Management Cybernetics for Silicon Valley - Part 2

Silicon Valley was a big letdown. When I arrived in the Bay Area back in 2010 and applied for a California Driver’s license, I was required to take a written exam, though the “behind the wheel” test was waived since I already held an Arizona Driver’s license. To my surprise, at the DMV, I was handed a real piece of paper and a pencil for the exam.

Even in Arizona, where I had moved from, I had taken my DMV test on a computer. I was taken aback — how could the world’s technology hub still rely on paper-based tests? Back then, this experience highlighted a crucial point for me: Technological innovation alone isn't sufficient - we must also innovate in how we organize humans to channelize and harness the full potential of technology.

While I was critical of government bureaucracies, little did I know that the same phenomenon was very much underway inside the corporations of Silicon Valley as well… In this week’s post, I continue to write about Management Cybernetics, discuss the ideas that underpin it leading up to the Viable Systems Model (VSM).

Why should you care about Management Cybernetics?

Management Cybernetics and some of its key ideas like the Viable System Model (VSM) are not new. Developed by Stafford Beer in the last century, this model has proven to be an invaluable tool for diagnosing and re-organizing at various organizations around the globe.

And yet it remains relatively unfamiliar to many in the management field. This was true for me as well. Mainstream Management taught me things like performance ratings, bell curve, compensation planning, budget planning, 5 year roadmap, etc.

Stafford Beer on the other hand was busy teaching me things like Feedback Loops & Control, Viability, Homeostasis, Variety, Black Box, Regulator, Recursion, etc. and injecting geekdom back into management and leadership.

With regards to its popularity, or lack thereof, Raúl Espejo and Antonia Gill, in their paper about the VSM, argue that this is primarily due to two factors:

It is high time Silicon Valley led the way when it comes to innovation - but, not just in technology! Organizations are socio-technical systems with purposeful actors. We must be on the bleeding edge of management innovation - but the unfortunate reality is that we are not! Instead, what we get from the mainstream is “Founder Mode”.

Many Silicon Valley entrepreneurs innovate and think from first principles when it comes to what Beer would call ‘Outside and Future’ (System 4 in VSM) but are a complete let down when it comes to ‘Inside and Now’ (System 3 in VSM).

When and if they are successful with their system 4 innovation, their organization grows and more employees are hired. And that’s how the “spinning out of control” slowly unfolds. Two people working in a basement and a corporation with say 100+ employees are not the same - System 3 requires more thinking and attention.

Many founders run for the exit after an IPO and the newly installed “executives” end up creating a large bureaucracy that’s hostile to creativity and innovation. The cycle then continues - some employees of those companies get frustrated and move on become new entrepreneurs. (But, there must be a better way to create new entrepreneurs - by breaking this cycle 🙂).

A good example of bad trade-offs is Neutron Jack (Jack Welch of GE) who compromised on the “then and there” for the “here and now”.

Even the most successful ones in Tech. like Jeff Bezos obsessed about aligning the interests of their shareholders with their customers, but arguably didn’t do much when it came to the well-being of their employees.

VSM is not a panacea but it is an excellent tool to diagnose what’s wrong with your organization. If you are prepared to move on from the mainstream top-down “command and control” structure where “strategic plans” are formulated at the top and cascaded down using a set of OKRs, you will find VSM valuable.

Let’s dive in…

Table of Contents

• Black Box

• Recursion

• Regulator

• The Viable Systems Model

  • VSM in one paragraph:

  • VSM in one paper

  • VSM in one diagram

  • VSM in one Quick Guide

  • VSM in one NotebookLM Podcast

  • VSM Test

Black Box

In the Viable System Model (VSM), a "black box" is a concept borrowed from cybernetics that represents a complex system whose inner workings are not fully understood or visible. Imagine a mysterious gadget that takes inputs and produces outputs, but you can't see what's happening inside - that's a black box. In VSM, this concept is applied to organizational units or processes.

The black box approach is used in VSM to manage complexity and maintain autonomy within an organization. Instead of trying to control every detail of a subsystem, managers treat it as a black box, focusing on its inputs, outputs, and overall performance. This allows for:

• Simplified management: Leaders can focus on results without micromanaging.

• Flexibility: Subsystems have the freedom to adapt and solve problems internally.

• Scalability: The model can be applied to organizations of various sizes and complexities.

By using black boxes, VSM encourages organizations to trust their subsystems, promoting adaptability and resilience in the face of changing environments.

Recursion

Recursion in management cybernetics refers to the principle that viable systems contain, and are contained in, other viable systems. This means that organizations can be understood as nested hierarchies of systems, each of which is a viable system in its own right. For example, a corporation may be composed of divisions, which are in turn composed of departments, and so on. Each of these levels of organization can be modeled as a viable system with its own inputs, outputs, and internal control mechanisms.

The concept of recursion is closely related to the concept of the black box. Just as managers can treat organizations as black boxes, they can also treat each level of recursion as a black box. This allows them to focus on the interactions between different levels of recursion without needing to understand the detailed workings of each individual system.

The concept of recursion has several important implications for management cybernetics:

• It provides a framework for understanding the complexity of organizations. By breaking down complex systems into nested hierarchies of viable systems, managers can more easily analyze and manage them.

• It highlights the importance of managing interactions between different levels of recursion. For an organization to be effective, the different levels of recursion must be properly coordinated and integrated.

• It emphasizes the need for autonomy at each level of recursion. For a system to be viable, it must have a certain degree of autonomy to adapt to its own local environment

By embracing recursion, VSM helps organizations balance local flexibility with global stability, making them more adaptable to complex, changing environments. Let’s now talk about VSM…

Regulator

In the Viable System Model, a regulator is like a thermostat for an organization, constantly adjusting to maintain balance and stability. Just as a thermostat keeps a room's temperature steady, a regulator in VSM works to keep the organization functioning smoothly amidst changing conditions.

Key attributes of a regulator in VSM include:

• Variety absorption: It can handle a wide range of situations, much like how a skilled juggler can manage many balls at once.

• Modeling capability: A good regulator contains a model of the system it's regulating, similar to how a GPS needs a map to guide you effectively.

• Adaptability: It can adjust its actions based on feedback, like how a skilled surfer changes their stance with each wave.

In VSM, regulators are crucial for maintaining organizational viability. They're used at various levels, from coordinating day-to-day operations to balancing internal needs with external challenges. By employing effective regulators, organizations can navigate complexity and remain adaptable in ever-changing environments.

The Viable Systems Model

Stafford Beer was notorious for his complex diagrams – intricate webs of boxes and arrows depicting the interconnectedness of systems. While visually compelling, these diagrams could be daunting, leaving readers to decipher the flow of cause and effect within the system. Here is an example from the appendix of his book, “Diagnosing the System For Organizations”:

Dan Davies has made a valiant effort to explain the VSM without any diagrams in Chapter 5 of the book I recommended in Part 1, ‘The Unaccountability Machine’. I highly recommend that you read the book before you venture into reading Beer’s works.

This post aims to demystify Beer's VSM using plain language in various forms, focusing on the core principles and also point you more online resources so that you can improve your knowledge and even test yourself.

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