Systems, leverage, and the beer game

Systems, leverage, and the beer game

Everything is a system. At all times, we are operating within a system, while other systems simultaneously operate within us.

Society as a whole is one giant system. The planet we live on holds the systems of society and is itself, within a solar system.

The individual human beings who make up society are themselves, systems of cells. And those cells; systems of atoms and molecules, right down to the quanta.

When we recognize this, we can better recognize opportunities to flex the system. One of the fascinating things about systems is that they all have similar properties. The most important one of all: leverage.

In any system, real change only happens through leverage points. This can seem counterintuitive at times. Especially in systems where hidden feedback loops create the illusion of progress in the short term. For non-systems thinkers, leverage points can be hard to find. Often because leverage lies in the places we'd least expect.

Consider Peter Senge’s Beer Game:

The beer game is a role-playing-scenario game played at MIT by students and professionals alike to highlight the importance of systems thinking in decision making.

In the beer game, players fill the roles of key figures in a beer distribution system: a liquor store manager, a wholesaler, and a brewery manager.

The game starts with a dilemma: an explosion in sales for a historically less than popular beer brand, Lover's beer.

Thousands of times, Senge and his colleagues facilitate this game, watching students and business professionals alike work to achieve their only goal: to manage their position as best they can to maximize profits for their company.

The players are allowed to make any decision that they feel prudent to their business.

Time and time again, Senge watches them fail.

It starts with initial spikes in sales leading to a sudden uptick in production demand accompanied by an inherent delay in timing to deliver.

The first seemingly logical choice players make is to order more supply to keep up with sales. The problem is, the wholesaler's supply eventually runs low, forcing them to only fill partial orders. Meanwhile, the stores themselves develop a backlog and must order even more than before to keep up with customer demand.

The delay inevitably continues, and in the background, the brewery is working double time trying to keep up with production demand, even management is on the floor getting their hands dirty.

The wholesaler, like the store manager, also develops a backlog. The cycle continues.

Eventually, bigger orders finally start to come in. But at this point, sales have already begun to level off. To make matters worse, the brewery is only getting started with filling its backlog.

The store manager and wholesaler both over-ordered and now the brewery is stuck with a massive oversupply. With sales dropping off, it will take years to get rid of all the supply. All players are essentially, f*cked.

What makes the beer game so interesting is that all of the players' choices, given the context of their individual jobs and situations, were seemingly logical.

This is what Senge calls an organizational learning disability. When players solely act under the mindset of, “I am my position.”, they fail to see the system as a whole and how their own decisions and behaviors play into it.

Had the players utilized the systems perspective to consider the broader whole, they may have been able to recognize the pattern emerging early on: the inherent delay in the production distribution cycle.

By over-ordering to compensate, players dug themselves into a hole. Since more ordering didn't mean faster delivery, the players simply needed to be patient. In fact, in The Fifth Discipline, Senge cites that in almost all instances of the game, players would have been far better off had they simply done nothing at all.

When dealing with systems, one must look beyond their individual position and into the underlying structures which shape behavior and create the conditions where patterns of events emerge.

This is where leverage lies.

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