Systems Thinking in New Product Development Term Paper

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A case study of a tech start-up reveals some of the challenges associated with implementing systems theory in new product development. This area of study hold promise, but there are some implementation issues in the real world that have been identified and perhaps in need of further exploration.


Systems thinking focuses on the interrelatedness of different systems, different roles and different disciplines. The system is not simply a set of parts, but it is how the parts work together, how they 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 the different teams involved to drive the new product from concept to market. The reality is that this role should naturally involve a level 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. This is 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 by on project management or innovation studies. Systems thinking can play a bigger role than it has to this point. This study will focus on the role that systems thinking plays in new product development to this point, but also will explore how systems thinking can be applied to new product development going forward. The focal point of this paper will be a case study, featuring a software company that is working on a new product. While confidentiality agreements preclude me from naming the company or its product, this is the company's second product. The first has been a tremendous success, but there was no process for the first. Only with the second new product launch has the company started to consider the role of process. Thus, this makes for a good case study as to what companies do today with respect to incorporating systems thinking , but more importantly how they can incorporate systems thinking to a greater degree going forward, as they solidify their processes for new product development.

Background to the Topic

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 the system.

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 to new product development, there would be a department focused on identifying opportunities, then another team that might design and build the product, and then another team would market it. If marketing and sales talk to each other, that alone would be considered a victory, let alone the other teams. New product development can actually occur just within the development team, which then dumps it onto marketing and says "Here, sell this." There are a lot of problems inherent in taking the view of the 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 to be underdeveloped. Optimally, this would be because it is fait accompli that systems thinking has been incorporated into new product development, but we know that this is not the case. The reality is that there is a lot of room for systems thinking to be incorporated into new product development.


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 better success rate than new products developed in companies without systems thinking as a core philosophy.

Research Hypothesis

The research hypothesis for this study is that products developed using systems thinking are on average more successful than products developed without systems thinking.


There is a fairly sizable body of literature on systems thinking and a lot of literature again about new product development. Yet, there is little literature that links the two. This, even though in practice there should be significant linkages. There are many companies that actually utilize systems thinking, and apply it to their new product development, yet again there is a paucity of direct study on this subject. This particular study therefore cuts into some 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 thinks about these requirements, they point to lowering the cost of developing viable products, and increasing the viability of the products that are developed. This study should begin to explore how this works in a small company that wishes to bring a new product to life, but is operating without a lot of established processes, as the product in question is only the second product that the company produces.

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Contribution to the IE/IEM Profession

This paper contributes to the profession by adding to the slender body of literature on the subject to applying systems thinking to new product development. There are findings within this study that highlight some of the benefits of utilizing systems thinking, and the pitfalls that can occur with new product development without systems thinking. This study's use of a real world example highlights the value of taking the theories that we work with and examining them in the context of the real world. The practice of IE/IEM is inherently practical, so there is significant value in a study that not only examines these subjects in theory but also in practice.

Literature Review

Systems thinking dates back quite a way, one author saying Kant, with the idea that systems thinking evolved as a means to understanding the world (Reynolds, 2011). As systems thinking evolved away from that realm and towards business practice, it provided value context to managers. If a company operating in a traditional management system applied systems thinking, departments would have a better sense of how different elements of their business piece together, and would even be able to gather feedback about their actions as the result of this greater understanding.

Best and Holmes (2010) discuss highlight the value of systems thinking. Writing in the health care context, they argue "the way we think about research, policy and practice inform and interact with each other shapes our efforts." This approach is basically systems thinking – the research and the 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. But these linkages are two-way at times, and then the practice step informs research. Conceptualized for business, business sets out policies that test the findings of research, and this testing informs the need for further research. Such an approach, applied to new product management might mean that marketing informs product what the market needs, product and development work together to bring something to market before turning it over to marketing and sales. Through their contact with the target market, these groups can then 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 the authors weaken their stance by basing their argument on the explicitly positions that organizations have no mechanisms for learning, and that if this is true they cannot learn (Caldwell, 2012); both somewhat spurious assumptions.

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." There are many people who struggle with being able to conceptualize entire systems. The value of systems thinking, therefore can be extracted by training people about systems thinking, and helping them to improve their skills in this area. In fact, the benefits of such an approach seem quite evident – when everybody within an organization is on board is aligned with the systems thinking approach, its integration into new product development will arguably be easier –some of the pushback that exists in organization 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 things like sustainability. Sustainability study recognizes the links between different elements in a system and therefore any manager attempting to improve sustainability measures will necessarily have to have 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, the different component pieces of which 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 – think Google, or Apple, among others – which opens the door for the application of broad, global systems in new product development, knowing that the world's largest and most successful companies have been able to reach such heights in recent years.

One of the best cases for systems thinking comes from Skazauskiene (2010), who made the argument that the complexity of modern business is such that systems thinking is 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 biggest concerns of the author is that cognitive intelligence competency is important in being able to apply systems thinking, so there is a societal need to develop this. From a business perspective, what this means….....

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