Whole-System Architecture

A Model of Lean Transformation based on High Engagement and Continuous Improvement

Organizations, whether public or private, are living and changing bodies. Most will fail, sooner or later. The cause of failure is rarely the external threat, the attack of the barbarian or the fierce economic competitor. The cause is most often an act of suicide, self-inflicted by one’s own hand. Civilizations most often decline when there is an internal loss of unity, of common vision and a faith in the future – companies do the same. Whole-system architecture is designed to create unity of purpose, a unified understanding of values and vision; alignment of systems and structure, and alignment to strategy.

Bureaucratic organizations were created in a world in which the external environment was predictable and slow moving. It is no longer. Most industries are affected by disruptive technologies or markets. Many of those technologies are clustered around the Internet and related marketing channels. But there are also disruptive technologies that impact how things are made and designed. How books are printed, for example, has enabled ordering on Amazon one day, the very book you ordered being printed that night, and shipped out the next day to arrive at your door the following day. In almost every industry companies are confronted by disruptive technologies. Those disruptions require revolutionary changes in internal processes and organization. Continuous improvement will not meet the challenge of disruptive environments.

Because managers don’t know when the next innovation is going to occur, when they will have to respond to disruption with redesigned processes, culture and organization, they must have a methodology for recreating their organization. The question is whether they will create their own internal revolution or be the victim of a revolution created by a competitor. Continuous improvement is not a response to disruptive technology or markets. What is required is transformative and holistic change.

Organizations as Systems

All systems must become aligned to their environment if they are to survive. Adaptation is critical for survival of every species. With the increasing speed of change in both technology and social behavior, organizations must increase their speed of adaptation.

Every system whether an ocean or forest, a school, hospital or business, all have the same elements: First, there is input into the system from a supplier or input system; then there are processes that transforms input to output. That transformation, in the case of a business, must add economic value to the customer who is the receiving system. Every business create more value than the cost of the work system, otherwise it is not sustainable. And, every system adjusts to its environment by processing feedback.

When redesigning any organization or system it is important to realize that there are big systems and smaller systems, or sub-systems. For example, the human body is a system which contains numerous sub-systems. The functioning of the whole, whether human body or company, or country, is dependent on the alignment of these sub-systems to each other and to the whole. This is where things often go wrong.

For example, in the human system, our brain or nervous system may be sending signals to other systems to eat more sugar and fat, and that response may not be in alignment with the needs of our digestive system or other system. Hence, you get fat and die of a heart attack – system failure. Misaligned sub-systems produce failure. You can easily see the parallel in a company. The functioning of production, marketing, finance, etc., must be aligned otherwise there is a system failure. That is why we have strategic planning, Hoshin Kanri, budgeting, etc., to create organizational alignment. But, that planning is often less than optimally successful because it doesn’t deal with the whole system. Strategy deployment often fails to align the internal technical and social systems.

The essence of strategy is recognizing threats and opportunities presented by the external environment and then responding to those in a way that aligns the organizational systems to meet those challenges. In other words, if the future of marketing our products is going to be through the Internet and social media, with single day response and delivery to customers, virtually every system in the organization needs to aligned to achieve success in that system. You have to intentionally design that system. The old system will likely not have that capability. Continuous improvement will not get you there. Intentional redesign will.

Socio-Technical Systems

When I first read the article by Lou Davis on socio-technical systems (STS) it was one of those “ah-ha” moments when something becomes obvious and useful. The theory of STS is simple and elegant. In every organization there are work or technical systems (the work process or “value-stream”) and there are social systems, the “people” systems or culture that surrounds the work process. In most organizations these have been designed independently and are misaligned, producing sub-optimal performance. Socio-technical system design, or what I chose to call whole-system architecture, is a change methodology as well as a way of looking at the nature of the organization. STS or whole-system design is based on a process of co-creation, in which the stakeholders in the process together analyze the current state and design a future ideal state.[1] The theory is that by having managers and employees who work in the system, customers, suppliers and anyone else who knows, cares or must act on the system engaged together, not only will the future design be more effective for all, it will also gain their ownership and commitment which will lead to successful implementation. This is the principle of co-creation and it is a key element in successful change management.

About a month after I read the Lou Davis article I was presenting a consulting proposal to Moody’s Investor Services in New York and I couldn’t help myself. I proposed that we do an STS intervention to redesign their work system. They bought it and miraculously it worked. After that my consultants and I did more than one hundred STS or whole-system architecture projects. When I became involved at Honda it was very obvious that their system was a dramatically different technical and social system than those I was used to. They did not use that language, but they didn’t use “lean” language either. I simply incorporated the lessons from Honda into our whole-system architecture projects as a model of what another system might look like.

Most things that are useful are essentially simple. Socio-technical systems are simple. The tractor, car, airplane, telephone, the cell phone, the Internet, are all technical things. And, they all have dramatically altered social relationships. They have altered how children learn their ABC’s, how we communicate with family, how we find dates and life partners, and how we buy or sell houses and cars. People change with technology and technology changes to meet the needs of people – it is all one big socio-technical-economic system. And, every factory, office, or hospital is a socio-technical-economic system. It’s that simple. But, within our organizations changes often result in misaligned social and technical systems.

Whole-system architecture is a change management methodology that recognizes the organization as a living, organic whole that must change in a coordinated way; and to do so in a way that will maximize the commitment and ownership of those who live within the organization. The first principle of managing change is that we are committed to that which we help to create. Conversely, we will not be committed to something that is imposed on or sold to us, no matter how good the sales pitch.

There is what I call the Habitat for Humanity principle. Habitat for Humanity builds homes for the disadvantaged. They learned an important lesson about sustainability. They do not just build a home and give it to a family. It is a requirement that members of the family must participate in the building of the house. They hammer nails, carry wood and use the paint brush. By doing this they are far more likely to care for and maintain that home. Their participation makes the home and the community more sustainable. The exact same thing is true of change within organizations. Habitats mission statement says “We view our work as successful when it transforms lives and promotes positive and lasting social, economic and spiritual change within a community; when it is based on mutual trust and fully shared accomplishment; and when it demonstrates responsible stewardship of all resources entrusted to us.” [2]This would be a good mission statement for almost any corporate change process. It must not only move equipment around and speed a production process. It must transform the lives of those within the organization. It must promote positive and lasting social, as well as economic change. Then you will have commitment.

Consultants may be useful to guide the process and to ask questions that can help your people think creatively. However, it must never be the consultant’s design. He or she must never own it. It must be owned by those who will then implement it. It is their house and they will live in it.

[1] Cherns, A. (1976). The principles of sociotechnical design. Human Relations, 29(8), 783-792.

[2] See Habitat for Humanity web site.

Enter the Economic System

Every business enterprise is an economic system. Hospitals and non-profit organizations are also economic systems. Money comes into the system first as capital, and then revenues. Money goes out in the form of expenses and goods produced. The revenue must exceed the expenses and input value of the goods produced. In other words, the system must add value in economic terms. This is no news to anyone running a business. But it is news to some who implement both lean and STS systems. In both cases they cannot be designed without regard to the economics of that system.

In order to design the organization one must design and align the technical, social and economic systems together. If either of the three is not aligned with the others it is not sustainable and will fail.

The same model can be applied to any institution and even a country. The whole-system architecture process must begin with an analysis of the current state: work system (cycle time, eliminating waste, variances, etc.); an analysis of the culture or social system (the empowerment, decision-making, competencies, motivation, etc.); and an analysis of the money flow. Based on that analysis, design teams then design the future.

When to Use Whole-System Architecture:

We have been introduced to many problem-solving models as the solution to all ills. Whether it is Six-Sigma’s DCMAIC, or the Shewart Cycle of PDCA or PDSA, or the A3 problem solving model, they are all predicated on the idea that there is a specific problem to be solved. Why do you think there are so many problems? Could it be that there is something more fundamentally wrong?

Maybe there is something wrong with the nature of the system. In healthcare we know that if the basic diet and patterns of exercise, the basic system of managing input into the body, is deficient, solving each illness is not the real solution. It is masking the problem.

Whole-system architecture is about pro-actively creating the future organization and system. It asks, “Given the future environment, the technology, the market and social changes, what do we need to be like in the future and how do we create that future?” It is designing a fundamentally different house than the one we are living in. Yes, there is a “problem” but you won’t find the problem by fixing every rash and headache. The problem is that the design of the organization is not suited to its current or future needs.

Whole-system architecture is a process designed to create significant change in the culture and work processes of an organization and produce significant improvement in performance. If your organization has a relatively traditional culture, you need WSA to engage your people, gain understanding a commitment to change. If you only need to make small improvements, to engage people in continuous improvement, you do not need WSA. The American auto companies desperately needed to make significant change in their culture, but instead of a serious approach to analyzing and changing the culture, they opted for a less threatening and less dramatic approach of small groups working on small improvements. It was too late for that.

If you need to align your organization and culture to your strategy, you need WSA. If the organization creates walls and barriers to the flow of work, you need WSA. If the market place is changing significantly and your organization needs to respond to changing technologies, customer demands, or regulation, you need WSA. And, if you have had difficulty implementing change, gaining commitment from your own managers and employees, you need WSA.

On the following page you will see a chart that describes the basic steps in WSA contrasted with continuous improvement. They are both good! The question is, do you have a platform, the culture, structure, systems and processes upon which you can build the gradual continuous improvement process? If you do, proceed to that process.

Principles of Whole-System Architecture

Whole-system architecture is an interactive planning process that relies on a dialogue between customers, employees and managers. It asks for a team of managers and employees to create an idealized design. Change management requires principles of change. In order for any dialogue to be effective there must be a safe space for that dialogue to occur. Agreement on principles and process goes a long way to create that safe space. The principles that underlie whole-system architecture are derived from the best business, management, and psychological theories and are combined in a unique way. It is principle-centered design.

Principles are important to the design process for two reasons. One, the process of whole-system design is not linear or simplistic. When design choices have to be made, underlying principles can help guide people to make better decisions. Two, the principles are used throughout the design process to provide consistency and flexibility. It is through the use of principles that people can continue to modify and adapt designs, yet not lose the core purpose of the design. When you write the charter for your transformation effort you must decide on your own principles.

The following principles underlie the methodology.

The organization is a complex system that requires alignment of its parts to the same goals and purpose.
Design the organization as an open-system that adapts to its environment and aligns with the requirements of its environment.
The design should optimize the opportunity for its members to work as natural work teams, to learn from each other, and achieve the intrinsic satisfaction that can be derived from enriching jobs.
The organization design should be done by the “world’s greatest experts” and those who design should implement that which they have designed. Enlarge the circle of involvement as you implement but do not lose the understanding of those who did the analysis and design of the new system.
Shared principles create unity of systems, processes, and people and must be applied at all levels and across all functions.
How you change is the change. The process used for designing the organization should be compatible with how the organization will function in the future.
Design for variance control at the point closest to the origin of deviation. Immediate feedback loops enable immediate improvement or solving problems that create variances. Design in feedback loops to minimize wasteful errors.
The purpose of the organization is to meet the needs of its customers. Involve the customer and focus on meeting customer requirements.
Appreciation and understanding of human needs and values should be reflected in the design. Design for the growth of human potential including expanded multi-skilled work, job rotation, load-leveling and expanded decision-making.
Expect an imperfect design, with no fear of failure, but opportunity for learning and continuous improvement.
Design to an ideal or future state beyond your “village.” Every company and every industry is a village or tribe that assumes the norms within. Look outside and beyond for models of excellence.
Engage in appreciative inquiry to find centers of excellence within your organization and incorporate those lessons.
All complex living systems contain processes of self-organization. Allow for and promote self-organizing processes within the design.