Introduction to Systems Thinking by Prof. Antonio Ma. Perez
Focusing on Customer Value Proposition
Ways of thinking:
• Linear Thinking: A causes B, B causes C
• Circular / Loop Thinking: A causes B, B causes C, C causes A
We have to shift our way of thinking from Linear to Circular.
If we think the same as our competitors, then we don’t have real advantage. We have to be creative in our way of thinking.
There are things that you can’t see in Linear Thinking but you can see in a Loop Thinking.
One thing affects the other; everything is interconnected.
Break down the silo thinking.
Peter Senge: Metanioa – a shift of mind
• ST makes you look at the big picture before making an intervention
“We cannot understand the nature of a system by analysis of its parts.”
You cannot solve a problem with the same level of thinking that got you into the problem.
Learn to connect; see patterns and trends.
In dealing with complex problem, there is no root cause. It is the loop that causes the problem – it is the structure that causes the problem.
Event – Pattern – Structure (Including Mental Models)
It is the Structure that causes the Pattern that produces the Event.
The Structure is a product of the mind.
Design, Create, Transform = Innovate
In order to see the Structure, we need to draw a Causal Loop Diagram (CLD). Cause and Effect.
To draw a CLD, tell a story.
Ability to anticipate unintended consequences.
Reading: Once Upon A Time
Although the business is turning in a profit, he’s not doing well because the business is not growing.
Do you focus on the turnover or do you focus on the margin?
Jollibee value meals have small profit margin but they focus on turnover – the speed that their product is bought.
Starbucks have big profit margin but the turnover is slow as consumers don’t consume coffee fast.
Find where you can compete:
Volume is small – small market segment
Quality? No, because they only have one supplier of rice
Price? Can Ming Hua lower the price? Price war isn’t good for the industry because others will also lower their prices.
Why is his business not doing well?
Because he is waiting for customers and…
volume is limited and demand is uncertain.
While thinking about his business, he thought of increasing value to his customers.
Value = Benefit / Cost or Gain / Pain
Value is defined by the customer; as a business the promise you make to a customer is the value proposition. The value is defined by the customer – the customer interprets the promise that you made.
Increase the gain, reduce the pain.
Delight – giving something not asked by the customer – but they didn’t expect it.
The strategy – must be able to tell it thru a story.
What is the Promise (value proposition)?
How do you Deliver (Capabilities)?
What resources must you have to deliver the promise (Enablers)?
How do you create value? Sometimes measured thru profit (Turnaround)
Kaplan / Norton developed Balanced Scorecard