Market Structure #2 – Using systems thinking to spot the right leverage points

This is the second part of Market Structure, a three-part blog series for leaders who suspect that traditional industry analysis no longer explains what they are seeing. In this series, we demonstrate how shifting your focus from surface-level competition to the underlying industry structure allows to sharpen capital allocation and strengthen strategic judgment considerably. The key to all of this is systems thinking and using it to challenge incomplete definitions of industry structure.

Have you wondered why some actions fail to change a thing, even when they seem perfectly logical? In this part of Market Structure we explore a core concept of systems thinking: identifying those rare high-leverage points where action actually transforms how a system behaves.

“We know how this should work – but for some reason, it just doesn’t.”

Organisations are constantly taking action:

• Cutting costs
• Making investments
• Improving processes
• Shifting priorities.

Yet, despite these efforts, the system’s behaviour often remains stubbornly the same. Lead times don’t shorten. Queues don’t diminish. The workload refuses to level out. Often, the issue isn’t that people are doing the wrong things; it’s that they are doing the right things in the wrong places.

So why does this happen? From the perspective of system dynamics, organisations aren’t just linear processes. They are dynamic systems characterised by:

• Stocks: Accumulations like queues or work-in-progress.
• Flows: The movement of things, such as orders or processing stages.
• Delays: The time lags between actions and their results.
• Feedback loops: Circular causalities that either reinforce or balance the system.

In these systems, not all variables are created equal. The visionary Donella Meadows offered a pivotal insight: in every system, there are points where a small shift can lead to a fundamental change in the behaviour of the whole. She called these leverage points.

Leverage in practice – a cautionary tale from the public sector

We recently worked with a public sector organisation struggling with its order-to-delivery process. On paper, the process was immaculate:

• Meticulously documented
• Thoroughly analysed
• Standardised using crisp swimlane diagrams

Despite this, reality refused to follow the plan. Orders piled up, deliveries lagged, and customer satisfaction plummeted. Most critically, order volumes were predicted to rise while the organisation was already hitting its capacity limits. Without a change in strategy, the problem wasn’t just going to persist – it was going to explode.

So, what had already been tried? The client had already done the so-called “right things”:

• Optimised individual process steps
• Added more staff
• Refined workflows.

Yet the backlog only grew. They had mapped the process correctly, but they hadn’t understood the system’s behaviour.

Here’s looking at you, structure

We took a different approach than the client. Instead of looking at workflows, we looked at the architecture of the system:

• What is accumulating?
• What is actually moving?
• Where are the true constraints?
• How does the system react to pressure?

One vital detail emerged. The designers’ calendars were fully booked for up to two months in advance, making it virtually impossible to arrange joint meetings. This meant that any item requiring a collaborative decision sat in limbo. The backlog continued to swell.

This wasn’t captured in the process map, yet it was a decisive factor. The calendar culture was acting as a capacity bottleneck and a primary source of delay

Shifting the paradigm

Using system modelling, we identified several potential interventions. Some were familiar, such as adding resources or speeding up individual tasks. These helped, but only to a point.

The second set of interventions targeted the structure:

• How work loads onto individuals over time.
• How quality issues and rework are generated.
• How delays are born and amplified.

Following Donatella Meadows’ logic, we categorised these actions by their impact. We didn’t ask what was easiest to do; we asked what would actually change the system. The greatest benefit wasn’t a single quick fix – it was a shift in mindset. The organisation moved from reactive firefighting toward structural understanding.

This led to:

• Less time wasted on low-impact, so-and-so improvements.
• Sharp focus on high-leverage pivot points.
• Predictable workloads and improved quality.
• Decisions based on shared understanding rather than assumptions.

Most organisations try to change a system by applying more force. Very few try to change it by finding the right leverage points. Systems thinking doesn’t make problems simple, but it does make them understandable. And once you understand the system, the solutions often become surprisingly simple.

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In Market Structure #3, we turn to systems archetypes, the recurring patterns that drive system behaviour across organisations. By learning to recognise these patterns early, leaders can anticipate unintended consequences and avoid solving the wrong problem twice.. If you wish to know more about enhancing your operations with a better understanding of industry structure, contact STE Analytics experts!