Bill Bryan

The Value Creation Model

At the basis of all growth is a reinforcing feedback loop, be it in nature, business or any social system. The value creation model is a visualisation of that reinforcing loop and of how a system grows by creating value for the environment from which it derives its right to exist. The core of the model is formed by the distinctive competences—those that enable the organisation to produce goods or services. The value creation model is a sound way to define what differentiates you from others—your identity and your capabilities—but that can only be done when placed meaningfully in the context in which you operate. That context is determined in the first place by the relationship with the client. If you can choose your clients in a free market, you are operating in a market organisation. However, if you are limited to only one organisation (or very few) and are bound to follow their instructions, you are working in a task organisation. In the second place the context is determined by the ownership of the output. If the organisation is the owner of the output you are working in a product output organisation. If the client is the owner of the output, you are working in a capacity output organisation. These four types have big consequences for your value creation model.

Systemic Pitfalls in Cooperation; The Pitfalls from a Bird’s Eye View

“It is not enough to be busy; so are the ants. The question is: What are we busy about?’ Don’t confuse activity with results. There is no reason to do a good job with something you shouldn’t do in the first place.” (Henri Thoreau). In this chapter all previous archetypes are summarised on one pagers and all of them on one A4.

Pitfalls of Not Looking Far Enough Around You

When confronted with a difficult or complex problem, we have a strong tendency to start with the things we can oversee and understand easily and to straighten those out. If we only concentrate on our immediate periphery, we sweep our own doorstep clean. But the dirt we sweep away may well end up on somebody else’s doorstep, who will in turn sweep it back to us. The solution is to find out where the dangers come from so that we can solve them at the root. This means that in analysing the situation we need to look at the surrounding organisations and societal structures in which it is embedded. The archetype Escalation occurs when two competitors do not want/dare to be outdone by the other. If one thinks he is lagging behind, he will put in an extra effort, but their relative positions remain unchanged in spite of a great deal of effort and resources. The central theme of success to the successful is that investment decisions with a choice between several options, the option that has already proven itself will be chosen. That creates a self-fulfilling prophesy, because projects that get no funding will fail. In other words: success breeds success.

Pitfalls of a Combination of Short Time Horizon, Not Looking Far Enough Around You and Fear of Facing Reality

This combination of limitations is described in the archetypes growth and underinvestment and tragedy of the commons. The central theme of growth and underinvestment is waiting for certainties to emerge, before investing in existing activities. However, if you wait until you have more certainty by carrying out additional analyses or wait for trends to develop; you will miss an opportunity for growth. The archetype tragedy of the commons stands for the situation where a common resource is used and needed by everybody but nobody feels responsible for it. And at the end of the day the resource is depleted. The typical reaction would be: “Why should I refrain if others don’t do it either?”

Impatient Managers Create Chaos

There’s frequently a time delay between an action and the result. And because of that time delay we often fail to see the effect of our actions. The longer the time delay between the action and the result, the more significant the overshoot effect. If you judge the delays incorrectly and intervene too quickly, the system may oscillate around the desired value. In extreme cases the whole system may crash, because boundary conditions have been exceeded. One of the best leverages to improve performance of a system is minimising the delay between action and result. It is important to choose a steering variable as close as possible to the action, and which you are sure is representative for your target variable. It is not always easy to know what a relevant measurement is. Our attention is always captured by the most obvious phenomena. We tend to look only at the lilies on the surface of the pond. Systems thinking is not a trick or gadget, it’s a way of approaching reality.

The Evolutionary Heritage

The human brain evolved at a time when people lived in small groups of hunter gatherers. We have not yet had the time to adapt our mental hardware (the way our brain is built) and software (the way we use our brain) to an agricultural society, let alone to an industrial global society. Our brain developed in several phases in the course of evolution. The emotional system that we share with most animals (“system 1” in the terminology of Daniel Kahneman) is the older one in evolutionary terms and functions very rapidly. It processes information in parallel (hence the speed) and drives physical responses such as a surge of adrenalin in moments of stress. The neocortex that houses our rationality (“system 2”) is the part that distinguishes us from other animals. It is much younger in evolutionary terms and functions much more slowly; it processes information sequentially. Both systems function within us all the time and we are seldom aware which of the two has the upper hand. Far more often than we think, we make our decisions emotionally and make up a rationalisation afterwards. To manage complex situations, we need to understand our basic shortcomings.

Driving Forces that Generate and Sustain Patterns

The driving forces within an organisation are the collective efforts of all participants to realise the implicit goals of the organisation within the limits of a situation that satisfies our system 1 needs. Implementing changes creates uncertainty that threatens system 1, who’s needs are formed by genetic factors, early childhood experiences and the “tribe” one belongs to. The experienced threat generates the genetic reaction of fight, flight or freeze, the early childhood asks for a strong hierarchy, and the tribe will exclude ‘others’. The rational system 2 should act as a counterweight to the structures and behaviour of the intuitive system 1. But system 2 always faces an uphill battle, because we are often not even aware that we are blindly following our instincts cleverly disguised in notions of “rationality”. To create an environment conducive to the smooth functioning of system 2 we have to create the space and the safety to question the “obvious” that was generated by system 1.

What Is Systems Thinking

Systems thinking is all about realising that there are moments when you have to postpone the doing and start with the thinking. Systems thinking can be illustrated with the metaphor of a lily pond. With a lily, the largest part is hidden under the surface of the water. The beautiful flowers catch our attention and seem to be the only things there. But they can only be there because of an integral system of roots, stems, and nutrients in the water and the soil that makes the lilies grow and surface. Like the lily pond, systems thinking takes the whole context of a situation into account and views it as an interactive system. It looks at the system as it is, it looks over the short-term horizon to identify unintended consequences. Insight into the interactions and relationships between phenomena enables you to intervene more effectively

Two Driving Forces in Depth: Mental Models and Team Learning

Mental models: If you do not understand somebody, or you think they are acting irrationally, you may safely assume that their behaviour is perfectly logical to them but that you have not yet discovered their inner logic; their ‘mental model’. Mental models are the lenses through which we see the world and interpret that reality. Groupthink: In situations of great uncertainty and pressure, individuals start to say what they think the others might think. People will not question whether or not an intervention was well supported with data but will react emotionally. “Will I still belong to the group?” or “What will my department look like in that situation?” Posing critical questions may seem very rational but is often an attack or survival reaction on a subconscious level. People are taken hostage by these emotional or survival reflexes without even realising it.

A Systemic View of Organisations

Looking at organisations from a systems thinking perspective counterbalances our instinctive reactions. Systems thinking sees organisations as living systems in which everything is interrelated. The complexity within a system is built up from just two basic elements: reinforcing and balancing loops.In an unchecked reinforcing loop a process runs out of hand until it passes its system boundaries. In a balancing loop the system returns to its equilibrium after an intervention as if nothing has happened. Combinations of several loops can describe a complex dynamic of counteracting forces, enabling to understand which interventions can change the system.