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“And Then a Miracle Occurs …”
Engaging the challenge of operationalizing theories
of success in digital transformation
© M...
Source: Kane, G.C., D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley (2015). “Strategy, not Technology, Drives Digital
T...
Source: Kane, G.C., D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley (2015). “Strategy, not Technology, Drives Digital
T...
Then a Miracle Occurs…
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 4
“I think you should be m...
Daily Business in Digital Transformation
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 5
Most d...
Managing digital transformations is a complex
endeavor!
The Real Challenge of Digital Transformation
is Not Just Technolog...
We tend to focus on the ”simple,” technical issues and
ignore the complex, messy ones – which are the most
meaningful.
The...
Is there an Approach to Make the
Theory of Success More Explicit?
We think, yes it is.
The tool to becoming
more explicit ...
What is a System?
Picture Source: Kauffman, D.L. (1980). Systems One: An Introduction
to Systems Thinking. Minneapolis: Sy...
Feedback Systems Thinking is
Characterized by …
Thinking of the ”big picture.”
Balancing short-term and long-term perspe...
Mental Models …
Events
Patterns
Structures
Mental models
Systems
thinking
world
”Real”
world
... influence the
selection a...
Feedback Systems Thinking moves
from …
Systems and
Structures
What are the
drivers and deep
structures? How
are they relat...
… to making sense of a situation
Systems and Structures
What are the drivers and
deep structures? How are
they related?
Pa...
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 14
A Feedback Systems Approach
helps in …
 Makin...
Bounded Rationality and the
Misperceptions of Feedback
Dynamic complexity and
limited information reduce
the potential for...
Multiple Perspectives
Developing and sharing
a clearly operationalized
theory of success,
communication with
other stakeho...
Barriers to Effectively Learning
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 17
Decisions Inf...
Virtues of Virtual Worlds and Feedback
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 18
Virtual...
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 19
Advantages of Theory of Success
Modeling
 Req...
3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 20
Advantages of Theory of Success
Modeling
 Sen...
We all have our Theory of Success
Source: Drucker, P. (1994, p.96). “The Theory of the Business.”
Harvard Business Review,...
Still interested? For more information …
Readings:
FHNW Competence Center:
 Technology, Organization & People: http://www...
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“And Then a Miracle Occurs …” Engaging the challenge of operationalizing theories of success in digital transformation_MvK_iiis-2017

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Businesses face numerous critical challenges and rely on managerial competence to respond successfully to them. These responses are called “theories of success” because they purport to be a recipe for achieving the desired outcome. As the limitations of human cognitive capacity are well documented, there is a need for new ways of thinking that clearly lay out the basis of these theories of success. Systems thinking is one approach that contributes to this in two important ways. First, it clarifies the nature of the causal relationships in the problem context. Second, by presenting a clearly specified model of the theory, communication with other stakeholders is improved, thus increasing the likelihood of a better result. (Keynote addresses at a Plenary Session at The 8th International Multi-Conference on Complexity, Informatics and Cybernetics and its collocated events)

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“And Then a Miracle Occurs …” Engaging the challenge of operationalizing theories of success in digital transformation_MvK_iiis-2017

  1. 1. “And Then a Miracle Occurs …” Engaging the challenge of operationalizing theories of success in digital transformation © Michael von Kutzschenbach, ICETI 2017, Orlando
  2. 2. Source: Kane, G.C., D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley (2015). “Strategy, not Technology, Drives Digital Transformation: Becoming a Digitally Mature Enterprise.” http://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/ Report from Reality 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 2
  3. 3. Source: Kane, G.C., D. Palmer, A.N. Phillips, D. Kiron, and N. Buckley (2015). “Strategy, not Technology, Drives Digital Transformation: Becoming a Digitally Mature Enterprise.” http://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/ Report from Reality 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 3
  4. 4. Then a Miracle Occurs… 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 4 “I think you should be more explicit here in step two.”
  5. 5. Daily Business in Digital Transformation 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 5 Most digital transformations involve some kind of formal analysis … but are weak on addressing the emergent behavior inherent in complex, dynamic systems. How is your project going? Fine, ... except for the people.
  6. 6. Managing digital transformations is a complex endeavor! The Real Challenge of Digital Transformation is Not Just Technology… 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 6 Digital transformations lie at intersection of the rational/emotional worlds.
  7. 7. We tend to focus on the ”simple,” technical issues and ignore the complex, messy ones – which are the most meaningful. The Choice “In the swampy lowland, messy, confusing problems defy technical solution. The irony of this situation is that the problems of the high ground tend to be relatively unimportant to individuals or society at large, however great their technical interest may be, while in the swamp lie the problems of greatest human concern.” Donald A. Schön 19 September 1930 - 13 September 1997 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 7 Source: Donald A. Schön (1987). Educating the Reflective Practitioner
  8. 8. Is there an Approach to Make the Theory of Success More Explicit? We think, yes it is. The tool to becoming more explicit is applying feedback systems thinking to the problem. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 8
  9. 9. What is a System? Picture Source: Kauffman, D.L. (1980). Systems One: An Introduction to Systems Thinking. Minneapolis: Systems Education, Inc. “A system is an interconnected set of elements that is coherently organized in a way that achieves something.” Source: Meadows, H.D. (2008). Thinking in Systems: A Primer 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 9
  10. 10. Feedback Systems Thinking is Characterized by … Thinking of the ”big picture.” Balancing short-term and long-term perspectives. Recognizing the dynamic, complex and interdependent nature of systems. Taking into account both measurable and non- measurable factors. Remembering that we are all part of the systems in which we function, and that we each influence and are influenced by them. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 10
  11. 11. Mental Models … Events Patterns Structures Mental models Systems thinking world ”Real” world ... influence the selection and interpretation of ... «Reality» … provide the basis of our theories of success. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 11
  12. 12. Feedback Systems Thinking moves from … Systems and Structures What are the drivers and deep structures? How are they related? Patterns How do patterns play out over time and space? Tasks, Crises Trends Events and Symptoms What is happening now? 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 12
  13. 13. … to making sense of a situation Systems and Structures What are the drivers and deep structures? How are they related? Patterns How do patterns play out over time and space? Tasks, Crises Trends Events and Symptoms What is happening now? Delivery delay - +- Production capacity orders Production capacity arrivals Customer order rate Production capacity Production rate Unfilled orders Market share - + + + + + + Price Debt financing Investment expenditures Equity Debt-Equity ratio Equity financing Retained earnings Dividends Cash flow from operations Supply of financial resources Percent debt financing Indicated financing Debt Earnings + - + + + + + + - - - + + + + - - + + + - - - This is what an explicit Theory of Success looks like (goals, drivers, limitations, constraints, relationships, time delays and dynamics) 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 13
  14. 14. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 14 A Feedback Systems Approach helps in …  Making choices  Learning  Communication
  15. 15. Bounded Rationality and the Misperceptions of Feedback Dynamic complexity and limited information reduce the potential for learning and performance by limiting our knowledge of the real world. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 15
  16. 16. Multiple Perspectives Developing and sharing a clearly operationalized theory of success, communication with other stakeholders is improved, thus increasing the likelihood of a better result. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 16
  17. 17. Barriers to Effectively Learning 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 17 Decisions Information feedback Strategy, structure, decision rules Mental models Real World  Unknown structure  Dynamic complexity  Time delays  Impossible experiments  Misperceptions  Unscientific  Biases  Defensiveness  Inability to infer dynamics from mental models  Selective  Missing  Biased  Delayed  Ambiguous  Implementation failure  Game playing  Inconsistency  Short-term Modified from Sterman, J.D. (1994). “Learning in and about complex systems,” System Dynamics Review Vol. 10, Nos. 2-3 (Summer-Fall 1994): pp. 291-330. Theory of Success
  18. 18. Virtues of Virtual Worlds and Feedback 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 18 Virtual world Decisions Information feedback Strategy, structure, decision rules Mental models Real World  Inability to infer dynamics from mental models  Represents operationalized Theory of Success: − Known structure − Variable complexity − Controlled experiments  Implementation  Game playing  Inconsistency  Short-term Theory of Success  Unknown structure  Dynamic complexity  Time delays  Impossible experiments  Misperceptions  Unscientific  Biases  Defensiveness  Selective  Missing  Biased  Delayed  Ambiguous Modified from Sterman, J.D. (1994). “Learning in and about complex systems,” System Dynamics Review Vol. 10, Nos. 2-3 (Summer-Fall 1994): pp. 291-330.
  19. 19. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 19 Advantages of Theory of Success Modeling  Requires decision makers to improve and complete their theories of success for digital transformation.  Self-contradictions and ambiguities are discovered and resolved in the building process.  Once the model is validated and running, formal experiments reveal the probable outcomes of decision alternatives.
  20. 20. 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 20 Advantages of Theory of Success Modeling  Sensitivity analysis reveals areas in which genuine debate is needed.  An operating model can be used to communicate with people who were not involved in building the model.  An operating model is always complete, but never completed.
  21. 21. We all have our Theory of Success Source: Drucker, P. (1994, p.96). “The Theory of the Business.” Harvard Business Review, September-October, pp. 95-104 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 21 Modeling and thinking in systems help you to operationalize your mircale in digital transformation – your theory of success.
  22. 22. Still interested? For more information … Readings: FHNW Competence Center:  Technology, Organization & People: http://www.fhnw.ch/business/iwi/competence- centers/technology-organization-people Contact:  michael.vonkutzschenbach@fhnw.ch, T: +41 61 279 17 70; Twitter: @MvKutzschenbach 3/25/2017Dr. Michael v. Kutzschenbach (Institut for Information Systems) 22 Meadows, H.D. (2008). Thinking in Systems: A Primer. Vermont: Chelsea Green Publishing. Morecorft, J D.W. (2015). Strategic Modelling and Business Dynamics: A feedback systems approach. 2nd edition, West Sussex: John Wiley & Sons Ltd. Sterman, J.D. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World. McGraw Hill.

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