Cybernetics, Blockchain, BlockScience, DAO

Applying Stafford Beer’s Viable System Model to Decentralized Organization

Kelsie Nabben & Michael Zargham


This post highlights an excerpt from Zargham, M. & Nabben, K. (2022). “Aligning ‘Decentralized Autonomous Organization’ to Precedents in Cybernetics.”

Stafford Beer articulated the “Viable System Model” (VSM) in his 1972 book ‘Brain of the Firm’ as a management tool to determine the viability of an organization. Applying the VSM is about structuring resilience in an organization — to adapt to changes in environment (variety) and survive, in line with its purpose.

In a recent working paper, we argue that decentralized technology communities are already practicing cybernetic principles without knowing it. The VSM is relevant to decentralized modes of self-organization as the goal is functional autonomy, which can enable a form of collective autonomy. In other words, cybernetics literature provides frameworks for self-governing. Thus, extrapolating and applying the Viable System Model is a constructive starting point for analyzing and developing the viability of self-organizing systems.

The Viable System Model

The VSM analyses organizations according to different subsystems, that form a complete (and autonomous) organizational whole.

These subsystems are:

• System 1: Primary Functions, or day-to-day activities conducted by constituent parts of the organization interacting with its environment.

• System 2: Co-ordinating Functions, which align the day-to-day activities of System 1 with each other, its collective purpose.

• System 3: Rules and other structures (such as software), which support the activities in System 1 and System 2.

• System 4: Strategic Functions that look both outward and inward, to consider how internal systems might adapt to external changes.

• System 5: Governance Functions that align the overall organization, defining or refining.

The first three systems relate to the current activities of the organization. The fourth system focuses on future effects of changes and how the organization might adapt. The fifth system maintains a balance between current activities and future changes through practical and strategic alignment across the organization. In Decentralized Autonomous Organizations (DAOs) in their current form, System 5 most often occurs via DAO-wide voting processes.

Applying the Viable System Model

Sufficient organizational variety is dependent on clear organizational functions across the different, interconnected layers of an organization and communication between them. This is also referred to as feedback loops.

The model is recursive, meaning that there is the possibility of different iterations or multiple occurrences of the Systems at different scales across the organization. Self-organizing systems possess a hierarchy or purpose, allowing for “nested” VSMs and numerous combinations of activities that enable adaptive capacity at multiple scales within the organization.

This explains why Beer claims that “no viable organism is either centralized or decentralized. It is both things at once, in different dimensions.” (Beer, 1967:75–6). Rather than a polarity of oppression and freedom, centralization in organizational purpose and specific organizational functions provides operational efficiency, and respects decentralization in decision-making and political power.

Figure 2: Hierarchy of functions (versus hierarchy of roles) by M. Zargham

The “hierarchy of functions” that VSM distinguishes is different to a hierarchy of roles. To get in the top right quadrant requires a functional hierarchy to achieve “alignment” but you do not need a strict power hierarchy. Power is distributed by clearly describing each function. System 1–5 are functions that anyone can participate in as long as they adhere to the stated processes and/or protocols for that function. In a sense, each System 1–5 can be “permissionless” to access or participate in but their individual function needs to remain in tact. To participate in multiple layers requires people to switch context between strategic and operational.

In the paper, we discuss the case study of 1Hive to demonstrate how the VSM can explain the various functions of governance in an autonomous system.

The VSM is about maintaining the balance in governance between effectiveness and control. “Policy-making, decision-taking, and control: These are the three functions of management that have intellectual content.”- states Beer in Management Science (1968, p. 10).

Next Steps

In terms of further (applied) research directions, we’re interested in analyzing how the VSM does (or could) apply with regards to adaptive capacity and resilience in decentralized systems, especially DAOs. We also intend to blend qualitative and quantitative methods in this pursuit. Rather than “inventing” organizational governance, the opportunity here is to apply existing frameworks that adopt a computer-aided governance approach to create more resilient, self-governing organizations.

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