Understanding Complex Systems through Mental Models: What It Takes

You may have experienced this – you sit in on a meeting where there are two people – one is collecting all of the key critical information while the other is getting distracted by the filler unimportant information. This is Mental Models at work.

By Mental Models, I am referring to the diagrams that you draw in order to model what is happening in the real world.  You are simplifying what is potentially a very complex system in reality.  You are explaining how things work and you’re bringing together a number of building blocks in order to form a complete picture. 

In this article, I’ll cover how you can understand Complex Systems through Mental Models. You can also choose to watch this video instead.

If you study any top business performer or any specialist in their field, they come across like they have exceptional memories; that they’re able to recall things quicker, that they’re able to understand the needs of their customers that much quicker. I argue that this has nothing to do with exceptional memory or IQ; it has everything to do with a set of well-formed mental models that they are drawing from.  This set of mental models is a combination of what they have learned through experience and what they have learned deliberately through other sources. 

Good mental models help you distinguish what is relevant information from what is irrelevant because they help you categorize and organize the information better. 

One of the best examples I can give you of a good mental model is the business model canvas which is something that we use extensively in our projects to get our arms around our customers’ business. The model comes from a book written by Alexander Osterwalder and others. It encourages you to ask a few questions about each of the business:

• Who are the customers that they are serving 
• What is the value proposition of their products and services 
• What are the benefits that they are delivering to their customers
• Through what channels are they interacting with their customers 
• How do they acquire, retain and grow their customer base 
• How are they delivering this value through their operations 
• What resources are they utilizing 
• What are the key activities
• What activities are they having partners do 
• through all of this, what are the costs that they incur and what are the revenues that they are making by delivering this value? 

The right side of the Business Model Canvas tells you who they are delivering the value to and what is the value being delivered, what part of the value they are able to capture back as revenues for themselves. 

The left side of the Canvas tells you the activities that go into delivering this value and the costs that they incur. 

What makes the business model canvas a very appropriate mental model for us is it explains complex businesses.  It is a composite of various building blocks that are coming together, it is the ordering, the combination, and the assembly of various individual parts and explains how each of these parts works in themselves and how they are also related to each other. 

You could use such a model to explain the hotdog stand next door as well as the most complex businesses like the IBMs and the Amazons. It is a way for you to get comfortable understanding the context of the problem you’re looking to solve; for instance, for the systems that we build when we hear the requirements, this is a way for us to understand the business context driving those needs. 

Good mental models also form a basis and anchor on which to build your knowledge of a complex subject matter. With each new piece of information that you receive, you are able to categorize it and put it in the right context. You understand how changes in one part of the system influence the final outcome. You anticipate how events that just happened will create the events of the future and in that sense, you get this uncanny freaky ability to project what is coming next! 

Ramana Metlapalli