Online Discussion of ISSS paper 2002-045,"The Five Elements Theory in Business Research", Kuang-Cheng WANG

Below is an archive of the comments contributed by members of the International Society for the Systems Sciences (ISSS), prior to discussion within the Special Integration Group (SIG) on Systems Applications in Business and Industry (SABI). For more information on the discussion which occurred in person during the meeting, please contact someone who attended the session!

(7/7/02 2:00:02 pm)
WANG 2002-045 The Five Elements Theory in Business Research


The purpose of this article is to apply the Chinese systems thinking, the five elements theory, to business research. The five elements theory is a cornerstone of Chinese culture. The Chinese believe that all penomena can be categorized into five elements: Wood, Fire, Earth, Metal, and Water. How things are characterized depends on their respective qualities. This author attempts to demonstrate that the five elements theory can be applied to manage the complexity in business problems. First, a clear description is given to explore the nature and explain the principles of the five elements theory. Second, the similarities between the five elements theory and the Western concept of systems thinking are compared and discussed.

In addition, the conceptual framework approach in the traditional business research, the framework of causal relationship comprised of independent, intervening, moderating, and dependent variables, will be shown to be incapable of expressing and handling the complex business realities. Finally, this article tries to classify the various variables in business researches in terms of the five elements. Three propositional examples are provided to clarify the confusion when applying this theory to complex business problems.

(7/11/02 9:51:15 am)
Re: WANG 2002-045 The Five Elements Theory in Business Resea

This is an interesting application of an ancient, traditional "mental model" to contemporary issues. In addition to the examples given, it would seem that the five elements could also be seen in relation to the "S curve" model of organizational or product development -- periods of emergence, growth, stabilization, decline, and reemergence. In the West, it is common for ideas from science, philosophy, and other disciplines, to be applied to business issues as analogies that might offer insights. I would be curious as to whether this application of the five elements is seen as an analogy or metaphor (i.e., a hypothetical way of looking at things) or whether it is thought to represent the actual underlying realities of business processes, as has been apparently thought of all reality in traditional Chinese beliefs.

Gary Metcalf

(7/19/02 4:25:45 am)
Re: Dear Cary's question to the five elements theory

Dear Gary

I deeply appreciate your reading my paper. The application of the five elements theory to business researches can be considered as an analogy or metaphor that utilizes the wisdom of the ancient Chinese in systems thinking. Because of its great generality, the five elements theory can be and has been successfully tested and evidenced in various disciplines, especially the traditional Chinese medicine. Therefore, when applying this theory to business researches, the key problem we have to solve is how to classify the elements of the real business systems into the corresponding ones of the five-element model rather than identify the relationship among the elements.

I agree that the five elements could be seen in relation to the ¡§S curve¡¨ model of organizational or product development. However, this is just one of the ways to explain and illustrate the properties of the five elements. I can share more knowledge of how to look at this five-element model with you if you are interested in it.

Kindly yours,

Kuang-cheng Wang

(7/27/02 4:15:35 pm)
Re: WANG 2002-045 The Five Elements Theory in Business Resea

Key insights I got from the paper:
The paper provides an excellent summary of the Five Elements Theory

How might I apply these concepts:
I'm currently doing work around relational governance (e.g. the design of counterbalancing forces negotiated for long-term relationships, in particular around strategic alliances). The nourishing effect and controlling effects may be useful to understand why a governance structure isn't working.

Additional ideas I might suggest to the author.
* Is the model more cybernetic, rather than purposeful?

Ackoff is a good source of systems definitions, but drives towards discussions on purposefulness, particularly in social systems (as compared to mechanistic, organismic and ecological systems). The differentiation is in terms of purpose in the parts versus purpose in the whole. See Ackoff & Gharajedaghi (1996). "Reflections on Systems and their Models", Systems Research, Vol. 13, No. 1, 1996, pp. 13-23.

* How do we use this framework to develop a design of the business (or does it just occur)?

An alternative approach to structuring forces a social system comes from a social theory approach, e.g. Pierre Bourdieu's framework of habitus, field and capital. See Pierre Bourdieu and Loic JD Wacquant (1992), An Invitation to Reflexive Sociology. University of Chicago Press, 1992.

* How might this model inform a better structuring of "elements", when discussing the design of an enterprise?

As opposed to a functional view of the business (a la Ackoff), might the five elements theory be another method to approach organizational change? See [reference may be fuzzy] Robert J. Marshak, "Lewin Meets Confuscius", Journal of Applied Behavioral Science, 1993.

(7/30/02 3:31:26 am)
Re: Dear David's comments on the five elements theory

Dear David

Thank you for your insightful comments and suggestions. In fact, my paper that will present at the conference called in Shanghai can be considered as an introduction to the five elements theory. My recent studies focus on the elaboration of the interactions among the five elements in terms of business and management functions. Various relevant examples are collected. Take ¡§benchmarking¡¨ for example; benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders. The industry leaders¡¦ qualities or standards of products, services, and practices can be classified as Fire, whereas the performance of our company can be considered as Metal. According to the controlling effect of the five elements theory, Fire controls Metal. In this example, the controlling effect means checking, monitoring or reforming. In other words, managers could use the super performance of the strongest competitor in the industry as a standard to check or monitor their corporate performance. Furthermore, the high performance standard of competitors acts as a trigger for the organizational change (reform) to enhance our corporate performance.

Another application of the five elements theory in my future research may be evolving around the topic of strategic alliances. For example, TSMC (Taiwan Semiconductor Manufacturing Company) is the world's largest and most successful dedicated independent semiconductor foundry. TSMC¡¦s core competence is in its incomparable production function that can be regarded as Earth. The nourishing relationship related to Earth is that Earth nourishes Metal. Therefore, it means that TSMC can make money out of its process technology and manufacturing excellence. In fact, it is really a highly profitable company, which means TSMC possesses a strong Metal. However, TSMC is weak in the design capabilities of the advanced IC technology, which belongs to Wood (R&D). Consequently, firms, like TSMC with strong Earth & Metal, will most likely be looking for partners whose strength is built on Wood. This type of cooperative arrangements forms a ¡§triangle relationship¡¨¡ÐEarth, Metal and Wood. Of course, there are other four types of triangle relationship in the five-element model, which can imply different strategic alliances.

If any problems, it will be my pleasure to share more examples and discuss with you while I arrive Shanghai.

Yours truly,

Kuang-cheng, Wang


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