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One must "initiate corrective actions when deviations exceed some preset level" (Kurtyka 2005). Process improvement is essential. It is not enough to meet benchmarks; a leader must enable the entire organization to improve in a synergistic fashion. It is also not enough to 'strike it big' with one large project success: an organization must ensure that its 'system' is functional and that a single incident of success is not a fluke. This is one reason for the success of Toyota, an industry leader that has pushed itself to eliminate defects and engage in continual improvement of processes and products, even when things are going well.
Systems theory also enables a leader to locate his or her organization within the system of a larger social environment. Porter's Five Forces analysis underlies systems theory. Porter analyzes supplier power, buyer power, competitive rivalries, threat of substitutions for a product, and threats of new entry, to determine market strategy (Porter's five forces, 2008, Mind Tools). A company cannot focus on its internal workings alone: it must acknowledge the larger system in which it operates. A pricing strategy that emphasizes low costs, for example, might run into problems if supplier power enables...
A lack of immediately available substitutions may buy a company competitive 'time' to hone its market strategy.
Systems theory demands a certain amount of humility on the part of organizational leaders. Leaders must know what aspects of the environment they can change and not change, and understand that their decisions require the input and enthusiasm of others. They can also not cling to a particular theory or plan, as the market environment may change.
References
Continuous improvement. (2006). Process Quality Associates (PQA).
Retrieved November 7, 2009 at http://www.pqa.net/ProdServices/sixsigma/W06002004.html
Kurtyka, J. (2005, December). A systems theory of business intelligence. Information Management Magazine. Retrieved November 7, 2009 at http://www.information-management.com/issues/20051201/1042317-1.html
McNamara, Carter. (1997). A brief overview of systems theory. Management Help.
Retrieved November 7, 2009 at http://managementhelp.org/mgmnt/cntmpory.htm
Porter's five forces. (2008). Mind Tools. Retrieved November 7, 2009 at http://www.mindtools.com/pages/article/newTMC_08.htm
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