A strategist’s ability to see the big picture involves not only the elements of the picture, but also how those elements are connected and what functions they serve. When these elements have connections and a purpose, we can refer to their whole as a system. The root of the word system comes from the Greek synhistanai, meaning “to place together.”10 As the first core skill of the advanced strategic thinker is to coalesce, or bring together, it’s fitting that the concept of a system helps us do just that.
A soccer team is an example of a system. The elements are the players, coach, referee, ball, and field. The connections are the rules of soccer, teamwork, and tactical plan. The purpose may be one or more of the following: win the match, build fitness, enjoy oneself, and earn a living. One of the ways we know a soccer team is a system is because if we take away elements, connections, or purpose, the system is fundamentally changed. Remove the players or ball (elements), rules (connections), or score (purpose), and you no longer have a soccer game. As rules of thumb, if you cannot identify the elements, connections, or the effects they have upon each other, then they most likely do not form a system.
As scientist Donella Meadows explains, “A system is a set of things—people, cells, molecules—interconnected in such a way that they produce their own pattern of behavior over time. It’s an interconnected set of elements that is coherently organized in a way that achieves something.”11 This description further builds on the concept of patterns described earlier. As a system develops, it generates patterns of behavior due to the connections between elements in an organized fashion. That’s one of the reasons it’s important to look at your business strategy as a system, involving your employees, customers, suppliers, competitors, and shareholders. Changes in any one of these elements or their connection (relationship) to others can fundamentally alter the course of your business. Strategic planning sessions that don’t fully take into account the market, customers, competitors, and the company itself yield half-baked strategic plans that will crack under the pressure of changes in the system.
Understanding the systems that comprise your business is an important part of developing long-term strategy. Sound systems can lead to success, as Chipotle CEO Steve Ells noted, “Chipotle succeeds not because of the burritos. It works because of our system: fresh, local, sustainable ingredients, cooked with classic methods in an open kitchen where the customer can see everything, and served in a pleasing envi- ronment.”12 And a lack of systems thinking can lead to competitive disadvantage as Nokia CEO Stephen Elop lamented, “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.”13
A useful exercise is to map out the system of the business. An Activity System Map provides a visual means of understanding the key elements and connections involved in mapping out a business strategy. It provides an elevated view of the business by capturing the strategy and activities, and the relationships between the two, on a single page. Designing an Activity System Map first requires the individual to step back and view the business from the high ground to better understand the strategic composition. It then drills down to assemble a conceptual framework, identifying the interrelationships and competencies of the key facets of the business. Once completed, the Activity System Map provides a clear and concise picture of the business, which enables leaders to more effectively set direction and allocate resources.
The Activity System Map consists of the strategic themes of the organization represented by large spheres, and the individual activities or tactics represented by small spheres. Between three and five strategic themes are appropriate to cover the primary hubs of strategy for a business. In addition to identifying the individual strategic themes and tactics, the Activity System Map highlights the strength of the relationships between the strategy and tactics. A solid line between two spheres indicates direct support and a dotted line indicates indirect support. Incorporating other elements such as suppliers, customers, and employees can add another dimension to the exercise. Based on secondary research, Figure 1.4 is a hypothetical example of an Activity System Map for Apple.
In this example, it is surmised that Apple’s three strategic themes represented by the large spheres are design, integration, and convenience. These are the areas that would hypothetically receive a disproportionate amount of investment in order to drive the differentiated value of their offerings. Key activities and tactics (represented by the smaller spheres) such as the design of their own microprocessor chips, the Genius Bar, and the expansive virtual stores competently support their strategic themes. Summarizing the value of looking at your business with a system’s lens is Harvard Business School professor Michael Porter: “Competitive advantage grows out of the entire system of activities. The fit among activities substantially reduces cost or increases differentiation. Beyond that, the competitive value of individual activities—or the associated skills, competencies, or resources— cannot be decoupled from the system or the strategy.”14