This paper investigates the relationship between systems thinking and new product development through a qualitative case study of a small technology company developing its second product. Drawing on open-ended interviews with three senior managers, the study explores how systems thinking was nominally adopted but poorly implemented, resulting in significant product launch delays. The paper reviews relevant literature on systems thinking, innovation, and new product development, identifies gaps at their intersection, and uses the case to surface practical barriers—including weak CEO buy-in, absent communication structures, and limited manager understanding of systems principles. The findings offer cautionary lessons and point toward several promising directions for future research.
Systems thinking focuses on the interrelatedness of different systems, roles, and disciplines. The system is not simply a set of parts; it is how the parts work together and interact with one another that forms the system. By focusing on the integrated whole, systems thinking is a natural fit for new product development. Most new product development is overseen by a project manager who works with different teams to drive the new product from concept to market. In reality, this role should naturally involve a degree of systems thinking.
Yet there is scant literature on the relationship between systems thinking and new product development. There is ample literature on systems thinking, and on new product development, but this intersection is seldom explored — to the detriment of business. Most companies need new product development as a means of exploiting market opportunities and driving both growth and profitability. The focus for new product development cannot simply be on project management or innovation studies alone. Systems thinking can play a bigger role than it has to this point.
This study focuses on the role that systems thinking plays in new product development, and explores how systems thinking can be applied to new product development going forward. The focal point of this paper is a case study featuring a software company that is working on a new product. While confidentiality agreements preclude naming the company or its product, this is the company's second product. The first was a tremendous success, but there was no formal process for it. Only with the second new product launch has the company started to consider the role of process. This makes for a good case study as to what companies do today with respect to incorporating systems thinking, and more importantly how they can incorporate it to a greater degree going forward as they solidify their new product development processes.
Systems thinking has been described as a management discipline "concerning an understanding of a system by examining the linkages and interactions between the components that comprise the entirety of that defined system" (Institute for Systemic Leadership, 2017). This would seem to make systems thinking a natural fit for project management of all types, including the development and launch of new products. Where traditional management sees a company as a set of individual departments each doing their own thing, systems thinking takes the view that the company is a system, and all of those departments are integrated into it.
New product development focuses on a couple of different things: first, the identification of new product opportunities, and then developing products to exploit those opportunities. If the traditional view of management is applied, there would be a department focused on identifying opportunities, another team designing and building the product, and then another team marketing it. If marketing and sales talk to each other, that alone would be considered a victory, let alone coordination with the other teams. New product development can actually occur entirely within the development team, which then hands it off to marketing with the directive "Here, sell this." There are many problems inherent in viewing a company as a set of individual departments. Systems thinking can and should play a critical role in new product development.
Yet the links between systems thinking and new product development appear underdeveloped. Optimally, this would be because it is a fait accompli that systems thinking has been incorporated into new product development — but that is not the case. The reality is that there is significant room for systems thinking to be incorporated into new product development.
Systems thinking dates back quite a way — one author traces it as far back as Kant, arguing that systems thinking evolved as a means of understanding the world (Reynolds, 2011). As systems thinking evolved away from that philosophical realm and towards business practice, it provided valuable context to managers. If a company operating under a traditional management system applied systems thinking, departments would develop a better sense of how different elements of the business fit together, and would even be able to gather feedback about their actions as a result of this greater understanding.
Best and Holmes (2010) highlight the value of systems thinking. Writing in the health care context, they argue that "the way we think about research, policy and practice inform and interact with each other shapes our efforts." This approach is essentially systems thinking — research and practice are linked with each other and with policy in order to generate superior outcomes. They describe systems thinking as a cycle where information begins in the research stage, moves to policy and then into practice, with linkages that are often two-way. Applied to business, organizations set out policies that test the findings of research, and this testing informs the need for further research. Applied to new product management, this might mean that marketing informs product teams about what the market needs, product and development work together to bring something to market, and then through their contact with the target market those groups circle back with feedback for product and development teams to generate further ideas. A critique of systems thinking holds that systems thinking without learning is incompatible between theory and practice, but this argument is weakened by its reliance on the assumption that organizations have no mechanisms for learning — a somewhat spurious premise (Caldwell, 2012).
Ulrich (2012) discusses the application of systems thinking to operational research. The study of operations informs the practice of operations, so there is value in applying systems thinking to operations research. Critical systems thinking, the author notes, will benefit both operations research and practice.
Valerdi and Rouse (n.d.) point out, however, that for many individuals and businesses, systems thinking is "not a natural act." Many people struggle to conceptualize entire systems. The value of systems thinking can therefore be extracted by training people in it and helping them improve their skills in this area. The benefits of such an approach are quite evident: when everyone within an organization is aligned with the systems thinking approach, its integration into new product development will arguably be easier, and some of the pushback that exists today — where managers can be protective of their silos — could be eliminated with greater application of systems thinking.
Systems thinking is applied in business to areas such as sustainability. Sustainability study recognizes the links between different elements in a system, and therefore any manager attempting to improve sustainability measures will necessarily need a systems mindset (Nguyen et al., 2011). The same is true for new product development, just with a different objective, even if traditional management practice has not recognized this. Systems thinking has also been linked to IT, in the sense that information systems are ultimately combinations of hardware and software whose component pieces must inherently learn to work together (Petkov et al., 2008).
One of the recent developments in systems thinking that can readily apply to new product development is the expansion of the concept to a more global terrain — focusing on larger, more complex problems (Davis et al., 2014). New product development has often been viewed as a narrow focus, but there are certainly examples of transformative products and innovations that have a larger, more holistic impact on society at large. New product development with those sorts of ambitions exists — consider Google or Apple, among others — which opens the door for the application of broad, global systems thinking in new product development, knowing that the world's largest and most successful companies have reached such heights in recent years.
One of the best cases for systems thinking comes from Skarzauskiene (2010), who argues that the complexity of modern business makes systems thinking almost mandatory: "Effective decision making and learning in a world of growing dynamic complexity requires leaders to become systems thinkers — to develop tools to understand the structures of complex systems." One of the author's central concerns is that cognitive intelligence competency is important for applying systems thinking, suggesting a broader societal need to develop this capacity. From a business perspective, companies that can recruit for systems thinking and master its application to new product development should be able to deliver more and better products than competitors who lag in this area. The author argues that systems thinking can serve as a catalyst for higher levels of organizational performance.
Sheffield, Sankaran, and Haslett (2012) further explore systems thinking and complexity. They studied project management and found that much of it becomes bogged down in complexity, but that there are opportunities to apply systems thinking to "tame" this complexity. They argue that even project managers often "do not seem to use simple systems thinking tools," despite the obvious value of those tools to the project management role. Modern management, they argue, should incorporate systems thinking — if even at a basic level — because of the benefits it brings to understanding and managing complexity, which is inherent in the modern business environment.
When systems thinking is applied to innovation, the antecedent of new product development, it can yield powerful results. A case study of Australia examined how the country's approach to improving innovation was rooted in systems thinking. Innovation as an output was fostered by focusing on a number of different variables, even when the interrelationships between variables were not fully known. There was enough evidence to recognize that multiple conditions for innovation exist, and so any strategy to foster greater innovation needed to be built around nurturing all of the different conditions individually while also understanding the linkages between them (Dodgson et al., 2009).
The literature on new product development also covers several areas of interest to this study. Bhuiyan's framework for new product development (2011) identifies as a key success factor that the new product must fit with the firm's overall strategy. Where firm strategy is clearly defined, it is easier to align new products with that strategy. When different departments align their activities towards overall objectives, that creates the opportunity for new product development to align with those objectives as well.
Leeuwis and Aarts (2010) examine the role of communication in innovation studies. They note that high levels of communication are typically conducive to higher levels of innovation, and that innovation focused on clear goals naturally requires communication between different departments within an organization. This more integrated communications approach is partway towards full systems thinking — communication being one of the critical linkages that drives systems.
One form of communication that has proven essential to new product development is creating linkages between consumers and the companies they buy from. When a company maintains regular communications with consumers, it creates an opportunity for consumers to inform the business about what products they need — an opportunity that can yield end results significantly different from what the company would have otherwise arrived at. The inclusion of the consumer perspective is part of systems thinking in new product development, because the product and development team maintain linkages with the end user that help them develop better products (Hoyer et al., 2010).
Aarikka and Sandberg (2012) support this, noting that commercialization of new products is an essential part of the new product development process. They argue that "the innovating firm needs resources to engage in consumer education, distribution, marketing communications, relationship mediation and credibility building." When innovating organizations create these linkages with the end user, those linkages better inform the new product development process.
Furthermore, when the customer is engaged in the process to a greater degree, innovation can flourish. The teams that interface with customers are often not heavily involved in the new product development process, representing a wasted opportunity to apply their knowledge to making the product better or to identify new product opportunities. Evidence from the financial services sector indicates that there is much to be gained from creating linkages between different departments that interact with the end customer and those responsible for new product development (Chien & Chen, 2007).
Another strong case for the use of systems thinking in new product development comes from Barton (1992), who outlines that companies often focus new product development on their core competencies as they understand them. But companies also have core rigidities — preconceived notions or ideas that ultimately constrain their new product development. A company may be locked into a particular vertical or product line, and even if it has a competency that can be applied elsewhere, it develops a certain myopia that prevents it from fully leveraging those competencies. Systems thinking would serve as a way to overcome such rigidities: other parts of the organization, when working together with development teams, would recognize certain opportunities that might otherwise go unnoticed during brainstorming. Systems thinking should therefore be applied to all stages of new product development, not just when a product is nearing market.
An area of systems thinking application to new product development that has been explored is decision-support systems (Chan & Ip, 2011). Decision-support systems typically intake data and produce outputs that help managers make decisions. A new product development process will often face a number of go/no-go decision points, and a decision support system can help with making those calls based on models. The models, and the data input into them, must come from somewhere, and a model embedded in a decision support system is not really worth much if it does not contain insight from a number of different departments regarding the potential market for a new product and the costs associated with bringing it to market. While not explicitly discussing systems thinking, this literature touches upon a common tool in new product development that ultimately relies on at least rudimentary systems thinking to be valuable.
Driessen and Hillebrand (2010) also explore this theme, focusing on the multi-stakeholder approach. They caution, however, that the involvement of multiple stakeholders does increase complexity — and this may be one of the things that holds back organizations from applying systems thinking to their new product development. Systems thinking, like the multiple-stakeholder approach, is inherently complex. It requires considerable work and expertise in handling complexity to properly execute, and as such there are barriers to its universal adoption. Nevertheless, there is a clear thread in the literature on new product development that notes the value of incorporating many different stakeholders, teams, customers, and voices into the new product development process.
Incorporating systems thinking into new product development will improve the quality and marketability of new products. Outcomes for organizations should be better — new products developed in companies with systems thinking should have a higher success rate than new products developed in companies without systems thinking as a core philosophy. The research hypothesis for this study is that products developed using systems thinking are, on average, more successful than products developed without it.
There is a fairly sizable body of literature on systems thinking and a substantial body of literature on new product development. Yet there is little literature that links the two, even though in practice there should be significant linkages. Many companies actually utilize systems thinking and apply it to their new product development, yet there remains a paucity of direct study on this subject. This study therefore cuts into new ground in exploring how systems thinking can impact the new product development process. The underlying logic of systems thinking is a good fit with the objectives of new product development — namely, to bring products to market profitably. When one considers these requirements, they point to lowering the cost of developing viable products and increasing the viability of the products that are developed. This study begins to explore how this works in a small company that wishes to bring a new product to life but is operating without many established processes, as the product in question is only the company's second.
This paper contributes to the field by adding to the slender body of literature on applying systems thinking to new product development. The findings highlight some of the benefits of utilizing systems thinking and the pitfalls that can occur without it. The use of a real-world example highlights the value of examining theories in the context of practice. The field of industrial engineering and industrial engineering management is inherently practical, so there is significant value in a study that examines these subjects not only in theory but also in application.
"Qualitative case study design and interview approach"
"Manager interviews reveal weak systems thinking uptake"
"Interpreting failure and lessons for implementation"
"Cautionary lessons and future research directions"
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