Thinking in systems
At 18, with my transition to college life, I demanded a regular flow of pocket money from my mother, the family’s matriarch. She refused without blinking an eye. Instead, she gave me a job to look after two parcels of land that belonged to the family- A coconut farm and a tract of paddy field! She demanded that I take care of the land, manage people and crops, and keep the profits for pocket money. This was my first lesson in management.
With the help of my caretaker-Soman, I quickly realized that I wouldn’t be able to manage the farm effectively if I started treating it as an isolated private entity. The farm was part of the larger ecosystem of farms with five neighbors. It had its rhythm when it came to the type of crop used, which dictates the kind of pests it attracts, influencing the nature of the pesticide used. The circulation of crops affects the fertility of the soil, and everyone should follow this rhythm to manage the balance of the ecosystem. Water flows from one end of the terrain, and each must share water with the other; blocking or hoarding can be disastrous. Planting, pest control, and harvest must happen uniformly to derive optimum benefits. One cant’ decide on labor prices or market prices for the crop in isolation. Appreciating this delicate balance of relationships between the various parts and seeing the linkages was necessary to manage the farm. A new practice to be introduced must be thought systemically and needed the buy-in of all the five neighbors. The inhabitants of this ecosystem were like musicians in a jazz group, improvising together. I had to think in ecosystems to make my pocket money!
Later, when I started working in organizations, systems thinking was not the norm. The dominant thought is to isolate parts and maximize effectiveness. We see this manifesting in silo cultures. If there is a problem, break down the components, isolate the one causing the issue, and fix it. With agility at a premium, a quick fix gets celebrated until the problem starts manifesting in another part of the system.
The interrelations between the parts are rarely explored as it takes time and can expose the complexity of the problem. Also, it can’t answer the favorite query of decision-makers– “what is the one thing that can fix this problem?”
In early 2000, we were working for a tea conglomerate. The problem at hand was that the brand was losing its market share. This decline happened over the last nine months, and the team found a correlation for this loss in market share with a new price-player entering the market. The conclusion was people are shifting for a better deal as consumers can’t make out the delicate nuances that differentiate the quality of teas. The problem got isolated, and the plan was to launch a new price-fighter brand to counter the competition. They asked for our help in launching this new brand and deciding on the portfolio’s brand architecture.
When using a systems approach to solve a problem, you think about relationships, connectedness, and context. The first aspect you explore is the relationships of all parts of the organization to the problem. The second is to understand the market and consumer context leading to this challenge. Through this process, you move from observing events or data, identifying behavior patterns over time, and surfacing the underlying structures that drive those events and practices. Often this exploration is as complex and nonlinear as the problem.
After listening to the team’s view, we ventured into the real world of consumers to hear them out. We met all kinds of people, from frequent users of our brand, competition users, and lapsed users of our brand from various life stages and geographies. We heard many perspectives from consumers about the reason for shifting the brand- attractive pricing, exciting offers, etc. But we listened to a consistent story from the frequent users of our brand whom we call the loyalist – these are customers who regularly buy this brand, have been with the brand for an extended period, love the brand. This familiarity becomes a barrier to shifting.
These customers felt that the quality of the brand has deteriorated in the last 12 months. Instead of using one teaspoon of tea, they have to use one and a half teaspoons to get the same strength and flavor. As we kept hearing this consistently from this group, it was a sign of something here to explore. Internally the team felt that there was no truth to this statement. Nothing has changed in the last 12 months to justify this observation, they felt this was a perception issue, and the team was highly skeptical about it. I remember one of the team members asking, “do you believe that consumers can make the difference between delicate nuances that differentiate teas?
As we couldn’t gather any further data from the marketing team, we started our explorations with other departments, starting with the R&D. Here, we met the head of R&D, an elderly gentleman. He has been with the company for more than two decades. R&D departments have this serene environment conducive for conversations. So, post a sumptuous lunch, we caught him over a cup of tea. Being a tea veteran, he was sure that people could detect variations in quality if they were regular users. He also said you couldn’t get to the truth unless you understand what goes into making good quality tea.
The best quality of teas is hand-picked- the two leaves and the bud plucked from the tip of the tree give you the best flavor and strength. The previous management understood tea and tea cultivation, and they appreciated these nuances. The new leadership of non-tea people has shifted the focus to efficiency and productivity. Naturally, machine plucking is becoming the norm.
The quality of tea also depends on the flushes. The first flush in spring post-winter is the best, followed by the second in summer and then Autumn. The previous management used to stock the first and second flush for the entire year to ensure quality and consistency. Now, however, the cost of inventory was seen as a liability. So they buy tea across seasons.
Thirdly, highly paid tea tasters usually run the show in a tea company. They select the best tea from the auction house. Once you see them as expensive and liability under the assumption that lay consumers can’t appreciate these nuances, you start replacing the best of talent.
And the final stroke is when a brand manager, who is the custodian of the brand often for 2- 3 years, starts diluting the quality by a fraction – This could be on various parameters like brewing time, appearance, infusion of colors, aroma, taste, etc. Which results in increased profitability, performance looks good on books, no deterioration of market share, and finally, the person gets promoted and moves on. The 2nd and 3rd managers do the same micro-changes, and finally, you have a situation where a regular customer can make the difference in quality.
At this moment, the pattern emerged, and the underlying structures that drove it became visible. The philosophy of efficiency drove the company. A belief system that customers can’t differentiate finer nuances incentivized quality dilution. Structures rewarded short-term performance. Fragmentation caused by silo culture didn’t give a holistic picture of the cause and effects. The competition just amplified this existing problem to the customer. This revelation finally reversed the teams’ decisions of launching a new brand to counter the competition; instead, they went ahead in fixing the quality problem. To find a solution that had to address multiple issues.
In a system, all parts are interconnected, and a change in one part affects all others. This way of thinking allows us to see a situation more fully. At the same time, it makes us aware that there are no perfect solutions; the choices you make will impact other parts of the system. It just allows for a conscious trade-off to minimize issues and maximize impact.
Soman – the caretaker of my farm, had explained systems thinking in his simple language. To start with, not to get fooled by what you see, dig deeper, and you will see the underlying patterns and relationships that connect your farm with its parts and with its neighbors. He warned, if you don’t see this connection, you will break it. Gently reminded me with sarcasm not to take hurried decisions, and finally, with a tinge of humor and a prophetic tone, he would say that a good solution solves more than one problem and does not create new ones.
He didn’t know that this was called systems thinking; he understood it as “pure common sense.”