Updated: Feb 19, 2021
System thinking looks at the whole system, its parts, transforming functions, and outcomes, i.e., holistically. The system is the sum of its interconnected parts. If the systems’ components are not maintained and updated, they become outdated, worn, and eventually irrelevant as technologies advance. System thinking is the foundation for understanding how to create business value. As a people leader, it is your role to understand the system and how those you lead fit into it and interact with each other. System thinking empowers leaders to see the whole picture and make better decisions. There are two major types of organizational system thinking; open and closed.
Open-system thinkers are aware of what’s happening around them. Their eyes are wide open to the changes that take place in the surrounding business environment and react to changes. Closed-system thinkers are the opposite. They function in bubbles, closed off from outside considerations and influences, and therefore see no need to change and are not prepared for change.
In his classic management book, “Images of Organizations,” Gareth Morgan, describes types of organizations through metaphors. Several of the metaphors he uses include “corporate blindness, organizational psychic prisons, and instruments of domination.”  Corporate blindness and psychic (mental) prisons result when a company thinks of itself as a closed system. Closed systems do not consider changes in the business environment around them. We can see this effect in the manufacturing industry in America. While other nations adopted TQM, Six Sigma, and customer-centric, continuous-improvement methodologies, many industries ignored the threat of global competition. Closed systems do not welcome input from outside resources.
Many closed-system thinkers develop a “we know it all” attitude, and therefore do not consult those who are “lower in the ranks” or external expert resources. Closed systems produce a corporate culture and way of thinking that does not embrace the freedom of thought or novel ideas. Phrases such as “we’ve always done it this way” and “don’t rock the boat” are typical of companies that have created psychic prisons. Mental prisons result when leaders discourage employees from being creative and looking outside the status quo for ideas. Workers and mid-level leaders become afraid to offer their opinions. Management views creativity and new ideas as a challenge to their authority, resulting in employees feeling at risk when sharing suggestions for change. When this happens, corporations and leaders can become as Morgan calls them “instruments of domination.” Open-system thinking helps prevent corporate blindness, corporate psychic prisons, and organizational leaders from becoming instruments of domination.
As a part of the next phase in management evolution, the differences between those who lead using closed-system versus open-system methods will become blatantly clear. The more mature you grow as a leader, the more you will view the workplace and organizations as systems. Every aspect of organizational life and business process intertwine with one another. They create a network of systems or a meta-system. A change in one system will have a reactive change in another. Organizations are so much more than groups of people who complete procedures to create value from inputs and outputs. They are more than profit-making mechanisms. Corporations consist of living beings, with feelings and needs; each person has a unique reality and experiences at work. As a leader, your role is to guide them, individually, as teams, and in divisions, using your distinctive skills.
When I originally wrote this, who knew that COVID-19 would bring such a delineation to leaders and companies who had either open or closed system thinking? IT has never been more visible than in today's marketplace. We truly live and work in a VUCA World.
For More information on Gartner's article on Business Ecosystems Click Here