Applying System Thinking to Strategy Planning Through Bank Checking Accounts, Essay Example

Introduction

Organizations are incessantly viewed as systems. Though basic, the systems perspective, for decades, has lacked the invaluable management training and practices necessary to make systems thinking applicable. Only recently have organizations embraced systems thinking due in part to tremendous need for transformations in operations. This paradigm shift heralds a new understanding of management studies and organizational approach (Haines, 2000). An organization as a system consists of parts or subsystems that are integrated to accomplish objectives. The system must be designed with input, processing, output and outcome assessment capabilities. Businesses, for example, are basically supply and demand systems. In businesses, old intermittent focus on parts is no longer fashionable because it lacks the much needed integration for overall effectiveness. In the banking sector, focus has shifted to the interrelations of the parts, effectiveness of processes and feedback. This paper presents a systems thinking approach as applicable in checking bank accounts.  It is presumed that by examining patterns of interactions and focusing on structures that provoke behaviors towards successful outcomes in the banking sector, systems analysis and thinking can effectively expose future potentials of the checking systems and reveal customer fears thereby enabling banks to transform their operations.

Systems Thinking as a Component of Strategic Planning

System thinking allows management to identify real causes of issues and their solutions. Its effectiveness, however, depends not on the sum of its parts but on the overall behavior as determined by the structure and optimum operational size of a business as dictated by its operational realities (Senge, 1990). The system too seeks balance with the environment such that when interaction with the environment fails, the system reaches its limit. A circular relation thus exists between the system, its parts and the environment in which it operates.

Inherent in strategic planning is the definition of vision and missions of an organization, while taking into consideration the internal and external environments (the SWOT analysis). Setting of strategies is the next step in planning. This involves defining key areas that are likely to enhance success by relying on available resources, the SWOT analysis and other aspects of the organization. The plan should be short, clear, and flexible. More exhaustive implementation plans and techniques of monitoring can be set for action items. As a component of strategic planning, system thinking includes the generation of a strategic management environmental scanning systems both of which must be used on regular basis. Key strategies for achievement of shared visions, values and strategies are then undertaken. Thereafter, performance measures are created for vision achievement and marketplace positioning. Buy and stay in tactics can then be used during the implementation of the strategies. Implementation should include follow-ups, tracking, and reporting (Kunc, 2008).

Strategic Banking: The Checking Accounts System

In banking, checking accounts allow a customer to deposit money into his/her account using checks, cash, money orders or electronic transactions. The customer can then write paper or online checks to pay for bills and purchases. When writing a check, the customer must promise that sufficient funds are in the account. These checks are paid by the bank every night. When there are insufficient funds in the customer’s account, the bank may opt to return it to the recipient or pay the check and charge an overdraft fee to the client.  All transactions are itemized and submitted to the client through passbooks or bank statements.  The client, on the other hand can receive his/her payments through cash money, checks or money order, funds transfer or direct deposit, direct debit, standing order, cashless direct payment, or international account to account transfers.

Applying System View Approach to Checking Accounts

In exercising a systems view approach on checking transactions, it is imperative to note the history of the checking account system in banking with its roots in paper banking. Customer preferences for the numerous payment and checking methods and the viability of the technologies viz a viz profitability to the bank are also noteworthy. Several outcomes of each technology are documented. What lacks is the predictability of the system and projections of the outcome of their utility under different circumstances not conventional to their use. For example, an attempt to inhibit payment of bouncing checks on regular clients may cause him/her to migrate to another service or bank. The ability to recognize the dynamics of the system and predict transformations and delays or possible casualties of embracing untested and potential risks in technology are realities. Moreover, changes in global banking means business must be responsive to such demands to remain profitable. These challenges call for systems thinking and strategic planning in bank checking transactions.

The illustration below shows a systems thinking framework over which the strategy of checking accounts as a banking technology can be molded, implemented, evaluated and reinvented to meet requirements of time and context.

How the System’s Components Interact to Produce an Outcome

The chart represents an inventive opportunity exposed to strategic systems thinking. In the template, feedback system processes are indicated by arrows and demonstrate exchanges in information and communications. Banks invest in checking accounts with a vision of remaining most profitable as transactional institutions. Checking systems are not only necessary but are also cost effective and easy to use. The objective of such an investment is therefore to enhance its operations by taking advantage of transformation through the development of values, creativity and synergies for maximum profitability. Having been introduced in the market as a service, banks struggle to remain competitive in service provision through their input of internal resources: strategies and capabilities, effectiveness of organizational structure, working feedback systems, skills and technology. Equally important is the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis, the first two as applied internal resources and the last two as factors affecting competition and trends (McNamara, 2008).

Other external resources necessary for effective systems include analysis of Political, Economic, Social, and Technology (P.E.S.T.) and legal factors incidental to effective operation of the organization. In analyzing market place reaction, it is necessary to consider the marketing mix that comprises of Product, Price, Place and Promotion (The 4Ps). Factoring on delay must include analysis of product life cycle starting from its introduction to new markets, its growth, maturity and decline periods. It is also necessary to introduce an aspect of sustainability such as end of product strategies within the processes (McNamara, 2008).

Conclusion

The inventory opportunity is put to a systems thinking approach so as to achieve objectives which, traditionally, are only partially visible. Once found, these opportunities are utilized for growth and addition of value. The import of the strategy is illustrated in several components of the systems thinking template. The flexibility of the template is a useful attribute because it allows for the application of similar methodologies to dynamic systems. The result of such strategic thinking would be a complex but sustainable checking service cycle that increases commoditization of checking accounts. This enables the bank to predict with certainty, outcomes of current and future trends in checking transactions such as powers to credit unions, brokerage houses and savings banks. The service could be easily used even in non banking operations to reduce processing costs, float reduction initiatives, predict service affordability for clients, sell new services, and most importantly, predict customer fears and confidence in general banking.

References

Haines, S. G.  (2000). The systems thinking approach to strategic planning and management. CRC Press.

Kunc, M. (2008). Using systems thinking to enhance strategy maps. Management Decision, 46 (5), 761 – 778.

McNamara, C. (2008). Systems Thinking. Retrieved 22 September 2009, from http://www.authenticityconsulting.com/Systems_thinking.mht

Senge, P. (1990). The Fifth Discipline. Doubleday.