Understanding Feedback Loop in Systems Theory

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In systems theory, a feedback loop is a type of relationship between different factors in an organization. There are two basic types of feedback loops balancing and reinforcing (MindTools.com, 2012). Understanding a feedback loop requires an understanding of not only the data but the way that the data affects behavior, and works on the relationship between different factors. Organizations seek to cultivate feedback loops in order to improve performance (Goetz, 2011). By understanding the feedback loops to which the organization is subject and learning from when those loops no longer function or learning from negative feedback loops when they are functioning organizations can improve their performance over time. A balancing feedback loop is one where the relationship between the different elements is such that the factors contribute to returning the organization to a base state. One balancing feedback loop at Skype is the balancing loop that suppresses revenue. This loop is, unfortunately for Skype, an essential part of its current business model. The nodes of this loop are the membership and the revenue. The loop functions as follows. Skype benefits from having more users, because more users should roughly equate to more revenue, since people who use Skype to call non-Skype users must pay for that telephony. Normally, this type of loop is reinforcing, so that more customers equates to more revenue, with which the company can attract even more customers. At Skype, however,
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