Systems Thinking Explained Simply

Systems – All You Need To Know

In this post, we’ll unpack all you need to know about systems, defining exactly what they are, their key elements, why understanding the nature of systems is important and more.

What Is A System?

A system is a set of interconnected elements, referred to as agents, that interact with eachother towards a common goal, referred to as function.

A system must therefore consist of three things: elements, interconnections and a function.

The interconnections in systems operate through the flow of information. Information holds systems together and plays a fundamental role in determining how they operate.

Stocks, Flows & Dynamic Equilibrium

Stocks refer to the accumulation of resources. Flows refer to the movement of resources either in (inflows) or out (outflows) of the stock. Equilibrium refers to the balance that occurs when the inflows and outflows result in a stable stock level.

If the sum of inflows exceeds the sum of outflows, stock levels will rise. When the sum of outflows exceeds the sum of inflows, stock levels will fall. If the sum of outflows equals the sum of inflows then the stock level will not change resulting in a dynamic equilibrium.

For example, in a bathtub, the water represents the stock and the tap and drain represent the flows. If the inflow of water from the tap is equal to the outflow of water from the drain, then the level of water will remain constant which represents a state of dynamic equilibrium.

Feedback Loops

Feedback loops are cycles that occur within systems where the output in the system influences its input. There are two types of feedback loops: positive (reinforcing) and negative (balancing).

Positive feedback loops increase changes in a system and can lead to exponential growth or decline. For example, the more people that are infected with a virus, the more they can infect others.

Negative feedback loops decrease changes in a system and work to bring the system back to a desired state. For example, a thermostat-controlled heating system works to maintain a set temperature.

Information delivered by a feedback loop can only effect future behaviour because it can’t deliver a signal fast enough to correct the behaviour that drove the present feedback.

Shifting Dominance, Delays & Oscillations

Shifting dominance refers to how different feedback loops within a system become dominant at different times, leading to changes in the behaviour of the system. Delays refer to the time it takes for changes in one part of the system to affect other parts of the system. Oscillations refers to the fluctuations in the behaviour of a system.


Constraints refers to factors that limit the ability of a system to achieve its goal. They can arise from either internal or external factors. For example, in a manufacturing system, a bottleneck in a production line is a constraint that limits its output.

Resilience & Self Organisation

Resilience refers to a system’s ability to survive while maintaining its function and structure. Self-organization refers to the process by which systems evolve and adapt over time.


Hierarchy refers to the subsystems within systems. The fundamental purpose of a hierarchy is to always is to help its subsystems do their job more effectively. In other words, the purpose of the upper layers of hierarchy is to serve the purpose of the lower levels of hierarchy. Hierarchical systems evolve from the bottom up.

To be a highly functional system, hierarchy must have a balance between enough centralisation to provide coordination toward the large system goal and enough decentralisation to allow enough autonomy to keep all the subsystems flourishing.

When a subsystem’s goals dominate at the expense of the total system’s goal, the resulting behaviour is called sub-optimisation.

Open Versus Closed Systems

Open systems can exchange energy and matter with the external environment. Closed systems cannot exchange energy and matter with external environment. Thus, open systems can evolve and adapt but closed systems cannot. It’s important to note that recurring behaviour is only possible in an closed system.

Why Understanding Systems Is Important

Systems thinking provides us with a holistic lens to understand the world around us. This perspective allows us to better predict the behaviour of systems, solve problems more effectively and make more informed decisions.

Summary (TL;DR)

A system is a set of interconnected components that interact with eachother towards a specific common purpose.

The key elements of a system are stocks, flows, dynamic equilibrium, feedback loops, shifting dominance, delays, oscillations, constraints, resilience and self organisation and hierarchy.

Understanding how systems work provides us with the ability to more accurately predict the behaviour of systems, solve problems more efficiently and effectively and improve decision making.


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