Patrick Hoverstadt is a Director and Consultant at Fractal Consulting and the author of The Fractal Organisation and Patterns of Strategy. Patrick is a viable system model (VSM) expert and we cover his deep views on systems thinking.

Interviewed by: Peter Hayward

Transcript

Peter Hayward: My big question for organizations in system speak, well, how I do systems speak anyway, is how does an organization maintain its viability, in an environment of infinite complexity? It's a good question. But what might a good answer be?

Patrick Hoverstadt: VSM is about how you deal with complexity. So you've got the complexity of the organization, you've got a thing that is more complex than the management is. But against that you've got a much more complex environment. And how do you balance that? So you can think of it as a set of balances or tensions.

And two of the really big ones are between Autonomy and Cohesion. The ability of the parts of the organization to decide what they need to do versus the ability of the whole organization to be able to decide to do something. So that's one. And the other is Change versus Stability. Change is what is the world going to need from us? Which is your foresight, your futures question versus how do we keep ourselves together. So there's always that tension and those two tensions work off one another.

Peter Hayward: That is my guest today on future pod. Patrick overstep. Director and consultant at fractal consulting. And Patrick is the author of the fractal organization and patterns of strategy.

Peter Hayward: Welcome to Future Pod Patrick.

Patrick Hoverstadt: Glad to be here. Thanks for asking me.

Peter Hayward: A pleasure to talk to someone else who knows a little bit about one of my favorite systems models, the viable system. But we'll get to that in due course.

We start our podcast, Patrick, with what we call the story. So we ask our guests to tell the story of how they came to where they are. So what's the Patrick Hoverstadt story?

Patrick Hoverstadt: Oh, it's convoluted, I think we could say. So just to ground it to where I've ended up in a way. I am a consultant, I play it being an academic, but I'm not really, I just do odds and ends for various academic organizations but primarily I'm a consultant and have been for nearly 30 years now and everything we do is based in systems approaches. So pretty much exclusively. I first came across systems thinking when I was at school.

I borrowed a copy of the limits to growth that my brother had. He was eight years older than me. And that was really interesting. But then I put that down and dropped out of school and there was a huge furore about that. Nobody ever dropped out of the school I went to, so that was a kind of first and I went and did a craft apprenticeship and then went down that route for 17 years so started my own business and ran that f for 13 years and then for a variety of reasons, a whole load of stuff was happening at the same time.

And I thought, do I really want to carry on doing this for the rest of my life? And it was a tough way to make a living and there were lots of other complications and decided to pack in. So over a two year period, I ramped that business down and I went and did an MBA and as luck would have it came across VSM.

Is the only MBA course, the only master's course in the world. I think that taught viable systems and I came across that and that for me answered way more questions about how organizations work, why they work, when they do, why they don't work, when they don't than anything else I've come across and I'd always, it sounds bizarre, but I'd always been interested in how organizations work from being a kid.

The plan going into the MBA was, get a sort of general management job in a, normal company. And I talked to the prof who was teaching the VSM stuff and I said, this is great. Where are the jobs in it? He said, there aren't any. He said I run this little consultancy, but we haven't really got any work.

So there's no jobs for you. You could start your own business, but I thought for the birds that, you know and then the last night of the course, I was stood at the bar talking to a guy I had not spoken to on the course for the whole duration of it. And I said, what do you think he, he had a normal career, not like mine.

He had a normal career in industry. And he said it's all pretty samey, really. It's all stuff we've been doing in industry for years, so there's nothing new. Except for the system stuff. That was great.

I said yeah. The trouble is that nobody can sell it. He said no, the trouble is nobody could do it, nobody got it.

He said, the only person on the course who really got it was you who could do it. How the hell he knew I could do it I don't know. But anyway. So I said yeah but like I say, it's the selling problem. He said, oh, I could sell it. And we formed the business there. And then it took me about a year because I'm slow off the mark, took me about a year to realize he couldn't sell it.

But I was committed by then. And it's just carried on from there gradually building the business up. So that's how I've ended up where I've ended up. as I say, we only really use systems approaches. And that's not for ideological reasons. That's for pragmatic reasons.

I just find for the sorts of stuff that I do, they work infinitely better than anything else I've come across. Yeah. Does that sort of answer the question?

Peter Hayward: Yeah, it does. Just so you know how I know about the VSM. I was taught the VSM by an ex SAS officer, because within the British Special Air Service, some of them use that as the theory of how they actually nest their operative teams. And so the teams are set up as recursive elements. One of the strategies when you're fighting is you take out the commanding officer and therefore people don't know what to do. And the SAS decided that's pretty silly way to organize yourself that if you lost one person, suddenly the group would become unviable. And like you I found VSM just explained organization. Yeah. When I found Foresight, or Foresight found me, naturally I had a way to understand how Foresight was placed in organization. That is the System 4 and its relationship with identity and control. And then of course, for the misfortune for my students, of course, for 15 years, was they also were exposed to the VSM, because I taught it to them, in order to understand foresight. The listeners of this podcast and the people who follow it, of course, are either futurist or foresight consultants or strategic foresight people.

Patrick Hoverstadt: Is that the same thing? So are those synonymous terms or are they actually technically different?

Peter Hayward: I think there would be academically a subtle difference. Future studies is the study of images of the future. Cause the future doesn't exist as all we can do is study ideas of the future. So the future is that space we can test our thinking against, we can prepare for it. You might call it anticipation. And then later on, this thing emerged called strategic foresight, which was the business or the leadership perspective side.

So does foresight have a role in viable organizations?

Patrick Hoverstadt: Oh yeah. Massive one. From a VSM point of view, it is, as you say, built into the fabric of VSM.

And partly what you're doing with VSM, with the viable system model, is looking at, essentially one way of looking at it is you're looking at how different types of activity need to relate to one another for the thing to be viable, capable of adapting itself. to unforeseen or previously unforeseen situations.

Situations that could not or that were not foreseen by its designers. So it’s the ability of the system to redesign and reconfigure itself and to repurpose itself. So it remains viable through time. So partly what you're looking at is how that sort of foresight activity relates to other types of activity like control, like resource allocation identity and how those fit together.

So because it's a systems model or a systemic model. It's much more about the connections rather than the thing. So a naive kind of VSM practitioner would look at it as a boxes model. You've got these types of activity, but actually the essence, one way of looking at the essence of it is in the relationships.

Technically, VSM is really about how you deal with complexity. So of particular relevance here, you've got the complexity of the organization, you've got a thing that is more complex than the management is. But against that, you've got a much more complex environment. So the environment we work in is theoretically infinitely complex.

And you've got that imbalance between, the complexity and uncertainty of the environment and the complexity of the organization, the complexity of management. And one of the VSM questions is how do you balance that? How do you cope with that situation? So you can think of it as a set of balances or tensions.

And two of the really big ones are between autonomy and cohesion. The ability of the parts of the organization to decide what they need to do, versus the ability of the whole organization to be able to decide to do something. So that's one. And the other is change versus stability.

So the change one is basically what is the world going to need from us? Which is your foresight, your futures question, versus how do we basically, keep ourselves together. The stability thing. So there's always that tension, and those two tensions work off one another.

I think about it like two kind of elastic bands knotted together at right angles, so there are times in an organization's life when basically the world's pretty stable and all you need to do is get your head down and do what you're doing more efficiently. And there are times in an organization's life when, oops, no, the world has changed and we need to change dramatically to deal with that.

And sometimes that's a kind of sub system level, and we need to max out on autonomy. So because we're dealing with loads and loads of kind of operational level changes in the environment. And sometimes it's seismic. Our whole market, if you're in business, our whole market is shifting and we all need to go over there.

And that drags you up away from autonomy towards cohesion. So those two kind of play off one another all the time. And really VSM is about how you wire the organization up so that it can work that stuff out and deal with it.

Peter Hayward: One of the challenges I found both as a foresight Practitioner Inside an Organization, and then as a consultant going into organization, was those tensions you talk about, Foresight by its nature is the outside and then perspective of what is happening.

And of course the organization, the hierarchy, the command system, the planning system are all about the inside and now, and they want to stabilize it and they don't want to be stressed. They don't want to be slowed down. They don't want to be made less efficient. And so one of the throwaway lines in our trade of being an inside Internal futurist is that you actually invariably will do yourself out of a job because you are just too disruptive for the organization. And one of the reasons why I think consultants come in, is that you can ask the consultant to leave. Have you got any perspective, any advice, any kind of thing of when a person's working inside an organization and trying to bring the sort of outside and then perspectives as to how you do it well, or how you do it and get listened to.

Patrick Hoverstadt: I think that's, I think what you've talked about is really at the heart of this. It's not that hard to, forgive me, because futures isn't my main thing, it's not that hard to do crystal ball glazing and go, I think this might happen.

The problem is getting it listened to and knowing what the hell to do about it and getting the organization to shift. And that tension of stability versus change is the big thing. It is really hard in organizations, for example, at a board level to hold that tension because as you say, as the person going yeah, it's fine today, but tomorrow it's going to be like that and we need to change dramatically.

That is so antithetical and so unwelcome. And, the thing I said about there are periods in an organization's life when everything's stable and you just need to be efficient during those times, that irritation factor of somebody going, ‘Oh yeah, but..’ is unbelievably destabilizing and irritating and just a pain.

And that's why they get chucked out. One of the really common. pathologies that we see in organizations is missing for system four. So there's 20 odd pathologies that we see repeatedly using VSM. There's a bunch of them around that foresight function, looking outside and into the future, either doesn't work, isn't listened to, does not exist, sometimes on an epic scale, absolutely epic scale.

So I think, My heart goes out to anybody trying to hold the line on that because it isn't, it really isn't easy. It so isn't easy. But it's so important. It's so dramatically important. I get your point about consultants and that is one of the things that consultants do.

And as a consultant, you are always if you're any good as a consultant, you're walking a tightrope between destabilizing the organization. If you do it too much, they throw you out. If you don't do it enough. Generally, they don't throw you out, but they should do because that's your job.

Your job is to move them. So you're always calibrating yourself against how much can I stretch this lot, and I think that's, I think that's really hard for the internal person. One of the things that I have found that works, this is not a panacea, but one of the things that I have found that works is rebalancing decision making teams.

For example, boards there's a there's a systems principle from Warren McCulloch, the guy who developed the whole, did the original mapping on neural networks. His redundancy of potential command principle, which goes ‘in any complex decision network the ability to act effectively depends on an adequate concatenation of information.’

He had a way with words, didn't he? But what he means is that, that your ability to take any decision well depends on having the right information. Yeah. Now, my corollary to that is groups tend to take decision, the decisions that they have the information to take, right? So the information design, to a large extent, will dominate the decision making.

And we have massive imbalances in information design in organizations. You've got loads and loads and loads of stuff about what's going on now in the organization and in the past, and very little about what's likely to be happening in the future. And of course, the past stuff is data and the future stuff is not.

So there's a, there's an imbalance in volume and there's an imbalance in certainty. And that makes life very difficult, but you can work on that. You can harden that up, and the thing you can definitely do. You can't definitely, but it's possible to do this.

If you talk to boards, they always know that they should be spending at least half of their time looking out into the future, thinking about that. And if you calibrate how long they actually spend doing that and measure that and hold up a mirror, you can recalibrate that. So you can get them to actually spend just over half the time talking about outside in the future.

And that creates a pull for that, creates a space for that information to be heard. and it creates a pull on ‘we need more of this stuff because we need to talk about it’, I think just that holding the mirror up helps because they all know. They always know. They always know that. if you ask them to say we should be spending 50, 60, 70, whatever percent on this.

And when you measure it, it's 20, 10 percent, . So that's the thing you can fix. You can fix it with board schedules. You can fix it with times in meetings. You can fix it with you can't fix it, but you can recalibrate it. You can rebalance it gradually through time, and then it's training them, just that process will train them to think differently and look for different stuff.

So I don't think that's a total answer, but it's a, way.

Peter Hayward: It's good stuff. What's your position on leadership mindsets that are more useful for dealing with the requisite variety challenge that, individuals have more complexity in their organizations than they can manage, and they certainly have more variety outside their organizations. And I'll just give you one theorist and I'd like you to comment on him, and it's the work of Philip Tetlock, where Tetlock and his famous Hedgehogs and Foxes. He's the person who studied people who make forecasts, and he finished up with this typology of what he ultimately called Super Forecasters. The people who are, by their nature, Fox thinkers, they actually hold their assumptions lightly and actively search for disconfirming information. Versus the Hedgehog that is very confident of what they believe and therefore the Confirmation Bias ensures that they continue to see evidence that their assumption of the future is correct, right up until the point that it's not.

How does that kind of idea of leaders adopting mindsets fit in with how we can make organizations more viable?

Patrick Hoverstadt: I'm not a leadership guy. So but obviously it is relevant here. So the thing that you picked up on particularly is looking fortwo things. One is holding your beliefs lightly or your options lightly. To deal with futures you have to encompass multiple possible futures, obviously. Not obviously, but you do don't you? So you have to hold them more lightly. And I think part of the trick in all of this is, as you say, looking for the evidence that this model is wrong, that this theory is wrong.

There's a guy who did some, he was doing some research on behaviour types around entrepreneurism. And he identified some behaviours that characterize really good entrepreneurs. And most of them were sort of 50 50 in the population. Away from towards thinking and stuff like that.

The one that wasn't was people who, when they encounter something new, look for confirmation. They look for how it's the same as what they already know. And only about 5 percent of people look for the differences.

So obviously, we can all do both. But there are a small proportion, roughly 5 percent of the population for whom looking for what I didn't, what I'm not expecting is natural.

And for most of us, it is not natural. Now in a way, good news is you don't need many people, 5 percent, 5 percent is plenty, from a leadership point of view. But it and I think it is a skill that can be trained. I think it is a skill that can be learned - to look for what I am not expecting.

You mentioned early on the SAS using VSM. So the U. S. Marines use Boyd's OODA loop. Yeah, which maps directly onto V. S. M. Yeah, so you can do a very direct mapping of OODA to VSM. And for me, Boyd who developed OODA is probably the best that I've seen, in terms of, here's how to, here's doctrine of looking for the evidence that our assumptions about the world is wrong.

That I think works well. And I think that's, as I say, I think that's trainable. I don't have evidence that it's trainable, but I think it is trainable. But part of it, if it's not trainable, then the answer is find the people who think that way naturally.

Peter Hayward: I'll just take one last point and ask you to elaborate. Recursion, rather than having large, complex organizations that are very stacked, we need viability at the most local level. We need systems that are viable locally and have them then relationally arranged. Rather than have a command at the top and operations at the bottom and long chains of communication. Because back to your point, you can't learn fast enough. You can't adapt fast enough. You can't get signs from the bottom to the top. I found it very hard to convince leaders to have autonomous organizations rather than controlled organizations. And that was beer's experience and that was Espejo's experience. Was that yours as well?

Patrick Hoverstadt: To an extent, I think it's a lot easier.

I think it's a lot easier than it used to be. So I think there's been a kind of, I think there has been a generational shift. Yeah. And I think there are several aspects to that. So one is just continual pressure off, built into different kind of organizational management disciplines.

The assumption that you should be pushing for more autonomy. If you look at, for example, the agile movements, it's massive on this. Absolutely. Almost bonkersly massive on it, you'll hear people in the agile movement going, managers have got no right to tell us what to do, and things like that.

You work for the organization. Ultimately that's, there's got to be some accountability to that. And you've got to be doing stuff that, that furthers the whole organization because the point of the, part of the point of the recursive argument is you're looking at the viability at different levels.

You're looking at the viability of the team and you're looking at the viability of the department and you're looking at the viability of the department and the division. And those trade off against one another because their environments will be moving at different rates at different times. There's that tension that I talked about, the elastic band tension.

Between autonomy and cohesion and between rate of change and stability that's shifting all the time at different levels of the organization. So part of that's, working those kind of trade offs, so that's kind of part of it. I think though, that we,we went through a generation of managers, management thinking that assumed that the world was stable and, so you had a really an absolute management fetish about efficiency. For, decades. Decades and decades, like 40 50 years. That was the management fetish. And that's shifted because people have now realized that the world is not stable, it never was, but there was a belief that it was, if you look at the death rate of organizations, even during that sort of Halcyon period when everybody thought it was stable, It wasn't. They were going out of business hand over fist, but the belief was that it was stable, and I think partly that's a, that was a, historical post World War II thing. So after the chaos of that, anything looks stable and there's just a sort of an emotional yeah, it's okay, next year is going to be like this year, but a bit better. And that worked pretty much.

Nobody thinks like that now.

Peter Hayward: It struck me as ironic, Patrick, as you talked about the Limits to Growth. And of course, that was one of the great futures books and one of the most disruptive books and still today, a remarkable piece of foresight research. And it, to some extent, captured what you talked about, because it said, we have this epoch of growth, and therefore we think growth will continue, but they modelled it, and they showed the relationships, and they said, yeah, there is no such thing as unlimited growth on a finite planet, impossible.

And so then they were, so then they were told they were wrong. They were told, no, the market will find replacement. The market will find efficiencies. The market will find substitutes. And Graham Turner in Australia in the CSIRO, he mapped the actual data based on The Models and found that basically we have tracked the Limits to Growth and that was not their intention. Their intention was not to have us track the limits to growth, but we tracked it because I guess people wouldn't accept that I had to think and do things differently.

Patrick Hoverstadt: Yeah the thing that's exercising people now is climate change. It is over here. I don't know how it is in Australia where you have bigger fires than we do, which is not one of the things that was the most obvious in limits to growth.

So the thing they did was, of course, as you said, multiple possible futures. If we do this, it'll might come out like that if you do that, but they all ended up with, drop off a cliff at some point. It has shifted the thinking. I think, so you've got, not that book on its own, but, climate change is all built on system dynamics models, and as soon as you're into that thinking the world isn't linear, That the world works in loops. And of course the big, one of the big things that, that's changed in this is that it is what I call the closure of the world. It used to be that you could, say at a national level anyway, you could project out and do stuff and it didn't come back and bite you in the bum.

That doesn't happen anymore.

Yeah. Here in the UK, we've fought four wars in Afghanistan, right? Historically. First three, there was no chance it was going to come back to bite us. Apart from, you send people out and they don't come back, but it wasn't going to come back to these shores.

Fourth time, there was no chance it wasn't going to, and that the whole world has closed to the point where. You cannot ignore this stuff anymore. You cannot think in a linear way, because it never did work in a linear way, but you could get away with it. You can't anymore.

Peter Hayward: Yeah, the speed and interconnection now is beyond it. So Patrick, you talked about the world change, obviously you changed. The next book you wrote, Patterns of Strategy, did that emerge from your ongoing work with organizational viability and systems approaches, or was it actually a divergence?

Patrick Hoverstadt: Yes. And yes. So as a consultancy we don't sell. Okay. So all the work that comes in, somebody rings us up and says, we've got a problem with this. Can you help now, which is great. That's lovely. It means that what we do has to work. Because if it doesn't work, they don't ask you back, and they don't tell other people about you.

Okay? So the business relies on what we do actually working. We were getting asked to do strategy stuff by clients. And if you look at the conventional strategy stuff, it doesn't work. So you know, conventional strategy fails 90 odd percent of the time. Okay. If you've got a business that runs on what we do has to work, you can't go out and do conventional strategy because it's gonna fail, it's not going to work.

Okay. So I'd done some work a long time back on strategic risk and how you model strategic risk, which is quite a sort of foresighty futures kind of thing,

And built that around Maturana's model of structural coupling. So basically, so the question I was asking there was, if we're doing strategic risk rather than any other sort of risk, what makes it strategic?

And my answer to that was taking a structural coupling view that an organization is coupled to its environment in such a way that the organization changes the environment and the environment changes the organization. And it's those sorts of relationships that keep the thing alive. It's about maintaining your fit with your environment, which is very VSM y, VSM is partly about how you maintain the organization's fit with the environment. When the environment changes, how are you going to change? So far so good. So we took that basic idea from Maturana of, this is what's going on and looked at how we could operationalize or turn that into a way of doing strategy.

So if we said, the real question is this if conventional strategy fails 90 percent of the time, and that's, that's a Kaplan and Norton figure. And, but, Russ Akoff came in with 98 percent failure rate. Okay. You can go, Ooh that's a shame. But the big question is, if it's not strategy that's driving us forward into the future, what the hell is it?

Yeah. What's creating the strategic direction we're going in? Because it's not the strategy because that's not getting implemented. What is it? Where's this coming from? And that's what we looked at with structural coupling. So the idea is that, what Maturana was interested in was how organisms evolve, which is through structural coupling, they're coupled to the environment in such a way that they, so the hummingbird's beak changes shape to fit, it changes structurally to fit the flower, and the flower changes structurally to fit the hummingbird's beak.

And through time the fit between them deepens. Okay. So we took that model and tried it on organization. Soon as you do, we went, Oh, my God, and we could see it everywhere. We could see absolutely everywhere. And you could see it happening in real time, so then the question was how do we turn that into something we can actually use?

And that was the development with my colleague Lucy, who died last October of patterns of strategy as a as an approach. Basically, what are the dimensions and the elements of that, and how does it actually work? And from that, we were able to basically, we documented every single successful strategy we'd see, we could come across using that as a language.

Yeah. And that's the patterns of pattern strategy. Although there are theoretically millions of possible combinations of these things, At the time we wrote the book, we found 80 looking really hard, so although theoretically there are millions, actually there kind of arn’t and, several years on, we've still only found 112, so there are, which is far more than Michael Porter, who basically had two, make it expensive and charge premium or pile it high and sell it cheap. So there are patterns for collaboration and for, competition and for growth and for small organizations and for, trying to get a market to go in a particular loads and loads of different types of strategy.

But all based on this idea that essentially when systems come into contact with one another, what determines what happens, and how does that unfold as a dynamic through time? So that's one of the, be interested in your view on this. So essentially what we're looking at there is how is the future created in the relationship or by the relationship between, for example, an organization and its relationship to other organizations, its relationship to markets and stuff, and I think of this, because I sail, as winds and tides. So you know, you get in a ship and you don't just go, Ooh, I want to go, I want to go from here to there, chart a course and go, because the tide's going to move you here and the winds are going to move you there, and the tides are what I think futurists tend to look at.

Those big socioeconomic technical trends that sort of sweep through sectors and sweep through society. And then you've got winds, which are the equivalent of our relationship with this other organization is going to push us in this direction, or it's going to pull us towards that.

So you've got those two kind of forces working on organizations all the time. And that's what essentially what creates the future it's those two kinds of things.

Peter Hayward: Yeah. I think also is part of the coupling is culture and the relationship. Yeah. To me, the culture of the organization, its openness, its ability to communicate, pass ideas around, listen to difference. So got the tides that are powerful and slow, and you've got the winds that are fluky and can blow and stop blowing. And then there is the fragility of the vessel itself that you're in. Whether you're in a bathtub or you're in something that's actually got a keel. And I come back to viability. There is an environment that is going somewhere and your responsibility is what is the vessel with which we are coupled to that environment? And they also play off one another.

Patrick Hoverstadt: Yeah. Yeah. No. So yes, absolutely. But I think, one of the, for me, one of the weaknesses of VSM is, this is heresy, isn't it? One of the weaknesses of VSM is so you've got a really good unpacking of what the thing needs to look like and how it needs to work internally to be viable.

But it's the, it's model of the environment is just, there's a thing there, and it's quite, it's actually quite passive. As it's modeled, theoretically, it's not. You've got the, how does the, organization, key into the environment. And how does the environment affect the organization?

But that isn't actually detailed. It just says it does. Yeah. Yeah. The thing that patterns does is say if there's this in the environment, what's going to happen between these two, and part of that is, How is each viable? And what's that viability look like? And how's that manifest?

And how do those play off one another? Typically when we do strategy exercises, it's because, an organization's in the poo, to use a technical term. Life is not good for them when you model it out. They go, Oh because they can always see they can always model the trajectory of the relationship and see where it's going to take them.

And they know that in their guts, but they've never been able to talk about it before. This is really normal. It's a visceral experience quite often for people and for management teams because all that anxiety that they intuited is suddenly there in front of them on the table.

Right. This is gonna unfold like that. Oh, shit. What are we gonna do about it? And then you work through what you can do about it. Okay. But it's,

it's the process. What you get to with patterns that you don't… more easily than you get to with VSM is the process by which the future is created. Rather than what you get in VSM typically is much more of a that the world out there happens and we adapt, there's not so much emphasis in the what's our part in creating this future.

And I think that's, they complement one another really well from that point of view, And some of what we do as well is we do ecosystem modeling. So that's like on a bigger scale. So you're looking amongst other things, so you look at, what are the big trends running through this ecosystem and who's playing what strategies.

So you might have, 40, 50 organizations in the ecosystem and what strategies are getting played out. And how do those relate to one another, which you can do very easily with patterns of strategy,

Peter Hayward: I would imagine too, if you've, if your organization has tried to model a bit of recursion, then yeah, parts of the organization may encounter the changing environment before other parts.

And if you've actually gotten some parts that bump into. The changing environment, and they have the ability to inform the rest of the organization, Hey, there's something out there that we didn't expect. And if the peripheries of the organization are, the sort of sensitive parts of the organization often bump into stuff.

Patrick Hoverstadt: Yeah. It's not just it might, it's inevitable that bits will encounter different rates of change. So different parts of the organization will be exposed to stuff at different times. And that's just that's absolutely inevitable. And it's inevitable that different parts of the organization have the ability to change themselves at different rates, which is one of the reasons that most change programs fail.

They try and change everything at the same speed, and it doesn't. It's not going to. Obviously, I think this goes back to our stability change thing, though, because, organizations are getting those sort of stimuli all the time about the world changing. And if you react to all of them, you'll just shake the organization to pieces.

So part of that in VSM, part of that system for thinking is having a model of the world and having a model of the organization and trying to work out what we actually need to pay attention to and what we don't, what can we, what's just noise and what signal. And that comes back to the thing we said before about, you've got to be able to read the signals that you weren't expecting and take notes and, in Boyd's terms, orientate yourself around those.

So how does that change my view? Is that enough to change my view of the world? Do we need to, do we need to think again about this? Or is it just a, is it just a bit of noise? That's so hard,

Peter Hayward: and your thinking now in 2024. You've written another book?

Patrick Hoverstadt: Yeah I've written a book called The Grammar of Systems, which is about how, it's two things. One is how to think like a systems thinker so it's nine thinking disciplines that systems thinkers, in my opinion, use, and the other half of it is a set of the basic laws and principles from which

Systems, systems practice are developed or systems methodologies are developed. So there's 33 of those. So things like the, the Warren McCulloch, I can't remember which one it was now, used that Warren McCulloch principle that I mentioned earlier that's one of them.

Redundancy of potential command. That's the one. Yeah. Oh and, the thing that VSM is based on Ashby's law of requisite variety that, that's there. So they're quite big, big chunky ideas if you like, and all systems approaches are built from those combinations of those.

But they are also things that you can use directly to look at the world and understand what's going on. So you don't have to use them through a methodology. You can use them, just drop them onto a situation that is, that's incredibly powerful and quick. I remember the first time I did it with a group, I had a bunch of MBA students and we had, half an hour at the end of a day and I just gave them five

systems laws and said, apply those, it was, I don't know, 2010, 2011, something like that. And I said, apply these to the financial crash and they were whip smart kids, and apply these and tell me what you, come back with, in groups, five groups, each, pick one, go and look at it through that lens, come back and tell us what you've got and you've got 15 minutes.

And then they came back with a way better explanation of why the financial crash had happened from that than you got from the economists,

you know, and it took, they had no experience with it before, but they came back 15 minutes later with a very compelling story of how this had happened,

Peter Hayward: so who's that book for Patrick?

Patrick Hoverstadt: It's for people who are interested in systems thinking at whatever level, like I, I really want to get a grip on this stuff.

I want to improve my skills as a systems thinker. So that's the so the first end of it is nerdy from that point of view, the back end, which is where the laws and principles are, I think Yeah. massively powerful tools that you can use for understanding how the world works and what we can do about it.

So that's much more practitioner orientated if you like. It's a little book. It's only a little thin thing.

Peter Hayward: It's a small book.

Patrick Hoverstadt: It's a small book with a lot of stuff in it. Yeah.

Peter Hayward: Yeah. I was going to say those laws, to some extent, govern the nature of the coupling.

Patrick Hoverstadt: They govern, some of them are, they govern the nature of coupling, they govern the nature of systems themselves.

They, yeah. So things like, we talked about system dynamics and the limits to growth. So system dynamics is made up of as a discipline is made up of several of those laws. So you've got the first circular causality principle in the second circular causality principle, which are about positive and negative feedback.

You've got the feedback dominance theorem that says it's the structure of feedback. This is again limits to growth. It's the structure of the feedback that matters, not where you start.

Yeah. So if you've got this thing, you've got the thing with the feedback loops, it doesn't matter whether you start with 10 of these things or 20 of these things, it will end up in the same place.

Because of the structure of the feedback is that matters, not the volumes of stuff in it, you've got systems approaches that are basically made up of some of these laws and they it's it's good for understanding organizations. It's good for understanding the world at large.

It's good for understanding big problems.

Peter Hayward: Patrick you would have noticed that one of the one of the changes in the environment one of the new emergent couplings is around Artificial Intelligence and how it's playing out. In this is AI going to make us better systems thinkers?

Patrick Hoverstadt: It's a really interesting one, isn't it? Cause we're all sensitive to the hype around AI. I've got a, I've got a mate in in Australia, in Adelaide who's really keen on using AI with the patterns of strategy stuff. So he's built an AI patterns of strategy model.

And it means you can just put in information about a company and say, come up with a strategy. Take some of the 80 patterns and see which ones would work for this problem. And it'll spit out an answer in a few seconds and you go this one looks interesting.

Tell me more about how we'd implement that, it'll go and do it. And that's great. It takes in terms of opening up your mind to possibilities quickly, it's really good. Thanks. as ever with AI, I think you've got to sanity check it, cause I've done AI exercises where it came up with total nonsense.

Not that but I've done other AI stuff where it came up absolute total garbage. So I think you've got to sanity check it, but in terms of, yeah, can you come up with 15 strategic scenarios for this like that? It'll do it for you in seconds. Could you come up with, scenarios about what this competitor might do or the market might do or it'll do that for you in seconds.

Peter Hayward: Yeah, I think that's, as I understand it, the art in AI is what they call prompt engineering. It's the ability to ask AI the right questions, that AI is only as good as the questions you ask it. Plus, of course, the data it's trained on. And it seems to me that thinking systemically, thinking through the rules and the patterns, it means we can ask AI some interesting questions that still might produce invented rubbish coming back, but it.

But it could be interesting for us as humans to think about.

Patrick Hoverstadt: I think that's right. The patterns make it much, much easier. And my experience to date, and I'm not going to nail my colours to the mast on this, but my experience to date is you can smell when it's bad. If when AI is coming up with rubbish, it no, I don't think so.

Yeah. So yeah, I, I think it's interesting to, watch this space.

Peter Hayward: I will.

Patrick, it's been great fun. I've had a wonderful time. As I said I'm I'm a VSM nerd from a long way back. It's just wonderful to have to sit and talk to someone who, wrote that wonderful book and help my students for years and years. The new book sounds interesting. Thanks for taking some time to have a chat on FuturePod

Patrick Hoverstadt: Thank you very much. It's been fun.

Peter Hayward: If Patrick's way of thinking about organizations, about Board governance and strategy is appealing then I do suggest you get into his books. Links to those are provided in his show notes. Future pod is a not-for-profit venture. We exist through the generosity of our supporters. If you would like to support the pod then follow the Patreon link on our website. This has been Peter Hayward. Thanks for joining me and I'll see you next time.