Seeing your business as a system can help make you a better strategist and a more insightful leader. Here are five ways to get started.
I wasn’t always a businessperson. My training was in architecture. While this didn’t put me directly on the path of becoming an entrepreneur and an Inc 500 CEO, it has served me well in many ways. The one thing my architecture training has taught me which I’ve been able to leverage as a business leader is my ability to be a systems thinker.
Every business is a system, a collection of elements and forces that interact with each other to produce a given set of results. People implement processes that produce products and services, which create value. That value creates money, which allows you to hire more people. Change one element and you impact all the others.
Systems thinking seeks to understand the subtle and long-term impact of how one change can all the elements over time. And being a good systems thinker can help make you a better strategist and a more insightful leader. Here are five ways it can improve your ability to create and deliver results in your business.
1. Search for connections
Business is a combination of customers, employees, processes, products, competitors, investors, and many more. Knowing the factors that drive your business results is key. Missing one will mean you’ll miss key elements that can make your business successful and hinder your ability to effectively plan.
When faced with a business problem, start by mapping out the key elements that are in play, then look for how these are connected–how they impact each other. If you want to increase quality with more quality checks, know that your development time will increase, as well as your production costs
2. Understand the cause and effect of decisions in your business
In business, you can increase your prices but that will likely decrease the number of deals you close. However, you may make up for it through the higher profitability of the remaining customers. A good systems thinker understands how these types of decisions can affect multiple areas of the business.When faced with a business problem, build your map and then ask yourself how changes might change the system. Do elements have direct or indirect relationships? Does one factor increase or decrease as another one changes? Is there a time delay? Is the rate of change continuous or varied over a specified range? These types of questions will give you key insights into what might be impacted by the changes your considering.
3. Find feedback loops
These are often situations where two or more elements in your business feed each other. For example, if you develop a great product and people love it, they will tell other people, which will increase the number of customers who will love your product and so on. These positive feedback loops are what you want more of because they will naturally grow and scale the business.
However, you might find reverse loops. Cutting salaries to save money will lead to your best people leaving, which will decrease your ability to deliver, which will lead to unhappy customers, and so on. When you’re business is in trouble, you need to find and correct these vicious cycles.
4. Look for balancing forces
In business, growing sales is a good thing, but without also increasing delivery capacity, you’ll run your business off the rails. And if you don’t hire more people as you grow, you’ll overwork your existing teams and they will likely quit. Business is full of short-term strategies that can lead to long-term problems. And unless you have a good understanding of how your business works as a system and where you need to balance and level the forces at work you’ll run the risk of digging holes and painting yourself into corners.
5. Learn through experiments
The best way to know if you have the right system model for your business is to experiment and measure. If you’re not sure how many customers will stay with you if you raise prices, don’t make the change all at once. Pick 10 percent of your customer base, try it, and see what happens. Once you’re confident, then roll it out en masse.
If you get your predicted results, then you probably have a fairly good model. If you don’t, then you’re missing some factor that’s at play or interaction that’s changing the system. Take measurements and observe each component so see what you’re missing.
Whether you’re trying to increase sales, hire more or better people, enter new markets, or bring on new investors, having a good understanding of your business as a system will help you with both developing and correcting your strategy and empower you to achieve the success you want.