Systems thinking as applied to management looks at organizations and markets as an organism or ecosystem of interrelated parts instead of focusing only on specific parts. The complex nature of systems was originally outlined in organic systems as a method for understanding natural and social phenomena, but it has been applied to management in recent years in search of a general systems theory for managers. Debate about general systems theory for managers rages on, with proponents advocating this wider way of looking at strategy as the only realistic way of understanding the market in a changing world and with traditionalists preferring the simplicity and clarity of older theories.

A hierarchy of complexity outlines the different levels of real-world system complexity and, although framed in the language of complexity of organic systems, has been applied as a tool for management to assess markets and organizations as dynamic systems.

A system-thinking approach opens the door to applying the scientific method to decision making and strategy formation. The scientific approach of creating hypotheses and testing them through experimentation is very similar to the process of continually applying strategic thinking skills to assess best decisions and actions while maintaining the flexibility to adjust if an action does not work.

This is rather different than the traditional approaches to management teaching, which stresses a focus on individual parts and specific processes within an organization. The study of systems thinking is an important development in management theory and applications because increasingly more complex markets require managers to assess interrelated internal and external environments in order to formulate applicable strategy and implement necessary changes to strategy based on changing forces.

System dynamics have also been applied to markets and organizations as a method for analyzing and determining best strategic formation. System dynamics studies the flow of feedback in systems and resulting behaviors. Traditional system dynamics thinking says that negative feedback processes drive successful systems toward equilibrium as they adapt to their environments.

New theories in system dynamics and strategy propose that strategic methods that create positive change and exist outside of equilibrium will result in more applicably competitive strategies for organizations. Translated into terms for management, organizations that create unique strategies and positive change leading to new markets by predicting future trends in markets and capitalizing on them will be more competitive than organizations that just survive by attempting to adapt within existing markets.

This application of system dynamics mimics the process of strategic thinking, which requires the development of thinking skills that adapt from utilizing negative feedback to creating positive change by predicting and creating the future of markets. As you can gather, this is the approach that we suggest within TSoT.