Systems Thinking

We are going through an industrial revolution for the fourth time.  The Forth Industrial Revolution: what it is, how to respond, published by the World Economic Forum explains what is going on. Things are getting increasingly complicated and practices that once worked in the industrial age no longer work in the information age. Case in point is, say, the financial report of a bank.  Below you see a comparison of a balance sheet of a bank in 1906 with that of a bank in 2018.

"Silo thinking" or having a "silo mentality", which most enterprises tend to have, will no longer work with the increased complexity, volume, and quantity of  information.  Our new networked world, our networked economy has new rules that apply because this is a new paradigm.  Applying old, outdated rules makes it harder to understand the change that is occurring.

Systems thinking is based on systems theory and is implemented using systems engineering.   Systems thinking is described well in this quote:

“Systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static snapshots…Today systems thinking is needed more than ever because we are becoming overwhelmed by complexity.” — Peter Senge

Fundamentally, systems thinking is about viewing the world as an organized whole and recognize the interconnectedness and interdependence of all things so one can comprehend reality or "real space" in a more comprehensive manner.

For there to be a system, there must be two things: a describable structure or state, and a describable pattern of behavior (rules).

Personally, I have been employing systems thinking my entire career as a professional accountant.  When I obtained my MBA I studied the work of Dr. W. Edwards Deming.  This 15 minute video, A Theory of a System for Educators and Managers, helps one understand how to think about systems.

This article, Embracing Complexity - Conclusion, promotes the idea of creating constructing knowledge graphs which I agree is a very good idea.  But then the author uses the term "your knowledge graph" which makes it sound like everyone has their own knowledge graph.  I don't think that is what the author means.  Some knowledge graphs need to be shared, publicly available.

For example, the area of knowledge that I work in is financial reporting. A financial reporting related knowledge graph should be the shared between a standards setter that specifies a financial reporting scheme to be used to report, a regulator that specifies which financial reporting scheme to used to report, a reporting economic entity that creates report per some mandated financial reporting scheme which they submit to a regulator, and an analyst that makes use of the publicly available reported information that uses that standard financial reporting scheme so that the analyst can effectively compare information between reporting economic entities. Examples of such reporting systems is public companies that report to the U.S. Securities and Exchange Commission (SEC) and listed companies that report to the European Single Market Authority (ESMA).

Further, financial reports are not static forms, nor should they be forms. Financial reporting schemes are intentionally designed to allow reporting economic entities to make modifications to their report model within specific boundaries to explain subtleties and nuances of their specific economic entity.  This adds a bit of complexity to the system, but the system can still work as designed. 

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Bank balance sheet in 1906:

Bank balance sheet in 2018:


Additional information:

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