Adaptive Design: A Conversation About Systems Thinking Approach to Contract Structure
- Katie Shearn
- May 15
- 13 min read
Exploring how systems thinking creates flexible solutions without losing clarity, accountability, or risk awareness.
Two friends, Emily and Katie, recently sat down to have a conversation about systems thinking and how it can be applied to real-world problems. Emily approaches the conversation with curiosity and a desire to better understand how systems influence outcomes over time. Katie has spent years applying systems thinking principles to complex environments, helping redesign structures around risk, adaptability, relationships, and long-term sustainability.
Their conversation eventually led into a recent owner-finance contract project that challenged traditional assumptions around structure, accountability, and what it really means for a system to “work” in the real world.
Emily:
"The other day we were talking about systems thinking and how it applies to real-world problems, and you mentioned that you recently worked on restructuring an owner-finance contract in a completely different way than what most people are used to seeing.
Before we get into the details, can you explain what an owner-finance agreement actually is for people who may not know?"
Katie:
"Sure thing! At a high level, an owner-finance agreement is when the seller of a property acts like the bank instead of a traditional lender.
So instead of going through a mortgage company, the buyer makes payments directly to the seller over time based on whatever terms both parties agree to.
Most of these agreements are structured in a very fixed way, usually with rigid payment expectations, strict timelines, and clearly defined consequences if those expectations aren’t met.
And honestly, I understand why. That structure feels safer because the boundaries are tight and predictable.
However, I’ve learned through experience that life doesn’t always operate in tight and predictable ways, but that doesn’t mean success isn’t possible. I think there are ways to manage risk while still being creative and adaptive in structure."
Emily:
"So why does systems thinking come into play with this particular contracting structure?"
Katie:
"Systems thinking is really about stepping back and looking at the whole picture instead of just isolated parts.
Instead of only asking questions like, “How much is this contract worth?” or “What’s the goal of the agreement?” you start expanding the lens to better understand the environment surrounding it.
Questions start becoming more like:
How do the people involved actually operate?
Where does risk truly show up?
What does the seller control versus what the buyer controls?
What assumptions are being made?
What happens if circumstances change?
How do all of these pieces interact over time?
By asking the right questions, you gain a clearer picture of reality. The goal is really to uncover the true objective and make sure the right problem is being solved in the first place.
Instead of reacting only to surface-level problems or relying on assumptions that may not actually address the real risk, you begin mapping out the bigger picture and how different factors, behaviors, responsibilities, risks, and conditions all connect and influence one another over time.
I would personally describe that as a system, but more familiar ways to think about it might be:
the bigger picture
the moving parts
the environment surrounding the agreement
or the relationships influencing the contract
It’s less about forcing a rigid structure and more about understanding the relationships, behaviors, and feedback loops influencing whether something can actually succeed long-term.
That’s where the perspective started to shift in this situation. It created space to think beyond the standard template while still protecting the core obligation of the agreement."
Emily:
"And that’s what made you approach this agreement differently?"
Katie:
"Exactly.
The seller was open to redesigning the structure because the risks were clearly mapped out and written into the agreement in a way that created visibility and protection, while still recognizing the buyer’s actual situation and needs.
A traditional structure really wasn’t a realistic option here, so the question became: how do you create something different without losing accountability?
I think people often underestimate how complex situations, agreements, and relationships can actually become in real life. Most traditional contracts are built around the assumption that progress will happen consistently, predictably, and in the same pattern over time.
But reality is usually more dynamic than that.
Income can fluctuate, timing can shift, and circumstances can change even when the overall intention and effort to fulfill the agreement are still there.
When you force a rigid structure onto a situation that naturally has variability, it can create more pressure and friction than actual progress.
Systems thinking offered a different approach. It allowed the end goal to stay clear while building flexibility around how that goal could realistically be reached.
So instead of the system failing the moment something didn’t happen exactly as predicted, the structure had the ability to adapt, respond, and still continue moving toward the original obligation."
Emily:
"Sounds like you’re not removing accountability, you’re redesigning how accountability is measured and managed over time?"
Katie:
"Exactly.
The obligation itself didn’t change. The line in the sand stayed the same.
What changed was the path to reaching it.
And this approach isn’t meant to replace traditional structures. In a perfect world, those structures probably work best.
But not every situation operates in a perfect world.
So the challenge became: how do you create something that still protects the outcome, while also being realistic about how life actually works?"
Emily:
"So all of this thinking about systems, flexibility, risk, and human behavior… that’s what caused you to approach this contract differently?"
Katie:
"Yeah. Because what made this situation different wasn’t just the contract terms, it was the dynamics underneath them.
There were multiple layers of risk, responsibility, and human behavior interacting at once. I saw this as a dynamic system with interconnected risks and feedback loops that a traditional structure wasn’t designed to fully account for.
A standard structure would’ve addressed the surface-level things like fixed payment timing, due dates, penalties, and basic enforcement terms, but it wouldn’t have addressed what was actually influencing whether the agreement would realistically succeed over time.
That’s where the approach began evolving differently.
Instead of only asking, “What would happen in a perfect world?” I had to ask, “What is most likely to happen based on the actual conditions surrounding this agreement?”
From there, the focus shifted toward understanding the range of possible outcomes the contract could realistically encounter over time and how the structure could account for those possibilities without losing risk protection or the core obligation itself.
The challenge became creating language flexible enough to adapt to changing conditions while still keeping the agreement anchored to a clearly defined obligation and timeline.
So the real challenge wasn’t just creating a contract.
It was creating one that could adapt to reality while still protecting the core obligation."
Emily:
"What factors were you looking at that most contracts don’t usually consider?"
Katie:
"I was looking beyond just the financial terms.
The first thing I started asking was: where does risk actually exist, and which parts of that risk are within our control versus outside of it?
For example, in many Power Purchase Agreements (PPAs), there’s force majeure language that accounts for unexpected “act of God” events or circumstances outside either party’s control. That’s something commonly addressed in larger commercial agreements, but not always considered in a standard owner-finance structure.
I felt it was important to think more broadly about risk and what the seller is responsible for, what the buyer is responsible for, and how the agreement would respond if circumstances changed unexpectedly over time.
I also spent a lot of time thinking through what reality could actually look like if things didn’t unfold predictably for either side.
I started by asking: “What would the ideal version of this agreement look like if everything went perfectly?”
Then I worked backwards from there.
What happens if timing shifts?What happens if progress becomes uneven?What happens if circumstances change, even though the overall intention to fulfill the agreement is still there?
Instead of trying to write out every possible scenario individually, I focused on building language broad enough to account for variability while still clearly defining responsibility, accountability, and risk between both parties.
Most contracts are built around the assumption of stability and predictable progression. But I could already see that reality would likely be more dynamic than that.
So the real question became: Can you still successfully reach the same end goal, even if the path doesn’t unfold as smoothly or predictably as expected?
And through systems thinking, I believe the answer is yes."
Emily
"So how did systems thinking change the way you looked at risk within the agreement?"
Katie
"It changed risk from something I was trying to eliminate into something I was trying to better understand, map, and respond to.
Because risk exists whether we acknowledge it or not.
At its core, a contract is really a structured way of defining responsibility, accountability, obligations, and what happens under different conditions over time.
So instead of pretending certain risks didn’t exist, systems thinking allowed me to make those risks more visible and ask:
Which risks can actually be controlled?
Which risks can only be managed?
Which risks are shared?
Which risks are environmental?
How do different risks influence one another?
And how can the structure respond if those risks become reality?
That shift changed the entire design process.
Because once you stop viewing a contract as just a fixed set of rules and start viewing it as a map of relationships, risks, accountability, and response pathways, you begin designing very differently.
The goal wasn’t to remove accountability or avoid risk entirely. The goal was to better understand the system surrounding the agreement so the structure could remain stable even when circumstances changed over time."
Emily:
"So once you started looking at this as a system instead of just a contract, what changed?"
Katie:
"I stopped trying to force the structure to create certainty and started focusing more on designing for adaptability.
A traditional approach often tries to reduce uncertainty by tightening control around the process.
But systems thinking showed me that uncertainty was already part of the environment whether the contract acknowledged it or not.
So instead of pretending variability didn’t exist, I designed the structure to account for it while still protecting the core obligation.
That changed everything.
Because now the agreement wasn’t relying on perfect consistency to survive, it was built to handle fluctuations, adapt to changing circumstances, and provide clarity around how different scenarios would be handled over time.
Whether the obligation was successfully fulfilled or the agreement moved into a default pathway, both the buyer and seller had a clearer understanding of the risks, responsibilities, and next steps involved, creating more confidence in how to respond and move forward.
To me, the success of the contract wasn’t just about whether the obligation was met exactly as planned or whether the structure itself was unique. Success meant creating a system that could still provide clarity, direction, and protection no matter how circumstances unfolded over time."
Emily:
"What were the biggest design shifts you made?"
Katie:
"I would say one of the biggest shifts was moving away from rigid expectations and focusing more on performance over time.
The total obligation stayed the same, that didn’t change. That was the line in the sand.
What changed was how the structure allowed that obligation to be met in a way that better aligned with the reality of the system.
Earlier I mentioned how I kept asking a wide range of questions. That process helped filter through a lot of noise and assumptions so I could identify the true boundaries that actually needed to exist within the agreement.
But I didn’t stop once the language was written.
After building sections of the contract, I would step back and ask:
“What happens if circumstances change?”
“How does this language respond?”
“Does the structure still hold if reality shifts?”
That became a form of feedback looping throughout the design process.
Instead of trying to write a separate rule for every possible scenario, I focused on creating language broad enough to capture risk and responsibility without needing to spell out every situation individually.
At the same time, I didn’t remove the structure, instead, I adjusted it.
For example, I rethought how checkpoints and progress tracking could work within the agreement so there was still accountability and visibility over time.
So now you had both flexibility and awareness.
You could see whether things were progressing before they fully broke down.
And I think that combination is what made the structure more resilient."
Emily:
"How did you manage risk with that kind of flexibility?"
Katie:
"Great question! I actually didn’t remove risk, I technically made it more visible.
The contract clearly defines what happens under different scenarios, so you’re not reacting emotionally in the moment.
And it’s not just success or failure, it’s layers of awareness.
Are we on track?
Are we at risk?
Do we need to adjust?
That creates space for correction without removing accountability."
Emily:
"How did you know it was actually working?"
Katie:
"The first success marker, or feedback loop, was when both parties executed the agreement within the required timeframe.
Timing was important to the success of the deal, so seeing both sides align and commit on schedule was an early sign that the structure was functioning as intended.
Another strong signal was that even though progress didn’t unfold in a perfectly predictable or evenly paced way, the agreement still continued to meet its key checkpoints and obligations over time.
That was important because it reinforced the idea that the structure was aligning more closely with real-life conditions than a traditional setup likely would have.
Things didn’t happen in a perfectly linear or consistent pattern, but the agreement still progressed forward.
And that’s really the goal, not perfection, but creating something resilient enough to continue functioning under changing conditions over time.
We’re also still relatively early in the lifecycle of the agreement, so it remains active and continues to provide value as the system evolves."
Emily:
"That leads me to my next question, how do you define success in something like this?"
Katie:
"I don’t define success as everything going perfectly.
To me, it’s successful if the system works no matter what happens.
Whether the agreement is fulfilled as planned, or something shifts and it moves into a different outcome, like default or a recovery scenario, the structure still holds, and both parties are protected.
That’s the whole point.
It’s not about forcing one specific outcome. It’s about making sure whatever happens is already accounted for and handled clearly.
And honestly, you can only fully measure that over time.
It’s still active, so it’s still playing out."
Emily:
"How does systems thinking change decision-making over time for this particular contract?"
Katie:
"It shifts decision-making away from reacting emotionally to short-term fluctuations and back toward evaluating the bigger picture over time.
In a rigid structure, even small deviations can immediately feel like failure because the system is built around the assumption that everything should happen in a perfectly predictable pattern.
But in reality, progress doesn’t always happen evenly.
So instead of constantly asking: “Did this exact step happen exactly on time?”
The focus becomes:
“Is the agreement still moving toward the intended outcome?”
“Are the risks increasing or decreasing?”
“Do the checkpoints still show progress over time?”
That changes the emotional dynamic of the agreement quite a bit.
The structure creates more visibility and awareness instead of forcing constant reactionary pressure around every short-term fluctuation.
It also allows both parties to make decisions with a broader understanding of the system rather than getting trapped inside isolated moments.
So the agreement becomes more adaptive over time instead of becoming fragile the moment reality doesn’t unfold exactly as predicted."
Emily:
"What do you think most people miss without a systems thinking approach?"
Katie:
"Another great question! I think a lot of people focus too heavily on controlling parts of the system that were never fully within their control to begin with.
They become overly focused on how the structure or process should play out without stepping back and asking whether that structure is actually aligned with the real goal and the reality surrounding it.
There’s often an assumption that if the process looks correct on paper, then the outcome should naturally follow.
But those structures are frequently built on hidden assumptions around predictability, consistency, timing, or control that may not actually reflect real life.
So people end up optimizing the wrong parts of the system.
For example, they may focus heavily on enforcing perfectly timed steps, rigid payment schedules, or strict processes because those things create a feeling of certainty and control.
But if the structure itself doesn’t align with how the people, risks, and circumstances within the system actually behave over time, the agreement can still fail even if the contract is technically written “correctly.”
That’s one of the biggest things systems thinking changed for me.
It shifted my focus away from immediately tightening or optimizing the structure itself and more toward asking:
What conditions are actually creating risk within the system?
Which parts are truly within our control versus outside of it?
What feedback loops are revealing reality versus exposing assumptions?
Once you start thinking that way, you realize that structure alone doesn’t create success. The structure has to align with the reality of the environment it’s operating within.
That’s one of the biggest advantages systems thinking brings to the table, it helps you separate what is real from what is assumed, understand how different parts influence one another over time, and identify where control, influence, and responsibility actually exist within the system. Systems thinking filters a lot of the noise and enables those to move forward with confidence!
And once you see that, it changes how you design everything."
Emily:
"What do you think this experience ultimately says about systems thinking as a whole?"
Katie:
"I think it shows that systems thinking isn’t really about making things less complex, it’s about helping people navigate complexity more honestly.
Life changes. Circumstances shift. People adapt.
And sometimes the strongest systems aren’t the ones that try to eliminate variability completely, but the ones designed to remain stable while variability exists.
That’s what this project really reinforced for me."
Emily:
"If you had to sum up this project in a few sentences, what would you say?"
Katie:
"I would say this project reinforced that real-world problems usually can’t be solved well by only looking at isolated parts.
You have to step back and understand the relationships, assumptions, risks, behaviors, and feedback loops influencing the entire system over time.
For me, this wasn’t just about creating a contract, it was about designing a structure that could realistically hold up under changing conditions while still protecting the core obligation and creating clarity for both parties involved.
I think one of the biggest lessons was realizing that structure alone doesn’t create stability. The structure has to align with the reality of the environment it’s operating within.
And once you start looking at problems that way, you stop designing only for ideal conditions and start designing for how life actually works."
Emily:
"Well, this has all been a really interesting converstaion and I appreciate you taking the time to walk through it with me.
I think a lot of people hear terms like “systems thinking” and assume it’s something overly abstract or complicated, but hearing you explain it through a real-world example made it feel much more practical and understandable.
It definitely changed the way I think about structure, risk, and problem-solving in general and I thank you for your time in sharing more about systems thinking with me."
Katie:
"You are welcome and I appreciate that.
Honestly, I enjoy conversations like this because systems thinking is really just a different way of looking at problems and relationships over time.
Once you start paying attention to the patterns underneath things, where assumptions exist, where risk actually lives, and how different parts influence one another, it changes how you approach almost everything.
And I think that becomes especially valuable in situations where life doesn’t always fit neatly into rigid structures.
So again thank you as well, I enjoyed the conversation!"
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