History

• This concept developed in the natural sciences to describe the give-and-take between an organism and its environment. Later, with the development of systems theory, the term became widely used in the social sciences, including business.
  
  

In Business

• An open business system interacts with its environment, constantly adapting in order to survive. It imports and exports energy, information, capital, personnel or influence.
  
  

Closed System

• The archetypal closed system is a space station that can meet all the inhabitant's needs without losing energy or resources.
  
  

Closed System Perspective

• Until the 1960s, closed system perspectives dominated business thinking. An organization was considered a system of managers, employees and resources, and the role of external factors was underplayed.
  
  

Open System Perspective

• Two early pioneers of open systems business theory were Daniel Katz and Robert Kahn, who in their book, "The Social Psychology of Organizations," argued that a closed-system approach fails to recognize organizations' dependence on the external environment.
  
  

Applying the Open Systems Model

• In the open systems model, a business is a system which transforms inputs to outputs. Inputs--personnel, information or equipment--are taken from the external environment and outputs--goods or services--are placed back into the environment. Businesses may design their subsystems to attain these goals.