Product #52

Product #52

Subtitle: Systems thinking, and more.


Thinking in Systems · Donella Meadows · 2008

The most talented people I work with are intuitive systems thinkers. They are disproportionately effective because they have the ability to see the big picture and identify high-leverage intervention points.

Key Highlights.

A system is a set of elements and interconnections organised together with a function or purpose. Systems are more than the sum of their parts, as even simple systems can produce complex behaviours. Non-biological systems, for example, can exhibit attributes like adaptability, goal-seeking tendencies, and self-preservation.

Flows of information (or physical elements) shape system behaviour. 'Stocks and Flows' help us understand behaviour over time. Stocks are accumulated quantities within a system; they are altered by flows and are determined by the balance of inflows and outflows. Stocks provide stability within systems, absorbing sudden changes to inflows/outflows.

Feedback loops occur when a change in a stock triggers adjustments in its inflows or outflows, altering the stock itself. Stabilising loops function to maintain a system within a desired range, ensuring stability and preventing significant changes. Runaway loops amplify change, leading to either exponential growth or runaway collapse. They work by enhancing the existing direction of change. It is possible for dominance to shift between two forces, which can cause dramatic changes in the stock (e.g., birth and death rates).

It is important to note that systems models are not meant for precise predictions. Instead, they are used to explore different possibilities and "what if" scenarios to understand how the system might behave under various conditions. Systems with similar underlying feedback structures will exhibit similar behaviours.

Delays can cause oscillations of over and under correction. Understanding the nature and length of delays is essential for comprehending the system's dynamics.

Nonrenewable resources are subject to depletion dynamics. They are stock-limited, and the stock can be extracted at any rate (limited by extraction capital). In contrast, renewable resources (e.g., fish) are flow-limited, not stock-limited. Renewable resources can provide indefinitely, but only up to their natural regeneration rate. Overshoot is possible, damaging the resource's ability to replenish itself, leading to decline or even collapse. There are three possible outcomes: sustainable equilibrium, oscillation, or collapse.

Promoting resilience, self-organisation, and hierarchy can enhance a system's long-term functionality. Resilience refers to a system's ability to recover and persist in a changing environment. Self-organisation is the system's capacity to generate complexity and create new structures from within. Hierarchy is a common organisational structure in systems, often seen in nested subsystems like cells → tissues → organs. Hierarchies contribute to stability, efficient information flow, and allow subsystems to thrive while serving the larger system.

Systems can surprise us in several ways. First, we tend to simplify complex systems by attributing their behaviour to individual events, neglecting the holistic view. Second, our thinking tends to be linear, whereas many systems exhibit non-linear dynamics. Third, the boundaries we set for systems are arbitrary and depend on our perspective. Fourth, a system's growth is contingent upon identifying the most limiting resource, a concept known as Liebig's Law of the Minimum. Fifth, delays in the stocks and flows within a system can lead to inaccuracies and dynamic complexities. Lastly, we often make decisions based on limited information, a principle known as Bounded Rationality.

Various traps and opportunities exist within systems. Policy Resistance occurs when actors pull a system stock towards differing goals, creating resistance. The Tragedy of the Commons is a scenario where shared resources are abused as everyone benefits from their use but shares the cost. The principle of Success to the Successful creates a perpetual loop where winners are rewarded with the means to win again. The trap of Shifting the Burden to the Intervenor happens when quick fixes become addictive and mask deeper issues. Lastly, Rule Beating involves distorting the system to appear to obey rules or achieve goals.

When considering places to intervene in a system, it is helpful to rank them from least to most effective:

  1. Changing numbers (constants and parameters)
  2. Changing buffer sizes (stocks relative to flows)
  3. Modifying stock-and-flow structures
  4. Addressing information delays
  5. Strengthening balancing feedback loops
  6. Managing reinforcing feedback loops
  7. Improving information flows and access
  8. Adjusting rules, incentives, and constraints
  9. Allowing self-organisation
  10. Redefining goals
  11. Shifting paradigms and beliefs
  12. Transcending paradigms and staying flexible

Systems thinking teaches us its own limitations. Self-organising, non-linear feedback systems are unpredictable and hard to control. We can only understand them at a surface level; we can't use that understanding to predict the future.

To effectively work with systems, it is essential to observe a system's behaviour over time before intervening. Making mental models explicit helps confront assumptions. Ensure the information you act on is accurate, and be aware of your bias to focus on parts of the system that can be easily measured. Optimise for the whole system, not just parts or subsystems. Where possible, foster 'intrinsic responsibility' to hold decision-makers accountable. Finally, take an interdisciplinary approach and follow the system wherever it leads.

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Pioneer Advantage: Marketing Logic or Marketing Legend? Peter N.Golder and Gerard J. Tellis. 1993

Several studies have shown that pioneers have long-lived market share advantages and are likely to be market leaders in their product categories. However, that research has potential limitations: the reliance on a few established databases, the exclusion of nonsurvivors, and the use of single-informant self-reports for data collection.

Marketing legend. Contrary to popular belief, being the first company to enter a market doesn't guarantee enduring success. Pioneering advantages such as higher market share, brand recognition, and customer loyalty may not result from timing but from superior marketing and strategic execution. Other factors like technology, brand appeal, or positioning could allow later market entrants to overtake pioneers.

Research involving around 500 brands across 50 product categories revealed that pioneers average only about a 10% market share, significantly lower than previously reported. Nearly half of market leaders were not pioneers, and a pioneer's market share advantages tend to diminish over time. These findings suggest that while a pioneer advantage exists, it may be less significant and less permanent than previously assumed.

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Book Highlights

In the conceptual phase of brand development, it was important to go broad and big, and not worry about every detail. But when we started applying the concepts, they had to be refined, so they felt appropriate for the new environment they occupied. The focus shifted from an open exploration to refinement and consistency. Alla Kholmatova · Design Systems
A sudden change in the competitive landscape could signal a need to adjust your positioning. April Dunford · Obviously Awesome
Stockdale Paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, exercise the discipline to confront the most brutal facts of your current reality. Jim Collins · Turning the Flywheel

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“In the long-run, prioritization beats efficiency.” James Clear
It's more advantageous to structure decisions to be easily reversible than to take too much time trying to make the perfect choice. Shane Parish

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