Misaligned incentives
Incentives create behaviours that do not support the intended economic outcome.
PROBLEM DETAIL · ECONOMIC SYSTEM
A system becomes unstable when its parts no longer follow a coherent logic.
Resources, incentives, value flows and decisions are interdependent. Changing one part without understanding the system can create a new constraint elsewhere.
Start with the problem, not the symptom.
Understanding an economic outcome requires seeing the relationships among resources, incentives, value flows and decisions as a system.
Where can the system problem sit?
These points help start the diagnosis, but the final answer depends on the relationships among the elements of the system.
Unclear value flows
It is not clear how value is created, transferred and captured.
Resource leakage
Resources are consumed in parts of the system that do not create enough economic value.
Disconnected decisions
Decisions are made without understanding their consequences for the wider system.
Economic outcomes do not come from a single component.
An economic system is shaped by the relationships among resources, incentives, value flows, decisions and outcomes.
Business model
Resources
Incentives
Value flow
Decisions
Outcome
Relationships matter
Which questions make the system clearer?
01
Which elements shape the economic outcome?
→02
Where is the bottleneck in value or resource flows?
→03
Which incentives shape behaviour?
→04
Which relationship in the system needs redesign?
→From system mapping to redesign
We identify the key elements, examine relationships and flows, and then test where redesign could create leverage.
01Frame the problem
02Map the elements
03Analyze relationships
04Identify leverage
05Design options
06Decide and redesign
Core outputs
Clear system map
A practical output that can support the next decision.
Leverage points
A practical output that can support the next decision.
Redesign options
A practical output that can support the next decision.
Decision logic
A practical output that can support the next decision.
NEXT STEP
See the system clearly, then redesign the decision.
When the important relationships become visible, new design options and more coherent decisions become possible.