcing loops amplify changes (like viral marketing), while balancing loops stabilize systems (like market competition).
- Delays: The time gap between action and result, which often causes overcorrection and instability.
Subsystems function like black boxes. Inputs go in, outputs come out. Leaders don’t always need to understand every detail, but they must recognize how these elements interact.
Why Systems Thinking Matters
Take a simple example: setting a thermostat. You adjust the temperature, but there’s a delay before the room warms up. Without patience, someone, clearly knowing better, cranks the heat to the max, overshoots, and then blasts the AC to compensate. The result? A constant, frustrating cycle, and a perfectly good meeting wasted.
Business decisions work the same way. Leaders often react impulsively without considering how different parts of the system interact over time. Every decision influences others, creating outcomes greater than the sum of their parts.
Think of an ecosystem. Plants, soil, animals, and weather work together in balance. In business, departments, processes, the market, and people interact to shape outcomes. Systems thinking helps leaders anticipate challenges instead of constantly reacting to them.
As John Gall put it in Systemantics, “A complex system that works is invariably found to have evolved from a simple system that worked.” Organizations are never static; they evolve. Without a systems mindset, leaders struggle to keep up.
Reflection Questions:
- Where in your organization do interactions between departments create opportunities or friction?
- Can you identify a success (or failure) that resulted from how different elements worked together?
The Hidden Cost of Ignoring Systems Thinking
Ignoring systems thinking creates costly blind spots. Take the 2008 financial crisis—banks focused on short-term gains available from selling products few understood, ignoring how their risk-taking could ripple across the entire economy. When one piece collapsed, the rest followed.
Or consider a company offshoring customer service to save money. The move seems logical—until a few years later when customer satisfaction plummets, loyalty erodes, and revenue drops. Without a systems perspective, the connection between past decisions and present struggles remains invisible.
Thought-Starters:
- Where does siloed thinking limit growth in your business?
- What unintended consequences have surprised you in the past?
The Business Case for Systems Thinking
Leaders who embrace systems thinking gain a competitive edge. They break down silos, encourage collaboration, and make smarter long-term bets. In The Fifth Discipline, Peter Senge describes this as the foundation of a “learning organization”:
“A learning organization is a place where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.”
Organizations that see the whole picture are also more resilient. They adapt quickly to change because they understand their internal dynamics.
Exercises:
- Think of a recent company decision. How did it affect other areas? Were the consequences expected?
- Where in your organization could small changes create big improvements?
Real-World Example: The Great Toilet Paper Shortage
At the start of the COVID-19 pandemic, store shelves emptied overnight. The great toilet paper panic had begun.
One person with a cart full of toilet paper signaled to others that they should do the same. Panic buying triggered a reinforcing feedback loop—scarcity led to even more demand, which led to more scarcity. The media amplified the message, worsening the cycle.
But the real issue wasn’t supply—it was misalignment. A significant portion of toilet paper production was meant for offices, schools, and businesses, where the paper is noticeably different from the triple-layered extra-soft kind in grocery stores. Manufacturers couldn’t easily switch production and re-route their existing industrial inventory. The system wasn’t broken; it wasn’t designed for a sudden shift in demand.
This is systems thinking in action. The shortage wasn’t about running out of toilet paper; it was about failing to adjust to a sudden shock to the system resulting in a shift in distribution patterns.
How to Start Thinking in Systems
- Ask better questions. What are the ripple effects of today’s decisions? What unseen forces are shaping outcomes?
- Map the system. Tools like the Business Model Canvas help visualize connections, even if they don’t capture time delays.
- Encourage cross-functional discussions. Great solutions emerge when teams understand the bigger picture.
Actions to Try:
- Map one key business process. What dependencies emerge?
- Use the Business Model Canvas to analyze decisions. What gaps do you find?
Final Thoughts: Think Bigger, Lead Smarter
Systems thinking isn’t just a framework—it’s a mindset shift. It moves leaders from reactionary decision-making to thoughtful strategy. It builds organizations that adapt, innovate, and thrive.
The best part? You don’t need to be an executive to apply it. Start today. Look at your work through a systems lens. Ask better questions. See the bigger picture.
Want to Learn More?
Start with these books:
- Thinking in Systems: A Primer by Donella Meadows
- The Fifth Discipline by Peter Senge