Question

Apply the different components of systems thinking on the zillow business scenario. In other words, the different components of Zillow as system, the input, the output, and the different feedbacks.

Answer 1

system thinking:

systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static 'snapshots'. It is a set of general principles -distilled over the course of the twentieth century, spanning fields as diverse as the physical and social sciences, engineering, and management. During the last thirty years, these tools have been applied to understand a wide range of corporate, urban, regional, economic, political, ecological, and even psychological systems. And systems thinking is a sensibility.

A system is defined by a set of elements which exhibit sufficient cohesion, or "togetherness," to form a bounded whole.

A system is a group of essential parts or subsystems, that can "affect the behavior and properties of the whole system and none of which has an independent effect on it.

The 6 Fundamental Concepts of Systems Thinking:

1. Interconnectedness : Systems thinking requires a shift in mindset, away from linear to circular. The fundamental principle of this shift is that everything is interconnected.

2. Synthesis:In general, synthesis refers to the combining of two or more things to create something new. When it comes to systems thinking, the goal is synthesis, as opposed to analysis, which is the dissection of complexity into manageable components.

3. Emergence :From a systems perspective, we know that larger things emerge from smaller parts: emergence is the natural outcome of things coming together. In the most abstract sense, emergence describes the universal concept of how life emerges from individual biological elements in diverse and unique ways.

Emergence is the outcome of the synergies of the parts; it is about non-linearity and self-organization and we often use the term ‘emergence’ to describe the outcome of things interacting together.

4. Feedback Loops:Since everything is interconnected, there are constant feedback loops and flows between elements of a system. We can observe, understand, and intervene in feedback loops once we understand their type and dynamics.

The two main types of feedback loops are reinforcing and balancing.

A balancing feedback loop, however, is where elements within the system balance things out.

5. Causality : Understanding feedback loops is about gaining perspective of causality: how one thing results in another thing in a dynamic and constantly evolving system (all systems are dynamic and constantly changing in some way; that is the essence of life).

Cause and effect are pretty common concepts in many professions and life.

6. Systems Mapping: Systems mapping is one of the key tools of the systems thinker. There are many ways to map, from analog cluster mapping to complex digital feedback analysis. However, the fundamental principles and practices of systems mapping are universal. Identify and map the elements of ‘things’ within a system to understand how they interconnect, relate and act in a complex system

Use Systems Thinking:

Problems that are ideal for a systems thinking intervention have the following characteristics:

• The issue is important.
• The problem is chronic, not a one-time event.
• The problem is familiar and has a known history.
• People have unsuccessfully tried to solve the problem before.

ZILLOW:

Zillow is a leading real estate and rental marketplace company that provides consumers with data and knowledge about homes and apartments and connects them with local professionals and realtors who can help with their purchase or rental decisions. Zillow seeks to serve the lifecycle of owning and living in a home including buying, selling, renting, financing, and remodeling.

Zillow operates through three lines of business: Homes; Internet, Media & Technology; and Mortgages.

Zillow was founded in 2006. Based in Seattle, the company was formed by two former Microsoft executives, Rich Barton, and Lloyd Frink.

EXAMPLE:

How Zillow Works: Business Model :

Zillow is empowering people with tools and information to make intelligent decisions about their homes - whether it's buying a home, selling, renting, leasing, remodeling or financing. To simplify this job for its 36 million visitors every month, Zillow categorizes the properties on its portal into four major segments:

1. For sale: The visitors on Zillow can find properties for sale by filtering them on various parameters such as agent, by owner, new construction, foreclosure, and coming soon.

2. Potential Listings: This includes a list of properties that can be made available for purchase in future. The type of properties under this category includes:

• Foreclosed: Properties where the homeowner has failed to pay the mortgage and the property has gone for foreclosure auction.

• Pre-foreclosure: Properties that are in the early stage of being repossessed due to the property owner's inability to pay an outstanding mortgage obligation.
  
• Make Me Move: Properties that homeowners enlisted to test the market and gauge potential interest, without officially listing the property for sale.

For Rent: This includes rental buildings and apartments for rent across the U.S. Also, the Zillow Rental Manager service enable landlords to accept applications and rent payments through Zillow. While the service is free for landlords, renters have to pay a fee of $29 for an application that includes background check and credit analysis.

One example of a value-additive, data analytics-driven product is the Zillow “Zestimate,” which is the sale (or rental) price that Zillow would estimate for the property given all public and provided information that Zillow has on the property. This information is publicly available and intended to be used as one point in decision making – whether that be a seller trying to decide whether it is worth it to list their home for sale, or a buyer trying to decide on an appropriate offer price

The Zestimate algorithm is, at its core, informed by the sale of comparable properties. Zillow looks at the sale prices of multiple comparable properties, and tries to tease out the home value given property features ranging from the basic (e.g., neighborhood, square footage, number of bedrooms and bathrooms) to the nuanced (e.g., fireplace, stainless steel appliances, original wood floors). The resulting Zestimate is, in theory, a highly accurate estimate of the home’s true market value – and freely available to all.[iii]

The “Zestimate” is a key component of Zillow’s virtuous cycle and therefore to increasing usage.

AI factory’s virtuous cycle

elements of a system - input, output and feedback. To put it simply, various inputs interact within the system and are transformed into outputs in the system's operations. Feedback is collected concerning the outputs, and then becomes information which is input back into the operation. Inputs and outputs are dynamic, changing as needed based on feedback, and helping to produce more effective outputs.

When we manage a system, we usually regulate the inputs and processes to produce our desired output. Here are two examples in one system:

The family can be considered a whole as well as a system. One key input into this system is the salary earned by the parents. The family transforms (or processes) the money when it pays the electric bill. Paying the electric bill produces the output of having electricity for the home. Having electricity is the feedback that reminds the parents to pay the electric bill. The family also transforms money into food by buying supplies at the grocery store.

The food that was purchased becomes input into the family's nutritional meals which are designed to address specific nutritional needs. The food is cooked (processed) and the output is eaten. The result is that the family is nourished. However, the family does its grocery shopping and finds that a particular item is not available. Not finding this particular item is feedback from the shopping trip and input into the weekly meals causing the meals to be adjusted to what was available at the store or omitted if no acceptable substitute was found. As a result, the family's nourishment could be is impacted.

Figure: The relationships among input, output, transformation (aka processes or operations), and feedback.

• The instructional design process is also system that must be managed. You collect your inputs, such as information about the learner, contexts, goals, and topic-based content, transform this information in the design process, and produce the desired output. But, that is not the end of the story.
• Feedback you receive from stakeholders, content providers, and even potential learners during the testing phase will need to be used as input into other phases of the process, resulting in revisions to your original design. The result is that the instruction you ultimately design is more effective in meeting the needs of the stakeholders and the learners and achieves the desired goal.
  
• Zillow has through the Zestimate algorithms , in theory, a relatively accurate picture of the home’s current (and potential) market value, which gives the homeowner peace of mind that the offer is reasonable and gives the future buyer peace of mind that the sale price is reasonable – a peace of mind is of great value in the home-buying process! Zillow is able to capture value through profit on the sale, and by using the transaction and home improvement data to improve the core Zestimate product.

Three great examples of systems or integrated thinking in action:

Costco and Organics – Costco has realized that one of the biggest barriers to being able to meet consumers’ growing demand for organic food is the supply chain. So they’ve started investing in organic producers. This increases their relationship capital with both customers and suppliers while improving natural capital. While it uses financial capital today, the expectation is that guaranteed supplies will give a good return on that investment in the future.

Google and Renewable Energy – Google started out as a weightless company. Their starting assets were intangible: two people and an algorithm. But the bigger they grow, the greater their tangible footprint. They’ve had to build enormous data centers that use significant amounts of energy. This has led them to become the world’s largest investor in renewable energy. These investments are a positive for natural capital and also increase the company’s brand and relationship capital. Given the outlook for non-renewable energy, this move should also reduce risk, protecting its financial capital.

Subaru and Zero Waste – Subaru has the only zero waste automotive manufacturing facility in the U.S. Their expertise has attracted many followers including the U.S. Parks Service and my family–we just bought our first Subaru! This program is a huge positive for natural capital.