Systems are complex to govern, difficult to maximize its potential, extremely difficult to adapt (do the rights things) in terms of innovation and transformation . Most innovation and transformation initiative fail, a large percentage of listed companies over a 30 year period have disappeared. Organizations such as Kodak , Motorola and Nokia from being market leaders have basically disappeared. These organizations are not strangers to innovation yet their innovation or lack of transformation triggered their downfall. The economic system either fail to grow adequately or are in permanent decline or they leverage the economy via toxic and dubious financial mechanism.
This applies to all system: The performance of the system depends on how well the parts fit together, not how well they perform individually and the ‘whole’ system exhibits emergent properties that are not to be found in its parts.
The performance of the system is not the sum of the performance of its parts but rather determined by the efficacy of its parts and specifically the efficacy of the interrelationship of the parts to realize system purpose.
A system is an entity which maintains its existence through the mutual interaction of its parts.
The ‘whole’ of the German economic system is quite different to Italy ‘whole’ system. This applies to a football team, automobile company ect..
In certain cases adaptation effort that generates more system damage or triggers serious side effects impacting system performance; typical example Italy fiscal compact constraints not only reduced output, it increased un-employment and public debt. Why is that? Reality governors fail to effectively govern the system, fail to act upon emergence (consequences) that have serious negative impact on the system.
Purpose of this blog is to provide an overview of systems, problems related to effective system governance, how to govern the system to achieve maximum potential and remain viable and provide pathway for effective adaptation (doing the right things).
A viable system is any system organized in such a way as to meet the demands of surviving in a changing environment
“A system is a set of elements or parts that is coherently organized and interconnected in a pattern or structure that produces a characteristic set of behaviors, often classified as its function or purpose.” (Donella Meadows)
The performance of the system depends on how well the parts fit together, not how well they perform individually. Thus, the best parts do not necessarily make the best whole; they have to fit together. The ‘whole’ system exhibits emergent properties that are not to be found in its parts (sub-systems). System effectiveness and efficiency which in turn influence system performance are attained through the interaction of the sub-systems in pursuit of the purpose of the system in its environment.
A system consists of a interconnected set of elements (sub-systems) that are coherently organized and work in coordination with each other to achieve the desired goal or overall objectives of the whole (purpose) as defined by its governors (managers, leaders) via defined ‘set course’. These elements derive their strength by means of association and influence with other elements whereby the collective contribution of the system is greater aggregate individual elements: this is known as systemic synergy. Systems contain the following elements which form a complex and unified whole:
- Interconnection between elements (physical flow and information)
- Attributes (properties) to both system elements and relationships
- System purpose and sub-systems functions
Systems are everywhere—for example: the R&D department, the human body, F1 racing team, automotive manufacturer, economic and political systems. Ecological systems and human social systems are living systems oriented towards system purpose; human-made systems such as manufacturing plant or Information technology architecture are nonliving systems which are oriented towards system function. Systems can also be made up of sub-systems that that can either have function or purpose.
A sustainable system is any system organized in such a way as to meet the demands of a changing environment and achieve is stated goal in time.
Resilience is the capacity of a system to absorb disturbance and reorganize while undergoing change so as to still retain essentially the same function, structure, identity, and feedbacks. Adaptability is the capacity of actors in a system to influence resilience.
Resilience is not just about doing the right things; but rather the right things to do (of what to what) considering internal and external conditions; system trajectory and stability landscape. Doing the right things does not imply success; they might even trigger side effects that create further damage reducing system performance.
Adaptability is the capacity of the system to influence resilience, restore potential and mange disturbances considering diversity, system leadership, regimes, dynamics balance and scales.
While transformability is the capacity to create a fundamentally new system when ecological, technological, economic, or social (including political) conditions make the existing system untenable (Paradigm Shift or crumbling paradigm).
A system needs to be continuously governed; steered, adapted and transformed in order to be sustainable, survive (viable), grow and achieve its goals.
It is fundamental when undertaking systemic transformation to avoid costly mistakes that can be detrimental to viability and sustainability.
System failure does not stem from cause and effect relationship but from the pathology of the system as a whole. If the individual or their organization is incapable of associating effects with their causes, then learning and adaptation is not possible and both will go on repeating the same error. System governance is a continuous cycle due to systemic external and internal conditions requiring effective adaptation.
According to Doerner (cf Doerner 1992) six classes mistake people are prone to make in coping with and intervening in complex systems:
- Class I: The perception and description of system objective is too narrow. It is imperative to clearly define the system in order to understand the system and its emerging behaviour
- Class II: The situation analysis of a system focuses on quantitative data and static aspects without considering dynamics and causal relationship. Systemic transformation requires thorough system architecture and dynamic analysis
- Class III: Intervention in a complex system irreversibly focuses on single favorite aspect. This can be overcome by means of relevant transparent teams to address problems and adaptation adopting Team Synergy to filter-out bias
- Class IV: Blindness of side effects. This can be overcome by adopting Causal Loop diagrams to identify cause and effect relationship and more important identify emerging patterns of behavior.
- Class V: The intervention is a complex system are first to weak and then too strong. System dynamics modelling can be used to evaluate efficacy of intervention. Systemic cockpit is also fundamental to evaluate systemic systemic state, achievements of its goals and via feedback its efficacy.
- Class VI : The intervention in complex system is dominated by authoritative behavior that overestimates level of understanding of the system. This can be overcome by means of adopting Viable System Model as a governance approach for design and diagnosis furthermore Team Syntegrity tend to diminish authoritative behavior.
The difficulty of System adaptation and governance
Typical example of expecting too much from single person to execute major transformation relates to HP: http://www.forbes.com/sites/frederickallen/2012/03/05/why-great-innovations-fail-its-their-ecosystem/#a2e4aa6b5336. HP Carly Fiorina may be an excellent CEO but it does not imply the CEO has the ability to carry-out major transformation and successfully introduce industry paradigm. Same can be said about Steve Jobs: very successful with iPhone, tablets ect..; but it does not imply that Steve Jobs at Nokia would have made a difference.
Nokia ( https://hbr.org/2011/02/the-real-cause-of-nokias-crisi.html ) further example adaptation failure: in this case adaptation issue was not related to innovation but more related to fact that their whole governance model was based on a crumbling paradigm impacting their resilience. They failed to understand that innovation in a crumbling paradigm can only lead to failures.
Within the European Union specifically Euro member country there are countries with exceptional performance such as Germany while Italy exceptional low performance. Is this caused by the Euro or is it mainly due to poor system governance that limits potential and limited resilience.
Why innovation fails?
“If you had to guess, what percentage of ideas for ground-breaking new products or services would you say are marketplace flops, or just never see the light of day? 50%? 80%? According to Mark Payne, it’s closer to 90%”
Why transformation fails?
The reported failure rate of large-scale change programs has hovered around 70 percent over many years.
Accenture: According to Gartner, “almost 90% of transformation projects miss their mark.”
According to research by McKinsey & Company, about 70% of all changes in all organizations fail.
After almost two decades of intense change from corporate reorganizations, new software systems such as ERP , and quality-improvement projects (six sigma) , the failure rate remains at 70%. Project failure not only has impact on cost but can actually result in major decline.
When changes fail, people often grow cynical impacting motivation and become afraid of their current and future security.