The Viable System Model

About the VSM #

The Viable System Model (VSM) was first formulated in 1959 by Stafford Beer in his book Cybernetics and Management. It serves as a reference model for describing, diagnosing, and designing the management of organizations, capturing the management functions at each organizational level, representing the flow of information between organizational levels, and helping to ask purposeful questions.

Viable in a system means that this system can adapt to external and internal changes. It must learn to perceive, to learn from changes, to make sense of them, to develop on its own. At the same time, it must not give up its own identity.

S. Beer formulates viability as follows: Not profit maximization, but survival must be the goal. It is not the management of people, but the steering or controlling and regulating of entire organizations in their environment that is decisive. Not a few people manage, but all must perform certain functions of management.

Stafford Beer continued to work throughout his life on the model and systems theory modeling of organizations and, building on that, on innovative facilitation techniques, especially syntegration. Today, the work continues in the non-profit Metaphorum organization, among others.

We will find in the VSM a lot of the terms that play a role in the Lean and Agile environment.

The VSM anticipates a lot of the principles that have been (re)developed in the context of agile development. As we will see, it has a broader basis and some scientific foundation.

Talking about systems #

We talk a lot about systems here – occurring in different contexts and representing different focalizations:

System as a non-decomposable unit, i.e. the system can only be understood as a unit and is more than the sum of the components system in interaction with its environment, or if you will, its ecological niche. One such model that applies cybernetic principles of governance to organizations and improves organizational sustainability and viability is the Viable System Model (VSM). Developed by Stafford Beer, VSM provides a comprehensive framework that enables organizations to understand and optimize their internal decision-making and information processes.

Viable – Survival and Identity #

Viable literally means viable. In the context of cybernetics, however, more is meant by it.

What is meant is that the organization (or organism) as a whole retains its identity. An example of the opposite would be a nation that disintegrates, leaving only a loose collection of gangs and refugees.

Therefore, conversely, we can say that a system wants to preserve its identity – and that in the case of organizations, we need to find a place to deal with preservation as well as evolve it as the environment (or niche) changes.

Viable – viable and sustainable #

We said at the beginning that you have to look at a system and its relevant environment – or niche – as a whole.

That is, a system is only viable if its environment persists. By taking an integrated view of the environment (or business ecosystem), the term “viable” becomes synonymous with “sustainable.”

This brings us strongly into the sustainability debate. That’s not just true of the focus we’re traveling in here – it doesn’t get much clearer when we look at applications in public domains like healthcare or education system design

As a consequence, we will see that we closely integrate the consideration of the environment, especially the customers, but also the other stakeholders.

Viable – Adaptive and resilient #

Viable is found in a term field that includes several similar terms:

• Resilient: can handle disruptions and maintain its function
• Adaptive: can adapt its function to new circumstances
• two sides of the same coin, in practice in organizations a constant challenge: translate this into operations and innovation and it immediately becomes clear that we are dealing with goals (and to some extent people / functions) which on the one hand are both necessary for survival, but which on the other hand constantly produce options for action which are in conflict with each other
• both are part of a bigger picture: learning ability
• Adaptation and resilience are the prerequisites for self-organization, self-organization ensures adaptivity and resilience

What does a viable organization need #

Now we have opened a huge barrel: adaptive and resilient, self-organization, stability and identity: – we need an operational system and responsibilities to deal with the environment and its variety – and we need – In order to reconcile all this, we brqauchen the subsystems of the VSM. Before that, let’s dwell a bit on the requirements that arise for a viable organization.

• Operational roles that are able to deal with the diversity of their local niches
• Roles in a metasystem (or management) that are capable of handling the diversity of - operations
• the adaptive and resilient organization as a whole, capable of dealing with the diversity of the environment

VSM is fractal #

Consequently, VSM can be used to describe the different levels of an organization using the same methods and to gain insights from them. This opens up an immense potential of in-depth analysis and design opportunities.

VSM Vocabulary #

Systems and channels #

In the VSM vocabulary there are different systems – systems 1 to 5 – and a number of channels or types of channels between these systems. The notation is confusing at first, because individual systems do not always mean parts of the organization; they can also denote points of view or perspectives.

There is also more to the channels than first appears, we will elaborate on that as well.

The different systems represent the different aspects of control ind control:

• System 1: The operational system, productive work, i.e. for the example of a battery startupl the delivery of batteries and solar cells.
• System 2: daily coordination
• System 3: “Inside and Now”. Planning and organization of work
• System 4: “Outside and Then”: New development, market research, new developments
• System 5: Identity, Prioritization: the ultimate Boss

In addition

• System 3*(three star): Inquiriy

The most important system is System 1 – in Lean this corresponds to the value creation process. Systems 1 and 2 represent the operational work, while systems 3 to 5 form the meta-system or senior management.

It is important to keep in mind when looking at each system that we are talking about functions, not roles or people. The VSM diagram should not be read as an organizational chart, but instead as a network of decision-making and communication paths.A better metaphor than organizational chart would be to compare the VSM diagram to a nervous system.

The channels include

• Vertical channels
• Horizontal channels
• The Algedonic channel

(click to enlarge)

System In Focus #

The focus is now on the company as a whole and we want to look at how it needs to be structured in order to function as a viable system like the old team.

This means that the three areas must each be viable individually as well as the overall system (connoisseurs of Lean will easily recognize the pattern and draw the parallel to three value streams).

Added are some new areas that are part of a complete viable system.

We are now concentrating on the new overall system, our System in Focus. For some purposes, we also need to consider the subsystems (S-1) and the parent system (S+1).

System in Focus (SiF): the system or level of abstraction we are designing. S(-1): the contained sub-organizations S(+1): the parent organization

System 1: Environment, Operation, Management #

The operational system (System 1)

The most important aspect of a system is what it does. It is roughly equivalent to what the value stream or value chain is in Lean.

In VSM we call this aspect the System 1, the operational system. It describes the direct responsibility for the delivery of a specific service or product.

System 1 is related to its environment and System 1 needs some method of organizing itself: its control system (or metasystem or management). We describe the connection between System 1 and the environment or its control system using communication channels.

Understanding and properly designing communication channels is almost more important than the individual systems, as they essentially determine the functioning of the system.

The products or services – or target groups, markets or other segmentations may each require their own operational system. Multiple operational systems can – and typically will – exist in an organization.

In the illustrations, one can also already observe the beginning of its own graphic language: in fact, the operational system is represented as an oval, the control, meta or management system as a rectangle, and the relevant environment – or the niche of the ecosystem – as an amoeba-like shape.

First insights #

A first consideration would be the following diagram:

The elements in it are – The environment, e.g., customers, competition, or government regulations – The operational system as the defining view (“the system is what it does”) – The control system or local organization. It means preferably self-organization, as far as that is possible, but in principle includes any kind of organization.

It shows besides the relations – between the environment and the operative system, as two directed communication channels – between the operative system and the control system, also as two communication channels.

System 2: Information and coordination #

The tasks of System 2 include coordination, i.e. avoiding (“damping”) oscillations, ensuring coherence and settling, or better avoiding, conflicts while preserving the autonomy of the operational systems as best as possible.

System 2 is also committed to the goal of strengthening the individual operating units. Specifically, this includes the task of strengthening them in their ability to organize themselves.

System 2 is not an entity in the company, it is a whole set of things that support the operational units and ensure stability, for example:

• Software systems

  • Room booking
  • Software version management

Roles of groups and individuals

• Secretariat
• Steering Committees
• Moderators and coaches

Documents

• Guidelines
• Corporate design standards and templates

Meetings

• Planning and review meeting
• Retrospectives

Culture

• Language and manners
• Standards

System 3: Optimization and auditing #

Reflection, improvement, synergies

System 3 can best be described as operational management. It is based on the ability of each System 1 to self-organize and coordinate with the support of the mechanisms of System 2.

System 3 has the task of providing an overarching view and initiating improvements from this overall view. To do this, it must communicate with System 2 and with the local control functions of each System 1.

Stafford Beer describes this system as “Inside an Now”: it takes care of the inner workings and functioning of the organization and drives improvements.

System 3 thus creates the environment and context for effective collaboration between the individual operational systems.

The channels between System 3 and systems 1 #

Operational systems organize themselves as much as possible and use System 2 services for coordination. This is the most effective way and you can derive this priority directly from Ashby’s law. One may ask why an overarching operational management is then still necessary.

System 3 is necessary because pure self-organization between operational systems is not always sufficient. When conflicts over resources arise or general policies need to be implemented, intervention may be necessary. To this end, System 3 has two vertical channels to systems 1: first, the resource negotiation and accountability channel, and second, the intervention channel.

Resource Bargaining and Accountability. Through this channel, goals are discussed and planning is coordinated, and the appropriate budgets or resources are allocated. It also serves to claim accountability over the resources used.

Corporate Intervention. – Central Interventions. This channel can be used to limit the autonomy of operational systems. In other words, it is a channel for explicit instructions that is used only in exceptional cases – but it must be present for emergencies.

The functional organization of the company #

In an organization there are many functions that strengthen the synergy in the organization and that embody a concrete implementation of the company’s System 3:

• Finance
• Marketing Management
• Controlling.

It is obvious to classify these functions as a whole in System 3. However, if you take a closer look, the picture becomes more differentiated. For example, for marketing we will find functions in different places: in System 3, System 2, the communication channel with the customer and more.

This is based on the fact that the cybernetic view with decisions, control and communication brings other structures to the fore than business administration with the organizational structure and process organization. This orthogonal view is an essential element for the strength that lies in the use of VSM.

We will explore the relationships in the chapter (organigram) in more detail and make intensive use of the mapping between VSM and SAFe – structures….

Research and auditing: the System 3* #

Another mechanism is the System 3* (“three star”). System 3* is a pure research mechanism by which System 3 collects direct unfiltered information about operational Systems 1 in as timely a manner as possible.

Examples of System 3* mechanisms include:

• Gemba or “managing by walking around"
• Revision
• Direct contact with customers
• Surveys

The function of this system is twofold: first, it prevents blind spots in central operational management caused by conscious or unconscious omission of information in reports. Second, it provides a richer context for interpreting facts when management has direct ground contact and a view out of their own silo.

System 4: Reconnaissance #

The function of the System 4

With the control systems discussed so far, we have a functioning organization – if there were no changes in the environment. Systems 1-3 provide the mechanisms to stabilize a company and keep it running. But we have yet to see a provision that responds to, or even anticipates and nudges, deep change.

We find these provisions in System 4.

While System 3 turns inward and has as its focus the current activities and the existing organization, System 4 turns its gaze outward and into the future – in the words of Stafford Beer, it is the system “Outside and Then“.

Examples of System 4 functions include

• Research and development
• Observation of the competition
• Strategic personnel planning
• Working in associations and networks
• Strategy development

At this point, at the latest, it becomes clear that each of these examples has both professional and financial consequences and thus represents a cross-cutting function through the typical division of labor in traditional organizations.

Possible futures #

One specific concept is still worth mentioning: one talks about a specific extension of the environment, the “possible futures”. This is similar to working in scenarios, but it is a useful perspective to explicitly place these futures in the context of the environment or ecosystem….

Conflicts and complementary views: System 3 and 4 #

The diagram shows the strong interactions between systems 3 and 4, which in a way represent complementary views: on the one hand, the forces of the existing that want to keep the organization running – that is the core function of the company and, on the other hand, the admonishers that something has to change because otherwise there is a threat of standstill and loss of significance.

The operational side – System 3 – points out that they ultimately make the money, and the changemakers’ side admonishes that the others are sleeping through the future. Both have valid points, and the productive tension results in a healthy mix of stability and advancement.

But it can also be that this conflict escalates or that factions form that dig in and no longer communicate with each other. Then a moderator becomes necessary to balance the different interests. This is where System 5 comes into play.

System 5: Identity #

The System 5 is the ultimate moderator, boss, decision maker.

Its function is to represent a north star, a general direction, an identity.

This then provides a basis for moderating conflicts, for example, between short-term goals of operational management, System 3, and longer-term goals, System 4.

If you look at the VSM diagram, you can see that System 5 has access to systems 3 and 4, plus the channels that connect them. It represents the logical fact that identity must resonate in all decisions.

The system also has an ultimate veto or directive function to ensure that the global purpose is not thwarted by local decisions and actions. For it to perform this function safely, another channel is needed: the Algedonic channel.

The Algedonic Channel #

Algedonic is an artificial word of the VSM and it is a mixture of pain and reward.

The channel ensures that threatening situations or extraordinary opportunities reach senior management in real time and that they can respond accordingly.

Dealing with options #

In cybernetics, the central insight of Ashby’s law[^1] of required variety: “The greater the variety (or options) of a system, the more it can reduce the variety (or amount of surprises) of its environment by control.” that is: fast enough and enough options Self-organization locally and on site

Variety and Ashby’s Law #

In cybernetics, the concept of variety by W.Ross Ashby refers to the set of different elements of a system, e.g., states or messages. It is, casually speaking, a measure of how many different “surprises” can be expected. The higher this number is, the larger the recipient’s repertoire of responses must be. In cybernetics speak this means: the inherent variety of the receiver, i.e. the set of its components and resources, must be large enough to handle the variety of the communication channel.

The greater the variety of a system, the more it can reduce the variety of its environment by control. Ashby’s Law

In VSM, we talk about the regulation of variety. This means, for example, filtering messages in a channel to limit the variety from a level that the receiver can handle.

Variety plays an important role in cybernetics, both as a theoretical concept for understanding complexity, organization, and regulation in systems and as a useful tool for conceptualizing systems.