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Sunday, 9 January 2011

A primer on viable systems model

I've had requests to do a quick primer on viable systems so I thought I'll pen this here, as well as elaborating a little on my earlier post. Since this blog is about value-based service systems I think I need to explain systems a bit better. Earlier, I have explained systems thinking but now I will explain viable systems because it is foundational to value-based service systems.

So here's the primer, my style. Viable systems came from Stafford Beer (1960s) and like all the great systems thinkers out there, Beer was a real genius even when he was not sober. Actually, I kind of see the pattern here - geniuses tend to drink. which of course is my excuse for drinking. next time you see me with too much to drink remember i'm practicing at being a genius ;p

More about Beer here

Beer spent a lot of time studying systems, the interconnectedness of it all so here's a summary:

A viable system “is a system with an identity and purpose which is, in principle, capable of surviving its appointed time, whether definite or indefinite” (Leonard in Beer, 1994:347). Basically, if you think about ANY system, it is able to sustain itself and be 'viable' because there are 5 systems.

system 1: the core transformation (the purpose of the entire system)
system 2: regulation/tactical - interface between system 3 and 1
system 3: operations planning, control/audit - this system sets the rules, resources, rights, responsibilities – interface between 4/5 and 1/2
system 4: management (and R&D), strategy, environment scanning (for adaptability)
system 5: policy: usually board of directors (decisions on what the entity of the system is, balance demands from all parts, steer the organisation)

So if you think of the human body as a viable system, then (taken from Jon Walker - brilliant website on VSM in layman terms click here):

SYSTEM 1: All the muscles and organs. The parts that actually DO something. The basic activities of the system. The KEY TRANSFORMATION (in my world, the value proposition)
SYSTEM 2: The sympathetic nervous system which monitors the muscles and organs and ensures that their interaction are kept stable.
SYSTEM 3: The Base Brain which oversees the entire complex of muscles and organs and optimises the internal environment.
SYSTEM 4: The Mid Brain. The connection to the outside world through the senses. Future planning. Projections. Forecasting.
SYSTEM 5: Higher brain functions. Formulation of Policy decisions. Identity.

You must realise now that the reason we die (i.e. become non-viable) is because one system fails. That is a key point. ALL viable systems MUST have ALL 5 systems to REMAIN VIABLE (this is a strong statement as my good friend Roger would say).

It's a very good way to think about the firm. What cybernetics and VSM does NOT tell you, however, is where to draw the boundaries.

So my natural biasness will draw the boundary on value - not just any value mind you - the value that is co-created with the customer to achieve customer benefits (hey, this is a value-based service system blog -what do you expect?). So here comes the immediate problem. At the narrowest of system boundaries, the firm produces something and the system's purpose is to have a high quality 'thing'; and if you broaden that boundary a little, the customer is in the system co-creating value with the firm and the system's purpose is to achieve customer outcomes. An example would be helpful so let's say I manufacture helicopters. I could have been viable all this while coz I make good helicopters. I know the customer uses it and co-creates value but it's not really my problem because the contextual use of the helicopter isn't going to hugely affect how I design and manufacture the helicopter because as a firm, I've become a viable entity just making helicopters. So although value co-creation happens, I have drawn a boundary such that my 'environment' (what is exogenous) is the customer, the contextual uses. Customer inputs into my system is usually through predesigned feedback mechanisms. The resources that inform the key transformation (i.e. manufacturing the helicopter) and the metasystem that manages, control and guide the policy of the firm are all surrounding this key transformation - manufacturing.

So let's say competitive forces have come in and it's no longer enough to make helicopters. The customer wants to make sure these helicopters are 'usable' and any failure of the helicopter has to be immediately rectified. The firm now has to say - my core transformation is no longer making helicopters, it's to repair them when they're faulty. The firm still doesn't have to understand value co-creation and can still treat the customer as 'environment' because the value is 'pulled' by the customer on the basis of need.

Now let's say it becomes more competitive and the customer now wants to buy availability of the helicopter, not the thing itself. The system immediately demands a redrawing of boundaries - because if availability is the value proposition of the firm, what is it the firm is DOING? making stuff is one thing, but delivering a value proposition of availability means understanding the contextual variety of use, making sure there are parts on standby on shelves to minimise possible down time, even redesigning the helicopter so that it might be easier to change parts, or cater to greater variety of contextual use without downtime. this would immediately imply that the resources for the core transformations before and after the new boundaries are different, as is the metasystem that controls and manages it. This is a serious threat to viability because the firm may not be equipped to deal with changes in resources and the metasystem. More importantly, 'the environment' is now the context and the customer has moved into the system boundary of the firm (previously both customer and context is 'the environment'). This means the customer is a recursion in the system as well as a transformation through which the firm needs to deploy a different set of resources.

Now let's take the most extreme - the helicopter is being purchased for its outcomes i.e. what they do e.g. how many soldiers or supplies it ferries. oh - oh, the firm now has to redefine what is 'environment' and what is in the system. if the firm is committing to outcomes, every possible context is now within the firm's boundaries. the firm has to think about redesigning the helicopter and supporting activities in the system for every possible use. that hypervariety is going to be a real challenge and can quite easily threaten the viability of the system. Here's another example of changing the core transformation:

customer paying for an airtanker ( refuelling their jets themselves vs customer paying for 1000gallons of fuel per minute from the provider (with increased price if the time spent decrease). For the provider? very. different. system. with very. different. resources. and very. different. management. of the system. Viability? No one really talks about it. It's like 'sure, if you can manufacture an air tanker, it's easy-peasy asking you to provide 1000 gallons of fuel in mid-air'. And when the firm don't do it well, marketing people say its not being customer-centric enough, it needs to change to co-create value etc. etc. but they don't really tell you how. Someone once told me it's easier to get a manufacturer of mobile phones to make tractors than for them to co-create mobile phone outcomes. Some manufacturers have become seriously unviable trying. I'm sure you know who I'm talking about.

My colleague once asked me if I had any sagely advice to give to Nokia. In my most 'sage-like' way ;p I said 'try not to think of yourselves as a mobile phone. try to think of yourselves as being a 'life-enabling-platform'. Of course, that's hard. because they have always been a viable firm as a phone manufacturer. now you're asking them to be something else. Apple had it good (resource and viability-wise). it was never a phone.

So that's my simple primer. Yes VSM doesn't give enough understanding of interactions, emergence and co-creation but it's a great start to develop the thinking and the research in a systemic way. So much of our own research (and solutions) are reductionistic. We do research in marketing, or strategy or CRM or something or another and pretend that the insights we have developed are able to apply without some efffect elsewhere (marketing solve marketing problems etc. etc.) but if we are to be truly systems researchers and systems practitioners, we cannot provide solutions and insights without saying something about the systemic effects of our insights. That is the challenge of systems researchers. The VSM helps us stay true to systems thinking and help us say something about the narrow bits of knowledge we give to firms and we can show where the knowledge we propose would sit within the VSM of the firm. As someone who believes in the power of service dominant logic to improve organisational effectiveness to co-create value with the customer, I am compelled to use SDLogic in tandem with VSM because it helps me sympathise with the challenge of transitioning from Goods dominant logic (due to the systemic and viability disruption it create). Yet, the mere visualisation of such disruption through VSM helps firms understand that disruption and allows researchers and consultants alike to develop paths towards effectiveness. That has to be better than just badgering the firm to death about customer centricity.

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