Essay by: Mike Shesterkin, Exec. Director
Last week, we covered how it is a business fits the definition of a system and how notions of interconnectedness and emergent properties are important to grasping the business as a system. These ideas are foundational to seeing the business in terms of how it fits within the Earth system itself, and why it is the triple bottom line of people, planet, and profit value creation transcends the narrow-minded “theory of shareholder primacy”.
This week we’ll take up two topics: the notion of emergent properties, and at a more practicable level, modeling the business as a system.
Although it has roots that go back to the ancients, emergence science is still a relatively new branch of knowledge; this is because reductionism – the belief that breaking things down to their component level and then understanding how the components fit together will eventually lead to a deeper understanding of how the “machine works” – has been the science’s dominant framework. Foundational to systems thinking is looking at the whole and focusing how things interact with each other. Taking a systems-level approach to understanding things leads to the concept of emergence, which – in simplest terms – is the idea that the sum of the parts is greater than the whole. This leads us to the concept of the emergent property.
To illustrate an emergent property, consider water, which is comprised of two atoms of hydrogen and one of oxygen. Oxygen and hydrogen are gases at room temperature, yet when they “come together”, we get water, which is a very unique liquid at room temperature. Water’s nature is an emergent property. The topic of emergent properties is complex and we need not go much further – at least at this point – in covering it. Suffice to say, a characteristic of systems is emergent properties, and if a business is a system, it, too, has emergent properties. The emergent properties of the business ought to be of concern to the business leader, because they have effects on the whole of the Earth system (i.e., in social, environmental, and economic dimensions).
We’ll take-up emergent properties of the business in a later article. At this point, we’ll turn to a tool that will help us see a bit more clearly how the group of items that make up the business come together to form a system.
I have a quality management systems background, which is the term used to describe the framework within which the business’s management functions. The term comes from the International Standards Organization (ISO), which has a long history of producing standards that are designed to ensure products and services meet customer expectations.
As part of my quality systems management apprenticeship – many years ago, when Detroit’s automobile manufacturers were being forced to play catch-up with the likes of Toyota – I was introduced to the thought leadership of Dr. W. Edwards Deming. Deming’s thinking as a business consultant is seminal, yet remains largely overlooked to this day, despite the more than seventy years since he hit the scene. Deming understood the notion of the business as a system, and in 1950, came-up with this simple, “back of the napkin” model.
(Image: U. (2020, July 28). The W. Edwards Deming Institute. Retrieved November 11, 2020, from https://deming.org/)
Deming’s system map is the foundation on which all of quality management systems thinking is built. It also serves as the “stepping-off” point for wrestling with the ways in which the business affects society (e.g., what effects do the goods or services have on the customer, employees and suppliers, etc.?), the environment (e.g., what effect do products, services and so forth have on the environment, etc.?) and the economy (e.g., how well is the business meeting customer expectations and thereby justifying the price charged for its products or services, etc.?).
Perhaps the most important aspect of Deming’s vision is this: Understanding the business as a system, and all of what this implies, is the responsibility of the business’s leadership. Although everyone involved with the business (e.g., employees, suppliers, community, ecosystem, etc.) provides input in the form of data, which needs to be processed into knowledge and wisdom, it is the primary purpose of business leadership to apply what is known and understood.
For far too long, business leadership has simply looked to the single bottom line of profits to measure and assess – gain knowledge – about the business’s performance. This way of thinking is counter to what Deming understood nearly 100 years ago, and it remains so today.
Mapping the business, as a system, is the starting point for gaining knowledge about the business’s performance in the triple bottom line realm. In this sense, the business leader will think of the business as a system, one that fits within and must harmonize with the Earth system. In later articles, we’ll look at this tool – the system map – and consider ways in which it can be applied to assessing the business’s triple bottom line performance.