Master's thesis. The Viable System Model in the analysis of the project management

Department of Electrical Engineering

MASTER’S THESIS

The Viable System Model in the analysis of the projectmanagement

The topic of the Master’s Thesis has been approved on 04.06.2008. The supervisorsand examiners of the thesis are Professor D.Sc. (Tech.) Pertti Selvintoinen andProfessor D.Sc. (Tech.) Tuomo Kassi.

Hyvinkaa May 21, 2008

Arseniy KrasikovSiltakatu 15 B05900 [email protected]

AbstractLappeenranta University of Technologyelectrical engineering department

Arseniy Krasikov

The Viable System Model in the analysis of the project management

Master’s thesis

2008

53 pages, 14 figures, 1 table and 1 appendix

Examiners: Professor Pertti SelvintoinenProfessor Tuomo Kassi

Keywords: cybernetics, systems theory, the VSM, Viable System Model, project man-agement, complex systems analysis

The paper is made to understand modern (especially cybernetic) methods of complexsystems analysis and management, to explain scientific basis of the Viable SystemModel, to compare theoretical model with developed project management system inCompany.

The manuscript purposes are achieved by studying of scientific papers from scien-tific journals collection such as Elsevier (http://www.sciencedirect.com) or Emer-ald (http://www.emeraldinsight.com). Scientific basis of the VSM is gotten fromStafford Beer explanation and from personal investigation of neurophysiology andcybernetics history. The comparison is made by "objective" (studying of official com-pany documentation ) and "subjective" (personal interviewing) methods.

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AcknowledgementsThe Master Thesis cannot be written without strong support of the LappeenrantaUniversity of Technology and excellent help in spite of warm work of Company em-ployees. I want to express heartfelt thanks to everyone who helps me during writing:to Julia Vauterin, Barbara Miraftabi, to Pertti Selvintoinen and to Tuomo Kassi fromLUT; to Antti Vanhatalo, to Mikko Uhari, to Marko Piela, to Esa Partanen, to Jukka-Pekka Reijomaa, to Kari Supi, to Ilpo Valimaa, to Petri Lindroos, to Tino Wallgen,to Asko Torki, to Janne Martin, to Sergeij Verolainen, and to Maarit Penti from Com-pany; and, of course, to Victor Borisovich Vtorov, to Nikolaij Dmitrievich Polyahovand Oleg Yurievich Sabinin from Saint-Petersburg Electrotechnical University; to ev-eryone who has helped and is not acknowledged undeservingly.

Special thanks to my room-mate Roman Ivanov, who was to endure it for 4 monthsand for all my friends from the universities.

Exclusive acknowledgements to sweet Olya, the most important person, for price-less help and for "broken nerves" during our discussions, and to my parents for theirknowledge, excellent advices and constant help.

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List of Figures1 Reflector curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Autonomic nervous system . . . . . . . . . . . . . . . . . . . . . . . . . 133 Information fluxes in HNS . . . . . . . . . . . . . . . . . . . . . . . . . 164 General architecture of functional system . . . . . . . . . . . . . . . . . 185 Variety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 VSM technical representation . . . . . . . . . . . . . . . . . . . . . . . 237 VSM neurological representation . . . . . . . . . . . . . . . . . . . . . . 248 Operation unit organization . . . . . . . . . . . . . . . . . . . . . . . . 259 Waterfall project management . . . . . . . . . . . . . . . . . . . . . . . 2810 Main flow of typical project in Company . . . . . . . . . . . . . . . . . 2911 Waterfall project management in Company . . . . . . . . . . . . . . . . 3012 Typical project team in Company . . . . . . . . . . . . . . . . . . . . . 3013 Relations into project management . . . . . . . . . . . . . . . . . . . . 4014 The VSM of Company’ PMO . . . . . . . . . . . . . . . . . . . . . . . 42

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List of Tables1 Comparison between first and second-order cybernetics . . . . . . . . . 11

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ContentsAbstract i

Acknowledgements ii

List of figures iii

List of tables iv

Nomenclature v

1 Introduction 1

2 A scientific foundation 42.1 Cybernetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.2 Fundamentals of neurophysiology . . . . . . . . . . . . . . . . . . . . . 11

2.2.1 Fundamental of neurophysiology . . . . . . . . . . . . . . . . . . 112.2.2 Theory of functional systems . . . . . . . . . . . . . . . . . . . . 16

2.3 Stafford Beer’s Viable System Model . . . . . . . . . . . . . . . . . . . 20

3 Company’ project management organization and VSM 283.1 Company’ project management organization . . . . . . . . . . . . . . . 28

3.1.1 Objective project management in Company . . . . . . . . . . . 293.1.2 Subjective project management in Company . . . . . . . . . . . 343.1.3 Conclusion of investigation . . . . . . . . . . . . . . . . . . . . . 36

3.2 Comparison the VSM and Company’ PMO . . . . . . . . . . . . . . . . 38

4 Conclusion 43

References 44

Appendices 46

A Appendix1 46

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1 Introduction

Effective organizations operatelike effective human beings.

Stafford Beer

We live in new world, in new post-industrial informational society. Today we op-erate mostly with information, mostly with complex information, and mostly withvery rapid changing information. “Information is power” but it is power only when wecan find useful information among of noise. To understand how we could make ourinteraction with information more effective and to create systems that can be adaptive(stable) like human, we are to understand the process of cognition and understanding.One way to do it is self-cognition. Humans are the most adaptive form of life, formof live matter. I am sure that building any kind of systems, using the principles onwhich the human body is built, is the key for stable development, and the answer tofuture challenges.

Construction of this type of systems is exceedingly wide and difficult task. But suchsciences as cybernetics, systems science, theory of information, game theory, neuro-physiology, behavioural and cognitive psychology give us new ways to understandwho we are. The heritage of Norbert Wiener, A. A. Bogdanov, William Ross Ashby,Ludvig von Bertalanffy, P. K. Anokhin, Claude E. Shannon, McCulloch, Heinz vonFoerster and Stafford Beer give us chance to find a solution.

As example of system operated only with information one can choose project manage-ment. The project management essence is to achieve goals in changing external andinternal environment with resource limitation. That is reason why project manage-ment orgnization should be flexible to change all the time to become as more adaptiveas possible. Thus it can be compared with live organism. And this is why it can bethe object of investigation. Project management is very important in modern world.Moreover, it is one of the cornerstones of success in process of creation and upgrading"tools" in "toolbox" of humanity, in progress. It is reason to make it as effective aspossible.

The Company company pays a lot of attention to its project management devel-opment. So I have excellent possibility to inspect serious, advanced "organism",exploring the Company project management orgnization in its development. Here itan outcome of one project management orgnization evolution was investigated andwas compared it with the Viable System Model by Stafford Beer which is based onsecond-order cybernetics and neurophysiology.

The cybernetics as a modern science was founded by mathematician Norbert Wienerwith publishing of his book "Cybernetics, or Control and Communication in the An-

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imal and Machine" in 1948. He defines cybernetics as "the science of control andcommunication, in the animal and the machine". Cybernetics science operates withsuch ideas as negative or positive feedback, transformations, blackbox, sustainability,and etc. in all kind of systems. Thus Cybernetics can be seen as general theory forcommunication and control. orgnization contains both and thus it should be basedon cybernetics.

Information as a base of communication requires its investigation. Thus the nextstep of cybernetics development - second-order cybernetics - doesn’t look outsider. Itis cybernetics of cybernetics or investigation of cognition by subject of cognition.

What is new is the profound insight that it needs a brain to write atheory of the brain. From this follows that a theory of the brain thathas any aspirations for completeness, has to account for the writing ofthis theory. And even more fascinating, the writer of this theory has toaccount for her- or himself. Translated onto the domain of cybernetics:the cybernetician, by entering his own domain, has to account for his ownactivity; cybernetics becomes cybernetics of cybernetics, or second-ordercybernetics.[1]

So now self-referentiality, self-organizing, and the subject-object problem are undercybernetics view.

The essence of an organization is a cooperation based on communication, on informa-tion exchange between subjects with personal goals and ways of thinking. Thus theresults of cybernetics and second-order cybernetics are necessary for the basis of cre-ation of organization. It is great knowledge, but a real example should be discoveredfor sure.

Thus, to understand the Viable System Model as a result of cybernetics it is nec-essary to explain the organization and the work principles of human nervous system(HNS) as optimal information processing structure. I say "optimal" because resultsof evolution give us special and exclusive power to work with information. The con-sciousness is a special property of human.

Of course, in the investigation knowledge of higher nervous activity or of physics ofsignal transmission is not implemented because of its extreme complexity and speci-ficity. The VSM (viable system model) bases on general functional division and itsorgnization, we work with a bird-eye view of human nervous system. Thus I explainfunctional division and some aspect of self-regulation of HNS.

Shortly, it consists of several systems by functional division which work with infor-mation from intra- and extra- environment and with experience and future prognosis.It is very difficult tasks for technical systems. That is why it is very interesting and

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important to explore how our somatic and autonomic nervous system are organizedand function together. It is a key for creation good information organizations.

Neurophysiology had been already connected with cybernetics by academic of Academyof Sciences of the USSR P. K Anokhin. Pyotr Kuzmich explored nervous feedback ac-tion in nervous activity and called it - ’return afference’ (’обратная афферентация’)in 1935. It happened 12 year before Wiener’s ’Cybernetics’. It clearly show to usstraight connection between ideas of cybernetics and real functioning of living systemlike we. It gives to us possibility to implement knowledge of physiology and morphol-ogy of our nervous system in construction of information processing system.

Besides feedback, Pyotr Anokhin create 2 additional terms. They are ’afferent synthe-sis (’афферентный синтез’) and ’acceptor of action results’ (’акцептор результатовдействия’). It says that cybernetics can be develop by knowledge of neurophysiology.

Therefore we have essential background to understand the foundation of the ViableSystem Model. Background knowledge give us point of view from where we can seescientific connection between cybernetics, neurophysiology and management orgniza-tion itself. The cross-point of this connection is created by Stafford Beer and called theViable System Model. It is suggested to be the best model of management orgnizationamong others known to me on today. It is very important to compare this model andreal evolution of management in information present world.

The investigation has been done by two methods: gathering of "objective" and "sub-jective" information. "Objective" flag is set to the official materials of trainings,guidelines, how-to, manuals, policies, and practices. But official materials had beencreated in the past, and something can be changed or official materials are transformby project managers into everyday work. Thus, it was decided to make an interview-ing of project management participants (project team players). It "subjective" partof the investigation.

With ideas of theory of functional systems, to define investigated system a goal waschosen. The goal is "providing successful project execution or achieving goals of cus-tomer with a profit". It is the goal of the project management. By this way, a reducingof variety of the reality for the manuscript could be done.

In the sum, the main goals of the work are to explain scientific basis of the VSM,to describe the complex system of project management by the model. This goalsachieving make possible to create recommendations which are could be used by thecompany to improve their management system.

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2 A scientific foundation

2.1 Cybernetics

A mechanisation of processes was started in XVII century from first industrial rev-olution. The mechanisation shows to world serious advantages of resource economyand quality improving. It was a new movement that can be turn back. The newepoch of mechanisation was started when one got possibility to create and distributemechanical and electrical energy in wide limits. Cheap energy opens the door towide using of mechanization. Because of it part of human hand work in all work wasmoved from 90% to 10% (Мартыненко И.И. и др. Автоматика и автоматизацияпроизводственных процессов. М., 1985;).

First mechanised process are was regulated by people. They check information givenby sensors or by process being. Next step, logically, was mechanisation of regulation.Idea of self-regulation by feedback principle was used. Feedback is universal principleof regulation. It can be found in any regulated system. Example of feedback classi-cally presents by thermostat.

The wide machine using showed great advantages of automatic work in comparisonof human execution of same tasks even in complex situations. Increasing movementof automation and of difficulty of tasks required appropriate methods of controlling.Investigation and development of the methods is task of cybernetics.

It is known that the term "cybernetics" for definition of science of the management ofpublic systems used by French physicist Ampere and Polish scientist F.-B. Trentowskiin the Polish language book "Stosunek filozofii do cybernetyki, czyli sztuki rzadzenianarodem"

One can assume that the roots of cybernetics, basically, are in the second half ofthe 19th century, and they were quite independently by the end of the first half of20th the century. The roots of these elements represent a purely engineering knowl-edge, as well as some local synthesis - the result of the development of theoreticalknowledge in specific science and the scientific and technical disciplines. They are:

• automatic control system and automatic control theory;

• elements of simulation and the theory of local models for different areas oftechnology;

• computing devices and mathematical instruments;

• digital computers;

• communications and some questions of the theory of communication;

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• biomedical research, such as biomechanics, general physiology, physiology highernervous activity;

• issues of the administrative and production management, the elements of thegeneral theory of systems;

• elements of psychology labor and engineering psychology;

• mathematical logic as a part of mathematics.

Let me start from automatic regulation and management. Development technologyneeds, the requirements for maintaining the different values that characterize the func-tioning of technical devices in specified limits, led to the invention and the subsequentdevelopment of various regulators. The first technically applicable device of this kind,which used unstated principle for the controlling of deviations (feedback), was a Wattregulator - it is served for regulating the speed of the steam machine by influencingthe amount of moving in her pair. In the future there would be created other devicesof this kind.

The proliferation of regulators, the need of improving the accuracy of their workand of eliminating the phenomenon of instability (self-oscillations) led to a theoreticalunderstanding of the principles of their work, to a mathematical description of theirmethods of operation, and the creation of appropriate engineering calculations. Thefirst theoretical study of automatic regulation systems with feedback associated withthe names of J. C. Maxwell, I. A. Vyshnegradskij and A. Stodolа.[2]

Until the middles of 30ies of 20th century theory of regulation was developed inthe framework of separate technical disciplines, such as the regulation of machines,regulation of electric motors, hydraulic regulators, electrical drive etc. The term "feed-back", piercing all theory of automatic regulation, became only after the appearanceof electrical and electronic components and built on the basis of a variety of trackingsystems, previously called servosystem or servodevice.

Since the late 30ies intensive insinuation of tracking systems in all branches of technol-ogy, including radio engineering, electronics and computing devices started. Articlesof the subject became available in magazines, collectives of appropriate specialistswere formed. Established by that time, the general theory of automatic regulationwas associated with A. V. Mihaylov, G. Nyquist, A. A. Andronov, B. N. Petrov, M.A. Ayzerman, A. A. Fel’dbaum and many other scientists.

The theory of automatic regulation was one of the essential foundations of cyber-netics, and after the last outbreak was in it as one of the essential parts.

modelling also had been developed in the context of specific scientific and engineeringdisciplines in the first half of 19th century already, in some areas earlier. It is primarily

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about building a small working models of various technical systems and devices beforeits creation in physical size. Such simulations are called scale-modelling. Examplesinclude model steam engines and locomotives were made by their designers (G. Watt,R. Trevithick, J. Stephenson, etc.) in preparation for the practical realization of theirinventions. Currently, this kind of model (ships, aircraft, etc.) studied in test water-pools, aerodynamic pipes and so on.

The origin of modelling in science related to appearance of the concept "similar-ity" used primarily for the solution of some problems of construction mechanics, andthen infiltrated into other areas of technology. The development of this type of mod-elling has led to the establishment of relevant theory, sometimes called the theory ofsimilarity.

Using the same system as a model for studying other is one of the main methodsof Cybernetics. It has been intensively developed since the wide distribution of elec-tric circuits, when thanks to the Kirchhoff laws it has became able to state thatthe behaviour of these circuits is described by the system of differential equations.Changing circuits parameters meant, in effect, changing the parameters of relevantequations (system of equations), and the restructuring of the circuit - changing theform of equations. So electrical circuits (schemes) have been became a convenient toolfor study processes of variety systems.

Model researches originally were developed independently by the individual technicaldisciplines. Electric simulation of acoustic systems, modelling of mechanical systemsetc. were studied. The moment that all of these types of simulations are based onthe differential equations for description of the different nature processes led to "uni-versalization" of electric (electronic) models, and to using them as a tool for solvingdifferential equations, regardless of what real systems and processes are described bythese equations. So it was beginning of development of analogue computers and theso-called mathematical modelling.

Around this time, i.e. by 30ies of 20th century, the efforts of a number of scien-tists (L. I. Gutenmakher, G. L. Polisar, etc.), shown that the electrical network canbe used for modelling more complex systems, for the solution of partial differentialequations. There electrical grid models that were applied to meet the challenges ofconstruction mechanics, the theory of elasticity, hydrodynamics, etc.

By the beginning of the formation of cybernetics as scientific direction (late 40ies)applies a revolutionary idea J. von Neumann of the "unity" of information used at allstages of digital computers. In the von Neumann concept automatic digital computeris a device for processing information of any nature, not necessarily the numerical.

By the end of 40ies, the development of computers and its theories were significantly

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influenced by components are ("roots") of cybernetics such as the theory relay-contactnetwork and slot-machines, mathematical logic. Programming issues also got increas-ing importance. There is a need, however, to note that computer science can not beequated with cybernetics: they are cross-cutting with it, as its technological base.

Indeed, "hypostasis" of computers are multiple. These machines are a powerful toolfor the most complicated mathematical calculations, solving of different scientific andengineering problems. It does not always have direct links with cybernetics, but, ofcourse, refers to applied mathematics. Because of the high-performance computing itis a powerful tool of information (not necessarily mathematical) modelling of a vari-ety of objects, systems, processes and phenomena. As a universal tool for modellingcomputers naturally used to meet the challenges of cybernetics itself. In this sense,computers are an essential cybernetics tools. Further, the computers are the mainpart of complex information systems, studied in cybernetics. Finally, the architec-ture, capabilities, the theory and principles of improving of computers are targetedby cybernetics.

Technical means of communication - like watches, methods and means of measure-ment - represent the most ancient preimage of cybernetic systems in ideological terms.Indeed, if any technical systems can be characterized by coefficient of efficiency, i.e.attitude useful energy or substances to energy or substances invested to produce thedesired effect, the task of communication systems and measuring systems is to obtaindata, communications, signals, i.e. that has generally named as ’information’ andhas become one of the basic notions of cybernetics. Signal, informational nature ofmeasuring instruments and communication devices makes them a direct predecessorof cybernetic systems. Because they are based on the concept of the signal, concept ofthe mark. Postal or wire message is valuable not because of his real or energy content,but because of the sense of information. You can go even further and find roots ofCybernetics as language and writing - the first system in which signs, informationalnature is the "excuse" their existence.

Let’s go back to communication systems. Development of them led to such importantconcepts for cybernetics as encoding of messages, communication channel, the sourceand receiver information, interference, noise, etc. Interestingly, the first example ofscience - namely, the statistical - approach to coding associated with S. Morse, who indesigning (1838) of telegraph code (called his name), took into account the frequencyof the various letters in the English texts.

The progress of communication systems, the invention of a radio, electronic circuitsand specific information tools such as radar, led to the development of the theoryof communications, released in the scientific and technological self-discipline, whichwould go down in cybernetics. A large influence on the subsequent development hadworks of academician V. A. Kotelnikov, who have established the link between the

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continuous signals and discrete codes and the possibility of a continuous signal at anydiscrete form and state, and works of C. Shennon and W. Weaver with their theoryof information and famous model of communication.[3]

The Shannon–Weaver model of communication has been called the "motherof all models."[4] It embodies the concepts of information source, mes-sage, transmitter, signal, channel, noise, receiver, information destination,probability of error, coding, decoding, information rate, channel capacity,etc.[5]

Biology and Medicine, which rate of development is continuously increasing, also hada noticeable effect on the emergence of cybernetic ideas. First of all, this applies tothe basic physiology and physiology of higher nervous activity.

As far back as 19th century one attempted to engage the scientific knowledge ofthe area of mechanics to study the movement of living organisms. Studies of bloodflow led to the opening of several laws of hydrodynamics (A. Navier, J. G. Stokes).Physiological studies (N. A. Belov, M. M. Zawadowskij, N. A. Bernstein, and then P.K. Anokhin) led to a significant role of feedback principle in the operation of livingorganisms.

Model representations in the study of physiological processes were involved by I. M.Sechenov,by I. P. Pavlov in widely known work about the role of signal informationin higher nervous activity in animals and humans. In the Cannon W. В.’s works wasformulated in 1929 principle of homoeostasis and were considered the foundation forstable functioning of physiological systems that after the invention by W. R. Ashbyof homeostat[6] formed the basis of one of the cybernetics directions - homeostatic.By the same date, complex inter-related regulatory systems that support - despitethe changing external influences - within certain limits several vital parameters of thebody, such as body temperature, blood pressure and blood chemistry, the frequencyof pulse, respiration etc. were found in an organism.

Studies of Higher Nervous Activity and morphology of the nervous system and brain,the study of the nerve cells functioning revealed the role of electric processes in thefunctioning of the nervous system, discrete - at some level - the nature of the neuronsfunctioning; was disclosed inaccurate structure of some brain zones, analysators inparticular. It turned out that the first approximation of neurons operate on the prin-ciple of "all or nothing", i.e., in a certain extent, similar to a relay switching elements.

By 30ies of 20th century were cybernetic meaningful research by N. A. Bernsteinand P. K. Anokhin. By him, in particular, was declared existence in living organismsof "acceptors of action results" (synonymous with the known proactive mechanism- "predictor"), and was created idea of a functional system and was shown that the

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implementation of the concept sheds light on the nature teleological functioning ofphysiological systems of organism and its purposeful conduct. Theory of functionalsystem has been used in the research to define systems in management of Company.Additional materials about this theory in neurophysiology were put in the paper.

The complexity of biological entities and processes, a large number and variety oflinks between elements and their subsystems, difficulties of studying such systems bytraditional methods resulted in the same period to the birth of the "general theory ofsystems" (L. von Bertalanffy), which was initially developed in parallel with cyber-netics and then almost merged with it.[7]

Root of cybernetics, relatively little noticeable in the first stages of its historic trainingand advancement, were attempts to explore the problems of scientific management insocial and economic systems. It should be noted, the above-mentioned work of F.-B.Trentovski that long before Wiener used the term "cybernetics", and published in10-20ies of 20th century work of A. A. Bogdanov "Tektologiya", who tried to make,in the modern language, system-cybernetic analysis of some issues in the social struc-tures and management.[8]

The works of A. A. Bogdanov and L. von Bertalanffy represent the first attempt tobuild a "general" theory of large and complex systems, such as biological and socio-economic system, the examination of those systems from structurally-informationstandpoint with a significant diversion from their real objects composition.

By the time of "clearance" of cybernetics a number of studies were executed inwhich the mathematical methods had been used to analyse economic systems andto solve a number of economic problems. One of the first works of this kind was thework of L. V. Kantorovich "The Mathematical Method of Production Planning andOrganization"[9] in 1939. It should also be noted walked in a similar vein studies ofV.S. Nemchinov, V. V. Novozhilov, V. A. Zalgaller and V. V. Leontiev - scientists, forwhom, in particular, belongs an initiative of using of model approaches in the econ-omy and construction of a number of economic models that have played a significantrole in the development of mathematical economics, also called economic cybernetics.

Note that the initial formation of cybernetics, social and economic structures, be-cause of their complexity and difficulty of formalization are not had been consideredas objects of cybernetics and information analysis jet. But these works are, oftenblurred, already had had some general principles and provisions that have been intro-duced into the conceptual apparatus of cybernetics later (feedback, information, theintegrity of the system, etc.).

Some mathematical directions, as part of its developing science, have become a nec-essary and important tool for cybernetics studies. Among these directions should be

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point, above all, to the theory of ordinary differential equations, and especially onissues of sustainability of A. M. Lyapunov, as well as on the problem of optimizationof complex dynamical systems described by differential equations and their systems.

Cybernetics was characteristic to use of such exotic, in their time, parts of math-ematics such as the mathematical logic and the theory of algorithms. Appeared in a"pure" mathematics, those sections traditionally contacted only with general issues ofmathematics grounding; long time it was believed that they would not have appliedvalue. Only appearance of the relay-contact network theory, the use of base-2 system,which is closely linked with the same algebra binary logic (Boolean algebra), the re-quirements in the design and optimization of logical and computational elements andnodes of computer made mathematical logic, and, to some extent, and all of discretemathematics, one of the effective tools of cybernetic research. The same can be saidabout the theory of algorithms and recursive functions created within the frameworkof mathematical logic in connection with the problems of computability and provabil-ity, but used theoretical basis and development tool of the programming.

It was noted that the development of cybernetics, in its turn, has had a stimulat-ing effect on research in the field of mathematical logic, the theory of algorithms andthe entire discrete mathematics. It should be mentioned that ideas and the results ofA. M. Turing, E. Post, A. A. Markov and other mathematicians and logicians, whosework formed the mathematical foundations of cybernetics.

Speaking about cybernetics, it is necessary to pay special attention to the impor-tance of communication or otherwise - transmitting of information in the operationof any natural organisms or technical devices. It is problem that try be solved bydifferent sciences. And it is one of the problem for second-order cybernetics.

Second-order cybernetics is founded by Heinz von Foerster in early 1970ies and de-fined him as "Cybernetics of cybernetics"[10]. S. A. Umpleby has created table toshow significant differences between first and second-order cybernetics[11]. It helpsus to speedily understand key ideas:

Discovering of details of second-order cybernetics is out this paper, but it is im-portant to note that the viable system model correlates with ideas of autonomy andcognition.

Before speaking about the viable system model to better understanding some basisknowledge of nervous human system and theory of function systems will be explained.

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Author First-order cyber-netics

Second-order cy-bernetics

Von Foerster the cybenetics of ob-served systems

the cybenetics of ob-serving systems

Pask the purpose of a model the purpose of a mod-eller

Varela controlled systems autonomic systemsUmpleby interaction among the

variables in a systeminteraction betweenobserver and observed

Umpleby theories of social sys-tems

theories of the inter-action between ideasand society

Table 1: Comparison between first and second-order cybernetics

2.2 Fundamentals of neurophysiology

2.2.1 Fundamental of neurophysiology

The main function of nervous system is connection and regulation of different physi-ological processes in accordance with changing of internal and external environmentconditions. Adapting to the environment does not preclude a certain independenceof the body. With higher level of adaptation it becomes less unequivocal response tothe body’s changing conditions of life, so much freedom it has. For example, an inde-pendent permanence of the temperature of the body in relation with a temperatureof external environment means autonomy from the environment.

The main structure-functional unit of the nervous system is the nerve cell - neu-ron, which is distinguished body cells and sprouts: dendrites and axons. Neuron is asystem that has many inputs and one output. Such a pattern is characteristic of thenervous system as a whole. The number of fibres carrying impulses to the centres,exceeded the number of fibres carrying impulses to outwards.

By functions neurons can be divided in three groups: efferent neurons carried in-formation from centre to outward, afferent neurons carried impulses from outwards toa centre, and interneurons which functions are preliminary intermediate processing ofimpulses and organization of collateral connections.

The figure below shows functions of this types of neurons in reflexes. The figure isunder creative commons license. Here and below (CC) symbol and url to the sourceof the figure into the caption are used.

In the thesis the higher nervous activity is not touched. Mostly, an attention toautonomic nervous system is paied. Anyway, consideration of a nervous system phys-iological division and organization of information fluxes are necessary to understand

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Figure 1: Reflector curve(CC)http://en.wikipedia.org/wiki/Image:ReflexArc1.jpg

essence of viable system model.

In the list below physiological division of the human nervous system is.

• Somatic nervous system

– Afferent system

– Efferent system

• Autonomic nervous system

– Sympathetic

∗ Afferent system∗ Efferent system

– Parasympathetic

∗ Afferent system∗ Efferent system

The autonomic nervous system is a set of points and ways to provide the regulation ofinternal environment of the body. The autonomic nervous system regulates metabolicprocesses and the activities of internal organs by participating in the integration ofinternal environment in a whole organism

There is close connection between autonomic and somatic nervous systems: all motorreactions are given autonomic support (changing pulse, blood pressure, gas, etc.), andmotor actions impact on the regulation of autonomic functions.

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The general principle of autonomic regulation is a reflex. Afferent part of a reflexstarts from various internal receptors placed in all internal organs. From this recep-tors afferent signals go to segment centres by special ways. From the centres regulationof organs is made by efferent ways.

On the basis of morphological, neurochemical, and functional characteristics of theautonomic nervous system is divided to sympathetic and parasympathetic. It is be-lieved that the function of parasympathetic system is first and foremost stabilize theinternal environment. A sympathetic system is designed to adapt the internal en-vironment to the changing environment and responding to the unexpected impact.This division multiple fiction because of any organ is under constant influence of thesympathetic and parasympathetic systems.

Before explanation of general principles of human nervous system (HNS) functioning,

Figure 2: Autonomic nervous system(CC)http://en.wikipedia.org/wiki/Image:Gray839.png

I should to say that both of systems are represented in the Viable system model. Ideathat every function-unit in enterprise has to have 2 independent information channels(moreover, two heads). One is for action. other is for relaxation. It is one of the mainBeer’s ideas for industrial management for me. For the future, sympathetic system

13

often functions in all organs of the body in one time.

Vertical management organization, or constant circulation impulses between higher-and lower divisions, is very important. The role of higher nerve centres is to enhancethe flexibility of regulation. Despite the hierarchical structure of the nervous system,the functioning of its various departments are inextricably. To perform simple actionsit is necessary to organize interaction of many complex nervous systems of automaticcontrol and management. Nervous reflex principle should not be seen as a simplestimulus-response scheme. In most cases, any reaction is the result of complex infor-mation processing, coordinated participation of various levels of integration.

Overall consistency in the processing of incoming to the nervous system informationand implementation elected solutions in the form of concrete actions can be roughlysplit into the following phases. The most peripheral receptor-effector level submittedreceptor apparatus and muscles, provides, on the one hand, the transformation of en-ergy of irritant to a specific energy of nervous pulse, but on the other hand, processingof the efferent signal energy in muscle contraction. Reception apparatus is the mainsource of afference to the next integrative level - segment.

Under the segmental level means not only the segment of the spinal cord, but also"segmental" stem complexes consisting of a sensitive and motor bulbonuclear (ядрачерепного нерва). Segment funds of its own assets of receptor signal admission andprocessing, and apparatus generated efferent pulse to a muscle. In the process ofevolution "segment" is gradually losing its importance as a efferent response centre,becoming in the latter stages of phylogenesis only a point of information conversion.The bulk of this recoded information "segment" sends in higher and more complexapparatus of integration - subcortical structures. At the same time, activity of efferent(motor) segmental centres is provided to be at a certain level.

Subcortical structure have a much more subtle information processing apparatus bythe side of "segment" because of several independent afferent channels being, andthrough the work of subcortical efferent system. This system is not directly related tomuscle, but manage it by segment efferent centres mediation. It is involved in makingthe complex automated motor acts that require consistency of many muscle groups.

With subspecial system for receiving and processing information, own efferent chan-nels, subcortical integrative level is the next step encoding of afferent signals whichprovides selection of critical information and preparing it to receive it in cerebral cor-tex.

Thus, the information, which comes by afferent channels to cerebral cortex, is ten-tatively processed and re-encoded at least three stages: receptor-effector, segmental,and subcortical. Each integral level processes of the information and produces a re-

14

sponse by itself, but the critical information is sent to the upstream centres, whichin turn perform the same task. Consequently, in the cortex comes only those signals,which require concerted action conscious person.

Multiple conversion of afferent impulses towards to the cortex provides step-by-step"drop-out" of signals that do not have critical meaning for the body as a whole and betreated with "precortex" levels of integration. This allows the cortex make fundamen-tal decision to the whole organism, "not staying focused on the little things". An errorin any "precortex" level of integration should lead to revenue perverted informationto cortex, and the last one with no direct link with an external source of informa-tion will generate erroneous decision. This is not happening because of multichannelrevenues of afferent impulses to the cortex, which provides an objective assessmentof each afferent channel information, early detection of the error and its compensation.

Impulses sent to the cortex, originally delivered to the so-called projection corticalzone, where it is reflected. There information from all zones receptor zones are "pro-jected" , but in processed and compressed form. Analysis and synthesis of this infor-mation are carried out in cortical centres that provide "recognition" - a comparisonof the received and stored in the memory signals, its update and specification.

Based on the convergence of the work of all gnostic centres, an objective pictureof the human environment and the state of the body is generated. An analysis ofthe situation and the real possibilities of propulsion systems for the moment forms"solution" - a plan of an action.

In the hierarchy of the nerve centres special place is for cerebral cortex. Thanksto the information incoming from the various functional systems, the most difficultanalytical-synthetic information processing activity is possible there. It provides edu-cation links to consolidate individual experience, and the freezing of relations, whichlose value. Using cerebral cortex provides training that leads development of self-livingsystems, decision-making based not only on analysis of given situation, but of the pre-vious experience in additional. The functional activity of the central nervous systemis regulated by the continuous flow afferent pulses through functioning of non-specificstructures of the brain, especially reticular formation. In reticular formation collateralgo away from all specialized afferent conductors. As a result reticular formation isa kind of energy collector, which can actively influence on the various centres untilcerebral cortex. It creates the possibility of reactions even at very weak irritant. Fromreticular formation inhibiting influence outgoes also, as upstream or downstream. Itprovides individual reactions and concentration of attention.[12]

On the figure below one can see scheme of information fluxes in HNS.

Combination of sympathetic-parasympathetic organization and information fluxes or-

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Receptor Muscle

EfferentAfferent

EfferentAfferent

Striatum pall idusOptic thalamus

Reticular formation

Litt le brain

Higher nervous activi ty

Addit ionalafferentat ion

Projection cortical zone

Subcortex level

Receptor-effector level

Segment level

Figure 3: Information fluxes in HNS

ganization is made in the viable system model by Stafford Beer. Before VSM expla-nation better to explain theory of functional systems. Besides its role in informationfluxes organization scheme it can give us additional approach to real organizationsdiscovering.

2.2.2 Theory of functional systems

Term ’system’ is widely used in modern world. Everyday one can hear: jagirdarsystem, Continental System, solar system, Banner system, plurality system, metricsystem, sewage system, control system, cardiovascular system, weapons system, eco-nomic system, operating system, endocrine system. But there is no clear definition ofthe system. It can be something what consists of several connected parts, it can beconnected parts with emergence property.

Moreover, there is special theory for exploring systems. It is called General sys-tem theory (GST) and is created by Ludvig von Bertalnffy in 1950. He presented itin the "British journal of the Philosophy of Science". Bertalanffy writes:

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...there exist models, principles, and laws that apply to generalized systemsor their subclasses, irrespective of their particular kind, the nature of theircomponent elements, and the relationships or "forces" between them. Itseems legitimate to ask for a theory, not of systems of a more or less specialkind, but of universal principles applying to systems in general.[7]

Unfortunately, its implementation in research activity faces difficulties. By my own,implementation problem can be solved by P. K. Anokhin system definition:

Системой можно назвать только такой комплекс избирательно вовлеченныхкомпонентов, у которых взаимодействие и взаимоотношения принимаютхарактер взаимоСОдействия компонентов на получение фокусированногополезного результата.

The system can be described only as such a set of components involvedselectively, whose interaction and relationships in nature are intercontri-bution of components for a beneficial result.[13]

That way, the investigation of system organization can be focused on goals and struc-ture supporting achieving it. Before investigation is necessary to explain the theory offunctional systems. It has very important moments concerning self-organization andhierarchy of goals. They help us to understand project management organization asa system.

The functional systems by P. K. Anokhin are self-organized and self-regulated dy-namic centric-acentric organizations united nervous and humoral regulations. Allcomponents of the systems interconribute in supporting various useful results satis-fying a needs and increased adaptivity for the systems and for a body in a whole.An assessment of results in every functional system is made continuously by returnafference.

Afferent synthesis stage is a start point. It is founded on dominant motivation.Motivation is originated on the most important need of a body in that moment. Ex-citation created by dominant motivation mobilizes genetic and personal experienceto satisfy the need. Information about external environment is posted by situationalafference. It allows to estimate possibilities and where applicable to correct previousneed satisfy experience in concrete situation. The interaction of excitations createdby dominant motivation, memory and situational afference, produces readiness con-dition (prestart integration) to achieve necessary adaptive result. Startup afferencechanges system from ready state to action. In the afferent synthesis stage dominantmotivation defines what should be done, a memory — how it should be done, situ-ational and startup afference — when it should be done to achieve the necessary result.

The afferent synthesis stage is finished by decision-making. In that stage the onlyone way to satisfy dominant need among other is chosen. By it functional system is

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SiA

SiA

StADecision making

Action resultacceptor

Actionprogramm

Afferent synthesis

Memory

Motivat ion

Action

Action result

Result features

Return afference

Efference

A

BC

D

Figure 4: General architecture of functional systemА - afferent synthesis stage; B - decision-making; C - formation of actionresult acceptor and efferent action program; D - return afference;SiA - situational afference; StA - startup afference;

under constraint.

Just after decision-making, an acceptor of the action result and program of actionare made. In the acceptor of action result all outstanding features of future actionresult are programmed. This programming is made on basis of dominant motivationthat import from the memory information about result features and its roads. There-fore, the acceptor of action results represents mechanism of foresighting, forecasting,functional system action results simulation, the place where results parameters aremodelled and compared with an afferent model. Results features information arecompared with the model by return afference.

The action program (efferent synthesis) is a coordinated interaction of somatic, veg-etative and humoral components in order to hit useful adaptive result. The actionprogram forms required adaptive act by way of special complex of excitation in centralnervous system before its realization by concrete actions. The program defines usingof required efferent structures.

By dint of return afference separate stages and final results are estimated. Infor-mation from receptors comes to structures of the action result acceptor by afferentnervous and humoral channels. A coincidence of real result parameters and its model(made by the result action acceptor) features means satisfaction of initial need of anorganism. It is the finish of the functional system activity. But its components can beused in other functional systems. In case of a discordance oriental-exploring reactionis appeared. It leads rebuilding of afferent synthesis, new decision-making, updating

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of the model characteristics in the action result acceptor and the action program.hence, the functional system activity realizes in new direction.

The principle of multiparametrical interaction defines generic activity of various func-tional systems which direction is to achieve multiunit result. For example, homoeosta-sis parameters (osmotic pressure, acid-base balance, etc...) are provided by individualfunctional systems. This systems are integrated in united generic functional systemof homoeostasis . It defines integration of internal environment and its changing inconsequence of a metabolism and a body’s external activity as also. In addition, adeviation of one indicator leads reallocation of other parameters of the generic func-tional system.

The principle of hierarchy suggests the functional systems range in accordance withbiological or social importance. In such a manner, in biological sense the dominantfunctional system is a system that provides continuity, then pabulum functional sys-tem, then reproduction, etc.. A organism activity in every time moment is governedby a dominant functional system in plan view of survival or adaptation. Dominantfunction system is changed after need satisfaction.[13]

The theory of functional system by P. K. Anokhin gives us understanding of adapta-tion processes. It looks to be recursive, thus it can be useful way of investigation realprocesses in business organizations.

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2.3 Stafford Beer’s Viable System Model

The people in an organizationneed information to performtheir jobs effectively, but toomuch information can be adistraction. What is needed isboth variety attenuation andvariety amplification.

S. Umpleby

In his books "Brain of the Firm"[14] and "The heart of Enterprise"[15], Beernoted that the time lag of traditional management schemes ability to respond tochanges dooming us to deal with the consequences. Adaptive to rate changes but noto changes itself methods are needed, we need self-changed structure, working on self-changed rules, i.e. self-organization. Let us say we would able to look at the problemfrom this angle and find possible solutions but could we implement them within theframework of existing structures and traditional management methods?

The most powerful computer used in the old concepts of governance does not savethe situation. The problem is not how to use the computer, it is to find new waysof managing our computer century, in the face of rapidly changing opportunities ofcomputer technology.

Instead, data-processing systems systems that produce information by deft data analy-sis are needed. Only then there is information as distinction that creates the differenceof perception, thinking and reaction, and so provide accurate decisions.

Instead of managing people, machines, materials and money Beer goes to the man-agement of complexity. This is a major cyber-invariant in the management of largesystem of any nature. Mere of complexity is the variety of states, and basis of VSM isa law requisite variety by W. R. Ashby, which requires a set of management reactionwas no less variety than a set of possible states of environment, problem situations inan environment where an activity is.

Umpleby presents this as

The amount of appropriate selection that can be performed is limitedby the amount of information available. For appropriate regulation thevariety in the regulator must be equal to or greater than the variety in thesystem being regulated. Or, the greater the variety within a system, thegreater its ability to reduce variety in its environment through regulation.Only variety (in the regulator) can destroy variety (in the system beingregulated). The law was formulated by Ross Ashby.[16]

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But it is impossible to accommodate all states of even very small company and itsenvironment. Attempts to develop a detailed algorithm to automate the managementfaced with such volume calculations, which surpasses even the hypothetical possibilityof computerization. How, the company survive? How do we manage this complexity?With the help of self-organization. Many processes are organizing themselves. Thestructure of the well organized company makes directed narrowing attenuation of en-vironment variety and amplification of management capabilities and reactions in onetime. Every moment it is trying to find compromise between autonomy of units anddictatorship of "senior" management, between cooperation and autocracy.

Obviously, the variety of environments is higher than variety of technological op-erations, which in turn exceeds the variety of management. No manager does knoweverything that happens in his office, and even more in the market. In reality, we aretaking measures that should neutralize any conceivable problem and simultaneouslyarming against us unimaginable problems. A narrowing of variety management facility(attenuation) and the increase in variety controller (amplifying). For example, law-

Figure 5: Variety

enforcement increase its variety by professionalism, modern communications, motortransport. Specific information systems reduce the variety of the suspects. Powerfulattenuators are weapon license, car registration, access restrictions, curfews, but thisis infringing human rights, his freedom. Search compromise between amplificationand attenuation of variety is a management itself.

All of this is quite naturally, but is used unwittingly. It is desirable in such sys-temic analysis of problems to list all the used and available attenuators and amplifiers.

So we manage complexity, questions about the role and structure of its flexibility,the geometry of relationships, channel capacity and converters of synchronizing theirwork appear. This special issues of management cybernetics.

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Select the main thing: instead of running over and analysis of all possible in thecompetitive environment situations, we simply employ an experienced administrator,clearly dosed give him the freedom to demonstrate the variety of his brain and re-sponsibility dictated by security of firm and those cover the variety of environments.In this way we create autonomic subsystem. That autonomy - powerful amplifier andattenuator at the same time. The extreme degree of autonomy - is when every daywe hear "All okay" or "There are problems". Through this subsystem, we brieflyattenuate a variety to one bit.

However, in problem situations we should organise quick and powerful intervention,possibly exceeding the competence of the subsystem. Will structure allow the tran-sition from autonomy to the central control? Will have channels enough capacityfor information in the periods of crisis? Who defines the degree of autonomy? Thehuman nervous system shows to us way to manage it. On this analogy Beer bases itsmodel. HNS organization we explore above.

In his model Beer introduces the concept of "resource" contract, which legalizes andagree on the degree of autonomy staff. The treaty declares activities that they cantake, and provides these resources activities. It is clear that the contract should beadjusted in changing of the degree of autonomy. In this light, it can be said that in-vestments are attenuators of variety, and the responsibility - limiter risk in the varietyof our decisions.

Now, VSM is drawn in the technical (in sense of working with variety) figure 6and in neuro (in sense of relation with HNS) figure 7. Its consists of 5 functional sub-systems (first of them contains recursion) and environment separated INSIDE-NOWand OUTSIDE-THEN. Firstly about recursion. Such self-similarity is considered asa key to viability. There is first theorem: every viable system contains a viable systemitself is an element itself. VSM fractal structure reflects the relationship between theparts in their integration into a whole, provides consistency of goals and the degreeof community growth.

Other subsystems two, three, four and five, do not contain ’fraktality’. They arenot viable in themselves, they are intended to preserve the organization to supporthomoeostasis in changes of the situation in the internal and external circumstances.In 6 on the left side an environment is shown, also there are the interests of units andtheir intersection. This intersection could be implicit, as an image of the company forall operational units.

Explanation of the subsystems is better to start from the System 1. Subsystem 1consist of operational units network. Operational units are who really do their work,or who operates with environment and their managers. Operational unit activities are

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3

4

5

3* 2

OUTSIDE INSIDE

THEN

NOW

1

Variety amplification Variety attenuation

Metasystem

Figure 6: VSM technical representation23

Figure 7: VSM neurological representation (modified source from [14])

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not a service for other operational units. Subsystem 1 normally connect and absorbmost variety from external environment. In the 5 represent typical operational unittasks and how it is represented 8 by Sandy Britain and Oleg Liber from Universityof Wales in their "A Framework for Pedagogical Evaluation of Virtual Learning En-vironments" http://www.leeds.ac.uk/educol/documents/00001237.htm.

Figure 8: Key operational communication channels

As an example of VSM here and below, the project management organization as anetalon for future comparison is used. By this way, operation units in project manage-ment organization makes abbsorbation of variety of different variant before realisationand make project executed. Firstly they are designers or constructors or leading en-gineers. Who make choices about ways of realization of customer requirements. Indifficult projects they are separate in different units, e.g. mechanical and electrical.In additional one can also classify manufacture, buying, erection as an operationalunits.

It is essential to show to communication between operational unit managers. It helpto react on events fastly if they have enough information and resources to do it. Op-eration unit managers communication allow to understand situation before officialexplanation.

This operational units especially in case of shared resources such as money, people,time, sequence of processing conflict each other. This oscillation should be dumpedand operation units should be coordinated. In the best case coordination is doneby operational units theirselfs. Because of reducing of variety in outside coordina-

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tion case. Such coordination is represented in the VSM as system 2 (triangles inthe 6). With connection with HNS system 2 can be seen as sympathetic system.For illustration of the system time schedule, general schedule, standards, cash flowregulation and etc. can be used. In project management this type are commonly used.

Reticular formation in the VSM presented by system 3 which is belong to metasystem.Metasystem does not mean senior in hierarchical sense. This system communicatewith system 1 and gather information from system 2. It has functions of integra-tion and synergation. It is management at all, management of situation INSIDE andNOW. It solve serious problems, set goals and communicate with other level of recur-sion. From higher level of recursion system 3-2-1 looks as only operational unit. Instandard project management system 3 is operational control of activities-in-progress.

In accordance with Ashby’s law of requisite variety Beer create The First Axiomof Management:

The sum of horizontal variety disposed by n operational elements equalsthe sum of vertical variety disposed on the six vertical component of cor-porate cohesion.

First 5 we already know: communication into environment among customers, commu-nication between operation unit, communication managers of operational units, dumpof oscillation by system 2, and an intervation of metasystem into operational units.[15]

The last one component is system 3*. It is audition or independent gathering infor-mation of operations by metasystem. This channel is only for audit not for providingof new instructions or interventions of metasystem into operation units. Managementshould create useful and only necessary indices for fast audit and good variety dispo-sition. Of course, 3* has analogy into HNS - parasympathetic system. For projectmanagement financial, scope, and quality audit is made usually.

To understand all environment and make suggestion about future, to orient into OUT-SIDE and THEN nature use system 4 by Beer terminology. This system understandwhere organization is, where it better to be in future and how to achieve it. Thissystem has channels, approaches and power make decision of direction into future. Asexample one can use RD department. But it only technical prognosis, enterprise, ofcourse, will be more viable if it would prognoses financial and market situation. Forbetter results all this prognoses should make by one team of managers. It is strangeanalyse market without technical support. Traditionally example from project man-agement: system 4’s functions are product planning, future activities, purchasing andcontract, financial planning, scope change control.

It is very important to make plans with understanding of situation in internal en-vironment. It provide be close communication between system 3 and 4. Both of them

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works with high variety and it is necessary to create good attenuators and amplifiersof it. It can be made by meetings

The final system in the VSM is the System 5. Jim Underwood from University oftechnology Sydney explanation of its role was used. One can find materials of VSMon http://www-staff.it.uts.edu.au/~jim/bpt/vsm.html#s5

The system is the "boss" system, the policy making system. This is wherethe final responsibility lies, but in a well designed system few decisions aremade here. The decisions which do need to be made here concern howthe operational system (system 1) should change its behaviour to dealwith the changing environment. This is based on intelligence informationabout the environment (filtered through system 4) and control informa-tion about the operational system (filtered through system 3). These twosources of information need to be in balance, so as well as dealing withthe information, system 5 needs to ensure that the systems which provideit are properly designed.

But the decisions which get as far as system 5 will be those that haven’tbeen prespecified by policy guidelines or subsystem goals, decisions whichcan’t be rationally decided. System 5 must make a decision, even if it’s tojust wait and see. So these decisions are made according to cultural prece-dent, the personality(ies) of system 5, the "mood of the time" or somethingsimilar. This is how the "ethos" or character of the organization comesinto play. Beer calls system 5 a "variety sponge". All the things whichcan’t be decided otherwise are decided here. There had better not be toomany of them.

System 5 can be compared with cortex in human nervous system. In the projectmanagement system 5’s functions are define project organization, objectives, policyand procedures, scope change approval.[17]

The original principles, theorem and axioms for the Viable System Model are intoappendix 1.

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3 Company’ project management organization andVSM

3.1 Company’ project management organization

The investigation concerns in project management organization. What is projectmanagement and how it can be organized will be discussed here.

Project management is management of achieving goals and objectivities with qualifi-cations of resources. Resources are money, people, materials, energy, space, provisions,communication, motivation, etc.

Besides effective using of resources, project faces with changing of environment and,consequently, of goals. It turn, situation is very complex and it has high variety. Thereare a lot of techniques and approaches help in fighting with this variety. For example,the simplest is do not change project plan at all. It is used in "waterfall develop-ment". This approach consists of several standards steps: requirements specification,design, construction, integration, validation, installation and maintenance. On figurebelow steps are can be seen. It has very strong disadvantage. It is very sensitive to

Figure 9: Waterfall project management

requirement definition. Thus if there is some small uncertainty in beginning it wouldbe big difference between realization and planning. To reduce it, different approachesare using. They are "waterfall development with feedback", critical chain, extremeproject management, event chain methodology, process based management. Thesemethods in the paper are not explained, but one can see that project managementorganization has a lot of techniques. It means that project is difficult and uncertainaction. Hence, it requires powerful system of controlling and strong organization.

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It is suggested that the Viable system model is what project management need foritself controlling because the project management works in, practically, not clear de-fined environment. It is a typical task for the viable system.

Before analysis better to say that project can be divided into two step: planningand realization of the plan. It can be compared with theory of functional systems.Plan has relation with acceptor of action result and realization relates to a efference.Now it can be suggested that should be sensors in subsystems to control how planis realized. This ideas give us strong relation between neurophysiology and projectmanagement. It is necessary to say that afferent synthesis (sells) and decision making(project kick-off) are not explored in the paper.

3.1.1 Objective project management in Company

Here explaining of the "real situation" starts. Firstly about methods of exploring.In the manuscript two ways to explore project management in Company are used.They are using of official documents like manuals, guides and teaching materials, andpersonal interviewing of project participants. I concentrated on the level of projectnot on level project portfolio or level of project parts realization. So system-in-focusis a big project.

The begining is the manuals and guides that are given to me by Company man-agement. The documents divided into to main parts: mindsets for overview of PM,and standard practices of operating. By this way, "objective" information about PMOin the Company is gathered. In the paper, I widely use it, but not everywhere putthe copies of the documentation.

It is seemed to be classical waterfall project that has a lot of problems in finish-

Figure 10: Main flow of typical project in Company

ing of the project. That is more interest for thesis because load of problems lies on

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Figure 11: Waterfall project management in Company

project management. Now I am suggesting that interviewing give me good informa-tion.

It is not very important information but it give us understanding how project "really"goes. More useful for the master’s thesis to see what are roles and their responsibili-ties. It helps to explore project management organization.

A project team consists of a project manager, leading engineers, buyer, manufac-turing supervisor, forwarder logistics and erection responsible. Also a productioncoordinator participate in the project, but official information has not updated.Project manager is a main person in project team. He/she has a lot of responsibilities

Figure 12: Typical project team in Company

and main of them is success of the project. The lists below are gotten from officialguidelines:Project manager is the Executive Director ("Managing Director") of the project:

• Responsible for the financial result of the project (= keeping or improving theproject’s margin)

• Responsible for the on-time delivery of the project

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• Responsible for delivering the project according to the Contract

• Responsible for managing all customer issues

He/she also has the tasks:

• Makes critical project decisions

• Makes overall project schedule. “Pulls the internal parties together”.

• Constantly follows and steers the progress, decides on changes .

• Launches the Project Team

• Secures that persons nominated to his project know what they should do

• Secures the necessary resources for the project. Does constant resource planning

• Secures that the Project Team members know their detailed financial goals

• Makes project budget and constantly forecasts the financial result

• Initiates invoicing and controls the money collection

• Initiates and controls that the necessary financials instruments are received andissued

• Knows the customer Contract interprets it to the rest of the organization

• Manages and settles extra orders during the project

• Initiates and controls, that the necessary financials instruments are receivedand issued (e.g. payment and performance bonds, Letters of Credit etc.), asalso possible special insurances are arranged.

• Secures to get necessary resources for the project (Engineering, ManufacturingSupervision, Erection, Commissioning etc.). Does constantly progress follow-upand resource planning

• Secures that persons nominated to his project know what they should do (bothcontent timing)

• Makes critical project decisions. Consults specialists to obtain necessary back-ground information for decision making.

• Represents KCI’s official position towards the customer

• Responsible for managing, invoicing and settling extra orders during the project

• Responsible for ensuring that the claims (including punch list issues) are takencare of. Makes necessary decisions to get these done

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• Responsible for managing warranty issues.

It is seemed to be too complex, too much variety for one person. It will be analysedin comparison part of the master’s thesis.

There are information about other team players:Leading engineering is

• Responsible for the technical content and technical documentation of the projectso, that we fulfil our obligations in the Contract’s technical issues. "We delivertechnically what is promised".

• Responsible for managing the work of project’s designers

• Responsible for defining and supplying technical information with the propercontent and right timing to persons / functions needing that information

• Understands thoroughly both the Contract’s technical requirements and thecustomer’s technical expectations

• Plans and secures the amount of needed competent engineering resources

• Makes the engineering schedule and steers its progress

• Defines the work contents for designers and monitors, steers and controls theprogress

• Arrange that the necessary Purchasing Specifications are done in due time andwith correct content

• Makes technical decisions concerning the project. Consults specialists as needed.

• Monitors and forecasts engineering hours constantly

• Monitors and forecasts equipment weight constantly

• Acts as the technical specialist for Purchasers, Manufacturing Supervisors andVendors

• Manages the distribution of the project’s technical documentation

• Manages that as-built –documents are systematically done and distributed alsoto the customer

• Makes Customer Training Material and Maintenance Operation Manuals

• Acts often as Customer Trainer him / herself

• Solves technical claim and warranty problems

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Purchaser

• Cost terms (incl. delivery times) information during quotation phase and duringproject execution

• Negotiate and place orders to the internal and external suppliers and vendors

• Plan together with the Project Team the proper timing for receiving tech. spec-ifications and placing the orders

• Proactively monitor and control all vendors. Focus on "bottle neck" vendors.Technical assistance from Leading Engineer.

• Manage all claim- issues related to Procurement ("the one who buys, managesettle his claims")

• Must know the budgeted cost (in project Budget) for each specific item to beprocured

Manufacturing supervisor

• Manage, control quality and supervise the crane manufacturer (both in case ofan internal or an external manufacturer)

• Responsible for steering and instructing the crane manufacturer so, that themanufacturer keeps the schedule, does proper quality and uses the methodssecuring the right quality. Arranges the necessary relevant documents and in-structs the maker.

• Reports to either Procurement or project Manager as agreed specifically in eachspecific case.

Logistics

• Define transportation and logistics concepts and costs(both in quotation phaseand in project execution). Define timetable for transportation arrangements.(In Finland: Do this together with Global Purchasing Manufacturing)

• Plan and organize the transportation/ logistics to intermittent storages and tocrane maker

• Plan and organize the transportation/ logistics of the ready made crane or craneparts to the erection site

• Arrange and/or buy the transportation and needed forwarding services

Erection responsibility

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• Responsible for arranging and planning all erection site activities: erection team,subcontractors, crane inspectors/ testers, tools, mobile cranes, housing, commis-sioning, etc.

• Responsible for defining and doing additional purchases required for erection,loading tests and commissioning inspections

• Define and make the punch list and warranty work. Arrange and manage thework to be done. Punch list and warranty works must be accepted by ProjectManager.

In addition, the list of activities for the production coordinator is made:

• Responsible for coordination of vendors and sub-contractors.

• Responsible for in-time delivering of necessary components to sub-contractors.

All this information about activities shows that project team as a whole and teamplayers have a big autonomy for the actions. It supports the investigation becauseautonomy of the units is a very important part of the VSM.

3.1.2 Subjective project management in Company

Objective means project management organization wich is based on documentationand guide lines. This objective documents represent general information about PMO.It gives knowledge of the project management organization as it should be. But realsituation is more complex. That is why it is necessary to gather information about"real" situations as more as possible.

Method of interviewing in reason of the time limit and, hence, impossibility to par-ticipate in real project was chosen. Real projects in Company take about 1-2 yearsfrom start to end. Thus I could get my own experience of project management.

The interviewing has been made by 20 personal questions and 9 general questionswhich was chosen by me. Personal questions concern 2 areas - internal and externalenvironment. Each area divided to 4 parts: structure, functions, pathology and com-munication. Venereal question are about 5 subsystems of the viable system model:operational activity, coordination, optimization and controlling, planning and policy.

Personal questions:

1. What is your role in project team?

2. Who is your manager?

3. Who are managed by your?

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4. With whom of project team do you communicate more recently?

5. What are your general activities?

6. Who defines goal for you?

7. How do you check that goals are achieved?

8. When do your start participation in the project?

9. What reports do you make for manager?

10. What information do you give manager besides reports?

11. What reports are made for you?

12. What information do you get besides reports?

13. What are typical problems in the project team

14. Are any conflicts in the project team?

15. If yes how is it solved?

16. What is an "external environment" for you if "internal environment" is theproject team

17. What information and how do you get from an "external environment"

18. How do you react on it?

19. What do you do when you cannot react by yourself?

20. How do you communicate with an "external environment"?

General questions:

1. Who are operational unit in the team?

2. How is team coordinated?

3. How is project execution optimized?

4. How does the team understand about stresses in the project execution?

5. Who set goals for all project?

6. What are usual goals?

7. How does the team understand that requirements for the project are changed?

8. How does the team make plan for the project?

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9. How does the team change approaches and policy of the project execution?

The questions were asked in the interview. Persons from different project teamsparticipated in the interview. Persons were chosen‘ from all subsystems of the hy-pothetical viable system model of project management. Knowledge of the theory offunctional systems was used. Thus, the main goal/function is to achieve project goalsby its management.

3.1.3 Conclusion of investigation

Basing on the analysis of the investigation results, the project management in Com-pany into several parts can be divided. The criteria of division are functions, clusteringinto a communication network, place and kind of activities. They are

• Project manager,

• Design or engineering,

• Building,

• Forwarding or logistics,

• Erection and commission.

The project manager is the main person in the project. He/she makes all impor-tant decisions, communicate with customer, choose methods of project management,he/she sets subgoals. He/she is responsible for final result.

Design or engineering is provided by mechanical and electrical leading engineers. Itis mental part of the project. On this stage, a technical plan and drawings are made.Actually a project plan is made also. It is made by the core team: leading engineersand project manager. Most of decisions are not changed in future.

The next step is physical realization of the drawings. It made by vendors are sub-contracts. Company wide uses outsourcing. Thus the building cluster of project teamconsists of production coordinator, buyer and manufacturing supervisor. Their func-tion is to made the crane in according with drawings and time table.

Forwarding and logistics move crane to the customer place. It is motion clusterin the project management team.

Last cluster or operational unit is erection and commission responsible. It customer-side operation units they make final part of the project.

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The clustering supported by functional division, by subjective points of view andby communication preference in the team. Special question about it is in the inter-view. It seen that project management can be easily represented by the VSM. It willbe done in next part of the manuscript.

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3.2 Comparison the VSM and Company’ PMO

The comparison of the models and the project management system will be made byfunctional system comparison. The PMO is suggested to be in the class of the VSM,hence it can be compared directly. Through the investigation I have not found andideas that do not appear in the VSM. So direct approach with the VSM as a referencecan be used in my manuscript.

Before the comparison some ideas of self-organization representation should be ex-plained. Self-organization is an essential part of the VSM. But graphical represen-tation of the connections into the team is too complex. Thus, communication intoCompany project management can be more simply shown by connectivity matrix E3.2. The connectivity matrix is a term from graph theory. The matrix contains infor-mation of ways which existence between nodes. The graph theory seems to be usefulin the VSM studing.

Main row and column for connectivity matrix are set by the vector of nodes V . Nodesare divided to 3 groups: metasystem, operational unit and environment.

V =

Metasystem_of_project_managementMetasystem_of_engineeringEl._and_mech._engineering

Environment_for_engineeringMetasystem_of_building

Manufacturing_and_buyingEnvionment_for_building

Metasystem_of_forwardingForwarding_and_logistics

Environment_for_forwardingMetasystem_of_erectionErection_and_commision

Environment_for_erectionProject_management

Outside_and_then_enivronment_for_PM

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E =

0 1 1 0 1 1 0 1 1 0 1 1 0 1 11 0 1 0 1 0 0 1 0 0 1 0 0 0 00 1 0 1 0 0 0 0 1 0 0 1 0 0 00 0 1 0 0 0 1 0 0 1 0 0 1 0 01 1 0 0 0 1 0 1 0 0 1 0 0 0 00 0 1 0 1 0 1 0 1 0 0 1 0 0 00 0 0 1 0 1 0 0 0 1 0 0 1 0 01 1 0 0 1 0 0 0 1 0 1 0 0 0 00 0 1 0 0 1 0 1 0 1 0 1 0 0 00 0 0 1 0 0 1 0 1 0 0 0 1 0 01 1 0 0 1 0 0 1 0 0 0 1 0 0 00 0 1 0 0 1 0 0 1 0 1 0 1 0 00 0 0 1 0 0 1 0 0 1 0 1 0 0 01 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Graphical representation of this graph is in the figure 13. The figure sows relationbetween 3 types of objects (environment, operational unit and metasystems). It showscomplex nature of the operational units into system 1 of the VSM.After this digression, I make direct comparison:

The system 1 in PMO is presented by the operational units: engineering, building,forwarding and erection. It is clearly seen from documentation. Besides, it relateswith "waterflow" project management. I suggest that nothing new can be added here.

The system 2, i.e. function of coordination, is realized by time tables and by theproject plan. The meetings of the project team also are very important. Interviewerspay a lot of attention to it. It is one of the most using tools to resolve problems.

The system 3* is supported by activity of the project team players. For my opin-ion, there are no good monitoring of the situations: no indices are made. Only activeposition of the operational units or the project manager, and some information in theMovex (financial and project software tool, http://www.lawson.com/) show real sit-uation. I suggest it is a soft spot in Company’ PMO. Fortunately, crane building doesnot have very fast changing external environment. Thus, there are no big problemswith passive monitoring system and thus system is not yet developed.

Integration or synergy of the internal environment are made by the system 3. Inthe project management of Company it is the responsibility of the project manager.All interviewers in the project team said about it.

The project manager’s activities also contain the system 4 functions or communi-

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Figure 13: Relations into project management

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cation with customer, participating in sales and making forecasting of the project.The system 4 based on experience of the project management team. But, also thereare instructions for forecasting during project execution. Moreover there is principle"Live in tomorrow already today". Subjective information do not make me sure aboutits esxecution. So it depends on concrete project manager.

The system 5 is a policy making system. Policy is written into guidelines, but notevery project team player knows it. Thus, the project manager should to provide thispolicy to everyone in the team. General policy of the company is shown at specialcommon meetings also. Thus the Company pays attention to this important but dif-ficult part of company life.

In the sum, I can say that project management seems to be quite viable system.It has autonomy, all parts are presented even they are not well developed. Growingof the company shows good results of using this approaches in management.

Negative moments are in not developed systems such as monitoring, adaptation, pol-icy. In addition, concentration that systems in one person - the project manager canmake too unstable because of too high variety in this parts. Thus here should beprofessional with big experience to provide this functions well.

To represent final results of the investigation the scheme of the VSM of project man-agement in the figure 14 is made. Dotted and light gray lines show problem partsof the system from the VSM point of view. Now it could be said: the system 1,the system 2 are made well; the system 3* is not well done; the systems 3, 4 and 5concentrate in one person what leads to the high dependence on him.

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Figure 14: The VSM of Company’ PMO42

4 Conclusion"Two waves" of cybernetics and neurophysiology are commonly used in modern man-agement. Besides the VSM, it is used in St. Gallen management system, in TotalQuality Management, in the Balanced Scorecard. The manuscript contains basic ideasand history of its development.

The VSM also is based on it. Hence, it was used in the manuscript as a referenceof management approach. Inasmuch as Company has developed project managementsystem it is possible to describe and compare it with the reference. It was done by"objective" and "subjective" methods of exploring.

Succesful describing allows to make some recommendation for Company’ PMO. Theinvestigation shows that management has good developed basic system 1 and 2. Buta bulkhead of project management to provide high adaptivity stay is not developedin so good manner. It is Achilles’ heel of the projects and can become serious in caseof fast changing environment. But now, the environment in heavy machine buildingis not fastly fluctuated. There again it is the reason to not pay a lot of attention tothe system 3*,4 and 5.

To prepare for future, to improve viliability of the Company project managementthe system 3* indices to active and other independent ways of monitoring situation ininternal operation units should be done. The systems 3, 4 and 5 should be improvedtoo, but I think it is not more important because of its present fractional development.

The goals and further exploring of scientific base of management can be set for futurework. Ideas of self-organization, battle with around-world complexity, adaptation,reflection systems are need to be learned for more successful actions in stable devel-opment movement.

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A Appendix1APHORISMS:

The first regulatory aphorism

It is not necessary to enter the black box to understand the nature of thefunction it performs.

The second regulatory aphorism

It is not necessary to enter the black box to calculate the variety that itpotentially may generate.

PRINCIPLES:

The first principle of organization

Managerial, operational and environmental varieties, diffusing through aninstitutional system, tend to equate; they should be dsigned to do so withminimum damage to people and to cost.

The second principle of organization

The four directional channels carrying information between the manage-ment unit, the operation, and the environment must each have a highercapacity to transmit a given amount of information relevant to varietyselection in a given time than the originating subsystem has to generateit in that time.

The third principle of organization

Wherever the information carried on a channel capable of distinguishinga given variety crosses a boundary, it undergoes transduction; the varietyof the transducer must be at least equivalent to the variety of the channel.

The fourth principle of organization

The operation of the first three principles must be cyclically maintainedthrough time without hiatus or lags.

THEOREM:

Recursive system theorem

In a recursive organizational structure, any viable system contains, and iscontained in, a viable system.

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AXIOMS:

The first axiom of management

The sum of horizontal variety disposed by n operational elements equalsthe sum of vertical variety disposed on the six vertical components of cor-porate cohesion.

The second axiom of management

The variety disposed by System Three resulting from the operation of theFirst Axiom equals the variety disposed by System Four.

The third axiom of management

The variety disposed by System Five equals the residual variety generatedby the operation of the Second Axiom.

LAW:

The law of cohesion for multiple recursions of the viable system The Sys-tem One variety accessible to System Three of Recursion x equals thevariety disposed by the sum of the metasystems of Recursion y for everyrecursive pair.

The principles and axioms are from "The heart of enterprise" [15]

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