Systems of Systems: Govt and Financial Crisis

The Business Model, By Brian Friel, Government Executive Magazine, November 5, 2008

The economy is one giant system of systems with complex interconnections among all of them. Problems can travel easily across those connections from system to system. As those problems multiply, solutions become more difficult because the law of unintended consequences is so powerful in complex systems.

That fact seems obvious when you look at the snowballing financial crisis.

The government is, of course, one system in the economy’s system of systems. Its revenues represent roughly one-fifth of the nation’s gross domestic product. The system of government is extremely complex since it is subject not only to the rules of the economy but also to the rules of politics. Just witness the difficulty Congress and the executive branch had in crafting ways to deal with the economic crisis.

Outstanding points and insight regarding the systems of systems perspective.

A system can be defined as a collection of processes with a common aim. A process is the action taken to achieve a result. Everything is done via a process.

First time I can recall seeing the term “system of systems” used outside a military context.  The intent of DoD’s Joint Guidance on Effect Based Operations (EBO) is to assess an adversary’s “system of systems” to identify and exploit vulnerabilities.

In a non-military application, same approach can be/is applied to improve capabilities.  The systems perspective is what W. Edwards Deming  introduced to the Japanese after WWII and has been successfully applied by companies such as Toyota.

A systems of systems assessment on the financial system would have easily identified the vulnerabilities. Would likely have also been fairly accurate on the time.

Systems thinking is also referred to as strategic thinking, horizontal thinking and/or macro-level thinking as opposed to vertical or stove-piped thinking. Vertical thinking incorporates a “process” or more of a micro-level perspective.

Thomas Barnett, author of the Pentagons New Map and the forthcoming book, Great Powers, contrasted the two perspectives:

There are types of people in the world: those who believe there are two types of people  in the world and those who don’t. I fall into the first camp.

I believe the world is divided between vertical thinkers, or those who specialize deeply in certain skills and subject matters, and horizontal thinkers, or those whose essential skill lies in connecting the dots across various subjects and synthesizing new combinations.

The challenge for what I refer to as Quality Leadership, includes leveraging the two perspectives to achieve the highest levels of quality.