Systems Thinking: How Flow Analysis Identifies the Single Root Cause of Chronic Business Problems
Many organizations incorrectly define their complexity by the sheer number of departments, divisions, or resources they possess. This perception—that "larger equals more complex"—often serves as an excuse when improvement initiatives fail. However, a systems-thinking approach argues that complexity is not inherent, but rather a function of systemic connections and distorted flow.
Just as the human body is a system of interconnected organs (respiratory, digestive, circulatory), a business is a system of connected entities (departments and functions) that work in tandem toward a common goal.
The Analogy of Flow and Disruption
To understand systemic connections, consider the flow of a crucial medium through the system. In the human body, the medium is blood. If the blood flow is restricted—a constriction in a vessel—the resulting disruption travels throughout the entire body, leading to effects like increased blood pressure, organ damage, or heart failure.
In a business or supply chain, the flowing medium could be material (in manufacturing), drawings (in engineering and design), work (in project management), or sales inquiries (in marketing). When a constraint or action in one department disrupts this flow, the distortion travels across the entire organization.
For instance, a seemingly isolated decision by the procurement department to tightly control material inventory can disrupt the flow of material, consequently affecting:
The utilization of production lines.
The dispatches of finished goods.
The inventory levels across the supply chain.
A localized constriction can thus cause widespread problems across all departments.
Peaks, Troughs, and Financial Implications
Organizations can diagnose these flow disruptions by mapping the flow pattern of the core medium over a certain time horizon (ee.g., weekly). If the resulting pattern is wavy or curvy, it indicates a flow distortion with significant financial consequences:
Peaks (Overload): When flow peaks, the department experiences an overload, leading to:
High overtime costs.
Deployment of additional manpower.
Increased freight and expediting expenses.
A false perception of capacity shortage, potentially resulting in unnecessary capital expenditure (capex).
Troughs (Underload): When flow hits a trough, the department experiences underload, leading to:
Starvation of production lines and resources.
Wasted investment due to underutilized assets.
These effects travel through the system even though the departments may not be physically connected. The material itself is the carrier of the causal influence.
Locating the Root Cause: Local vs. Non-Local
The key to solving a problem is invalidating the wrong hypothesis about the cause's location:
Non-Local Cause: The distortion observed in a department was caused by a disturbance that traveled from another place.
Local Cause (Epicenter): The distortion was caused by an action or issue within the department itself, which then creates shockwaves that travel to other areas.
Managers often incorrectly assume the cause is local (e.g., blaming poor mold cracking on the sand quality), when the true cause might be non-local (a process issue earlier in the flow) or vice versa (as in the case where mold cracking was due to equipment misalignment, making the cause local).
The systematic approach is a two-step process: first, map the flow patterns across all departments; second, determine where the causal influence is truly flowing from by evaluating the two hypotheses. This pinpoints the single location of the root cause, demystifying complexity and simplifying the problem-solving effort. The organization should realize it is not a collection of entities, but a connection of entities.
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