PwC's Tech While You Trek: Systems Thinking

Tune into another episode of Tech While You Trek to hear PwC Director Lyle Wallis discuss using systems thinking and simulations to solve problems. This approach aims to see a situation more holistically, recognize the relationships behind it, and uses simulation tools to experiment with solutions.

Transcript

Tech While You Trek - Systems Thinking
Release Date:  May 20, 2021

Adam (00:07):
Hello everyone, and welcome to another episode of PwC's Tech While You Trek. I'm your host, Adam, and today I have with me Lyle Wallis, to talk about problem solving with simulations and systems thinking. Lyle, thank you so much for being with us today.

Lyle Wallis (00:20):
Thanks, Adam. It's great being here.

Adam (00:22):
Why don't you introduce yourself and tell us a little bit about how you came to PwC and what your background is.

Lyle Wallis (00:27):
I've been working with systems thinking and simulation pretty much my whole career. I came to PwC about six years ago after having my own firm where we use systems thinking and simulation to address business problems, mostly for Fortune 500 companies.

Adam (00:41):
So Lyle, let's dive right in. Tell our listeners what systems thinking is.

Lyle Wallis (00:46):
The short answer is that it's a highly visual approach to understanding how the world works and how we can be effective in operating in that world. It's focus is on understanding the world holistically. And by that, what I mean is by understanding, what are all the important elements that we're dealing with? Those might be people, or they might be institutions. It's the natural world, it's the built world, and then how those are interrelated, how those interact. And so by understanding those interactions, I can develop a mental model about how the world works. Systems thinking is a way to build better mental models. It's a way to create a better model in my head so that I can be more effective and frankly, more satisfied in my life.

Adam (01:38):
Well, so talk to me about then, what mental models are.

Lyle Wallis (01:41):
The mental models are the cognitive facility that we have, the way our brains work to understand how the world works. We're constantly building them in our mind and we're using them to understand how to achieve whatever goal we have. It ranges from very simple things like how do I take the trash out to the curb and get back, to very complex things about how does my business work? We're constantly building in using these mental models and they're very powerful, but they also have many limitations. They tend not to be very accurate sometimes. They are certainly constrained in understanding things that are far in the future, and probably most importantly, and especially, I think we see this in today's environment, those mental models are not naturally shared. They're trapped inside your head.

So Systems thinking works by helping us improve those mental models. If we have better mental models, we can make better decisions. We can have more understanding about the choices that are available and how we should act. The systems thinking technique, not only does it give us a way as an individual to improve our mental models, but the systems thinking technique gives us a way to share those mental models and collaboratively improve those mental models.

Adam (03:04):
Well, so you talk about these mental models. Is this what they talk about, how the human brain in order to interpret what goes on and handle the world around us, it shortcuts. It needs these models to shortcut so it can understand processes and that's how we form these neural pathways. Is that correct? Am I in the right ballpark there?

Lyle Wallis (03:21):
Yeah, absolutely, and there's many different specific theories of cognition, but for our purposes, we don't need to understand all of the specifics of exactly how those neural pathways are getting created or not. What we need is an actionable technique, something we can actually do in a business environment that can help us improve those models and help us be more effective in running our businesses, developing strategy, and as a really nice side effect, the same techniques work in your personal life, too.

Adam (03:55):
Everyone has their own mental model, but with the systems thinking everyone's all on the same page, correct?

Lyle Wallis (03:59):
It is a method to get there. If you imagine a management team, a set of stakeholders, they're trying to accomplish something. Who's sitting at the table? The CFO, the operations guy, the marketing guy, they all have their different points of view. And if you were to ask any of them how to achieve the objective, they would tell the story from their perspective, all of those things are part of the business system, the overall business system, but none of them are thinking about that overall business system. They're thinking about the system in their silo.

This is a technique that encourages those stakeholders to understand systemically how all of their different pieces fit together to create the success or failure of the business system, the behavior of the business system. It's not like there's a magic wand that says, "Oh, here's the answer everybody. Give up your mental models, give up the way you think it is because this is the answer." What they're going to do is collaboratively create that understanding. Famously, people say, "I don't believe the data that you show me, but I do believe the stories that you tell me." Systems thinking is a way to create the story, the cause and effect narrative, that leads from the actions we're going to take today to how the future is going to play out.

Adam (05:13):
Let's talk about working simulations. How do we generate working simulations from these shared mental models?

Lyle Wallis (05:19):
We have a visual representation that sets the context for the actions we want to take. The next step is, as the management team says, "Yes, I understand that we have these relationships. So, I know the elements in the system that we all agree are important, but that's not enough to run a business. You need to drive that into specific actions and to get there, you need the numbers. You need to move it from a context setting to an analytic and management tool." That's the transition that happens between, I would say, the systems thinking part and our brains are not so good at all of that, and that's the reason why we use simulation tools.

We need to keep track of how all these relationships are going to play out over time. By time, I don't mean usually, the next few days. What we're really talking about usually is, over the generation of business strategies, which is usually depending on your industry, five or 10 or even 20 years. So, when people ask me, "When do I want to use simulation versus maybe some other analytic techniques, machine learning or other AI techniques? When would I do this?" I always say, "It's when you need to invent a new future. It's when you want to disrupt the way the world is going to be, or it's when someone's disrupting the future you had in mind."

Adam (06:47):
Well, so you're already leading in this direction, but can you talk about what some common business applications of simulation might be?

Lyle Wallis (06:53):
Everything from the rise of ride sharing and the impact of that on mobility, or drone delivery systems. All of those disrupt the way we did business. We want a way, a method, to think through in a structured and analytic way from beginning to end how that works. If we take any one of those, if you want to take drones, you start with that systems thinking step, and you start to map out what you think the elements of the system are and those calls are relationships, and then we transition those two numbers in a simulation, and then we start to run scenarios about how the world works, or how the world will develop over five or 10 or 20 years. Oftentimes, when I get to this point in a conversation, people say, "Well, that sounds great because now we can predict the future," but this is really not.

Lyle Wallis (07:51):
This is very much like writing a novel about the future. It's really about a way for a stakeholder to explore what could happen. It's a great way to understand about things that probably can't happen. The physics of the world make certain outcomes, very unlikely, other outcomes, much more likely, and this allows stakeholders to explore that space, make decisions that are based on the possible and the part of the possible that we want to achieve.

Adam (08:23):
What are some reasons that businesses would use systems thinking and simulation versus other options in the business world?

Lyle Wallis (08:31):
Firstly, because we're thinking about whole systems, we think about the behavior of that system, the outcomes that we get, as being the cause of the results themselves. We call this system as cause thinking. The structure of the system actually generates the results that you get. When we do this process, we're trying to identify the feedback loops that create the results and particularly the feedback loops, it builds upon itself to accelerate the results and hopefully move us rapidly towards the objectives that we want. That's a very different point of view than one that says the results I get from my business come from external sources. In other words, a traditional strategic analysis would often say it's the outside environment, the externalities, that are creating the results that I'm getting. We reject that view entirely from a systems thinking perspective. It's not that we aren't in some environment, but it's the structure of how our business system works that will create long-term success or at least the opportunity for long-term success.

A second thing that I think is really important is the idea of cause and effect relationships. This is a technique that says, "If I want to understand what those feedback loops are, if I want to understand what the relationships between elements in this business system are, then I want to frame those as cause and effect." This is in contrast with a great deal of other thinking that is correlational or statistical, and that's really the heart of it.

There's a third element, too, that I think is really important. And that is, these results play out over time. A lot of analytic techniques are what I would call, point in time techniques. They say, "We're here today. Snapshot five years from now, that's where we're going to be." In those techniques, the path from where we are to where we're going to be, there's nothing in it about that. This is a technique that says, "No, we don't want just to know where we're going to be in five years, but what we want to know is what's the journey? How does the cause and effect relationships happen? What are the elements that are in play?" And we need to understand all those things together.

Adam (11:07):
Lyle, before I let you get out of here, I ask a final question to all of our guests. Are you prepared to answer that question?

Lyle Wallis (11:13):
I am prepared, Adam.

Adam (11:15):
What would the you of 20 years ago be most surprised, from a technological standpoint, that the you of today is using?

Lyle Wallis (11:22):
Well, from a technological perspective, I don't really have that many surprises.

Adam (11:27):
You made good mental models.

Lyle Wallis (11:29):
Well, I would say, the thing that surprises me, frankly, Adam, is the rapid change in our society and social structure, the impact on our world... By that I mean, climate change, that these technologies have played a part in. When I see the technologies, the information technologies and transportation, all these things, what I find very surprising is how rapidly humanity is changing and how the impact on our planet. I would never have guessed that, that could happen so rapidly. On one hand there's so many benefits from the technologies we have, the information technologies, the healthcare, the miracle of MRNA vaccines. And then I also see the downside, the misinformation at scale that social media creates, the rapid climate change, and the repeatity of which that change has happened, the non-linearity of that change. That situation calls out for systemic perspective, systems thinking and modeling.

Adam (12:41):
Well, listen, Lyle Wallis, thank you very much for a very interesting conversation.

Lyle Wallis (12:46):
Thanks, Adam. I really enjoyed doing this.

Adam (12:48):
This has been another episode of Tech While You Trek. Thank you all so much for listening. I've been your host, Adam, and we will talk to you again next time.

Speaker 3 (12:59):
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