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This study concerns the application of Cybernetic Management principles, with special emphasis on the use of the Viable Systems Model, to an existing organisation. Apple Inc is the organisation chosen for the purpose, even as the system in focus is its IPad business.
The work is structured into two main sections. The first provides an outline of the chosen business along with a recursive map of the organisation. The second section discusses cybernetic management principles and applies the Viable Systems Model (VSM) to diagnose various viability issues and potential areas of difficulty within the organisation and system in focus, outlines possible structural, informational and communication flaws and provides recommendations for enhancement of business viability.
2. Organisational Outline
Apple Inc. is a well-known global organisation engaged in the manufacture and sale of a range of products in the area of personal computers, portable music players and smartphones. The company markets upper end personal computers (PCs), iPads, iPods and iPhones. Started by
Steve Wozniak and Steve Jobs at Cupertino in 1976, the company has survived difficult times to grow into a respected and valued business firms.
The iPad was released by Apple in April 2010. Internally designed and developed by Apple, it is a tablet computer and is being marketed by the company in its existing global markets as a platform for visual and audio media like movies, games and music, and of course also for web content. Lighter (at 700 grams) than a normal PC, the iPad uses Appleâ€™s own operating system (OS), which is also common to the iPod and the iPhone. Focused on entertainment, the iPad is not expected to replace a laptop or a netbook, even as market experts expect it to be an additional premium product for wealthy advanced economy markets for several years. (Apple iPad) The product launch has been successful and production of iPads (by the outsourced supplier) has recently been doubled from 1 to 2 million units per month.
Apple operates with a conventional divisional structure with vertical and lateral configurations. Steve Jobs, the CEO, occupies the apex of the pyramid, with the CFO, the COO and the heads of central departments like design, legal, retail, marketing and communication reporting to him. The third level comprises of various operational functions that report to the second level. Whilst the organisational structure does not show a specific organisational position for the iPad, it is presumed that (a) its outsourcing is being handled by the COO in charge of outsourcing and (b) its sales is being handled by the iPod and iPhone sales division in coordination with the regional offices.
It is important to note that all iPads, like iPhones, iPods and Mac Minis are manufactured by Foxconn at its largest plant at Shenzhen, China. Foxconn, the largest electronics contract manufacturer in the world, has recently been in the news for the high incidence of suicides by distressed workers experiencing high pressure working conditions at its factories. (Why Apple) Steve Jobs has made his concern with the shockingly high incidence of suicides public. Apple iPads are likely to face intense competition in the market in the coming months from competitors like Dell, Samsung and Acer.
Conventional organisational structures, like the one at Apple, focus mainly on dominance hierarchies and superficial accountability, giving little indication of how organisations operate or the various forces that are always at work within organisational structures and systems. The Viable System Model, introduced by Stafford Beer more than 20 years ago, provides organisational analysts simple ways to map organisations in order to make them more comprehensible. The VSM will be taken up in detail in subsequent sections. The drawing of a recursive map, an essential part of the process, entails the identification of three main elements of organisational working, namely the operational component, the management, and the environment. A recursive map of Apple Inc. can thus be drawn as under.
The simple recursive map shown above provides details of three main components of the iPad organisational system, the operations, the management and the environment and the complex relationships that exist between them. The environment here comprises among other things of different market segments, the customers, and other environmental constituents. The operations comprises of various operational units who work independently and in collaboration with each other. The management comprises of functions associated with control, intelligence and laying down of policy, the functions that are associated with the first two levels of the conventional Apple organisational chart. It is also important to note that each system is composed of numerous subsystems, all of which are engaged in continuous activity. The recursive map for Apple iPads as a sub-system of Apple can thus be shown more elaborately as under:
The Operations functions are constantly engaged in 2-way processes with the Environment. They absorb information from the environment and on the other hand try to influence it and cope with its demands. Market research for example provides Operations with information about the Environment, even as advertising emanates from Operations and tries to influence Environment in different ways. The Management and Operations functions are also in constant contact with each other, with the Operations providing feedback on various issues to the Management even as the Management provides Operations with policy decisions and tries to control its actions.
3. Application of Cybernetics Management to Apple iPads
Overview of Cybernetic Management Principles
Cybernetics represents the interdisciplinary study of regulatory systems. It concerns the underlying laws that govern the ways in which organisms, machines and organisations maintain their identity, and fulfil their objectives inside their environment.
It is a broad area of study that is associated with systems theory and control theory and aims to comprehend and define the actions and processes of systems that (a) have goals, and (b) take part in causal and circular chains that routinely move from action to perceiving to comparing with preferred goals; and again thereafter to action. Cybernetics is particularly relevant for systems that are involved in closed signal loops, wherein the action by the system with the environment causes alterations in the environment. Such changes are made apparent to the system through feedback and cause the system to adjust and adapt to new environmental circumstances. Such circular and causal relationships are necessary for development of cybernetic perspectives. Cybernetics provides ways and means for analysing and assessing the functions and designs of different systems, including those pertaining to business and organisations, in order to render them more efficient and effectual. It is based on the premise that the underlying laws that govern the ways in which the nervous systems of animals function in order to maintain control over their actions are similar to the manner in which species maintain themselves within their ecosystems as also the ways in which corporations maintain their existence in the marketplace. With regard to organisations, cybernetics management states that systems need to maintain Homeostasis, i.e. a state of equilibrium. The lack of such equilibrium can lead to instability and collapse.
Experts like Peter Senge and Stafford Beer have worked extensively on systems thinking and have developed useful and widely appreciated theories. Whilst Peter Senge used systems thinking as the bedrock of his vision for the learning organisation, Stafford Beer argued that the essence of management science did not lie in apparently important things like money, capital, machines, materials or employees, but in complexity. Variables like products, prices, sales, profits, cash flows, investments, and customer needs were no more than visible manifestations of complexity. Such manifestations form the tip of the tip of the iceberg, even as the complexity originates from the changing structure of the fundamental underlying system.
Senge also argues that much of the problems in management arise from the application of fairly simplistic frameworks to what are actually complex systems. Organisations tend to concentrate on the parts instead of visualising the whole, and are unable to see organisations as dynamic processes. Improved appreciation of systems, Senge feels, should result in more suitable action.
Stafford Beer believed that efficient and effectual organisations should maximise the autonomy of their participants, within the realistic limitations of organisational requirements, for fulfilment of their purpose. He used cybernetics to design the Viable System Model, which can be used for the diagnosis of organisational issues as also for subsequent processes of organisational redesign. The redesigning process, he felt, should make good use of technology, particularly IT, to help in supporting organisations with nervous systems that support their objectives without burdening them with bureaucracy.
The Viable Systems Model
The Viable System Model (VSM), developed by Stafford Beer in 1972, has been used for understanding and redesigning organisations and for supporting associated change management. Whilst VSM has successfully been applied in many organisations, it is yet to be widely known, possibly because it questions the traditional view of organisations being hierarchical institutions that operate with top-down command structures in which strategies are formulated at the senior levels and then implemented by instructions through tiered ranks of executives.
VSM offers organisations a method for organisations to achieve functional decentralisation and yet establish effective organisational cohesion. It is underpinned by basic cybernetic principles of control and communication in complex organizations. These principles provide a way of achieving both autonomy and empowerment within integrated frameworks, along with required supportive links between individual parts. VSM gives a framework for the design of flexible and adaptable organisations that balance internal and external perspectives as well as short and long term thinking.
Application of VSM theory requires an understanding of the concept of recursivity, which is based on the premise that all living systems are constituted of series of sub-systems that have abilities for self regulation and organisation. Corporate organisations are not however built with recursive abilities and their systems and sub-systems do not have the capacity to automatically regulate or organize themselves in response to internal or external stimuli. Whilst organisations have lesser internal complexity than their environments, they do have imbalances that must be recognised and addressed through various leverage strategies to bring such complexity within their range of response. Management teams again have much lesser complexity than the larger organisation and must find ways and means of understanding the organisation without having access to all the details known by others.
Application of VSM Concepts to Apple and Apple iPad
VSM provides ways and means to design organisational structures in such a way that corporate organisations, their systems and sub-systems become autonomous and acquire the capacity to regulate and organise their actions within their environments. Autonomous units, i.e. viable systems should have 5 important systems for effective operations within their environments, namely (a) System 1; implementation, (b) System 2; co-ordination, (c) System 3; control, (d) System 4; intelligence, and (e) System 5; policy. An analysis of the existing states of these systems can help in assessment of the level of system viability and location of structural, information and communicational flaws in the system in focus.
Implementation (System 1) represents the conduct of primary activities. The systems responsible for producing organisational products or services form the centre of the VSM or recursive model. The output of such products and services occurs at different aggregation levels through conduct of primary activities. Whilst conventional organisational structures do not unfold beyond such points, most viable systems, regardless of their structural level, contain further sub-systems to help them deal with environmental complexity. These sub-systems then become responsible for executing the value addition activities of the system in focus, in this case the iPad.
Viable systems also have systems to coordinate (System 2) the interaction between value adding functions and primary activities. Such coordination is however little more than top down control and direction and does not represent a continuous process of interface, interaction and mutual adjustment between the autonomous units and the support functions. Co-ordination in the Apple iPad business will most likely be achieved by senior managers overseeing groups of operational divisions and sub-divisions.
Control (System 3) occurs with the use of the communication channel between sub-units and meta-level units in VSMs. Such control systems in viable systems are minimised with the implementation of instruction systems that operate on the basis of exceptions and prevent excessive direct interference by managements in the running of operations. Reports about Apple from external observers indicate that the majority of the employees, except those with acknowledge brilliance, are closely supervised and controlled. Practically all employees work under gag conditions and are forbidden from discussing their work with people outside the organisation. Such tight supervision and control can raise a number of viability issues. In the first place, such tight control can lead to excessive time consumption of highly paid and competent people who would otherwise be better occupied in actions other than policing. Organisational practices like these can also lead to the creation of biases in perceptions towards employees and defensive behaviours in middle managers who are often bypassed by senior executives. The damaging consequences of excessive authoritarian control have been illustrated many times at different organisational levels. The collapse of Soviet Russia is a stark example of its potential dangers. Organisational experts are similarly concerned at the future competitiveness of Apple after the exit of Steve Jobs.
Viable systems that can control their actions and respond to stimuli need to have effective intelligence systems (System 4) in place. Such intelligence functions consist of 2-way links between the system and external environment and are essential for response and ability to adapt to changing environmental stimuli. These functions firstly provide primary activities with constant feedback on market conditions, technology advances and other relevant external factors. They secondly project organisational identities and messages to the environment. Intelligence functions of systems are furthermore firmly focused on the future; they concern planning for the future in anticipation of likely changes in the external environment and internal capabilities in order to plan and moderate the future. Most modern day organisations with orthodox organisational structures have weak intelligence systems. Such systems, where they do exist are furthermore the first to be reduced during times of organisational trouble. Such actions can lead to loss of contact between organisations and the environment, reduction of information flow and slowing down of responses as well as purposive projections on the environment. The gag order on all Apple employees in speaking with outsiders needs to be seen in this light.
The last function of a viable system (System 5) represents policy making. It provides closure to the complete system, provides clarity on the overall direction of the unit and defines the conditions at the highest level for organizational effectiveness. It monitors the System 3-System 4 homeostat and makes decisions, and that too infrequently, after the conduct of extensive debates between the Intelligence and Control functions.
It is important to note that Apple is, to a large extent, a hierarchical organisation. Steve Jobs maintains close control over the organisation and rank and file employees are closely supervised and directed. The organisational chart reveals that as many as 11 senior managers and important departmental heads report directly to Jobs. It is widely acknowledged that such structures, where power is concentrated at the top, are slow and inflexible, which makes it difficult for them to handle the ever increasing change and complexity that surrounds most modern day organisations. It has also been seen that medium and junior level members of such large organisations are unable to explain their structures to outsider and when asked are likely to provide confusing and conflicting interpretations. Whilst Jobs is known to be an enormously capable and visionary leader and is credited with pulling the company out of the great difficulties the company was experiencing when he reassumed control in the late 1990s, his successors may well be more ordinary and unable to control and grow the company in the same way in the future.
Most subsystems, like the one in focus, the iPad, are unlikely to have strongly developed System 4 and System 5 functions. These functions are as such assumed by the senior management of the organisations, in this case Apple, thereby leaving such systems short of significant viability and dependent upon senior management for critical responses to environmental stimuli and for all levels of policy decisions. Modern day systems like the Apple iPad are surrounded by environmental complexity of such levels that it is not possible for a few organisational managers to see them, leave alone deal with them on a one-to-one basis.
Organizations like Apple are also likely to lose cohesion and synergies in their attempts to create new business units that require organisational support and are able to respond to different market pressures. Knowledge and information in such circumstances can often then be trapped in local networks and lessen the opportunities for people to work collaboratively across organizational boundaries. People working in different parts of Apple iPad may be simply unaware of numerous issues that should concern them because the intra-organisational connecting tissues have become overstretched. Serious apprehensions have been expressed over worker suicides at the companyâ€™s suppliers for reasons like work pressure and leakage of confidential information.
Conclusions and Recommendations
This assignment concerns the application of cybernetics management and VSM principles to an organisational system, the assessment of the viability of the system in focus and the making of appropriate recommendations for improving structural, information and communication flows.
VSM offers organisations a method for organisations to achieve functional decentralisation and yet establish effective organisational cohesion. It provides ways and means to design organisational structures in such a way that corporate organisations, their systems and sub-systems become autonomous and acquire the capacity to regulate and organise their actions within their environments.
The Apple iPad, as a subsystem of Apple, comprises of numerous subsystems and undoubtedly uses numerous methods and techniques to deal with organisational complexities in different operational and managerial areas. Such methods and techniques are likely to be system and IT oriented and constructed to help the organisational in dealing with market and operational demands in areas of sales, production, inventory, finance and accounting, HR and other areas that are related to everyday work.
Analysis of information available on the organisational structure and culture of Apple and its iPad business do however indicate that whilst the system in focus will have numerous systems in place for dealing with Operations, i.e. System 1 functions, its Coordination functions are likely to be top-down and its Control functions handled by the larger organisation. Internal Intelligence and Policy functions are also likely to be weak. Efforts to develop the system into a viable system, in line with VSM theory, will need focussed and committed organisational action in specific areas.
The area of Coordination should first be taken up for assessment on whether IT and IS can be effectively used to reduce intrusive human intervention. The co-ordination needs between support and value addition functions should be satisfied with the design of effective 2-way communication mechanisms that facilitate reciprocal adjustment. It should be seen that sub-units that share the same parent unit work synergistically Greater sharing of standards and approaches will increase chances of synergy. Stronger lateral links, both technological and human, will reduce the need for imposition of control from above and increase the autonomy of subsumed primary activities.
The Control function can be eased by setting up mechanisms that ensure that provided accountability reports accurately reflect the status of Operations. The development of monitoring channels, which by-pass the management of sub-units and operate between meta-level managements and operations of sub units, (without undermining the authority of managements of sub-units), can help in reducing the incidence of control from the top and increase the autonomy and reactivity of sub-units.
IT and IS can also be very effectively used in moderating the 2-way link between the primary activity and the environment. The system will need to be constructed such that (a) the loops are balanced, (b) the system is not swamped with external data, making it difficult for the system to respond, and that (c) outward communication is balanced with feedback.
Close interconnection of Intelligence and Control will drastically reduce the need for the Policy function to come into the picture and improve system viability. It is likely that the introduction of these changes will not be easy, considering the tightly regulated nature and essentially dispersed functioning of the company. Improvement of informational and communication channels for ensuring better coordination and greater autonomy can however be a practical and achievable initial step on the road to achievement of organisational viability.