Systems thinking and strategic thinking PDF

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system thinking is a tidy thinking and observing the causal relation between the operational factors through the working medium...

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According to ……. Systems thinking is an approach to integration that is based on the belief that the component parts of a system will act differently when isolated from the system's environment or other parts of the system. Where as, Strategic management is defined as the process of evaluation, planning, and implementation designed to maintain or improve competitive advantage. The process of evaluation is concerned with assessment of the external and internal environments. Planning involves developing business models, corporate direction, competitive tactics, international strategy, acquisitions, and collaborative action. The implementation phase requires leadership to build the appropriate organizational structure, develop management culture, control the strategic processes, and steer the organization through ethical corporate governance. The outcomes of strategic activity are visible in the change in revenues, market shares, profits, and return on investment for stakeholders. The outcomes create a feedback loop which in turn affects the external and internal environment of the organization. Therefore, this essay seeks to critically appraise the statement “Systems thinking essentially seeks to understand phenomena

as a whole formed by the interaction of parts.” (Stacey, 2011), in relation to the changing ideas of strategic thinking and see how it exists within a company’s strategic management.

In today’s dynamic world, the business environment is quite complex and multi-faceted and this environment has a far-reaching impact. Strategy as a whole has been a unique tool as every organization has systems and strategies in place in order to achieve their goals. Combined, the vision, mission and values statements provide the essential context for the development and execution of strategy. In the 1990s, there were three concepts of strategic thinking: strategy as art, strategy as science, and strategy as a combination of these two approaches. Ohmae, Minzberg, and Stacy considered strategy as an intuitive, creative and divergent process, strategy as art, whereas Andrews, Ansoff, and Porter insisted on the idea that strategy is a convergent, rational, analytical thought process, strategy as science. The concept of strategy as art refers to an eastern model of thinking, based on the work of the right brain. In contrast, another view is western, analytical, and grounded in the

functions of the left-brain. However, in the late 1990s, Wilson, Liedtka, Raimond, Heracleous supported the concept of strategic thinking as a synthesis of the rational and intuitive processes, and regard it as a balanced and the most effective tool of management. Ohmae subscribes to the idea of the priority of intuitive problem solving before the logical one. According to Ohmae, right brain provides the better insight into the problem that analytical reasoning. Ohmae believes in the power of nonlinear thinking that integrates the separate parts of the process into a new effective pattern, produced by the right brain. Ohmae does not deny the use of logic; moreover, he gives a manager some flexibility in applying logic where it seems to be necessary (Ohmae,1982, 13-14). Bates and Dillard Jnr outline the key features of art strategic thinking: intuitive ability, abstract thinking, tolerance for ambiguity and risk, and mental elasticity. They insist on the involvement of the staff members in the whole operation process. Moreover, the staff should obtain such qualities as ability and motivation—all the staff should be trained to think strategically (Bates&Dillard,1993,103). Minzberg does not agree with the idea of the involvement of the staff in the strategic thinking. He believes that effective strategic thinking is possible on condition of distancing from the business process and considering it from the detached perspective. So, the duty of strategic thinking should be performed by CEO and top managers, the people who are able to get a whole view of the business (Minzberg,2008,18). Stacy thinks that every company has a unique strategic situation with different levels of uncertainty that make the managers face everyday challenges. Therefore, the choice of the approach depends on a particular case and allows some alternation of the decision making frameworks. Also, Stacy points at the problems arising from cultural and political conflicts within an organization. In these cases, bringing the corporate atmosphere to harmony may require stepping away from the bitten paths and applying a sophisticated creative approach

similar to art, the one, totally relied on feelings. Stacy's ideas found supporters in the face of Shon, Hammel and other scholars (Minzberg,2008,18). The main proponent of the strategy as science is Michael Porter, who invented a number of tools for strategic management. Porter put forward such analysis frameworks as the value chain, five forces analysis, strategy as an activity system, the diamond model of national competitive advantage. To realistically apply and infuse the science of system thinking in strategic management, Firms are observed to use two perspectives when going through the strategic management process of analysis: planning and implementation. Resource-based view. This perspective suggests that a firm’s unique internal resources are the critical determinant of strategic competitiveness. If a firm’s resources are unique, difficult to imitate, and without close substitutes that competitors can adopt, they will create competitive advantage. When these conditions are maintained over time, the firm’s resources will create the foundations for sustainable long-term competitive advantage. Industrial organization. This is the second perspective, which assumes that the external environment determines the strategic actions a firm can deploy. The corollary of this concept is that a firm should identify and seek to operate in environments that allow strategic activity creating competitiveness and profitability. STRATEGIC MANAGEMENT PROCESS International competition has increased the accessibility that customers have to products around the globe. Intense competition has called for a concerted effort to build strategic action through the process of environmental evaluation, developing a set of strategic plans and implementing them. Phase 1: Strategic evaluation. The strategic management process starts with an in-depth evaluation of the internal organizational environment and the external environment. The evaluation is a component of SWOT analysis (internal strengths and weaknesses, external opportunities and threats). The main components of an internal analysis are the firm’s resources (such as premises, machinery, financial capital, human capital, and distribution networks), which can be combined and developed into capabilities. Examples of capabilities are • developing innovative technology products, • reducing the time to market, • creating more efficient distribution channels and retail outlets, • capturing the consumer’s attention through marketing, and • managing customer relationships for longterm brand loyalty. Capabilities are converted into core competences, which are difficult to imitate and lead to a position of competitive advantage. An internal analysis evaluates how they can be developed to continue creating competitive advantage for the firm. The external macroenvironment consists of variables that are beyond the control of an

organization, but require analysis in order to realign corporate and marketing strategy to shifting business environments. Firms are affected by forces that can be political, economic, social, or technological (summarized in the mnemonic PEST) as well as legal, ecological, demographical, ethical, or regulatory. Phase 2: Planning strategic activity. A comprehensive set of strategic plans would include a roadmap for the firm’s business-level, corporatelevel, competitive, international, collaborative, and acquisition strategies: 1. Business strategy is formulated around the customer perspective and aim for leadership and differentiation in both product and pricing policies. The business-level strategy defines which customer segments and needs will be addressed, and how the customer need will be satisfied. Wiley Encyclopedia of Management, edited by Professor Sir Cary L Cooper. Copyright © 2014 John Wiley & Sons, Ltd. strategic management Business strategy Corporate strategy International strategy Mergers and acquisitions Internal environment Leadership Corporate governance External environment Strategic evaluation Planning strategic activity Implementation of strategic activity Outcome of strategic action: Competitive strategy Collaboration strategy Phase 1 Phase 2 Performance feedback on Phase 3 Phase 4 Management factors Environmental factors Competitiveness, market shares, profits and growth Internal and external environment Strategic plans 2.

Corporate strategy defines how the firm can widen its scale of operation from a single business to a portfolio of businesses, operating in international markets. The strategy helps companies with strategic positioning of their products and brand. 3. Competitive strategy focuses on how the firm will defend and protect its resources, capabilities, and core competences that have created its current competitive advantage. This part of the plan includes reactive strategies that preserve the current core competences, and proactive responses that develop the firm’s competences even further. 4. International strategy defines which products and businesses are assigned to different geographic regions and countries. International corporations are observed to use three types of international strategies: national, global, and transnational. National strategy is created for each country in which the firm operates. The strategy is sensitive to the national context and builds on the knowledge of the local competitive landscape. It defines the products, pricing policies, distribution strategies, and advertising campaigns for each country. National strategies may include country-specific procurement policies, manufacturing, and human resource management. National strategies are instrumental in creating the core competences of a firm which are later aggregated into global and transnational strategies. When a firm operates in several countries, the complexity of handling too many national strategies would lead the firm to introduce a more harmonized global approach. Global strategy determines the standardization of products and processes across strategic management 3 geographic boundaries and harmonizes national strategies into a more homogeneous format. The objective is to reduce the complexity of managing diverse markets, lower

the need for local responsiveness, and gain economies of scale. With a global strategy in place, best practices are easier to replicate across different locations. Global strategies work when the customer needs are similar across the different markets. Another prerequisite for a global strategy to work is the standardization of operational and financial reporting, which provides head office with the tools of analysis and control. Transnational strategy integrates the benefits of both national strategies and global strategies. It aims to emphasize local sensitivity and increasing local responsiveness while standardizing operations in different regions in order to gain from economies of scale. The duality of the strategy makes it difficult to conceptualize and implement. Successful transnational strategies are built around a strong common vision for local orientation and an equally strong operational infrastructure which is common across different countries. It requires a substantial investment in infrastructure and managerial resources. HSBC has embraced the role of “world’s local bank,” which epitomizes the essence of transnational strategy. However, post the recession in 2011 the bank declared it would have to abandon the concept as costs to maintain an intensive local sensitivity was spiraling. Lower profit margins were placing pressure on the firm to focus more on operational efficiency and standardization across all geographic regions. 5.

Collaboration strategy is based on both competition and cooperation between a firm and its competitors, suppliers, distributors, partners, and regulators. The most common motives for firms to engage in collaboration are to develop larger markets, improve industry standards, spread the costs of research and development, and increase consumer awareness for the benefit of all the industry players. In the communications industry, Vodafone, T Mobile, and Orange, among others, cooperate to maintain interconnected telephony platforms, which in turn generate a larger subscriber base for the industry. Cooperation in telecommunications is ubiquitous. It created compatible communications networks, uniform technology standards (such as global system for mobile (GSM), universal mobile telecommunications system (UMTS), and 3G), and facilitated the coordination of complex subscriber billing across networks and borders.

6. Mergers and acquisitions strategies are carried out to improve a firm’s competitive position through two main venues. First, economies of scale and synergies are gained from combining similar operations and overhead costs. Second, core competences are bought in, which are otherwise difficult to replicate. Firms would gain access to new products, new distribution networks, established customer bases, and financial resources. International mergers and acquisitions were dominant strategies in the 1990s. In more recent corporate history, firms are favoring the more flexible and adaptive collaborative strategies over the high cost and commitment of mergers and acquisitions. In international mergers and acquisitions, the inefficient integration and development of the incumbent cultures may cause strategic challenges. During the integration process of the two firms, much attention is given to drawing synergies through cost reduction at the expense of developing new strategies. The leading party in a merger tends to force its managerial culture and mode of operation on the target organization. Managers assume that the methods deployed to run the original organization will function equally well in creating a new strategy involving new corporate partners. The misplaced paradigm often leads to the inefficient distribution of physical resources and tacit capabilities, and eventually leads to strategic drift.

Phase 3: Implementation of strategic activity. It requires two main capabilities: leadership and 4 strategic management corporate governance. Strategic leadership is necessary to communicate the vision of the firm and objectives of the strategic plans (outlined above) to the management level. Leadership captures the cognitive side of management which goes beyond financial performance measurement. It can be the source of motivation, empowerment creativity, and innovation, which often are required to steer firms out of challenging situations. Corporate governance is a firm’s underlying infrastructure that facilitates and controls strategic action. It provides a monitor for ethical behavior and regulatory compliance. Corporate governance determines the relationships among the shareholders, the board of directors, and the company’s management. The traditional mechanisms of corporate governance were the stakeholders, the board of directors, and executive compensation. The triad of control mechanisms has come under criticism and scrutiny. Trends in corporate governance are to include business performance measurement and stakeholder feedback with traditional financial measures of control. Phase 4: Outcomes of strategic activity. These are visible in increases in revenues, market shares, profits, and return on investment for stakeholders. The outcomes create a feedback loop, which in turn affects the external and internal environment of the organization. See also strategic manageme

CONCLUSIONS: In summary, there is an interconnection between systems and strategic thinking. A strategy cannot be set to motion if one doesn’t not have an in-depth knowledge or understanding of the systems in place. It is impossible to have a system without a developing strategy – (Zhu, 2017). We can therefore draw our conclusion that an organization will definitely require both system and strategy for it to be successful amongst its competitors but in order for that success to be achieved, it depends on how their strategies are implemented and also how the systems are interrelated.

TD Canada Trust is one of the Top 10 leading banks in North America and its success stories is attributed to strategies and systems that were and are currently being put in place. Having worked with the organization for over 4 years, we thrive consistently to stand out from our peers by having a distinguished brand which is anchored in our demonstrated business model. This has enabled us to be gain valuable recognitions such as One of Canada's Top 100 Employers for the 12th year in a row, recognition by Forbes as a Best Employer for New Graduates in 2019, most Innovative Digital Bank award in Global Finance's 20th Annual Best Digital Bank Awards and the list goes on. All these wouldn’t have been achieved without deliberate strategy and identifying any gaps or loopholes to reach to the top. For any organization to guarantee a competitive sustainable advantage, systems thinking will remain a principal approach and strategic thinking will always be a powerful tool for strategic management....