Decision Line, March 2007 7 PRODUCTION/OPERATIONS MANAGEMENT ■ JAYANTH JAYARAM, Feature Editor, University of South Carolina Systems Thinking: Opportunities and Challenges in the Graduate Classroom by Vijay R. Kannan, J. Brian Atwater, Alan A. Stephens, College of Business, Utah State University W hat do the following scenarios, drawn from actual firms, have in common? Scenario 1. An automobile manu- facturer implements a quality improve- ment program that successfully creates additional manufacturing capacity (Keating et al., 1999). To prevent downsizing that might discourage fur- ther improvement, management com- mits to increasing sales by developing new vehicles. To speed up existing de- sign processes, the manager of the im- provement program is assigned to oversee implementation of a similar program in R&D. Employees in R&D however are challenged by the need to both increase the number of new car designs and participate in improve- ment projects. As a result, the improve- ment program fails to catch on and there is no increase in the number of new models. Demand does not increase as anticipated, excess manufacturing ca- pacity has to be trimmed, and the labor force is reduced. Manufacturing person- nel become cynical and distrustful of management and the improvement pro- gram there dies. Scenario 2. A check printing com- pany offers first time buyers a special introductory price. In response to this successful effort to attract new custom- ers, competitors adopt the practice, the result being that customers switch from one company to another whenever they need to place a new order. Scenario 3. A car maker offers em- ployee pricing to all customers buying vehicles in the new model year. In re- sponse, competitors follow suit, the net result being to advance the timing of sales of new cars and potentially com- promising sales of the following year’s model cars. While each of these failures of strat- egy can be explained in a number of different ways, one is the failure of man- agement to fully understand the com- plexity of the situation by taking a systemic approach to understanding and responding to it. For example, fail- ure to understand the impact of the R&D improvement program on the rate of new product development, coupled with a single minded focus on new product offerings, led to behavior that might have been avoided had the po- tential implications of the program’s implementation been considered. One need not look far to find other examples of firms that, despite large investments of time, money, and resources, fail to reap the rewards of large, strategic ini- tiatives due to a failure to think systemi- cally. Failed efforts at implementing downsizing and other cost cutting mea- sures (e.g., cutting investment in R&D in response to a financial crisis with the result that future product development and growth is compromised), and man- aging constrained resources (e.g., over extending equipment at the expense of maintenance, leading to increased ma- chine failure rates and lower quality/ productivity), are not uncommon. These can also be attributed, at least in part, to a failure to fully appreciate the com- plexity of the problem, or take a systemic approach to problem solving. In this article, we identify what it means to think systemically, and present insights into how systems thinking is viewed in Vijay R. Kannan is Vernon Maughan Buehler & Maree C. Buehler Endowed Professor and Professor of Operations Management in the College of Business, Utah State University. He has pub- lished extensively in the ar- eas of cellular manufacturing and supply chain management, his work appearing in journals including Decision Sciences, International Journal of Production Research, and Inter- national Journal of Operations and Produc- tion Management. His current research examines the impact of relationships and relationship in- frastructure in supply chains, and the role of systemic thinking in management education. v.kannan@usu.edu J. Brian Atwater is an associate professor of operations management at Utah State University. He is certified in production and inventory management (CPIM) by the American Production & Inventory Con- trol Society and serves on the committee over- seeing the Master Planning of Resources exam. He is also a certified academic associate (JONAH) of the Goldratt Institute. His current interests center on the teaching of systemic thinking and its integration with other problem solving ap- proaches such as Lean Thinking, Six Sigma, and the Theory of Constraints. brian.atwater@business.usu.edu Alan A. Stephens is the department head of the Business Administration De- partment and an associate professor of finance at Utah State University. Dr. Stephens’ primary areas of expertise are in corporate fi- nance, and investments. He is currently partici- pating in research concerning systemic thinking, systems thinking in finance, as well as other financial markets research. alan.stephens@business.usu.edu