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This article is originally published on Forbes on 25 April 2025 (https://www.forbes.com/sites/maryjohnstone-louis/2025/04/25/todays-most-crucial-leadership-skill-is-systems-thinking/)
In face of global uncertainty, how are top executives and board members delivering genuine insights for their organisations?
The answer is systems thinking: arguably the most crucial skill in today’s strategy toolkit. As geopolitical tensions, technological change, and economic shifts move quickly and unpredictably, understanding how your business relates to a web of interconnected systems is essential for decision-making. Systems thinking enables leaders to see beyond isolated events and identify the underlying patterns and feedback loops that drive outcomes. It is, in essence, a framework for navigating complexity.
What is Systems Thinking?
At its core, systems thinking is an approach to strategy that focuses on shifting the conditions holding a problem in place. Recent examples of such “problems” include fragility in global supply chains, challenges with governance of AI and technology, widespread mental health complications affecting employment, and intensified environmental strain ranging from water scarcity to pollution. Each of these problems impacts business and is impacted by business in turn. However, it is not always clear how a firm should direct its resources towards mitigating risk from such challenges, let alone seeking to resolve them.
Systems thinking enables leaders to recognise the dynamic relationships within and around their organisation, focusing on root causes rather than symptoms. The concept, developed by systems theorists including Donella Meadows, provides practical tools for mapping the complex systems that affect your organisation’s sustainability and success. This holistic approach enables leaders to anticipate unintended outcomes and identify smart leverage points on which their organisations can focus resources.
In today’s volatile, uncertain, complex, and ambiguous (VUCA) world, the need for systems thinking is more pressing than ever. Businesses that fail to account for the broader context of their environment find themselves blindsided by change and fail to capture significant opportunities for sustainable value creation.
The Importance of Systems Thinking in an Uncertain World
Global risk reports highlight the unpredictability of today’s political, economic, and environmental landscapes. The World Economic Forum’s Global Risks Report consistently underscores the interconnectedness of risks, including cyber threats, political instability, and diminished trust in institutions. The 2025 report not only presents global risks in the familiar form of a ranked list to which leaders have become accustomed, but also as a visually compelling map depicting the connection between risks. This change – from a list-based view of outcomes to a focus on their strategic links – epitomises the mindset shift that makes systems thinking a powerful tool.
Systems are ‘a set of things… interconnected in such a way that they produce their own pattern of behaviour over time’. This is a core insight of systems thinking: systems, by definition, have emergent properties that no one within the system designs or even anticipates. For this reason, it is essential to approach systems challenges with tools that equip your organisation to understand how the outcomes your business observes are generated at the systems level. Without systems thinking, interconnected challenges can overwhelm leaders and organisations, leading to reactive and ineffective responses, and even responses that perpetuate the problem.
Five Key Tools of Systems Thinking
Working with resources such as the open-source Omidyar Systems Practice Workbook or Meadows’ iconic Thinking in Systems: A Primer, you and your teams can become confident in your ability to lead effectively and navigate complexity through a systems-based lens. While systems thinking offers a wide range of approaches and methodologies, five core pillars of systems thinking are:
1. Problem Statements
A clear problem definition forms the foundation of systems thinking. Arriving at a good problem statement is often tougher than it appears: leaders must be able to describe problems not just in terms of symptoms, but as part of larger systems. This is the difference between a (less compelling) problem statement such as, “How do we convince customers to recycle our packaging?” and a sophisticated problem statement, such as, “Our products contribute to post-consumer waste due to their materials, single-use design, and lack of recycling infrastructure. How might we reimagine our product design and service ecosystem to support circularity?”
2. Stakeholder Mapping
Stakeholder mapping involves identifying all parties impacted by a decision, from customers and employees to suppliers and regulators. By understanding the relationships and interdependencies among stakeholders, leaders can make more informed decisions that minimise risks and maximise long-term benefits. Like problem statements, stakeholder mapping is not as simple as it may at first appear: a systems map for electric vehicles would include, for example, national and local governments, parts suppliers, industry bodies, and urban planners as well as global commodities traders and communities adjacent to critical mineral mining sites, to name a few.
3. Iceberg Analysis
Aptly named, iceberg analysis is used to identify underlying causes and patterns driving a given outcome. It helps leaders understand the “shallow” observable symptoms of a problem and trace them to deeper systemic causes. Above the metaphorical “waterline” is the visible iceberg of events and outcomes. It is commonplace for executive teams to focus on the level of events, responding, understandably, to known opportunities and risks they wish to manage. However, the power of the iceberg model is its ability to draw your team’s attention to the dynamics leading to the outcomes your business observes: “below the water” norms and practices which are influenced by systems-level structures, including power dynamics and tacit ways of organising. Closer examination reveals that these, in turn, are upheld by mindsets and mental models that represent the true “root cause” of outcomes.
4. Causal Loops
By demonstrating circular patterns of cause and effect, causal loops illustrate how variables in a system influence one another. This is why causal loops are powerful: by sketching the constituent parts of a pattern and how they are linked, causal loops offer insight to you and your teams into where to focus your limited resources and attention. By mapping these feedback loops, you gain insight into how actions in one area can trigger unintended consequences, highlighting the leverage point any intervention will need to disrupt, reset or reverse to alter outcomes.
5. Iteration and Testing
Systems thinking emphasises the importance of iterative processes. Leaders should constantly test their assumptions, track the outcomes of their decisions, and refine their strategies. For many teams, this is countercultural. It means learning to check yourself when you find your team proposing solutions before you have identified root causes. For action-focused leaders in high-pressure environments, this can feel deeply counterintuitive. However, in an unpredictable world, a flexible, adaptive approach is key to resilience and long-term performance. Systems thinking helps you to normalise iteration within your teams through a structured, transparent methodology.
Systems Thinking is a Core Strategy Skill
The ability to think systemically is no longer a nice-to-have for leaders. It is a crucial capability for leading a sustainable, credible business. Systems thinking has a place in the curriculum of every business school. With the interconnectedness of global risks, leaders who embrace systems thinking will not only understand how their company operates within the broader system but also be able to anticipate change and lead their industries. Systems thinking tools, including good problem statements, comprehensive stakeholder mapping, smart iceberg analysis, and well-designed causal loops, are gold dust for strategy in today’s world. But the most important contribution of systems thinking – the ability to see the context in which your organisation sits – is the true distinctive that will enable you to lead for sustainable growth in an uncertain future.
The SIM Centre for Systems Leadership (CSL) aims to develop and build systems leadership capacity to drive transformational, systemic change for the benefit of current and future generations.
We achieve this by offering professional learning and development programmes, partnering with professionals and enterprises to enhance and apply their systems leadership capabilities for greater individual and organisational success. To learn more, email us at simacademy@sim.edu.sg to arrange a discussion.
