How many community and business problems get bigger, because we grow the ‘open loop’ rather than growing the ‘closed loop’?

Open loops involve inputs at one end, some kind of non-linear travel and some outputs at the other end. As the human population grows, as economic activity grows, as the monetary value grows, more goes in, but correspondingly more comes out of the open loop. Think of a plumbing system with water flowing through it. Think of house supply shortages and rising house prices, creating barriers to people getting onto the property ladder (the result).

With closed loops, as there is growth in population, economic activity and/or monetary value, the loop itself has enough flexibility to get fatter and it enlarges proportionately. Think of global trade, the human vascular system (veins & arteries), healthy lifestyles, housebuilds linked to household growth. Or the double-entry book-keeping system itself.

Open loops are about waste and shortage.

Open loops are about freedoms (with some adverse and sometimes unexpected consequences).

Open loops are about functional department battles (to obscure the blame for waste).

Open loops are about poor strategy, executed to excess.

Open loops allow you to only measure flow, not total volume.

Open loops are about one-time trading (exploitation), with little trust.

Open loops tend towards disorder & obsolescence over the long term.

Open loops discourage significant innovation & teamwork.

 

Closed loops are about proportionate recycling for net growth.

Closed loops are about responsibilities (what goes around comes around).

Closed loops are about joined-up leadership & waste avoidance.

Closed loops are about great strategy, executed to excess.

Closed loops allow you to measure total volume and flow. As ‘volume’ builds, its capital value also builds e.g. social network or phone network size, club membership influence, no of bank accounts held, customer information. The opportunity – create enclosed volume to create collateral than can be financially borrowed against.

Closed loops are about repeat trading (sustainability), with embedded trust.

Closed loops build order & sophistication over the long term.

Closed loops are about significant innovation & require teamwork.

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How can you make an open loop more efficient?

  • Increase the rate per period (a possible trade-off is more efficiency sooner, but faster wear and tear on the supporting infrastructure, causing more maintenance cost).
  • Increase consistency within the flow (create fewer gaps and more even flow, including using queuing or booking systems, or variable pricing, to manage time of day demand levels).
  • Reduce the friction between flow and its infrastructure (manage people’s expectations about freedom to act within boundaries and make appeals time-limited).

How can you make a closed loop more efficient?

  • Increase its flexibility to expand and contract cost-effectively, as demand dictates.
  • Leverage the infrastructure investment. If employ blended learning in higher education, can increase the flow, with proportionately less investment to scale up the infrastructure investment.

 

Are open and closed loops the same thing as vicious and virtuous cycles?

An open loop isn’t a cycle, but instead is a one way flow. A closed loop is a virtuous cycle.

Are open and closed loops the same thing as self-balancing and self-reinforcing cycles?

Self-balancing cycles typically involve trade-offs, for example in politics. Stability is achieved when there is common agreement and recognition of the value of the trade-offs made. Arguably closed and open loops can be both self-balancing and self-reinforcing. The problem with an open loop being self-reinforcing is that the downstream problems (pollution etc) prevent its sustainability.

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The opportunity

If government policy-makers take more of a closed-loop approach, rather than an open-loop approach, policy regulation might design out tax avoidance, pollution, redundancy, unemployment, crime and economic migration.

If corporate owners take more of a closed-loop approach, rather than an open-loop approach, corporate policies and procedures might design out process inefficiency, process rework, redundancy, legal and after-sales support costs.

 

The means

So how can you turn an open-loop approach into a closed-loop approach?

(1) One way is to join together two open loops to create the closed loop.

At a university, in the Facilities Management department, use heat transfer from research equipment experiments to generate power (geothermal energy generation) or heat office buildings.

Use faculty discoveries that are approved for commercial use (new materials and energy management systems especially) to reduce the university’s estate operating costs.

In a corporate setting, people are hired, work and then retire or leave the organisation. Unemployed and retired people then provide volunteer labour to advise organisations how to run better. Can these two open loops be joined into one closed loop? If the organisation creates a new status for those retiring or leaving it as employees, those ex-employees could then plough back on a voluntary basis, ideas and advice that the same organisation then benefits from, to grow and hire more staff. Similarly, when the Justice system succeeds in rehabilitating law-breakers, not only is future social cost avoided, but their productive contribution helps build the economy and national culture to greater heights.

(2) Another way is substitution – replace open with closed. This happened historically when the World adopted the double entry book-keeping approach to business records.

In a university setting, embrace a student self-service model, reinforced at all points of the student lifecycle, from preregistration, enrolment, self-directed course content enquiry, study group communication, campus services, course assessment, student survey, student finance, aspects of graduation, professional registration, alumni communication and life-long learning

In an automotive design example, effect refinements to engine efficiency aim to turn exhaust gases into usable system inputs and replace the heat (generated by friction) and moving parts wear with frictionless or solid state components.

In a government policy setting, modify the tax system to build public reserves that are ear-marked to maintain and develop public infrastructure, regardless of economic cycles. Build the fund in the good times and spend correspondingly more in the downturns.

Food for thought?

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