Day 3 of “7 Days to Systems-Thinking”: Stocks, Flows and Feedback Loops

A link to the complete 7-day series on systems thinking is here …
Systems Thinking 101: The Magic of Systems Thinking

Yesterday, we explored the relationship between the structure and behaviour of systems and some general guidelines for changing elements, connections or relationships in a system. We are beginning to understand how systems work and, as you will see, this is critical to being able to manage them better.

The traditional approach to complex situations and problems, however, is to focus on specific parts of the system in the (false) hope that somehow changing one small part of the system will “fix” the problem. This “reductionist” approach is not all bad though. After all, the reductionist approach inherent in the scientific method has served humanity well – so far, at least.

However, as Peter Senge said in his book The Fifth Discipline, “dividing an elephant in half does not produce two elephants.” As we have already said, systems-thinking encourages us to look at the system as a whole. In the example used by Senge, as Dennis Sherwood succinctly states in Seeing the Forest For the Trees (A Manager’s Guide to Applying Systems-Thinking), this act “results in the transformation of a system that used to work very well indeed into sub-systems that don’t work at all.”

There are some useful tools and concepts that can help us think about and explore whole systems, so that we are better able to understand the nature of the system as a whole. These are: stocks, flows (inflows and outflows) and feedback loops (balancing and reinforcing).

Stocks

A “stock” in a system is a reservoir or store of resources of some kind. Examples of stock could include the water in a reservoir or the number of trees in a forest.

Inflow and Outflow

The Inflow is a flow of information, energy or resource flowing into the stock, whereas the outflow is the information, energy or resources flowing out of the stock.

Importantly, the rate of inflow and outflow will have an overall impact on the size of the stock. Hence, in the example of the forest, if the rate of growth of the trees (the inflow) is less than the rate at which tress are cut down (the outflow), the size of the forest will reduce. So, if the inflows exceeds outflows, the level of the stock will rise. If the outflows exceeds the inflows, the level of stock will fall. If the inflows and outflows are the same, the stock level will not change.

Now, when viewed from a systems-thinking perspective, we are already able to see opportunities for change in all kinds of systems. For example, in an organisation that wants to increase its number of employees it can, of course, simply recruit more people (i.e. increase the inflow). However, it can also reduce the level of staff turnover (i.e. reduce the outflow), thus also retaining more skills, knowledge and experience.

Inflows and Outflows Over Time

As you might appreciate, changing inflows and outflows in this way can take some time to change the system. This can be both a good and a bad thing. It can be a good thing in that the stock itself can act as a buffer when the inflows and outflows are out of balance temporarily. It can be a bad thing in that it can take some time for the size of the stock to increase or decrease to the size we want it to be.

Interestingly, because of the interconnections and interrelationships that hold the system together, when we changes parts of a system, all kinds of other things can happen to bring the system back into balance. Systems-thinking is about seeing the world not simply as a set of transactions, but seeing the world as a series of “feedback” processes.

Feedback

Feedback exists when changes in a stock affect the flows into or out of the same stock. For example, putting money into a saving account will attract interest, which subsequently increases the amount of money in the account. Hence, systems can change in response to this “feedback”.

The term “feedback’ as we commonly understand it today, was actually coined by the systems-thinking movement back in the 1940’s. It is used to today in a wide variety of contexts. Feedback can also include information.

For example, if you drive to work … as you drive, information about your surroundings and your whereabouts in your surrounding will be received through your senses, and this information will subsequently alter your behavior. Hence, you will alter your position in the road slightly to avoid the pothole, or you will swerve to avoid the pedestrian who steps out in front of you.

Have you ever tried to change something in your own behaviour, or perhaps you’ve tried to implement change in an organisation? Whenever we attempt to change a system, very often the system will attempt to revert to its previous state because of feedback, Changing patterns of behaviour – either individually or within an organisation- is difficult for this reason.

There are also different kinds of feedback that might operate at any one time…

Balancing Feedback

Balancing feedback exists when the flow coming back into the system brings the system back into balance. For example, if I forget to eat, my body will tell me that I need to take on board fuel in the form of food … hence, the feedback coming back into the system from a prolonged period of not-eating is hunger, thereby encouraging me to eat and bring my system back into balance.

Reinforcing Feedback

Reinforcing feedback, on the other hand, is rather more interesting and occurs in all kinds of situations. For example, reinforcing feedback can occur in the case of runaway inflation, where an increase in the costs and price of goods increases labour costs, which in turn increases the cost and price of goods.

The presence of reinforcing feedback in a system will quickly lead to exponential growth in the system or will lead to its swift decline and destruction.

If you want to explore this in more detail, there are many more example of the effects of stock, flows and feedback in the excellent “Thinking in Systems: A Primer” by Donella H. Meadows (see one of the Recommended books below, or elsewhere on the Watt Works site).

So, we’ve seen how systems can maintain their stability by making adjustments on feedback, and we’re now able to begin exploring the opportunities that exist for us when we are to see the world through our systems-thinking lenses. We’ve also seen how small changes can produce big effects (particularly when reinforcing feedback loops are present), and so when we are able to view whole systems in this way, as systems-thinker we are more able to be able to focus on the right things to change. As Peter Drucker said, “management is doing things right; leadership is doing the right things”. Systems-thinking, then, helps us to ensure we do the right things as well as do things right. Leadership and systems-thinking are inextricably linked.

Feedback, as you will begin to notice more and more, is everywhere. In contrast to the traditional, reductionist view of the word that views cause and effect as a purely linear process, the systems-thinking view is that the effect can also impact the cause. The world is perhaps a more complex place when viewed from a systems-perspective, but the way we look at the world can also give us invaluable information about what is happening in a system at any one time. Rather than seeking to attribute blame, we might be more encouraged to ask what is happening.

So, what new insights do you gain when you explore a particular problem scenario you might have from a systems-perspective?

Tomorrow, we’ll explore specific types of behaviour that systems exhibit in more depth … allowing us to explore root causes, see new opportunities for intervention … and more.

Day 4 of this 7-day series is here … http://www.watt-works.com/systems-thinking/day-4-of-7-days-to-systems-thinking-system-behaviour-and-change/

Tags: balancing loop, complexity, Dennis Sherwood, Donnella Meadows, Drucker, feedback, inflow, intervention, Leadership, outflow, Peter Senge, reinforcing loop, stocks