Simone Cicero 

Hello everybody, welcome back to the Boundaryless Conversations Podcast. On this podcast, we meet with pioneers, thinkers, and doers, and we talk about the future of business models, organizations, markets, and society in our rapidly changing world. Today I’m joined by a bit of an unusual co-host, my colleague at Boundaryless, Emanuele Quintarelli, who leads our 3EO Platform Organization Unit. Hello, Emanuele.

 

Emanuele 

Hello, nice to be here.

 

Simone Cicero 

Thank you for joining. And today with us, we have a fellow explorer of all things complex organizing, Mark Lambertz. Hello, Mark. It’s fantastic to have you with us today.

 

Mark Lambertz 

Hi Simone, an honor and pleasure to be your guest.

 

Simone Cicero

Thank you so much. Mark defines himself as a Viable System Model expert and organizational coach. And he has joined us today mainly to discuss the  Viable System Model, which is a model of the organizational structure of, let’s say, any autonomous system capable of producing itself. This model was developed by cybernetician Stafford Beer in his book – “The Brain of the Firm” from the 70s.

 

And I would say that it was effectively, I think, the first attempt to use cybernetics in the field of organizational management. So why are we organizing this with Mark? Well, because we believe that cybernetics perspective on the organization is essential to building adaptive organizations today. At the same time, we believe that the VSM, a Viable System Model, succeeds in encapsulating a lot of complexity in a nice and actionable way. So today we aim with Mark in this short conversation to be able to, let’s say, first introduce the VSM to all of you and then draw parallels with the idea of a platform organization, which is what we help companies to build thanks to our Platform Design Toolkit and 3EO toolkit.

 

So the first question for Mark is probably, the best question for you to start is to make a quick introduction of VSM and the key systems that make it. For the listeners, we are going to project some pictures on the video from time to time. So if you are following on a podcast, you may switch to the YouTube version where you can also see these visuals, or in any case, we will add a couple of visuals in the notes. 

 

So maybe you can keep it handy on your phone as you listen to the conversation. So Mark, what is the VSM? Where is it coming from and what are the key components of it as an introduction?

 

Mark Lambertz 

Yeah, Simone, thanks very much. Well, the VSM is a model that shall help to understand how can we create an organization that is able to maintain its own existence, like you said already in the introduction. And to be very specific, it deals with the question, how do I steer an organization? How can I ensure healthy maneuverability through complex times? So that’s the basic concept. So it’s very different to the typical approach, let’s say, of organizing in a hierarchical organization. And it’s also different from the typical approach of a process-driven organization, which wants to explore what is happening when in time, so activity-based. So VSM is about steering/enhancing the maneuverability of an organization. So it’s the third dimension of an organization that’s sometimes also kind of a saying in the VSM community. 

 

And what makes it special? Well, you start always with an outside-in perspective. In the diagram, in the visualization, you find on the left-hand side always an organic-looking shape. Some people are reminded of a peanut or an amoeba, and that’s the environment. In this environment, we have everything that is important for this system in focus that we’re looking at, that we want to organize or understand that it needs to live and exist. 

 

That means there are the customers, the markets for a typical economic organization. Clients, suppliers, everything up to future talents that once at one point in time eventually this organization needs to have all the skills and competencies on board to develop interesting solutions that are relevant for the markets. 

 

So you start with the environment, with the outside-in perspective. And this is already, for me, and in my experience, often a huge game changer because many organizations always are starting from their own internal perspective. In the worst case, they start to draw organizational structures, boxes, and hierarchies. And afterward, they want to find out, and now how we do business. That is in the VSM, the first may be a shift of paradigm, given also the age of the model.

 

Then we have five to six, it depends on how you count it, functions. And this is also very important when you look at the VSM and you want to understand it. You see boxes plus please, please, please, reframe from the reflex to put no people or positions into these boxes. We talk about functions that are necessary to create a viable organization. 

 

And let’s start with system number one, which is connected to the environment. System number one.

 

is the operation. They are producing value for usually customers in the markets, at least when I’m looking at typical organizations that are acting in the economic sphere. Of course, I could also look with the VSM, by the way, on national institutions, I don’t know, educational institutions, and so on, but I’m really focused rather on the typical business world. So system one operation. 

 

System two is then the self-coordination between the operative units because let’s take the example of an HR team. When you have a couple of people, they are the operative units. They are delivering value in the form of, I don’t know, an application. And then from time to time, usually once per day, they self-organize themselves through the daily stand-up. So system two is a function that ensures that on a daily basis we are on course, we are delivering value to our customers, and if we have problems, we have here an opportunity to address them. And also this example hopefully illustrates that instead of using now a role or position to bring a certain system in the VSM to life, you can use a meeting. 

 

So the VSM is so agnostic that you can use meetings or maybe sometimes certain protocols or plans as an artifact to bring a function in the VSM to life. So that’s the one thing, the self-recordination. 

 

Then let’s look at system three. System three has a rather tactical perspective. Some people call it also operative management. It’s located above the operative units. It has two major functions. Number one, it is responsible for creating synergies between the operative units so that the whole is more than just the sum of its elements.

 

In the agile world, maybe let’s use again this kind of example, maybe the sprint planning would be a typical event to maintain system three. So what do we want to achieve? What do we want to build? What kind of increments do we want to deliver in a certain period of time? And also the sprint backlog would be then a corresponding artifact for system three. So this is really, like I said, focused on rather the operational management in the here and now – delivering value. 

 

Then, interestingly, we have another system. Some people call it their own system. Some people see it rather as a channel. No matter how you look at it, at least we need the function of the so-called piece to stay strong. This is a very old-schoolish world now, the audit channel. Audit sounds really horrible to me. But these were the days. 

 

Nowadays, I would translate it with the review and retrospective system, and that already indicates what it means in the agile world. So from time to time, we have to look at our operational results and we should always ask of course the question of how do we achieve these results. So that’s why I love the combination also of a review and retrospective. Now we have our value production already well on course. Now we need two more functions and then I’m done with the introduction.

 

So we need someone who takes care of the future. How do we prepare the organization for upcoming changes? How do we ensure that the organization is able to adapt? And therefore, we have system four in place. I compare them always a little bit like the people in the old times on the big sailing ships sitting on top of the mast and observing the horizon. And eventually, there are reefs and dangers and sharks. And maybe there are the pirate islands and the treasures that we can together achieve or get. 

 

So system four is looking out and is rather concerned about the future and stuff like that. As you can imagine, there is an inherent conflict between system three, making the money, earning the money, and system four, looking into the future – it’s more or less spending the money. 

 

It’s a cost-center function, of course. So we have the typical balance between exploitation and exploration. And in order now to manage this balance, we have our final big system in the VSM in the game, and that’s system five. System five produces the identity of the system. So who are we or who do we want to be? And this is usually expressed, for instance, by a vision, a mission statement, corporate values, the purpose statement, not to forget that one, of course, and stuff like that. 

 

And this implies also the distribution of regulations, policies, and so on in order to keep the whole together. So to balance the interests of the operational priorities with the valid, also important interest of system four of the strategic topics – This is what system five is doing. Yeah, and that’s it. Big quotes and with a big smile in a nutshell.

 

Simone Cicero

Thank you so much. Thank you so much for the intro. So essentially, you said system one is operations, operational units, system two, coordination, system three, what you said, tactical operational management, so synergies. And maybe you can complement a bit too, you know a little bit what’s the difference between the synergistic part and the coordination part before I move forward.

 

Mark Lambertz (12:21.427)

Yeah, well, system two, the self-re-coordination shall be done in an ideal world as much as possible between the managers of the operational units. It’s a self-recordination event. So we don’t need any bosses. But system three, and that’s what, by the way, I forgot to mention. Thanks for bringing it up. Has these two functions, I described only one. Yeah, creating synergies by rules, and operational rulings.

 

But the second important function is the distribution of resources. And system two has no authority. While system three has the right to intervene, here comes the principle of subsidiarity, by the way, into the game. So you intervene from a higher perspective if you see that the whole is in danger and system two has no authoritative power. It’s really purely a self-organizing function. 

 

Maybe one last example. Let’s imagine. We look now on a family. And the family is sitting on a Saturday morning together in the breakfast table. And they’re discussing, what do we do at the weekend? And maybe one kid needs to be driven to a birthday party. And on Sunday, we want to visit grandma and have a coffee and cake. So they do their self-organization. But if they would now discuss, what do we buy this weekend? So a family budget would be Assistant 3 task. 

 

In praxis, of course, systems two and three sometimes really melt into each other and it’s hard to distinguish them.

 

Simone Cicero

OK, thank you so much. And then we said one, two, and three. Then four is more, sorry, and three is still for auditing also capabilities, as you said. And then we move into four, which is more into looking into the future, seeing what’s coming up. And five is direction, right? So mission, vision, shared stories, and things like that. So these are the five systems.

 

Emmanuel, I know that you have a couple of questions about the systems.

 

Emanuele 

Yeah, the first one is, Mark, would you say that there is a hierarchical relationship between the systems? I know this word is a bit scary, but you were saying system two doesn’t have the freedom, the authority that system three has. It sounded to me a bit like a hierarchical position.

 

Mark Lambertz

Yes, thanks for this question, and yes there is a hierarchy but I would say it’s not the typical hierarchy like we know it from organizations or I don’t know where it originated in the church, Catholic church, not the order of God but it’s a hierarchy that follows an inclusive logic like we put letters together and then we have words. From words, we come to sentences, from sentences we come to paragraphs, from paragraphs to books, from books to libraries. 

 

So it’s for me an inclusive logic number one. And the hierarchical order is determined by the responsibility for the whole. And that is to me interesting. That means operational units, which have always, of course, their local interests. Because they have their perspective on their markets, maybe especially in a huge organization like Bosch, where we work, I don’t know.

 

More than 130 countries in the world, of course, each of these local units have its own perspective. On the other hand, we need to keep the whole together. That’s why we have a hierarchy to preserve the whole. But it’s not the typical top-down hierarchy, which I don’t know, often ends up in oppression of people also. 

 

That is clearly not the intention.

 

Emanuele 

And as a follow-up to that, it is my understanding that VSM is somewhat inspired by an organic view of the organization, a living system with its neurons and transmission of signals. Can you comment on that, please?

 

Mark Lambertz 

Yeah, to me that’s very interesting about the VSM because it incorporates two perspectives of the system. I can look on a system as a pure input-output system, very mechanistic, and deterministic. I can really calculate it. It’s the complicated part. At the same time, especially when we talk about system five, we talk about the identity and how also, we create in organizations our own mantras by ourselves. Who are we in this organization? What is our basic belief system and so on? What are the sentences that we are saying to ourselves? And by combining these two aspects, I think this is for me the real power to understand how an organization works. And it comes from my own personal experience, by the way, when I was an entrepreneur running an agency with friends for 20 years before I left and sold my shares, I always felt somehow some parts of the organization I can really understand like a computation, and other parts of the organization I can only feel them. And that’s so fascinating also about the VSM to me.

 

Simone Cicero 

Thank you so much. I have a couple of points that I think are a good idea to look into. Starting to see the parallels with the work that we do with the platform organization. 

 

In the past, we also had on the podcast, we had Joao Rosa and Trond Hjorteland, discussing Open Systems Theory. And I see there are parallels, for example, when we speak about the redundancy of functions, so the principle where each unit in the organization is to some extent able to produce a fully functional value proposition. So it’s not just a piece of a broader puzzle. And I think VSM kind of starts from that, right? 

 

It starts by saying, we have operating units and these operating units are the ones that deliver value to the market. They are the ones that are, and they are fully functional, let’s say. And then, to some extent, the VSM kind of completes the picture, not saying, no, you also need other systems, right? 

 

And it’s interesting that when you speak about the various systems that you have in VSM, you can see how this kind of, play a role in achieving certain aspect of a distributed organization that otherwise is very chaotic, right? So for example, we wrote a few months ago a piece called “The Trilemma of Unbundled Organization”. So when you unbundle the organization into nodes, then you lack, maybe if you do not create those systems that you spoke about, so the control systems, the auditing, the coordination systems, you end up with a very uncoherent organization. 

 

So maybe we can spend a couple of words trying to discern and discuss the two major principles that I see here. One is the idea of units, and one is the idea of the fractal nature of VSM. So to what extent these systems of control and coordination are just at certain levels or maybe they are just replicated at every level? So can you talk about this fractal nature that the system has so that we can maybe, how can I say it, but we can clarify this idea because otherwise, it feels like, as Emanuele said, it feels like a bit hierarchical, but instead I feel that it’s more like a fractal structure?

 

Mark Lambertz 

Yeah, thank you. And actually, it’s also a network. Unfortunately, the visualization, the original, looks really somehow horrible, hierarchically horrible, and also very rigid. But actually, when you just play visually a little bit, the VSM, and by the way, Stafford Beer encouraged the users, this is just the model of the model, and A, do whatever you want, as long as it works, and keep the basic principles in mind. It’s OK. 

 

So actually, it’s a network structure, the VSM. Or this is how I see it and perceive it. And in the VSM, the funny thing is that each operational unit contains, again, the same steering levels as I said before. So systems 2 to 5 and also some substructures of operations are again part of system 1. So it’s like.

 

A little bit, it reminds me always of the Russian dolls, the puppet, Russian puppet, yeah, this is a self-similar shape, nested in each other. And this is a very elegant way to deal with complexity, to my opinion. And that also emphasizes, for instance, that leadership is always distributed in the system. No one knows everything alone, not in a complex world anymore. And we have also to distribute our intelligence in the system.The purpose is always to give our operational units as much autonomy as possible. Of course, not endless autonomy because that will end up in chaos. So we need constraints. We need cohesion. But only for the sake of the well-being of the whole and it’s always a trade-off. It’s always a constant balance. There is no perfect answer. We’re always dealing with dilemmas. And these support functions, the enabling, the empowering of the operational units, always the philosophy is as much as possible.

 

Martin Pfiffner in his very cool book, The Neurology of the Business, is probably the best book about the application of the VSM, I have to admit, even though I wrote also a few about them.

 

But this is really good because exactly this question regarding the support functions and how we put support functions into our operational units, three basic questions. Question number one, can we afford decentralized realization? Because if we don’t have the resources, the money, yeah, nice idea. But obviously, we have to offer something in the overarching part as a typical service center or as it’s called in business and corporate life. Second question.

 

If we have the money to, for instance, have HR in each operational unit and not HR as an overarching function, the next question is, will it have an influence on key buying criteria from a customer perspective? So if we, for instance, have our own local sales, because the local sales guys understand the local markets much better than the central sales function, and we have the resources, we have the money, hell yes, let’s do it. Give the operational units their own sales function. And then the last question is usually when you say okay we have the money but it has not an impact on the key buying criteria from a customer perspective but we can leverage synergies which are relevant then of course let’s centralize something and if it has if we cannot leverage any synergies let’s keep it in the local units because then they can absorb and manage their complexity by themselves. 

 

And they don’t need the big mama or papa, in quotes, the big corporate function that is governing the units. So there’s actually a simple logic of how to solve the riddle of what kind of support and autonomy we need. But it starts, of course, with our resources.

 

Simone Cicero 

That’s great. I mean, it’s a brilliant example of the subsidiarity principle, which is essential to VSM. Emanuele, I know that you have a couple of questions.

 

Emanuele 

Yeah, these are a bit harder. The first one is going back to your initial statements about the relationship between the VSM, the organization, and the market. How is this dialogue happening? How is the organization taking feedback, being validated, and exchanging value with what lies into the environment in which the system has been, let’s say, conceived?

 

Mark Lambertz 

Yeah, now in the best sense you are laying the finger in the wound. That’s a German phrase. 

 

Because the VSM does not explicitly tell you how to do this. It tells you only what will happen if you don’t listen to the market. If you don’t incorporate the customer’s voice. Basically, if you don’t manage this loop between system three, operations and the operational experience from the markets and what the strategists are telling you. Coming from system four and this loop. 

 

How do you manage how you manage it’s essential to manage it and now one thing is clear if you invest a super simple example. Not enough money into making your customers and the here now happy you will lose them But if you do invest not enough money into taking care of the needs of the customers of the future – You also won’t win the game. And that’s all the VSM is actually telling. And that’s why, for instance, I like the 3EO framework so much, because the VSM is, in this regard, rather abstract. And then now, I mean, I want to really work in the real world and not sit in the ivory tower of organizational design and development. Therefore, I need tools. And here, complementing this sometimes rather abstract theory of the VSM, the 3EO framework to me, it’s super helpful to really answer these questions. How do we, on a structural level, incorporate customer feedback, the voice of the customer, etc.

 

Emanuele 

And this brings me to the following question. In your book, you start from Michele Zanini’s and Gary Hamel’s work on humanography. And you try to build a map, and Simone was saying it’s a fractal map between VSM and Rendanheyi. And just for our listeners who may not have heard about Rendanheyi, there are just three concepts in a nutshell that are micro-enterprises, so small, powerful companies within the company, which the company is fragmented. There are EMCs that are collaborations, and contracts between migrant enterprises. And then there are, as you were saying before, Mark, centralized, structured, just shared service platforms and industry platforms to look at the future, to, let’s say, assign investments, and to give a bit of a direction, common direction to EMCs and migrant enterprises. 

 

How would you translate all of this into a VSM way of thinking?

 

Mark Lambertz

So at first, the idea that you have an overarching body between system two and system five, from self-coordination to identity, that is for me actually kind of the platform that creates hopefully the conditions for a healthy ecosystem. So that these many micro-enterprises get all the standards and protocols, tools, and infrastructure that they need to run their business.

 

For instance, contracting. I love the idea of the micro-entropies and the P &L. I saw in the past challenges to implement, for instance, the contracting issue. And this is, for me, then, again, close to the VSM. In the VSM, you have also connections between the operational units, and operational dependencies sometimes. That’s how you create your alliance. I call it an alliance.

 

And there I see already a connection. The other thing is when I have in the overarching platform body, for instance, a strategy that gives the direction, then that should be aligned with the strategy function in the micro-enterprise. I think every micro-enterprise also needs its own micro-enterprise market strategy, business strategy, and marketing strategy. 

 

I don’t know what types of strategy we all have. Basically, the VSM helps me – think about is it coherent, whether is it aligned, whether is it paying into each other, and what is the relationship. The same applies then also for certain guidelines or rules. I don’t know the quality standards. There is maybe an overarching body determining from ISO 9001 and deriving certain things for the organization. And then how do we implement the quality in the micro-enterprise? What is relevant? And that is different maybe when you have teams working on software, then teams working, I don’t know, with physical stuff in the factory and the plant at the production line. And this is always then for me the connection and also operational steering. We have maybe operational global targets that we want to achieve. How do we translate this into operational steering from the micro-enterprises? And this is how I see always a relationship, a cadence, so to speak.

 

Simone Cicero 

I have a couple of bits to add with this because I think we are going in the right direction. I have some insights that may frame this discussion between VSM and Randonnei 3 .0. Again, for those that listen to this podcast for the first time, the 3EO toolkit that we are mentioning is our Open Source framework to implement something like the Rendanheyi, a concept of a platform organization. 

 

So first of all, system one, the operational units, micro-enterprises. That’s kind of a one-to-one identity within the models, right? So that’s the idea that you have a system that in open systems theory concept is there is a redundancy of functions. So every unit is functional on its own, and can achieve a fully complete value proposition. It doesn’t depend on others to be valuable and functional. That’s as a principle.

 

System one is very, very, I would say platform work, very, very Rendanheyi-like. Then system five, systems, sorry, system five policy, kind of systemic direction, and so on. I feel that the random AI and 3EO advocate for exercising this type of function through architecture. 

 

So through enabling constraints instead of hierarchy and more like top-down processes. I also want to recognize a little bit that as we implement VSM, maybe with a European management mindset, it may be very different from the Chinese approach that gave birth to Rendanheyi, which is much less hierarchical, it’s much more systemic. 

 

So the idea is you exert direction, you exert influence on the system by creating enabling constraints. These enabling constraints are, for example, the form of contracts that you can use, pushing people to manage their own P &L. So it’s more like an enabling constraint approach to system 5, to generate the direction of the system. Then systems 2 and 3, so coordination and control. 

 

Coordination is largely achieved with contracts. So the idea is that in the platform organization, you don’t coordinate much in a top-down manner, but you rather leave the units to self-coordinate with contracts. So they have these contract tools, contracts like the EMC that Emanuele spoke about. So ways for two units to, let’s say, agree on, they want to bring a new product on the market, they sign a contract, they say, you know, if we achieve these results, we’re going to split the revenue in certain ways. 

 

So these contracts, are going to regulate how do they share resources with each other and cooperate on projects. So coordination through contracts. So that’s the second part. Then three, it’s very interesting because I think that’s probably the most interesting. I don’t want to say difference, but I want to say the nuance that Rendanheyi platform org approaches and 3EO approaches bring to the VSM. So control and auditing.

 

I feel that in the Rendanheyi and 3EO perspective, that’s mostly achieved with skin in the game. What do I mean by that? Units receive investments, for example, and they sign value adjustment mechanism contracts. So basically, if you have a unit in the organization that wants to bring a new product to the market, they negotiate capital investments with internal kind of venture builders, let’s say. 

 

And they can negotiate objectives. And there are systems of rules that allow, for example, an employee to say, if I achieve these results, that’s what’s going to happen. So I’m going to get, for example, a certain percentage of the revenues. My salary is going to get an upside. Or maybe I have access to equity of this new thing that I’m creating. And so to some extent, there is nobody that really controls what you do. But it’s a negotiation of commitments that you have with the structure of the organization. So nobody’s gonna tell you what to do. It’s you setting your objectives. Maybe the company can help you by telling you these are kind of market-leading objectives that you should be thinking about and then you negotiate the rules and contracts. And this is very powerful because if I get back to the open systems theory principles that we briefly discussed, one of the key principles of the open systems theory is that, you need this type of contract because otherwise, if you don’t have it structurally agreed, then somebody can come and say, forget what you said yesterday, what we said yesterday. You don’t have the resources anymore. You just get back to your job and maybe we bully you out of the company. So that’s the idea. So that’s a very important difference in how VSM gets implemented in the, let’s say in the Rendanheyi and 3EO. 

 

And then four, lastly, it’s probably, I would say, when you speak about strategy and direction and anticipating the future and so on, we very often, when we do platform organization transitions, we don’t just operate at the structural level. So PNL setup or contracts and so on. But we also instill in the organization a capability to have a community of practice around strategy.

 

And what do I mean by that? I mean, visualizing strategy. I mean, for example, making, you know, we do a lot of Wardley mapping, for example, which is in a communal way. So you have all the units sharing Wardley maps, sharing strategic insights with each other. And this, you know, is the place where the organization can really enact more coherence. What do I mean by that? It’s the place where, for example, based on this shared strategy vision, you can as an organization, you can say, I’m going to invest capital here or there. And this to some extent translates into what units you’re going to see or what units you are going to support with capital injections and so on.

 

So as a recap, it feels like the Rendanheyi and 3EO offers a really, it’s like, I mean, I don’t want to be too ambitious, but it looks like it’s a very good evolution of VSM. So, implement the VSM. If you think about VSM together, you really do a complex implementation, which is very, you know, it’s very based on self-defined interactions and rules, more than processes and hierarchical approaches that maybe as a European mindset, I must say, and now you’re a German also with German heritage that we have, we tend to think more into having the responsibility to control top down what’s happening because maybe the employees are not good enough to make right decisions. 

 

Instead, the Chinese culture has brought up an approach to complex organizing, which is much more natural. It’s much more about the nature of the people. It’s much more about managing by not managing, as they say. And the Wu Wei is one of the principles of the Rendanheyi. So what do you think?

 

Mark Lambertz 

Wow, so many aspects and so many cool points that you brought up. I don’t even know where to start. At first, I agree indeed that Rendanheyi is a very elegant and powerful way to bring the idea of the VSM to life. And that’s in the first place when I got in contact with it, I thought, my God, finally. 

 

Then, and I think this is my new favorite model indeed also, and I try to incorporate by the way it also now in my daily sphere of influence at my workplace. And then this idea of an enabling constraint is really a different paradigm. And with a big twinkle in the eye, this is again the difference between system five of a European or an American management school and the Chinese way especially the Chinese culture and this entrepreneurial spirit that is for me a typical characteristic of many many Chinese actors in the Chinese economic sphere. 

 

Let people do things and trust them rather and intervene if they deviate hard. Instead of we need to regulate everything in the first place and then people can play the game. This is, yeah.

 

Simone Cicero 

Just, Mark, as a follow back to you and just as an idea, don’t you feel like, you know, there is this idea of optionality where things can die? So basically, as Europeans, we tend to say, you know, maybe I do an investment, I really care about this investment and I don’t want it to die. Why this kind of Chinese, Rendanheyi approach is more like, you know, let’s create diversity, then maybe some of these diversity is going to die off. It’s not a big deal, but over the long term, that’s what makes an adaptive system. Don’t you think, do you think it resonates with this?

 

Mark Lambertz 

Absolutely, and this expresses for me again a way how an entrepreneur is thinking. You know your stop-loss point and then you say, okay, the horse is dead, sorry, it won’t win the race anymore, let’s relieve it from the pain, it caused. This sounds maybe a little bit hard. Indeed, I mean, 

 

I learned it a little bit the hard way in my times in the agency where the rule number one was always, kill your darling. The first idea that you love so much about a campaign, but maybe this is not always the best idea. And this is not a thinking figure, especially in corporations where you want to keep all this investment. And then you throw good money, the bad money in the, sorry, where the sun is not shining part of the body instead of stopping a stupid activity. Yes. fully agree. Yeah. This is a disease, a corporate disease.

 

Emanuele 

Yeah, maybe I have a follow-up consideration in question to Mark. Two of the features of the Rendanheyi are EMC contracts – The contract of collaboration between micro-enterprises and VAMs that are contracts of incorporation and evolution of micro-enterprises. To me, those are in system three. So those are ways to facilitate the collaboration, and cooperation of different of these different entities. It could be people in the micro-enterprise. It could be micro-enterprises themselves. The big difference I don’t know, perceive at least is the fact that when it comes to budgeting, so when it comes to distributing objectives and money, the Rendanheyi is much more, you know, peripheral. 

 

Again, this possibility of managing a budget, using it, planning activities, and attaching the distribution of value to some moments really falls within the node, within the EMC, within the micro-enterprise. My perception is that in the VSM, this is a higher level, let’s say, function. Is it correct or wrong?

 

Mark Lambertz 

Yeah, not so easy to answer the question. At first, just because we see a box and system three and the description of the function, it does not tell us how it is maintained. So one could say, technically speaking, imagine you are a manager of a micro-enterprise, I’m a manager of an enterprise. The two of us meet because we see an opportunity to collaborate and to leverage synergies.

 

Then in this moment, in the theory, we are already together in system three. So we also need to, and this is also what Steph has always said, don’t try to over-organize everything. Leave room for informality. And by the way, system two, for instance, operates maybe 20% of the activities of system two are formally organized. 

 

The rest is happening. in the Cantina, I don’t know, after the work, after the work. So I agree. I think this is again our preoccupation, our Western style of thinking. We see a box, we think in hierarchies. There’s a position, there’s Mr. Müller. And this person is then responsible for XYZ and is commanding others. But the VSM could be also seen in a way that fits to the Rendanheyi and 3EO philosophy.

 

So it’s open. I would say the best answer a consultant in the past that I could give was always it depends on Rendanheyi and 3EO. 

 

Simone Cicero

Yeah, that’s the thing that we use when we don’t have the answer every time. Thank you so much. So let’s move into kind of a concluding part of the conversation. I want to ask you to maybe share your perspective in terms of how the VSM framework can be used. So.

 

Is it something that can be used in the design phase, maybe in combination with the Rendanheyi? Is it something that can be used as a diagnostic tool? So what’s your experience in using VSM as a means of organizational design and evolution?

 

Mark Lambertz 

I think you can categorize the application of the VSM into two major dimensions or aspects. The one is designing and then running a system, an organization, so the design phase, definitely. But often, it’s then the question, are you starting on a green field or a brownfield?

 

And that changes then a little bit the way how you apply the VSM. And then you can use it really lightweight as a thinking framework. I call it sometimes like, you know, these games, Monopoly, or I don’t know how they are called, these board games, as a lightweight thinking framework. And then you have really a very, in quotes, rigid seven-step approach, where you can say also like in Bosch, it happened, we used the seven-step approach to completely designed a new organization, the so-called BBM mobility sector in Bosch, which was before not so clear organized and the VSM was there helpful to develop basically the governance logic that is needed to govern such a huge organization with 230,000 people and I don’t know, 56 billion euros turnover last year. 

 

So by my favorite approach is in the beginning, an easy diagnostic. So understand where are the pinpoints, the challenges, and the steering challenges of the organization. So basically, where are the pinpoints in the decision-making structures? Who’s talking to who, when, about what? Simply said. And then I look out for either is the system is not taken care of. And there we have this system with three stars, the so-called audit slash.

 

retro review channel, which is always the unwanted child in the family. My typical experience is the higher you get, by the way, in the organization, the higher the likelihood that three stars are not done in an organized way, which is a pity. In the design phase, usually, I usually map existing meetings towards the VSM to understand, for instance, where is the budget meeting happening. Because all the organizations have typical events. How do they take care of getting the right talents into the organization? How do they take care of keeping the talents in the organization? And so on. And there I have kind of a checklist that helps also to identify spots where it’s worth to intervene. 

 

And often the VSM is for me then like, a medical apparatus, like this x-ray instrument. It helps me to find the broken bone, but the VSM is then not the cure. But for healing a bone, of course, I use then something else than the instrument that made the problem visible. I use it for design purposes only, really only if you want to design a steering organization and the strategy must be there in the first place because it makes no sense to work with the VSM if you have no business strategy. So often I get requests, Mark, can you help me? And I say, yes, I would love to. But if I don’t know what is your long -term aspiration, it makes no sense to organize something because then I will build something that eventually will last only, I don’t know, for the next quarter, but not for the next 100 years, in quotes. 

 

So yeah, from diagnostic to design. From simple mapping approaches to really thorough deep dives, here the seven-step approach is worth mentioning. Again, the book by Martin Pfiffner, The Neurology of the Business, is probably the best that we have at the moment when people want to go through each and every step of the design. And sometimes, honestly, in the last sentence, it’s hard to distinguish between diagnosing and designing the organization because sometimes you see a little quick win. Yeah.

 

Simone Cicero

Right. It’s a circle, right? It’s something that feeds itself over time.

 

Mark Lambertz 

Yeah, yeah, yeah, that’s it.

 

Simone Cicero 

Mark, you have a very long tradition of working in the agile movement. And I wanted to ask you a little bit of an informal question as a closing before we move into the breadcrumbs. Do you kind of feel that we are going through a chasm in how we manage and design organizations? 

 

So it feels like the agile movement is in a kind of critical moment. We are at the same time encountering new approaches that the VSM is getting steam again, the 3EO, the platform organization. Is this something that you are sensing? Are you sensing a kind of a switch, a little bit of a coming of age of transitioning from what has regulated organizational management and design in the last maybe couple of decades, everybody was about Agile and, you know, the end of Taylorism. But now it’s like we are feeling we are kind of feeling the end of Agile and we’re looking into a new age. 

 

So are you first of all, do you feel the same? And secondly, what are the kind of characteristics that you see in the case of this new age that is coming up?

 

Mark Lambertz 

Number one, yes, I see this development, especially in Agile. But hey, let’s talk to the guys who worked in the early 80s on topics like lean production systems. 

 

So what I want to say is I think we have these peak cycles. And sometimes we have another cycle, more centralization than more decentralization, maybe as one example. More standardization, more degrees of freedom. Actually, you can go back to the early 70s, where in ex -Yugoslavia, they wanted to create this also self -organized factory with cell logic. I think we’re dealing here with a classic and sometimes it’s getting more attention than sometimes getting less attention.

 

Sometimes I think that the next big buzz will be about creativity in organizations because we need innovative solutions and what is happening now with AI/AGI. If it’s really hitting us, how do we deal with that? But I think on the other hand, Agile went a little bit through this Gartner hype cycle. We had this peak of inflated expectations.

 

Then came this slope of disillusionment, or what is it called, and now slowly we’re entering actually the plateau of productivity. Yes, we see layoffs of agile coaches, but honestly, not every agile coach is good. Maybe some were really bad and it’s well deserved, sorry to say, for the colleagues. On the other hand, probably agile was not really understood and this book from Jeff Sutherland “Scrum: The Art of Doing Twice the Work in Half the Time” set  so wrong the tone for the topic of agility that, of course, people must be disappointed when they find out, Agile won’t solve my resource problems. And still, we have to develop quality and stuff like that. 

 

What’s beyond Agile? I mean, my default answer is, of course, always the viable organization. But this is such a fluffy word, to be honest, that you can interpret everything. I hope we will keep the spirit of this entrepreneurial stuff and that we have with Rendanheyi and 3EO finally a tool set at hand to bring it in a very practical, feasible way to life. And that the basic patterns of organization, autonomy, cohesion, exploitation, exploration, stability, diversity, formality, informality, they won’t change. They get new names, but the kit will always stay the same.

 

Simone Cicero

Right, right. Maybe one thing that we can say is that probably we are entering a new age where again, optionality and diversity play a much broader role in maybe versus typical aspects of productivity or the poignancy of what we build. It’s much more about building a diversity of things now and much more about trying and feeding these diversity, you know, these ecosystems of diversity that platform organizations and the VSM with this idea of units support and profess. 

 

So as a closing word, maybe I would like to ask you first of all to give us a couple of break rams. So again, things that you want as our listeners to pick and consume as our inspirations for their work. And maybe you can end by describing where people can find your work. I know that you also have a GPT just released. So maybe you can give us a few bits of where people can find your work and connect with you as well.

 

Mark Lambertz

At first, I would like to give credit to Stafford Beer and his work and really would recommend in checking out the videos/ audio recordings that you find in YouTube. There is one longer session, almost three hours in Monterey, one of his last sessions where he summarizes all his knowledge and wisdom about management, autonomy, and believe me, Stafford Beer, when you hear it, you clearly hear and feel how much he does not like the traditional top-down approach of management. And he’s also very funny. So these recordings. Then I mentioned already the book from Martin Pfiffner, The Neurology of Business. I think in terms of application, this is the best that you can find. And I’m working a lot with it. 

 

Then. Another book about the VSM which is also very good is the Fractal Organization by Patrick Hoverstadt. I think that it also describes, he’s describing very nicely the principles of an organization which is very close also to Renn and He and so on. And then what is his name? god I know only of his phoneme. José Ríos Pérez? Pérez Ríos? 

 

He’s a professor or was a professor, I think he’s now emeritus from the University of Viaduct. He worked also with Stafford Beer together and he published also fantastic books in English about the VSM, the application. He talks about typical pathologies and how you can heal them and so on. So he’s also a great source of inspiration. 

 

Next, of course, to always the original work from Stafford Beer.

 

Where can you find my stuff? Well, my first mission when I started to work with the VSM, by the way, it was the 23rd of May 2013, so since 11 years now, and I almost tattooed the VSM on my arm. Luckily, there was no space anymore for a new tattoo. So that’s why I started to write in German because that was my mission. I wanted to make the VSM more accessible in the German-speaking sphere. 

 

That’s why my website has a German ending intelligente-organisationen.de. I started to write only in English, but I have stopped in the last two years, I have to admit, publishing stuff. But there you find also the links to my books and so on.

 

My newest interest by the way, which is also available in English, is leading by wigsignals .com. That deals with the idea of how we spot early changes in the environment that are relevant to us. So I’m a system four type of guy. I like strategy and innovation and checking out trends. And this book, there’s also the VSM part of it, but it focuses rather on the process of how do we perceive changes and how do we intervene then in the organization. 

 

And in this context, the VSM plays a role. Rendanheyi is also mentioned a little bit as the Haier model. And therefore, you find also a wild integration that I once dared to develop of the VSM Rendanheyi. So these are actually the sources where you can find stuff from me.

 

Simone Cicero 

Great. Thank you so much. Emanuele, I don’t think you have anything to add. Good to have you. I hope you also enjoyed the conversation, Mark.

 

Mark Lambertz 

Oh yeah, a lot. Thanks for the questions and especially for inspiring me. I have new things that I can think about and that’s always the best.

 

Simone Cicero

Yeah, I mean, I think we were very effective in kind of trying, getting new insights on how these two frameworks can connect. Very happy about this. And yeah, I mean, thank you so much for our listeners. You will be able to find all the details and all the notes and links that Mark mentioned during the conversation in the website. 

 

So if you go to www.boundaryless io/resources/podcast, you will find a Mark episode very visual and you can also access the transcript and all the notes. And thank you everybody for listening and until we speak again, remember to think Boundaryless.