Thinking in systems

Twelve leverage points for systemic intervention design

In a blog post of 11 March, 2016, I incorporated the twelve types of leverage points discussed in this blog post to explain the ‘hidden workings‘ of Wicked Solutions. This explanation is crucial to addressing the ultimate wicked problem, viz. the fundamental asystemicism of academics, politicians, CEOs and other thought leaders of our increasingly connected, globalized world. Wicked Solutions, by the way, is the other key tool for addressing debilitating asystemicism.

Dana Meadows ….         is best known for co-authoring The Limits to Growth (1972) for meadows-headshotthe Club of Rome, which has sold more than 12 million copies worldwide (for a 2012 update, click here). One of her best-known essays is Leverage Points: Places to Intervene in a System (1999). It describes what types of interventions in a system (of any kind) are most effective, and which ones are least effective in changing the performance of the system. In it, Meadows also points out that systemic leverage points are often counter-intuitive, so finding a lever may not be all that difficult, but knowing what direction to push it in is quite another story. One more reason to invest in systems thinking.

NAFTA, GATT, and WTO        Somewhere in the 1990s, Meadows was attending a high-level meeting about globalization and was getting increasingly convinced that the people designing the rules didn´t have a clue how the new system was going to behave. It was all about enhancing corporate growth, but with very feeble negative feedback mechanisms to control it all. While there, Meadows got up and drew up the first version of the leverage list. One negotiator immediately saw it was brilliant. The others didn´t quite get it yet: “Huh?!”

Leverage points      “Leverage”, especially in financial terms, is one of the key business ideas of the ninetees and noughties. The trouble with financial leverage is that it cannot only magnify profits, but also losses. Although it isn’t really a pyramid game, it can work out as one. It is one of the root causes of the financial crisis we live in today, because the application of this type of leverage throughout the financial world, changed the financial system as a whole. It corresponds to the second in the list of leverage points (LPs) of Meadows: “buffer sizes”.

Leverage combinations        What is interesting in the financial crisis is that the shift to financial leverage in the ten years before the crisis was caused by a mix of levers in which the US government was heavily implied (thus expanding the system). The Clinton decision to encourage and enable poor people to become homeowners by changing the mortgage rules was one of them (the LP of “system rules”), the Federal Reserve decision to continue to supply cheap money another (the LP of “reinforcing feedback loops”). Other ones include the repeal of the rules that separated commercial and investment banks (I am not sure about this one, maybe the LP of “balancing feedback loops”), and the bonus-stimulated irresponsible lack of transparency of the so-called derivatives (the LP of “information flow structures”).  With the LP of “buffer sizes” that makes five of them.

leverage points

Easiness versus effectiveness     Meadows listed 12 leverage points in all.   Most people, including most managers, flock to the easiest one: that of the constants, parameters, and numbers, e.g. for setting targets. It is the “faucet” or “tap” in the stock-and-flow diagrams. Stocks and flows are the basic building blocks of system dynamics models as developed by Meadows colleague, Jay Forrester. The tap can be opened and closed to regulate flow. In many cases the tap is opened to increase throughput. Easy, but not quite the epitome of effectiveness if you really want to improve the system.

More examples      We have already seen examples for 6 out of 12 leverage points. Here are the 6 remaining ones: (1) stock-and-flow structures: road networks, primary schools in suburbs; (2) delays relative to change rates: central planning problems, e.g. in former Soviet Union; (3) self-organization: changing any aspect of a system lower on the list, e.g. new rules or loops: the human brain, learning organizations; but this may require enough freedom (i.e. letting go of control) to experiment; (4) the system goal: e.g. Ronald Reagan declaring to “get government off our back”; (5) the paradigm, world view or mind-set out of which the system arises, our values and assumptions: e.g. we can own land, nature is a stock of resources to be converted for human purposes etc.; and the most difficult one of all (6) transcending paradigms: the realization that world views are terribly limited. In this sense, systems thinking can be quite liberating.

Leverage scales       These leverage points do not only apply to global systems, but also to business initiatives, development projects, or human beings. So when you are redesigning a project with the aim of (systemically) improving its effectiveness it is a good idea to work from the top downwards, i.e. examine the world views underlying your project, and if a change seems warranted, see what would be the impact on the project goal and the learning needs within the project. All other changes lower on the list will follow from there. More about this and what Churchman has to with it in a later post. For a concept map of this post, click here.


About csl4d
This entry was posted in General. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s