Complexity is everywhere, bringing uncertainty and interdependence. Managing it requires “systems thinking” — expanding your mental model.
We live in a world of change. From the energy sector to the financial markets, things are shifting beneath our feet. NBS is creating a podcast series to share experts’ views on leading positive change in the face of disruption.
In this first episode, MIT experts describe how “systems thinking” can help manage a complicated world. The audio below offers insights in their own words. A summary article follows.
NBS’s podcast series shares experts’ views on leading positive change in the face of disruption. This series is about discussion. We want to hear from you. What changes do you see remaking our world? How is your organization navigating toward the future? What topics should we cover?
Outside of assembling IKEA furniture, few things go according to plan.
Maybe you are developing sustainable packaging. Planning your business’s response to new regulation. Keeping a team motivated.
All these tasks — and many others — have some common elements.
Uncertainty. It’s hard to predict the outcome in advance. For example, will a sustainable packaging introduction succeed?
Interdependence. Many factors — from colleagues’ behaviour to market shifts — affect what happens.
Feedback loops. Often, an outcome will reinforce your effort — either positively or negatively. For example, if a packaging redesign cuts waste and lowers costs, leaders might authorize another, leading to further improvement in a virtuous cycle.
When these elements are present, you know you are living in a complex system. Jason Jay and John Sterman, directors of MIT Sloan’s Sustainability Initiative, have spent years studying systems. They offer advice on how to understand and handle complexity in ways that can create better outcomes.
What Complexity Looks Like
Our actions occur in a larger context. The PROMISE framework shows the many influences on a single company action. It was developed by Sterman, Jay, and their colleague Roberto Rigobon. See Figure 1.
The acronym PROMISE comes from each level of the framework. It shows how people work with each other (Personal/ Relational), in a firm (Organizational), influenced by the Market and other Institutions such as government and NGOs. An even broader set of constraints comes from Society (e.g. potential workers) and the natural Environment (e.g. available resources). Directions of influence work both ways, with each level affecting the others.
Considering these different levels makes for better decisions. “You can always try to optimize things within one level, like trying to make the organization more efficient,” says Jay. “But if I’m not looking at the bigger changes that are needed in markets and institutions, then I’m going to be constantly swimming upstream.”
Both the overall PROMISE framework and each level within it have the qualities of a system: full of uncertainty, interdependencies, and feedback loops.
How to Act on Complexity
Try to keep the full PROMISE framework in mind as you design and implement initiatives at any level. Sterman identifies two common sustainability challenges, each focused on a specific level of the framework. These are (1) process improvements that the firm can do working internally or with a supply chain and (2) larger disruptions that require collaboration across institutions.
Process improvement programs around energy use, operating costs, and risk reduction are common. But cost-cutting pressures still limit gains. Sterman points to his own university, MIT, as an example. In the early 2000s, the engineering lead for MIT’s buildings wanted to clean the university’s steam traps, but didn’t have the budget. He knew that clean steam traps would lower energy use, so he reached out to MIT’s fuel manager to borrow funds from the fuel budget. Energy use fell immediately, and the savings allowed payback within just a few months. All this could be done inside the organization.
By contrast, the shift underway in transportation requires collaboration across institutions. Car-sharing and electric and autonomous vehicles are causing a major disruption. “You can’t handle that disruption as an individual auto company,” says Sterman. “You can’t even do it as all the auto companies, because you need to partner withthe energy providers. You need to partner with governments which will regulate these new technologies and provide incentives for people to buy them. Creating the charging infrastructure for an electric fleet requires involvement by all these organizations, as well as the public.”
Three Ways to Manage Complexity
Whether you’re working on process improvement or a major disruption, certain approaches are valuable. These help you manage the uncertainty, feedback loops, and interdependence you’ll encounter.
1. Find out what you’re missing
Complexity means never saying you’re certain. “Be in a state of humility and inquiry, understanding that your view of the situation is never complete,” says Jay. Get additional perspectives, and try to envision alternative futures. “Constantly challenge your own mental models of any problem,” Sterman says.
2. Shape positive feedback loops
When MIT’s facilities staff saved money with cleaner steam traps, they invested the savings into additional energy efficiency efforts. That reinvestment “turned what was a trap into a virtuous cycle of ongoing improvement and still more savings,” says Sterman. “Our study of MIT showed that the virtuous cycles created by reinvestment yield a positive net present value of nearly $100 million.”
Identifying opportunities for reinforcing feedback requires thinking about connections and consequences. “If you weren’t thinking systemically in that situation, you might say, ‘Let’s get this project done. It’ll be great. We’ll save some money,’” says Jay. “You wouldn’t be anticipating two steps ahead of the game. After your initial success, the administration could say, ‘Congratulations, you cut your costs, so now we are cutting your budget.”
3. Connect with others
Change takes cooperation. At MIT, the engineer and fuel manager made the initial deal. But the next conversation was also important, says Jay. The facilities staff told their supervisor “We’re going to need to have the air cover to reinvest the savings so that we can be driving continuous improvement.”
Too often, we don’t think about connecting with people outside our immediate circle. “Changing the system always requires more conversation,” says Jay. He encourages people to build new alliances, even with people viewed as adversaries. Indeed, he is so passionate about this kind of engagement that he has recently published a book, Breaking through Gridlock, on how to connect.
Understand Disruptions by Acting as ‘Car Czar’
Work at the institutional level – on major shifts in areas like transportation and climate change – can benefit from new approaches to learning, says Sterman. He advocates using science-based simulations: interactive models that allow people to explore how different factors influence outcomes
“MIT Sloan has a new simulation that we call ‘Driving the Future’ ,” says Sterman. “You play the role of the ‘car czar’ of the United States. So imagine that you are in charge of all the different actors and could implement any kinds of policies you want. You decide whether to emphasize electrics or plug-in hybrids or biofuels, whether to subsidize the cars, provide tax incentives, build out the charging infrastructure, do extra marketing. And then you get immediate feedback about what might happen, which allows you to improve your strategy.”
Sterman brings leaders from government and the auto and energy industries together to use Driving the Future. They learn together and build a shared understanding of the issues.
A Career’s Worth of Challenges
Sustainability issues are complex. Being effective at sustainability means being a good collaborative leader, coalition builder, and systems thinker, say Jay. Mastering these skills is useful for leadership in any field.
As an illustration: Walmart has started to use its sustainability leadership positions as rotational positions for high potential employees. Jay explains that Walmart seems to recognize that “people serving in sustainability roles get a cross-functional perspective that prepares them for anything.”
Challenges aren’t going away. Sterman notes that even climate change — perhaps our most visible sustainability issue — has causes that people aren’t grappling with. “It’s a symptom of a deeper set of problems, having to do with the growth of our economy, the growth of consumption. If we solve the climate problem, but we don’t solve the desire everybody has to constantly increase their material consumption, then we’re just going to have another crisis.”
Those fundamental issues won’t be easy to solve. “It’s very difficult for companies and students here and for me to to grapple with that,” Sterman says, “because it’s so deeply embedded in our business models and our way of life. Those are moral and value and cultural issues that are I think core to the sustainability conversation going forward.”
The PROMISE framework: See Jason Jay’s 2016 presentation at Sustainable Brands.
Simulations: Visit MIT Sloan’s Learning Edge site to try sustainability and strategy simulations including:
About the Authors
John D. Sterman is the Jay W. Forrester Professor of Management at the MIT Sloan School of Management and a Professor in the MIT Institute for Data, Systems, and Society. He is also the Director of the MIT System Dynamics Group and the MIT Sloan Sustainability Initiative. Sterman’s research centers on improving decision-making in complex systems, including corporate strategy and operations, energy policy, public health, environmental sustainability, and climate change.
Jason Jay is a Senior Lecturer at the MIT Sloan School of Management and Director of the Sustainability Initiative at MIT Sloan. He teaches courses on leadership, strategy, and innovation for sustainable business. Through his writing, teaching, and community building, he empowers business leaders to help their organizations thrive while tackling the tough social and environmental challenges of our time.
 Feedback loops are complicated. A green packaging redesign could lower waste and production costs. But if lower costs result in lower retail prices, total sales may increase, increasing waste in a rebound effect. That feedback effect could undermine the environmental benefits of your initiative.