Applying systems thinking to Local Economic Development

Transcription

1 Applying systems thinking to Local Economic Development by Shawn Cunningham November 2005 Page 1 of 11

2 Applying systems thinking to Local Economic Development By Shawn Cunningham November 2005 Draft 1 Introduction In Local Economic Development (LED) calls are often made for a more systematic approach to the analysis of the locality. This call is usually accompanied by the plea to move from small, isolated projects to activities that involve large numbers of stakeholders in the analysis and development of interventions that could improve the locality. Thinking beyond projects to how economic systems work requires a basic understanding of systems thinking. This article will look at some of the principles of systems thinking and will consider how some of these may be applied in a LED context. The ability to think beyond individual parts and components of a system to the whole system is referred to as systems thinking. Each system is an interaction of elements manifesting as a whole. Instead of looking at snapshots of a system at a point in time, a systems view allows us to see change as a continuous and ongoing process. The ability to apply systems thinking is important for facilitators and consultants in Local Economic Development (LED) due to the fact that the private sector, public sector and civil society all form parts of a complicated system. Traditional decision making tends to involve linear cause and effect relationships. By taking a systems approach, we can see the whole complex of bidirectional interrelationships between various parts and actors. Instead of analysing a problem in terms of an input and an output, for example, we look at the whole system of inputs, processes, outputs, feedback, and controls. This larger picture will typically provide more useful results than traditional methods. Page 2 of 11

3 Systems theory also attempts to explain the phenomena where carefully planned interventions into systems do not perform as intended or why unexpected side effects are produced. This rest of this paper will provide some practical considerations for LED facilitators on how some of the systems thinking principles could be applied to local and regional economic development. It will not be an exhaustive or theoretical discussion on systems theory, nor will it provide for any recipes or tools. The basics of systems thinking Systems thinking is based on the perspective of the systems sciences, which seeks to understand interconnectedness, complexity and wholeness of components of systems in specific relationship to each other. It is interesting to note that systems theory spans many fields of study ranging from mechanics, to natural sciences, economics and sociology. Systems theory concentrates on the complexity and interdependence of relationships of groups of activities/parts that form the whole. Analysing systems involves the use of various techniques to study many different kinds of system. It emphasises studying systems in a holistic way, rather than applying simplifying (or oversimplification) techniques. This sounds much more complicated than it sounds. Simply put, parts are understood and analysed within the context of the larger system that they form part of. This means that insights are gained into the whole by understanding the linkages, interactions and processes between the elements that comprise the whole "system". This approach can help avoid the silo effect or fragmentation (or specilisation), where a lack of communication and interaction can cause a change in one area of a system to adversely affect another area of the system. This is especially relevant in fragmented systems where the linkages and relationships between components and activities are not clearly understood. Systems thinkers consider that: Page 3 of 11

4 a "system" is a dynamic and complex whole, interacting as a structured functional unit, the interdependency of the components is critical as a change in one part of the system has consequences in other parts of the system, information flows between the different elements that compose the system are important, a system is a community situated within an environment, and; information flows from and to the surrounding environment via boundaries. Systems in a local context Any person or organisation in a local economy can be part of several systems. To make things even more complicated, different stakeholders or actors could view the same system from very different perspectives. An example is a local firm that is part of the private sector system in a town. The employees see the firm as being part of an employment system, while the customers see the firm as part of the supply system to their own operations. Suppliers of the firm see the firm as part of their distribution system. This interwoveness of systems is especially relevant in a local setting, where external facilitators (or even the locals) are not even aware of all the links, ties, forces, influences and relationships between the various parts. A little known characteristic of systems is that intervening in a system often leads to counterintuitive or unexpected responses. This is probably the reason why so many well intended interventions often do not work due to reasons described as external or out of control factors. This is caused by all the relationships, activities and forces in systems not being visible or understood. Systems thinkers also see problems or failures as part of the system, not as external forces working in on the system. This means that problem solving should be done by the actors in the system, and not by external force or intervention. Some have even gone as far as to say that it takes effort and energy to keep problems or failures in a system, otherwise it would have solved itself a long time ago due to a systems tendency to maintain harmony and equilibrium. This phenomenon can usually be explained in terms of invisible vested interests and Page 4 of 11

5 hidden agendas. In a more practical sense this means that if there is a really strange behaviour, or rule, or activity in a system, it can only remain in the system if a certain group in the system benefits from this behaviour. Another view from the world of change management and learning is that systems should not be seen as things that are broken and that need fixing (Senge, 1999). Systems should be seen as functioning and living organisations with the problems and failures forming part of the system. Systems strive to equilibrium and harmony, thus failures and problems in the system are usually kept there by energy or other forces. This energy comes from the actors in the systems who may behave in a specific way to cause the illeffect that is harming other actors in the system. Sustainability of interventions in systems requires a habit of frequent reflection by the actors of their relationships and interaction with the systems that they identify with. This is also referred to as the learning ability of the system or the institutional memory. It should be noted that not only do the parts of a system influence the performance of the whole; the whole also influences the performance of the parts. It is important for stakeholders in a given economic system to become more aware of the systems that they are part of. Awareness and understanding of the economic system that people and organisations form part of is already a first milestone towards the improvement of the system. Practical considerations for LED facilitators The following section will provide some practical considerations for LED facilitators. These considerations are not exhaustive and are meant to cover only the most important aspects of systems thinking in LED from the experience of the author. Raising awareness and understanding is the first objective Facilitators should refrain from trying to fix problems or failures in economic systems even if they appear to be very obvious. It is more important to get the actors (system components) to understand the larger system and the impact of their behavior and other factors on the performance of the system. This self awareness of the system Page 5 of 11

6 stakeholders is already a first milestone and contributes to the learning and evolution of the system. This in turn would lead to the increased performance of the system. There is another important reason to emphasize importance of the awareness of the actors of the larger system. Just as the parts make up the larger system and influence its performance, the larger system also influences the performance of the parts. While a deeper understanding of the theoretical argument is not so important, this argument certainly holds true from a LED perspective. Senge (1990:13) said Taking in information is only distantly related to real learning. It would be nonsensical to say, I just read a great book on bicycle riding I ve learned that. Through learning we become able to do something we were never able to do. Through learning we re-perceive the world and our relationship to it. Stimulate local evolution - do not import external solutions Every local economic system is unique and is on its own development path. This development path is made up not only of local actors, local factors and other forces, but also by learning, decisions, thinking of groups etc. Copying or importing solutions or institutions from other economic systems often lead to failure or disappointment due to mismatches in the environment and evolution of the local system (Kay, 2004). This does not mean that the local actors should all look internally for their solutions to certain problems. Certainly looking at how other localities dealt with similar issues could be very useful. The point is that solutions should be developed that fit the local environment and that can form part of the local system. Whenever an external solution is brought in and competes with elements in the local system, the chances are that the improvements, no matter how good or noble they are, will be rejected by the system. Facilitators should caution local actors of identifying solutions from other localities that sounds like a great idea (e.g. we need an airport or, we need a waterfront ). From a systemic thinking perspective, external solutions that could fit into the local system and that can strengthen the functioning of the system should be identified. Page 6 of 11

7 Creative and innovative thinking on the part of the local actors is more essential than great ideas that worked elsewhere. Local actors should rather concentrate on exploration and learning of the local systems to develop homegrown solutions within the specific economic and social context. Applying instruments like Porters diamond will allow local actors to analyze their economic system, and to identify areas in the system where performance can be improved. This allows the actors to develop a differentiated local profile based on certain economic, social and physical characteristics makes it very hard, (if not impossible) for other localities to copy or clone the economic profile of the locality. Soft issues are critical in systems Culture, belief systems, value systems and opinions are important forces that should not be ignored in the analysis of local systems. We often say that perceptions can be more important than facts in a local context. Planning approaches and rigorous research often ignore these soft issues and prefer to focus on measurable factors. An example is where the local community believes that they are losing hundreds of formal jobs per year, despite the facts showing growing employment or small firm formation. The perception that there are so many job losses could lead to paralysis by the local stakeholders. The perception could be re-enforced by various means including the schools, churches, leaders, local press and other media forms. The reality is that the local stakeholders need to identify their own myths and belief systems and must decide to investigate, clarify and address these findings. The benefit for external facilitators is that they often see these myths easier than the locals and can point them out to the locals for investigation. Another important consideration for facilitators is the importance of trust building by the actors. Trust is essential for learning, for open and honest discussion, and for taking risks. Page 7 of 11

8 These soft issues are essential in the functioning of systems. Often, well intended change processes and interventions fail simply because they ignore the soft issues that keep things in place in the system. Small steps lead to sustainable change and improvement LED Consultants are often under pressure from their local customers for ambitious plans that solve many problems simultaneously. At the same time local stakeholders are often over optimistic about their ability to implement several activities at the same time without losing focus on their existing activities. The shelves of decision makers are filled with great plans and glossy project proposals, yet only a small percentage of these ever get implemented successfully. Facilitators should rather promote a multitude of small changes or alterations than a few big changes (Senge, 1999). Not only do the smaller changes strengthen learning and trust building, they are usually more acceptable to a large variety of system stakeholders. This approach is known as incremental development. From a systems theory perspective, it is advisable to make many small adjustments and then monitor the system for feedback, rather than making large changes that may cause other side-effects. Systems have a tendency to reject changes that disturbs the harmony of the system. Promote incremental change in existing institutions and organisations It is often said that the weak institutional layer is an obstacle to local economic growth, especially in rural areas and smaller economies. Facilitators should involve the weaker institutions and organizations in the analysis of the local systems together with their stakeholders and the other system actors. Opportunities for the institutions to respond to unmet local demands should be carefully analyzed with the assistance of the facilitator. Care should be taken not to transform or load existing institutions with completely new roles and responsibilities, as this often leads to an identity crises or negative pressure from existing stakeholders of the institution 1. The response to the demands of the system should be carefully analyzed, and incremental steps should be implemented. Not 1 If the facilitator is trained in change management then they would be able to engage with the organisation as a change facilitator, applying known change management instruments. Page 8 of 11

9 only does this reduce the risk for the institutions, it allows for feedback mechanisms to adjust or reinforce the new activities. Again, the task of the facilitator is to allow for the institution to explore and learn about new opportunities and roles within the system, and to then create a platform for the institution to experiment with different options. This way the stakeholders in the institutional will accept changes in the institutions more readily. Create a safe environment for exploration and reflection Business people and government officials are all used to a very linear thinking approach and a planned environment. Risks are identified and managed. Opportunities are identified and evaluated against current resources and abilities. The list goes on. It is important for the facilitator to create an environment where people can take risks, use their imagination, and get out of their boxes and silos. Establishing rules similar to those needed for creative processes like brainstorming of scenario planning is important to make sure that all participants feel free to contribute and take risks. Conclusion Although it is often tempting for external consultants and facilitators to point out obvious local problems and shortcomings, these interventions are not seen as systemic or integrated into the local system. Local systems often reject or cause external interventions to fail due to many soft factors. A trusting environment where opinions can be aired, concerns openly raised, and joint analyses can be done, is needed for this. The theory behind systems is maybe not so important for the local stakeholder as it is for the facilitator to understand that suggestions, ideas and interventions should be identified, refined and driven by the local stakeholders. By applying some of the simple principles of systems thinking to the development of local economies more sustainable solutions can be developed. This is especially true when it is recognised that the actors in a system must learn to understand themselves within the context of a greater system. Local actors must understand their relation to the system, and the influence of the system on their own performance. Page 9 of 11

10 Incremental development, learn by doing and stimulation of innovative thinking are key ingredients to allow systems to evolve to a higher level of performance. The role of the facilitator is to create a platform for discussion, joint analysis, reflection and learning where the stakeholders can better understand and respond to the systems that they belong to. What is needed is out-of-the-box thinking within the reality of the local economic system. Page 10 of 11

11 Source list Dorward, A, Kydd, J, Morrison, J and Poulton, C Institutions, markets and Economic Coordination: Linking development policy and praxis. Kay, J Culture and prosperity: the truth about markets why some nations are rich but most remain poor. Pasteur, K Learning for development: A literature review. Lessons for change in policy and organization. Institute from Development Studies, UK. Senge, P The fifth discipline - The art and practice of the learning organization Senge, P, Kleiner, A, Roberts, C,Ross, R, Roth, G and Smith, B The dance of change: the challenges to sustaining momentum in learning organizations. For German readers, the works of Niklas Luhman would be interesting. Page 11 of 11