University of Cassino Faculty of Economy

1. University of Cassino Faculty of Economy Viable System Approach - VSA BUSINESS MANAGEMENT A.A. 2008 -2009 Prof. Francesco Polese

2. Viable Systemic Approach Contents The System Framework Focus Influences Formulation Foundations “Systems” Perspective Approach Business in Systemic Framework Definition Characteristics Evolution Environmental Interactions Related Theories The Viable System The Structure The System The “Viable System” Viable System Enterprise Complexity Intersystemical Relationships Survaival Sovra and Sub Systems Operating Structure Government Viable System Enterprise

3. The Systemic Framework Focus The Systemic Framework represents a focused revolution that shifts the attention from the parts to the whole, perceiving the truth like integrated unicuum and integrating of phenomena in which the individual properties of the single parts become indistinct, while the relations between the same parts and the events, that these generate, assume importance for their reciprocal interactions.

4. The Systemic Framework Influences Biology, Science that studies the various forms of life conceived as complex and integrated living systems Ecology, Science that studies the interactions between operating systems on our planet Tectology, Science that studies the structure of living and non-living systems (A. Bogdanov )

5. The Systemic Framework Formulation L. Von Bertalanffy: 1. from the elementary components analysis of a phenomenon it is possible to go back and then to explain the phenomenon in its entirely; 2. the systems general theory is a logical mathematical framework based on a logical - formal (reductionism) and heuristic-General (holism ) approach

6. The Systemic Framework Foundations The boundary The border is as a filter for the input, selecting them and making them consistent with the system The events The events are perceived not as isolated event but as a result of a series of dynamics reports The system Any living system is identified as a sub-system for a more extended system The context A system can not be studied separately from its referential context, The study of phenomena Any phenomenon is not an isolated event, so it is interpreted through the interaction between its components and the environment reference The structural changes Compared to the context we observe the ongoing structural changes as adaptive responses in the system Environment It is relevant to the objective sphere, in according to this approach, the boundary and context concepts are strictly dependent by observant / observed relationship and they are the result of perception differences

7. The Systemic Framework “Systems” Open Systems They maintain exchanges with the energy, matter and information environment Closed systems They have not matter and / or information exchanges, but only energy exchanges The ability to retain its vitality and stability characteristics even in the non-equilibrium conditions Homeostasis Mechanism that allows to the system to keep itself into a balance condition through adaptation, within the limits of its structure and through information exchanges with the outside world Self adjustment Balance Ability to provide an appropriate contribution to the needs of over-reference systems Possibility to reach a final status starting from different initial conditions or through alternative routes Same aim Completely open systemsThe environment interactions are uncontrolled and unconditional and the external influences may occur without any hindrance Systems partially open (or open / closed)They are characterized by a barrier (border) to the system entry that acts as a filter

8. The Systemic Framework Perspective change In system framework, it is needed to focus the attention on the characters together rather than on the parts characteristics and on its component sections. The shift of perspective observation, from the items (a) to the reports (b)

9. The Systemic Framework Approach • It is not a formalized and structured discipline (unlike a theory) • It is a pervasive and interdisciplinary concept (as a philosophy of various disciplines) • It is a continuum between the analytical – riduction reality approach and the holistic view of the phenomena

10. Business in Systemic Framework Business Definition The enterprice is a system with its purpose and it aims to survival. Enterprise as an open system, immersed in the environment, with which it interacts exchanging information, matter and energy. It is aa complex system of interacting elements rationally connected The enterprise is an open system, aimed, organic, autopoiethic, cognitive, cybernetic Biology: the environment is a complex (full of knowledge, resources and activities), in which the enterprise is encouraged to selective mechanisms to increase its complexity and align it in an orderly and balanced external complexity From cybernetics it comes the idea to interprete the enterprice as a system capable of self control homeostatic It is characterized by a life cycle similar to that of living organisms, which pursues own survival in a selective environment The cognitive approach suggests that the main source of value creation lies in knowledge and stresses the importance of learning mechanisms 10

11. Business in Systemic Framework Characteristics It has several components It respects the interdependence and communication concept Enterprise It respects the concept to a common finality

12. Business in Systemic Framework Historical evolution By Fordist Business To Viable System Business Business black box Viable Business(the role of social responsibility) There is greater vitality for the sub-operating system The organizational units are as micro-business viable systems There is a government of more distinctive competences originated from organizational units Customer-supplier Logic

13. Business in Systemic Framework Environmental Interactions Synthesis of over systems interacting with viable business Environment Resources Products with tangibility and intangibility characteristics Capacities Output Input Energy Skills Openness Degree It depends by several factors of enterprise and it is determined by the Government

14. Business in Systemic Framework Environmental Interactions Synthesis of over systems interacting with viable business Environment Impacts Direct Indirect Social economic elements Exchange relationship Political elements Cultural elements

15. Business in Systemic Framework Environmental Interactions Synthesis of over systems interacting with viable business Environment Government Decisions oriented by sustainable development Social responsibility Business and entrepreneur search social legitimacy Corporate Social Responsibility

16. Business in Systemic Framework Related Theories The environment is a stakeholders set with interests and influence power Stakeholders Theory Primary and secondary Stakeholders Finding resonance with Stakeholders The environment is a complex phenomena that periodically determine the adaptive and responsive attitudes of enterprise Contingencies Theory Environmental dynamics monitoring The environment is a set of sources from which the company draws substantial resources for their survival Dependencies from external Resource Theory The resources are limited because they have a cost and they are contended Importance of enterprise ability to influence the environment

17. The Viable System The Structure The structure is a set of elements in which roles, activities and tasks, in respect of rules and constraints, are assigned to specific elements. These elements are in relation with themselves to can achiev a common goal through the implementation of a system.

18. Structure Mix Set Components Identification of elements and homogeneity links Specifying role in relation with a behavior linked to a final purpose Structural relations distinction Structure recognition The Viable System Structure Development

19. Logical Structure Physical Structure Widened Structure Set of physical components with communication skills for the connection with other elements Set of logical components able to play a particular role, according to standard rules and on the basis of ties / reports • It is related to the capabilities and potentiality to interact with external organizations. • The conditions are: • Connection capacity between internal and external components • Routes choice to activate relations with outside The Viable System Tipologies of Structure

20. The Viable System Structure Characteristics • It is a Set of tangible and intangible materials that the Government designes and realizes • It is Composed by components and connection relations. 3. Its components are static. They become active if they are addressed and guided by the Government 4. The physical structure (related to static moment) differs from the expanded structure (related to potential relationships with external physical structures) 5. A certain logical structure can be concretized into a variety of physical structures

21. The Viable System Structure Elements The set Human and technical factors The components Role, activities and tasks for a common purpose The aim Survival Structure Instruments Relationships Communications network Constraints and behavior rules Interaction

22. The Viable System The System The system is a physical structure, with physical components (each one has a role), considered as a qualification of default logic components, interacting with each other, oriented to a specific purpose

23. The Viable System System Development Definition of Specific Organizational Scheme System Structure Interaction Relationship Activation of Relations

24. The Viable System System Evolution to whole Business System Business Idea Specific Organizational Scheme Widened Structure General Organizational Scheme Physical Structure Logical Structure from parts

25. The Viable System The “Viable System” “The viable system is a system that survives, remains united and it is integral; it is homeostatically, internally and externally balanced and also it has mechanisms and opportunities to grow and to learn, to develop and to adapt, (i.e. to become increasingly effective in its environment)" 25

26. VARIETY AMPLIFICATION Decisional Area VARIETY ATTENUATION The Viable System “Viable System”Areas Action Area (operations) Viable System has the capacity of isotropy

27. Governmental Decisions Area Decisional Area Residual Area for managerial decisions The Viable System “Viable System”Areas

28. Operations Area Specific Operating Structure Managment Area + = Management Decisions Government Area Management Area The Viable System “Viable System”Areas

29. The Viable System “Viable System”Postulates • The enterprise is an open system inserted in a context ( "read" by the government) 2. Companies (industrial, commercial, services) have the same identity 3. The Government analyzes and meets the expectations and motivations of sub-systems and over-systems 4. The interaction with the over-systems: towards a single system with shared aims and values

30. Viable System Enterprise Complexity Reality Interpretation about major phenomenon, events, interdependencies, risk Compared to Government Exhibition of events Phenomenon Randomness Influence by several external Actors The phenomenon can not be only partially understood (interconnections and interdependencies, multiplicity, variability, circular cause-and-effect ) Compared to Sistemic Framework The observer is not outside nor neutral Partial and approximate knowledge and not final and complete From complexity discovery to the complexity method

31. Viable System Enterprise Complexity Possible variations with which the phenomenon appear to the observer Variety The Complexity size Other varieties that can appear with pass of the time Variability Ability to understand the phenomenon in its entirety Vagueness Characteristics of phenomenon differentiation Aspects of identified character Variety Attributes that explane the effects Elements Abundance and interdependencies New attributes previously unknown Variability Changes that affect the quantitative measure of a phenomenon

32. Observer Understanding (personal perception) Non comprehensible Comprehensible Viable System Enterprise Complexity Personal Understanding of variety

33. Viable System Enterprise Complexity Complexity Model Vagueness Ignorance Area Knowledge Area ¥ + 0 non Comprehensible Comprehensible Observer personal understandig of variety

34. Viable System Enterprise Instersystemical Relationships They have imperative nature and general validity Constraints They achieve technical requirements aimed at collective interests (regulation) They derive from the government will to link the business System to one or more entities (self-regulation) Rules Standards Result of activation of a structural relations Relationships A single relation can produce different interactions

35. Viable System Enterprise Instersystemical Relationships System Potentiality, derived by a capacity of the structural framework to deal with the outside Opening Capacities Government Decision decides how to adjust the capacity utilization of openness inherent in the structure Opening Degree (Level) Compatibility between systems able to allow the business System, its sub-systems and its over-systems can relate and connect with themselves Consonance Harmony and effectiveness in interacting systems Resonance Ideal Development of Consonance Acceleration of consonance (related to dynamic moment)

36. Viable System Enterprise Survival Capacity of adding value to generate competitive advantage Conditions Consonance with over-systems Consonance between sub-systems Resonance with over-systems Resonance betweensub-systems Resonance Level 36

37. Viable System Enterprise Survival Capacity of external System to influence prospects for business survival Systemic relevance Identification and description of individual resources Resources Mapping Qualification of critical attributes and influence Allocation of weights Identification / classification entities Qualification and selection of relations with external systems Identification and classification of entities Assessment of their relevance Interpretation of constraints / rules Setting consistent targets

38. Viable System Enterprise Over-Systems and Sub-Systems Mutual reinforce between Direct and indirect Over-Systems DIRECT OVER-SYSTEM of S1 Influence Expectations Prizes/ Endorsements Feed-back from indirect over-system SYSTEM S 1 Influence Expectations Prizes/ Endorsements Prizes/ Endorsements Indirect over-systemof S1 e Direct Sub-System of S1 DIRECT SUB-SYSTEM of S1 Expectations

39. Viable System Enterprise Government The Government is an expression of Property decisions. The government effectiveness depends by its ability to select managerial competents The Government dynamic is influenced by over-systems and sub-systems. If they are dissatisfied, they can influence the decision-making The kind of relationship between Property and Government can influence the conformation of the Government and establishe the level of autonomy The Government must seek to establish harmony and resonance conditions with over-systems and sub-systems

40. Viable System Enterprise Governmental Decisional Processes Total Resonance Level two conditions Government Decisional Processes Effectiveness Operating Sub-System Effectiveness to give strategical guidelines 40

41. Viable System Enterprise Governmental Decisional Processes PROPERTY OVER-SYSTEMS Government OPERATING SUB-SYSTEMS Decisional Processes Action Effectiveness 41

42. Viable System Enterprise Governamental Actions Necessity of government and its entrepreneurial skills Necessity of Government to gain legitimacy and leadership The Ability of government to deploy their creativity is dependent by intra and inter-systemic relationships Government action is a set of decisions capable to change the operating structure and its evolution 42

43. High 1) SATISFY 4) DELETE Influence 2) WATCH 3) NEGLET Low High Criticality Low Viable System Enterprise Governamental Actions

44. Viable System Enterprise Operating Structure The Operating Structure is the logical component necessary to translate the Government decisions into action and to achieve consonance / resonance 44

45. Viable System Enterprise Evolution Dynamics Adaptations related to the relations change of components in constancy of the principle and defined organizational scheme Governament Actions Trasformations related to actions that affect on defined organizational scheme Restructuring concerning actions that change the principle organizational scheme (physiological), or the business idea as identity (patological) 45

46. Viable System Enterprise Evolution Dynamics Preliminary Decisions Preparation of the principle organizational scheme Choice of structural components Relations setting Government Decisions Governmental Decisions Definition / Modification of specific structure Definition / Modification of the defined organizational scheme Operative Decisions StructureUsing Monitoring and Feedback 46

47. Viable System Enterprise Evolution Dynamics Structure Costs qualified for the strategic value of the corporate goals without considering the choices about the acquisition, transfer, negotiation and / or remuneration Costs Use of Structure Costs qualified on the base of the specific options concerning the efficiency use of a particular resource 47

48. VALUE SYSTEM Viable System Enterprise Conclusions The Cycle of vitality STRUCTURE INCORPORATION context Governmental Centre VALORIZATION