Systems thinking—still in short supply

By Hans Norden
Special to Slightly East of New

I’m observing how there is, at least within management education, a dichotomy between two paradigms; one that builds decisions on the belief that money is the highest value (see Small is Beautiful by Fritz Schumacher) and another that builds decisions on systems thinking, or quality; improving the capability of a system. It’s interesting how Boyd described Orientation as the Schwerpunkt of his thinking; the paradigm through which to observe one’s environment, including new and unforeseen circumstances as they unfold.

It seems to me that people have a hard time even opening their minds to beliefs that are in conflict with their mental programming; they even reject the idea of just trying it on for size, so to speak. It was an intelligent investment banker who explained to me why Deming was not widely used, not because his ideas were too complicated but because people simply do not believe that they are true!!!??? They experience a ‘short-between-the-ears’ when their Orientation fails to make sense out of their Observation of Deming’s System of Profound Knowledge. Subsequently, their lack of Fingerspitzengefühl suppresses their curiosity. (After Chet’s presentation, why was there neither a single question nor any opposition? In other words, a dialogue in which they engage the messenger.)

Therefore, it is not surprising to read a description by Janis and Mann1 of a common pattern by which decision makers react to new and unforeseen circumstances. Convinced that trying more and better of the same proven methods must work, they will work “smarter not harder,” even do more with less, until it is too late to try anything else.

Robert M. Pirsig writes in his epic book Zen and the Art of Motorcycle Maintenance that “Quality is the goal at which methodology is aimed”. He also explains how quality is different because people have different perceptions of what quality is. Therefore, what one believes to be the most valid method on which to construct a decision (= Orientation) is of vital importance. 

Now take a look at all the ‘leadership’ stuff out there, completely devoid of any appreciation for the system or, I guess what Boyd would have called, the Force. Even though no one questions the importance of investing in the vehicle for a F-1 race or NASCAR, it has been best practice to erode the capability of the “Vehicle for Business” with operational efficiency measures in order to cut cost. Everything must make financial sense so, screw the vehicle’s basic principles (= Orientation) on which the vehicle’s capability is based. 

Deming was known for saying that the most important numbers are unknown and unknowable, referring to the incurrence of waste, re-work, eroding profit margins, warranty claims and unhappy customers. Eventually, those numbers will make their way into the financials, and analytical minds are ill-equipped to deduce a cause and effect relationship between newly adopted operational efficiency measures that are eroding the vehicle’s capability, and higher production cost. So, they decide to do more and better of the same!?

A recent report by IBM found that execs from all over the world are perplexed by complexity and events. No wonder that they are puzzled by events when they don’t understand how a business functions as a singular, unique, integrated and open system. Interestingly enough, those same executives in the IBM study concluded that the antidote to complexity and events had to be found in creativity!? But, creativity without appreciation … isn’t that called “trial and error”? 

Management education is obsessed with analysis at the expense of synthesis, to the extent where people get confused when confronted with multiple and sometimes conflicting ideas/principles. Executives are equally obsessed with the possession of deep-domain expertise by their current/future CEO: Deeper deep-domain expertise is regarded as more desirable, despite the fact that a chief executive assumes ultimate responsibility for the entire business (value chain), which requires more of a generalist than a specialist. This reminds me that Boyd recognized two kinds of people; those that can build snowmobiles and those that cannot. 

In observing my environment, I notice that quality household appliances, cars, city busses, etc. are all European brands. Which paradigm do they embrace on the other side of the pond? Money (status quo) or quality (Development of a business system’s capability = Evolution)? Is it possible that (some major) US brands are unwilling to satisfy customers’ specific needs? Is the rationale for mergers and acquisitions to take away choice whereby they can pass on the high cost of their under-developed capability to buyers? Why do US executives decide to use retained profits for buying back their own shares instead of developing their business’ production capability? 

1)Decision Making: A Psychological Analysis of Conflict, Choice, and Commitment by Irving L. Janis and Leon Mann

Hans Norden is principal and owner of Anticipated Outcome and author of of the forthcoming book The CEO Adventure, How to Differentiate Yourself from Others with the Same Know-How.  He was the organizer of the Boyd for Business and Innovation conference in San Diego in February 2014.

5 thoughts on “Systems thinking—still in short supply

  1. Oh, boy! I guess I would comment back to front. Let’s start with the Europeans. Most European manufacturing companies are run by engineers and operations people. Finance is considered a compliance and controlling function and, other than the treasury aspect (lining up bank loans and hedging currency), is of no strategic interest and really does not have a seat at the decision making table. This helps. Europeans generally and Germans specifically, generally believe that if I have the most interesting product, with the coolest level of Technik, my product will probably be successful. They make their decisions accordingly. How different the American “can I milk one more generation of product out my existing capital equipment” mentality one sees so often in the US. It is a product driven outlook versus a minimum investment outlook. One of the most interesting German companies, Vorwerk, makes the best vacuum cleaners and blenders in the world and do not even advertise or have a huge sales network. Everything is strictly word of mouth. But ask any German who knows anything about cooking what a “Thermomix” is, and they will be able to tell you immediately what it is and how great it is. Their finance department is laughable tiny. One other thing is that most of the German executives I know are dedicated to their company and to the employees. There is much less of the cowboy/mercenary mentality that one sees in US or British “hired guns” who infest the face of our industries. These guys are usually after feathering their own nests and couldn’t really give a toss about the companies they run.

    Quality is important. It Is NOT important because it is some altruistic goal that we want to aspire to, like a state of grace or some loony concept of industrial redemption. No, quality is important because it is efficient. Quality is the absence of unplanned activities. Quality means machines do not go down. Quality means that products are not inspected, sorted and reinspected. Quality means we do not have expedited freight, rejections at the customers, third party containments, etc. Quality means efficiency, and this is an aspect of Boyd’s thought that is not given enough attention. Boyd’s earliest important work involves efficiency. Boyd is concerned with the ability to change direction without losing forward momentum. He is concerned with conservation of energy; of not squandering resources but rather of husbanding them and putting all available energy to it best and most efficient use. This is the essence of quality. Do things as planned without extra, resource robbing eddies and whirlpools which redirect resources in a non value adding manner.

    Hans is correct about management thinking being highly resistant to ideas that are incongruous with existing dogma. Hans is also correct in assuming that our current educational system teaches a tool box of tricks and techniques that limit the ability of the tool user to imagine a new tool that is not already in his or her toolbox.

    I sincerely hope that people like Chet are not doomed to failure because what he espouses is so different and so difficult. Thinking is hard. Constantly questioning your understanding and belief systems is hard. Making the commitment to turning information into knowledge and knowledge into wisdom is hard. And so many are so lazy.

    • Dean Lenane is the CEO of Fisher Dynamics Europe in Wuppertal, Germany. He has many years experience as an executive in European companies.

      Our Articles page has his paper and PowerPoint presentation describing his adventures applying Boyd’s ideas in his previous job.

  2. In the wake of the 7Mar83 Time/Spinney articles … usually behind paywall … but (mostly) lives free at the wayback machine,9171,953733,00.html

    one of my co-workers got Spinney’s number and called him up. Chuck told him he really needed to talk to Boyd. I then got con’ed into sponsoring Boyd’s briefings at IBM (and got to spend a lot of time alone with John). In the briefings, John would say that military officers got WW2 training in rigid, top-down command&control structure … which required bloated officer corp (he would also contrast it with the WW2 German military). He observed that many of these former US military officers were then starting to contaminate US corporate culture, with their management style (rigid, top-down command & control and bloated middle management). However about the same time, articles were appearing claiming MBAs were starting to destroy US corporate culture with their myopic attention to quarterly numbers.

    trivia: I was blamed for online computer conferencing (precursor to modern social media) on the internal network (larger than arpanet/internet from just about the beginning until sometime mid-80s) in the late 70s and early 80s. There was a lot of discussion then about the myopic focus on short-term quarterly results.

    Note in the wake of ENRON, the rhetoric in Congress was that Sarbanes-Oxley would prevent future ENRONs and guarantee that executives (and auditors) did jailtime. However there was joke that it was just a large present to the audit industry (for what happened to the industry and major audit houses in the wake of ENRON). Sarbanes-Oxley required that SEC do something, and possibly because even GAO didn’t believe SEC was doing anything, it started doing reports of public company fraudulent financial filings (which also used to drive larger executive bonuses), even showing that the fraudulent filings increased after Sarbanes-Oxley goes into effect (and nobody doing jail time).

    Several articles having pointed out that even when the fraudulent filings have been restated, there is never any recovery of the inflated bonuses.

    trivia: I was asked to participate in a 2004 financial meeting (in Lichtenstein) of European CEOs and corporate presidents that focused on effects of Sarbanes-Oxley spilling over into Europe (Lichtenstein appeared to be hosting these meetings as part of getting off the Treasury’s money laundering black list).

    More recently, there has been a lot written about executives of large US corporations, focused on heavy borrowing for large stock buybacks, that juice the quarterly earnings per outstanding share, driving larger bonuses (exacerbating the short term myopic attention on quarterly numbers).

    pg464/loc9995-10000: IBM was not the born-again growth machine trumpeted by the mob of Wall Street momo traders. It was actually a stock buyback contraption on steroids. During the five years ending in fiscal 2011, the company spent a staggering $67 billion repurchasing its own shares, a figure that was equal to 100 percent of its net income.

    pg465/10014-17: Total shareholder distributions, including dividends, amounted to $82 billion, or 122 percent, of net income over this five-year period. Likewise, during the last five years IBM spent less on capital investment than its depreciation and amortization charges, and also shrank its constant dollar spending for research and development by nearly 2 percent annually.

    The other effect about the cheap money is the rise of private-equity borrowing for LBOs … this has comparison to house flipping (except they can sell for less than they paid and still walk away with boat loads of money)

    There is enormous pressure put on the victim companies to service the extreme debt load (cutting corners and generating revenue every way possible), side-effect is that over half of corporate defaults involve private-equity victim companies. An especially attractive target has been companies doing business with the US government (intensive lobbying last decade has accelerated the rise of government out-sourcing). Articles reference that private-equity victims include those responsible for doing government security clearances (which were just filling out the paper work and not actually doing the background checks).

    Spies like Us
    How Booz Allen Hamilton Swallowed Washington

    somewhat related to associated rise of the “Success of Failure” culture (sometimes serves up blank page on initial click and has to be repeated)

  3. “(After Chet’s presentation, why was there neither a single question nor any opposition? In other words, a dialogue in which they engage the messenger.)”

    Not being a peer of the group watching the presentation at the conference, I am not in a position to answer your question, but I have to wonder if Chet’s presentation was more illuminating than informative to those watching, and their orientations were not such that they could begin a conversation on what they were feeling.

    Take as an example the lie within the statement “All by Ourselves” that Chet called out (59:31). It is not that the leader was absent, which is what “All by Ourselves” suggests. The point of the system is that the leader is implicitly in each and every member of the team.

    In other words, a decentralized (agile) network doesn’t mean that there isn’t a center, it only means that the potential that the center represents is in each node (worker) of the network.

    Take the Kitchen Kanban video as an example. In the 20×20 presentation all the “leaders” who were in command of that project were the chiefs that first created the recipes–all controls were in the form of the self-control of those doing the work.

    It were the cards (Kanban) that gave a common orientation to command those working in the kitchen, and time the constraints that controlled, and kept it Lean.

    To me that is pretty darn illuminating, and hard to comment on, as I didn’t know where to begin.

  4. other trivia … about co-worker from the science center:

    It’s Cool to Be Clever: The Story of Edson C. Hendricks, the Genius Who Invented the Design for the Internet

    Ed was responsible for the internal network which was larger than the ARPANET/INTERNET from just about the beginning until sometime in the mid-80s. I attribute much of this because Ed included a form of gateway and distributed control in every node from the beginning. The ARPANET/INTERENET didn’t get this until the great 1JAN1983 cutover to internetworking protocol. This replaced the tightly controlled, centrally administrated IMPs. At the 1JAN1983 cutover there was approx. 100 IMP network nodes (with approx. 255 connected hosts) at the same time the internal network was rapidly approaching 1000 nodes. Part of the IMP folklore from the early 80s was that the 100 tightly controlled IMPs would periodically totally saturate all the network links with administrative protocol chatter anytime there was any significant event (part of the requirement to cutover to internetworking protocol was that the IMP paradigm couldn’t scale).

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