What is the Neurology of Business | Martin Pfiffner

Your organisation might have a polished strategy deck, a neat org chart, and a backlog full of “agile” work, yet decisions still stall and accountability still blurs. That is the gap we tackle with our guest Martin Pfiffner, author of The Neurology of Business. He identifies the missing third dimension of structure. Beyond anatomy (boxes) and physiology (process), we dig into organisational neurology, the real wiring of decision rights, control, and communication. When that wiring is unclear, work escalates, leaders overload, and you end up with what Dan Davies calls an unaccountability machine.

We bring cybernetics into the boardroom without the jargon. Martin explains why communication never works perfectly, and why viable systems rely on negative feedback loops and closed-loop control to correct mistakes quickly. We connect that thinking to the Viable System Model, recursion levels, and the very practical question most organisations avoid: who steers whom, and which dimension actually leads, product, region, customer, or something else. That clarity is often the difference between moving at speed and getting stuck in endless consensus.

We also challenge common strategy habits: confusing planning horizons with strategy, treating strategy as a one-off project, and ignoring constraints created by past investments and relationships. Instead, we talk about real-time strategy cycles, essential variables that simplify complexity, and how to navigate uncertainty without pretending you can predict it.

We finish with a sharp warning and a hopeful path for AI. AI will not fix a broken organisation; it will accelerate it. Fix the decision and governance structure first, then use AI to strengthen organisational memory, sensing, and learning. If you find this useful, subscribe, share it with a colleague who wrestles with decision bottlenecks, and leave us a review with the one structural question your organisation needs to answer next.

Find Martin's Work: 
LinkedIn: https://www.linkedin.com/in/martin-dr-pfiffner-07534459/
His book The Neurology of Business: https://amzn.eu/d/046UympH

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Transcript

Strategy Meets Reality Returns

Mike Jones 0:00

Most people do think of strategy that way.

SPEAKER_01 0:02

Developing a new strategy.

SPEAKER_02 0:04

Strategic blind spots.

Mike Jones 0:05

When strategy meets reality and innovation in the strategy world. Drive their strategic goals. And welcome back to Strategy Meets Reality Podcast. And welcome back to Strategy Meets Reality Podcast. Thank you for all listeners. We've had a two-week break because I mean majorly traveling around Europe, having a bit of time off during the sort of writing a book. But what a great way to get back into the season with our um fantastic guest, Mark Martin Feifner. So, Martin, pleasure to have you on. I've been wanting to have a conversation with you for a long time. So welcome to the show. Thanks for having me, Long Before today. Yes.

SPEAKER_01 0:58

Yes, what I do. Well, I'm I'm 60 years old. I'm a Swiss. I'm in since about 30 years mainly consulting companies, large ones, big ones, business, non-business, mainly in the German-speaking area in Europe, sometimes in America and in Asia. And my topic is actually structure. So if you talk about strategy, there's a side of working in the system, so to speak, right? Developing strategies content-wise, that's one thing. I'm not doing that. I'm not a strategy expert. But I look at strategy from the opposite direction, and that makes that conversation with you always so interesting. Because I think we have two opposite ways of looking at the same thing and have the same understanding to a great way, also. Yes, working on the system, working on the system. What's a structure that enables an organization to come up with what you would call a strategy and what we have in mind when we talk about a strategy? So am I still doing that? I'm currently rather running down my consultancy business and uh concentrating a little bit more on trainings, educating people, training people, enabling people to

Meet Martin And Why Structure Matters

SPEAKER_01 2:10

do these things rather than to apply it myself. I have applied quite a lot so far. So yeah.

Mike Jones 2:15

And you have a fantastic book, and I'm really annoyed because we did we were scheduled to talk earlier. Um but obviously we had technical issues, so we rescheduled. Um and I had the book out, and I think my wife's put the book away. I'll find it before the end of the show. But I'll link your book to the um in the comments anyway. It's a fantastic book. Neurology of Business really takes you through um viable sisters model and why that's important. And and I think the reason why I wanted you on this show is to talk about structure. Like you said, you um you've been working with structure for a long time. I can't believe you're 60, by the way. That was a surprise to me. Must be that uh Swiss water. But is that is that structural point? Because I see it too often in organisation. I don't think they took they don't really put the onus and emphasis on structure. I think structure becomes like this thing that they unconsciously think about. And whenever I go into an organization, I don't see that they've thoughtfully gone through and worked out structure and uh in the sense we do, and we'll unpack that more. It's more that you know, well, it makes sense to have these things, and you know, every other business has got that, so we'll have that. And you know, Dave's not very good at that, so we're gonna take that away from him and we're gonna put it over here. And it doesn't seem to be a purposeful logic to structure. How do you find that?

SPEAKER_01 3:49

Yeah, something seems to be missing, right? I mean, we have we have basic, my basic um thinking is around three dimensions of organizing, and I think we only cover two of them so far, and that creates the problems. Yeah, what are the tools I approaching an organization rather rather from the perspective of an organism rather than a machine? And an organism has these three dimensions. It has an anatomy, which we see in the organization charts, it has a physiology, which we see in agile processes, one of them an agile strategy process. And there's a third dimension, which is the neurology that makes the whole thing work, right? Yeah, and we we don't have the means to look at that. I mean, we have the means, but the organizations typically don't do it.

Mike Jones 4:38

No, they don't. So how how would you how would you recommend that they they look at that?

SPEAKER_01 4:46

Well, the first thing is to to to be clear about what we're talking about, because the observation is as soon as as as managers start talking about structure, they take a flip chart and draw boxes and and and orc charts. And I mean, we are working with org charts for for more than 150 years and have tried all the different aspects of anatomy. And nevertheless, we have Frankenstein organizations very often. They are live, but they're not able to dance uh very elegantly, right? Yeah, yeah. So and and then they have the processes, and thanks God, we have agile processes nowadays, we have IT supporting these things and so on. But the what I observe is that the agile community currently asks the question what comes off the agile because the thing still does not work. For example, they try to have safe structures, agile structures, combined with a hierarchy that leads to absolute uncertainty about who is deciding what. Yes. There's an excellent book actually by by Dan Davies. I don't know if you heard of him. Yes, the unaccountability machine. Yes, yeah, pretty good. So very often they they have let's say they have reasonable autonomies and they have good processes, good physiology, but they they have unaccountability machines, right? Because the neurology is not working. The neurology is what we need to look at. What is neurology? It's decision taking and communication,

Anatomy Physiology And Organisational Neurology

SPEAKER_01 6:20

control and communication in that sense. Who takes what decisions, on what base, who needs to inform whom, and so on. That's exactly, I think, one of the if not the biggest issue in probably world worldwide organizations, business and non-business, especially in Europe and especially in Germany also. I I I know the German market, I'm not so familiar with France or England.

Mike Jones 6:44

Oh yeah. I think England's the same. They love a consensus. There's no one to make, especially when you go into, and I suppose that it really depends on the the size of the organization and the type of organization. But you see it very prevalent in public services, and as soon as they start getting larger, we tend to go into this consensus. We don't want to make a decision unless everyone's on board. And then when it when things start to slide, no one really knows who should take the decision. So everything just goes upwards.

SPEAKER_01 7:19

Yep. Exactly. And then it leaves to a complete overload, and that's what we observe uh observe in management, right? The people are completely overloaded, they are frustrated because they take decisions but they're not implemented. But they they are helpless somehow because they don't they're not used to look at that third dimension, which is actually the leading structure. What is my leading structure? What is my decision and control structure and and communication structure? And I think that's the bad news. And we observe that small or large into the European Union organization. We can talk about whether it has a strategy or not. I I'm laughing. I'm like, nah, no way. Business, non-business, so it it applies everywhere, I think. And uh, especially German automotive industry, it's a big topic currently. They're too heavy and too slow in regards to uh their uh Chinese competition, Asian competitions. So, but the good news is that there is even a science to it, which is cybernetics, the science of communication and control. So we don't need to guess around and we don't need to rely on management fats. We have a science that helps us to look at that neurology of an organization and to find out whether it's pathological or not.

Mike Jones 8:38

Yes.

SPEAKER_01 8:39

Excuse my English, by the way. Uh I I always tend to cite Viktor Frankel, the Austrian psychiatrist or and neurologist, also. He was that um I speak speak a perfect accent without the slightest English.

Mike Jones 8:55

No, no. Um your English is spot on. Um I was thinking that when I go well, definitely when I was traveling in Europe, I'm going off slightly off the track here, but when I was um traveling through Europe, I really noticed the privilege that I didn't have to change my language, I just spoke English. And everyone around me spoke English, yeah. Or I know it I know a little bit of German that got me by when I was near the sort of Austria-Switzerland border, but apart from that, I could just speak English. And I suppose this is part of what we're talking about, this communication, because it's quite a privilege that you could speak one way and everyone understands. And I think that in organizations we get like this, we we assume that we have a corporate language and we just communicate, and everyone will understand and in interpret what we're saying correctly. Yeah, and we know that's just not true, but we seem to work on this.

SPEAKER_01 9:58

Yes, and again, here comes the interesting perspective of cybernetics. It's it's actually a science that I think the original title by Norbert Wiener was Cybernetics, communication and control in the animal and the machine. So the question is, what kind of structure do we find if we look at functioning organisms where communication takes place? I mean, every second in our body we're communicating like hell, right? We don't realize it. There's a reason why we don't realize it. So that's part of the system, part of the structure. What do you realize? What do you decide on your level, and what does your liver decide on its level? Because there's a lot of complexity and communication going on currently in both our livers. So the the interesting question is what we can we learn from these structures? And I think the core insight of cybernetics, which we try really to apply in management, and that helps managers a great deal, is the principle of negative feedback. So because we know that communication is so difficult and never really works, the question is how do we ensure that nevertheless systems function? Like that uh the the that famous quotation of Schwarzkopf in the Iraq uh uh wars, he said we have to allow room for mistakes. Yes. Which was created in our communities, in our media, wrongly, in the wrong way, saying, Well, uh, it's good to make stakes, it's nice if you if you can make mistakes in our company, like you would want to have that in a hospital or in an airplane. But allowing room for mistakes, that's that kind of negative feedback principle. So making

Unaccountability Machines And Decision Rights

SPEAKER_01 11:40

sure that you working with closed loops, and I think it's a principle that we can observe in organizations that must function because it's about life or death, rescue organizations or military organizations that cannot afford to accept that communication is so difficult, right?

Mike Jones 11:58

No. It's like we we will know if we've made a mistake very quickly and um very harshly. Like in the civilian world, the feedback loops are if they do exist, and I question a lot of them, they exist, but they're very long. So you find leaders that will make decisions knowing that it's okay, because by the time that decision has sort of come through and hit reality, I I would have probably been gone anyway. So I'm not gonna get the feedback that that requires.

SPEAKER_01 12:40

Yeah, yeah. So interestingly, if you look at organizations that we have at least the idea that they're not so bad in functioning, be it military, be it the rescue organization where it's about life and death, be it uh be it organizations like without becoming religious, the Catholic Church, for example, 2,000 years on the markets, it's not that's not so bad. And uh, I think you know people have have um either gone to the military or the state or the church, probably at these times. So um, what can can we learn from that? And it's you you find all these basic elements of functioning structures that you that you see with that vital system model that we're talking about, right? The invention of Stefford Bieron, an Englishman, by the way, English cybernetic.

Mike Jones 13:31

Yeah, and it's really important these those loops and thinking about communication in this way. So you said a really interesting thing earlier around the German automotive systems being really slow comparative to their Asian competitors. Now, thinking about what you've just talked about then, why why do you think that they are falling behind? What is it that the Asian markets are doing really well, or the Asian automotive um team, especially people like BYD, what are they doing so good comparative to the German operatives?

SPEAKER_01 14:04

Actually, I think they they're following following some of the principles that you either just uh know because you're a talent or it because you have a lot of experience, or you can know them also by looking through a model like the viral system model. You find the same principles, you find the exact same principles also in Nasim Tolleb's newsbook, Anti-Fragile, which is heuristic, saying what organizations need to do actually in a heuristic, not in a model way like the viral system model, but as a heuristic. But they're talking about the same thing about two perspectives once more. And I think one point has to do with establishing negative feedback loops, not only in communication-wise, in daily communications, but also, and maybe that starts. The whole organization question starts with being very clear what your operations are actually. Distinguish your operations, purposeful filling, profit center, so to speak, your businesses, your whatever. I mean, if it's non-business, then it's your operations that fulfill together the the purpose of the organization and distinguish them from everything else that you find in organization charts, and then establish a clear accountability. In that, I call it the primary steering dimension, in that steering, because that's the first question: who steers whom in an organization? We need to talk maybe about levels of recursion, the principle of recursivity, so there's different levels. Like you have also political organizations, we have villages and cities and countries and so on, different levels which manage all themselves to a great extent. Principle of recursivity is important, but uh then also to establish that clear accountability. Who takes decisions, who is accountable, who can take a decision without asking five people? And that consensus-oriented organization that you've been talking about, I I observed that as well. Also uh in the markets I am active in. And the more folk you have in the future, the difficult, the more difficult it gets to get numbers behind decisions, the more discussions you have, and the more people you need to involve. It's not about being able to involve people, which is okay, but the need to involve people, we without them you cannot take a decision. That's really deadly, and that's where uh where it all starts, I think. That's what the Chinese are doing better than we're doing here. Here, very often, for example, we have uh a lot of unclarity between business unit, product owners, globally responsible for product areas, and region, for example. So that's what I'm talking about. Who is who steers whom? Yes, what's our primary steering dimension? Is it the regions, or is it and there is where it all starts also with the intersection between strategy and structure, because that's uh as Raymond Chandler said, strategy follows struct structure follows strategy. That's a strategic question, right? Who is your customer? What are you paying for? What is your strategy, and what is your right leading dimension?

Mike Jones 17:16

Yes, yeah. And you know, and this is it's it's that two-way relationship between the structure and the um strategy, because like you said, your what your current structure is limits what's possible. Um initially, you know, you can uh adapt to take things.

SPEAKER_01 17:34

Yeah, absolutely. It's important to look at both uh both arrows, so to speak, from structure strategy to structure and the opposite way. Yeah, yeah. And the same is true also for people, right?

Cybernetics Negative Feedback And Closed Loops

SPEAKER_01 17:45

So you need also to involve uh culture, people, abilities in the organization. Without them, you will not be able to implement them, right? So in the end, it's it's it's a triangle of of aspects that need to fit together.

Mike Jones 17:59

Yeah, and I think this this whole idea, and you you you mentioned it briefly uh uh a moment ago, it's about that purpose and you know what's what's the makeup of the organization, and it's not just the the boxes that we we've created on the hierarchy, but it's it's all those past decisions. Like when we're thinking about the structure and the strategy, we think about well, a lot of stuff is obvious, but then you think, well, you know, past decisions or current decisions make things difficult. So where we've chosen to invest in, where we we've chose not to invest in, that that capability is not because we've not invested in a long time, is not up to the scratch we need to maybe to deploy. The the relationships that we've created in suppliers, you know, they're we're so contractually bound for a while, that's gonna limit you, or um created relationships that are so politically sensitive that to break away from those is unthought of. And I think this is the other part of structures and organizations that people forget when they're when they're when they're trying to make strategy. What what are our primary activities that we're really good at?

SPEAKER_01 19:19

Yes. Well, interestingly, if I look at strategy from the perspective of structural, especially from that neurological perspective, then certain aspects come to mind, and uh that's one of them that you're mentioning here. One aspect we have been talking about also already is is recursivity. So it's the question of if you say if you talk about strategy, are we talking about strategy of Germany or strategy of the European Union, or a strategy of a Bayern, or a strategy of a village in Bayern? Because it's always strategy, and I think there's a lot of confusion about that if people talk about strategy. So, what's my management level, so to speak? What's the environment I need to look at? Because I have also operations going on, product areas, regions, customer groups, whatever it is, technologies, and and they are also having a look at their business. But my business is more than the whole of its sum, right? If I'm responsible for Germany, I don't need to look at Bayern because the Bayern take care for themselves. I need to look at the whole, so that difference in strategy. And to make sure that the strategy is not only just the sum of its parts. So German strategy is not the sum of the parts of strategies of all the countries in Germany. It's something different additionally, right? So there it starts with the recursivity. And uh the other thing is what I observe also regarding what you just mentioned, that uh difficulty very often to not just to wish things but to also to deal with the constraints. Uh it has to do with the strategy process. The question there starts already, what is strategies? What we are we're talking about, and uh the next confusion is here, right? Everybody has an understanding, and everybody has a different understanding of what what a strategy is. And my observation here from the Bible system model, I look at basically three things. I look at decision categories that are normative, and that's an input into strategy. Constraints like what we want or we don't want, right? We can or we cannot, basically. Normative decisions, that's one input. The second category of decisions I need to look at is has to do with strategy, outside and then related in an organization, the future relented, outside related. So that's typically the the heart of strategy, where you need to ask yourself, are we doing the right things? Right. What do we need to stop doing today? Uh and what do we need to start to do today in order to be viable in the long run?

SPEAKER_02 21:59

Yes.

SPEAKER_01 22:00

And the third category is the operative category, the executives. Since Montesquieu you have that uh different parts, right? Uh the executive, the legislative and the Euristic difficult world. Sorry. And I very often observe that the part between strategy and operative planning, where where we really talk about planning, people have a lot of planning. What they do is they take the past and it determines the future, right? They have some proposition that make uh turnover expectations and planning like that. And it's not necessarily the future that determines the present, the complete other thinking in how I plan actually. That's that would be the cybernetic thinking and planning. That's one thing. And the other thing is that what they think is long term is always strategic. So they think if they have a planning that is planning turnover for five years, that's our strategy, which is ridiculous, of course, if you look at it closer. But that's what I see in practice, and sometimes it's really frightening.

Mike Jones 23:10

Yes. There is definitely that huge confusion about what is strategy and also how that plays into the different um parts. Yeah. And I think that's where you're you're really looking at the organisation, and and I think that you you see it when when someone comes up with a new strategy, they're straight away it's it's all the town halls, but they do all that flashy stuff. But the the bit that worries me with all this as well, a bit what you're talking about, is then suddenly everyone has to justify their objectives against the strategy, suddenly you've got new values on the wall. It's almost as if that when the new strategy is announced, everything changes, and it and it doesn't because a lot of the times, definitely when you you think about structure, you're not suddenly going to change your whole structure of your organization overnight. It's just not gonna happen. People try, and that's why they go into turmoil. But it's

Why Some Industries Move Faster

Mike Jones 24:10

there are things that will just stay the same. Yeah, they're part of the operation that that won't change what they're doing, but there are certain things that are very important aspects, also neurological-wise, right?

SPEAKER_01 24:21

Yeah, I think it has to do with the synchronicity between what is happening outside and what are you what's your speed of reaction, your reaction time, and it has to be synchronized if you want to stay in business in the long run, right? So you need to be able to react fast enough, and that's the topic where we started also when we compared Asia versus versus uh our own industry currently, where the the pain point is. It has to do with how we do with we deal with, and I think technology helps us a great deal with that. We need to manage in real time nowadays. So the open also in strategic structures was all after five years, after three years, after seven years, we we start the strategy process and we fill a lot a lot, a lot of formula uh a big project, right? And then there's a strategy, and then there's a plan, then we we do it, whatever happens, that's not working anymore. It's much more dynamic. So we have to be able to think completely different. So, from the perspective of the viable system model, we need to take care of that ambidextry to build the future business on one hand, and on the other hand, optimize the existing business where we earn the money for it, also. That's one thing. And uh, we need to build, we need to be able to navigate in the fog. Cybernetics, that science we're talking about here, basis of viable system model, is the science of navigation in the fog, so to speak. Governance, Kubernetes, it's all goes back to that word of cybernetics, the science of communication and control in the animal and the machine, as Norbert Wiener said. Actually, one important sentence, I think we have applied that a lot in technological systems so far. Yeah, but we haven't applied these principles in our social systems. And that's the basic reason, my perspective, why we all have all that turmoil. We're not able to really steer, feed whatever it is, business or no business. Yes, the other thing was real time to build on premises to say, well, so far as we see now, we believe that this is gonna be important, this will happen, and so on, and to test that in very short cycles. And as soon as something relevant happens, then you have to rethink your strategy. A complete different approach to how you do strategy. And most organizations are not used to do that.

Mike Jones 26:43

No, like you said about real time, I talk about strategy needs to be continuous, it's it's a consistent thing. You see, especially in the Viable Sisters model, Stafford Beer talks about that. Like you said, the ambidextry. So he's not on about doing one and then getting around to doing the other, it is attention that lives, and you you you're doing both, which I think often people miss. That that loop, that feedback into the external environment is really important to test because we're going to give direction and give decision rights to uh parts of the organization to configure what they need to to enable us to achieve what we want to. But then we need to ensure that one what we've asked the organization to do um is having the effect that we expect in the external environment. So otherwise, what I find a lot of people they give a lot of direction, they're not mu they're not measuring or understanding if all that accumulated effect is actually changing what we want. Yeah, yeah. And then the other one is the what I call the intent loop. So it's like, well, this is the strategy we we thought, and this is our assumption. We've now done tests, we've now, you know, people have acted. Yeah, is is that actually right? Things changing that we didn't foresee, that is now going to need to update our assumption around the strategy.

SPEAKER_01 28:13

Yes, and actually it's not so difficult. I mean, you need to come together probably every three months in a given committee of let's say five people on your recursion level, if you're looking at the say at the right recursion level, which cuts out a lot of complexity because it determines what you need to look at. And um, and then to do it continuously as a cycle. You always start from scratch and always ask yourself again, am I still seeing it right? Have my premises changed? Am I not really implementing things as I expected and so on? What does that mean? Then you're doing continuous strategy, I would I would say real-time strategy. And I think the other thing is also an interesting concept from cybernetics is the concept of the essential variables. So the concept was by Ross Ashby, I think, British neurophysiologist, he said if you want to know about the viability of your body, look at probably seven, eight, nine factors which tell you the great extent if you're viable or not. So the blood pressure, heartbeat rate, and

What Strategy Really Means

SPEAKER_01 29:20

so on, so on. Some factors are really relevant. And I think that helps us also to deal with the complexity. That's what our neurology also is doing, right? How do we deal with that complexity apart from the level of recursivity, the principle of recursivity? It's focusing on essential variables, but deal with them in an interactive way. I think that's the core of systemic thinking, right? To reduce everything to, let's say, five to seven really important things, areas, let's call them. Or in a business, I would say they are factors like what is my market position, number one, yeah, what is my innovation rate, number two, what is my productivity, number three, am I attractive for the right people? Number four, cash flow liquidity, number five, and number six, the profitability in the end, how much money do I need to earn? If you look at these six factors and if you concentrate your strategy on these essential variables on your level of recursion, then it's not so difficult to do. You come together five to seven people, three months, and do you just do your continual continual yeah.

Mike Jones 30:27

And that's the thing, and you when you when you think about strategy, I I term what strategy is for, strategy is for the pursuit of viability and advantage. You know, we want to make sure that you know what we're doing means that we are viable. You know, that's the number one thing. We need to make sure we're viable, otherwise we don't exist. Yeah, absolutely.

SPEAKER_01 30:49

There it starts. Yes. Yeah, and that's that's that's the basic problems. I mean, organizations look at liquidity, cash flow, and profitability. That's important too. That's two of the six I mentioned. They're coming actually uh from the St. Cala Management model, Fredman Molly, Kelly Scalder, and so on. There's a lot of evidence behind these uh things. Yes, and there's still basic problems actually, like just neurological pathologies. Do you say pathologies? Pathologists, pathologies, where, for example, you're doing strategy for for for regions, but your operative units are in the regions, they're the product groups. I've seen that in many organizations. So you have a poly neurological storm in your brain, you're thinking in one direction and acting in another direction. Yeah, yeah, yeah, yeah. You bring that together. It's what then Dan Davis calls the unaccountability machine, not to clean that up. Yes. That helplessness currently, that's that's why organizations don't clean it up. They would like to clean it up, but they look at anatomy and physiology, and they don't have any means to look at neurology to really clean it up.

Mike Jones 32:00

Yeah, I agree. You mentioned recursive recursivity quite a lot, and it's a really important element, and we know that there are recursive levels to an organization, to an organism, to anything, there are recursive levels. Um but I've seen, and I don't know if you see this as well, there's a huge swath of people that are pushing for what they call flat organizations. And and I I get what they mean um underlying, but I think the question they're asking is or all the perspective they're looking is quite lazy. They go, and let's go flat organization. And I don't think they mean that. What they mean is what we're talking about here is that you know, do the right people have the right decisions? Do the right people have the right information? Do people have the freedom to take action without needing to um get committees and exactly?

SPEAKER_01 32:57

And I would ask the question, is it manageable? How many levels of recursion can we get rid of? And I agree, we grew too big in the last 50 years. And we take in very many cases, we take levels of recursion uh out. The Catholic Church, to my knowledge, has still three management levels, three levels of recursion: priest, the bishop, and the pope, and uh um rest or other functions. I might be wrong, but I I think I think I'm right. Um if it if it were four, nevertheless, I mean it's a global organization. It's uh so yes, that's one thing.

Mike Jones 33:38

Sorry, you've got God above the Pope, so go at least and you're right.

SPEAKER_01 33:45

Yes, can uh and you should try to take levels of recursion out, I agree, because that uh makes things more faster, it makes it uh lighter also, less costly, and many reasons for it. But the question still remains: is it manageable? Can you manage 20 organizations below you on the next level, or can you manage OD7, or can you manage 50? The largest organization I know of manages 170, it can do the job. Whereas there are much smaller ones. Let's talk about the European 27. Quite a lot of difficulty to manage that, even. Yeah, right? How to keep these 27 as a viable system that has a common future and uh that really where we're stronger than everybody for himself. That's the reason why there is a EU. Um you need means to assess that. People do not have the means to do it, they do it by heart, by experience. Sometimes it's it's okay if they have experience. But um, the system model wants more the neurology, that perspective deals with complexity, and it's a complexity question. How many children can you have in your family? Yeah, can you have adopted and uh other cultures or not? All that adds to complexity. And complexity can be as huge as it wants as you as long as you have enough complexity to deal with it, which is called Ashby's Law, only variety can destroy variety or absorb variety. Another topic we could spend an evening on, I think. I know, yeah, yeah. I was gonna say. But uh, as long that is fulfilled, it's okay. So if the European Union would be strong enough and function as an institution, uh then it would be okay to have 27 organizations. Yes. So it's a question of design, right? Yes, neurological design. What I say is you can look at org charts, you don't find it out.

Real Time Strategy And Essential Variables

SPEAKER_01 35:40

And you look at processes and you don't find it out either. You really need to look at that third dimension of organization, the neurology, the decision and control structure, the leading structure. But people don't do it. In universities in Germany, they still teach there's a so-called oblauf and aufbauer organization, obstruction processes, roughly. Yeah, yeah, yeah, yeah. And that's it. Yeah. And that's that's what they learn. And they learn a lot of project management, and they learn a lot of agile processes and agile methods, which is all fine, but just not sufficient.

Mike Jones 36:16

No. And I find this a lot, and I see a lot of university things talk about leadership or strategy or design, or they do, and people probably challenge me on this on the call, but please do. But I see a lot of it as um I call it woo-woo stuff, you know, woo-woo. I call it, it's a bit, you know, it it it's it's nice, you know. Everyone's that nice are you what that flight organization, or or they go on there and they're still teaching old school ways of of bureaucra bureaucratic management that we we know just don't work, it's too stiff. Yeah. But I rare to find one that that really teaches about things about Ross Hasby. Like, you know, do they talk about uh law of requisite variety and how important that is to understanding these questions? Do they talk about how do we how do we measure complexity in a in a business? And then thus by understanding that how how what does that mean to our structure and how we design ourselves? Yeah. I don't think they're they're teaching this type of thinking.

SPEAKER_01 37:21

Yeah, how do I make these complex things work? That's the question, right? And uh it's like a higher order of engineering. I mean, I mean, they deal with organizations somehow in a very mechanistical, primitive thinking way. But I understand people, I mean they are good in what they do, they have become managers and they have a lot of respect for these people, by the way, because they have been successful in the past by what they have been doing, and they're the best experts in their area, I'm sure. But the general understanding of how do I make it work on that science, uh, cybernetics is the science of functioning, so to speak, right? That understanding is just not teached. You can't get it, it's not around. And I think this is uh what I try to shed some light on with my experience and um yes, with the book that you mentioned at the beginning, uh do some trainings, uh, teach people, other people. I work with Metaforum, you know Metaforum, I think. Are you a member too? I'm not sure.

Mike Jones 38:20

Yeah, yeah, yeah. And I I spoke, you invited me to speak as well, didn't you? Oh, okay. Yes, people can speak on um, people can see my my talk on Metaforum as well. Oh, nice.

SPEAKER_01 38:31

Yeah. We try to set up as a kind of quality practice and education operation there where we globally do something to disseminate that uh that experience, that model, that uh way to look at things. Because it's not complex, actually, it's not difficult. It's you just need to deal with it. And it's it's a language you need to learn. It's another perspective. You can't talk in org charts about your neurology and not about processes, and not even if they're agile, but you need to have that language, and it teaches you that language, which is a natural language because it we all built like it. I mean, it has been derived from ourselves, that's interesting as well, right?

Mike Jones 39:14

Yeah, yeah, yeah.

SPEAKER_01 39:15

It has been derived from our own functioning as a complex organism, and a dynamic and agile organism and viable organism to a great extent.

SPEAKER_02 39:25

Yeah.

SPEAKER_01 39:26

So uh it's not difficult to learn, but you have to deal with it. You have to to realize it.

Mike Jones 39:32

It's very different. It's very different, but not a different in a um in a difficult way. It's just that it's just not and this is probably the point to you. It's like I love the viable systems model. I think it's by far the best way to look and understand organizations and cybernetics that uh underpins that. But what why from your perspective, why why do you think it is not just readily taught in universities and business schools at the moment?

SPEAKER_01 39:59

Good question. I think basically because it was not necessary. It was okay to talk about these two dimensions. I mean, we have made a lot of progress in the last 20 years about agile processes. Yes, agile processes. And uh maybe it was good to focus on physiology, and IT has enabled us to do a lot since since the 90s, business processor engineering, hamburger. That was a revolution. So the question of now that we have computers, how can we organize processes differently rather than just make them more efficient? That started there agile. But I think the next wave, the next next door into a new area must be the look at that neurology. And I don't know of any any other any other model that allows us to do so. It was not necessary in the past. I think that's my answer to your question. Why isn't it teached? Because, like the double entry bookkeeping, is that the term? Double entry bookkeeping? Yeah, yeah. It has been invented quite a long time in the north part of Italy before it was used widely. And until then, environments were not complex enough, so that just ordinary

Flat Organisations Recursion And Requisite Variety

SPEAKER_01 41:10

bookkeeping was not sufficient. Everybody did bookkeeping. But then we had the first banks, also Germany, the Fuckers, the Medici in Italy. So it became more complex the environment. Making business became more complex, investments and the deviations and things like that. So suddenly it became necessary to deal with it. And now what we observe is the time where managers feel that necessity to think about their decision structure to find out that living in that matrix as we thought, it's not gonna be the future. We are too slow and too heavy.

Mike Jones 41:48

Yeah. And with that as well, because you've got the you know the everyone's panicking about AI and all that at the moment. But I've saying that if if you if you really want to be able to have AI in your business to be this learning organization that can help you, the best way to do that is understand cybernetics and the the viable systems model because it's it relies on those it relies on the information, right, to be able to adapt and learn. And that's what Stafford Beer was on about. It's about how do we create an organization that adapts and learns and maintains its viability, and you could do that with AI, but for that to work, you can't you can't have the lack of um neurology like we do now, because the neurology is what it needs to be able to work.

SPEAKER_01 42:39

Absolutely, absolutely. I'm glad you you talk about it. That's an in in an important point because if if you apply AI to a wrong neurology, a wrong decision communication structure, things just get worse as they are, because you're doing it more efficiently what you shouldn't be doing, actually. It's pathological, right? All organizations have their pathologies or some pathologies. So it's a dangerous thing. So I absolutely agree to start with that decision communication structure, be clear about it, and then to apply AI to it, because that increases your intelligence there where you need it. And otherwise people just get into their hairs.

Mike Jones 43:18

Yeah, and then you've got already in the viable systems model, you've got system five, the governance and ethos, and the governance. It's the you know, how how do we check, make sure, and agree with those decisions that are coming up so that the AI can learn and say, you know what? Actually, there's probably a better way of doing this. Um, unless it's this, how do we have that governance to check to make sure that that decision is right and we adapt the organization?

SPEAKER_01 43:44

And I think AI will allow us and help us also to make a big step in terms of that. I'm talking about the viabilization model, we have these five decision systems, right? And the decisions three, four about that balance between. Between what is right for the future and what is right for today's business, that ambidextry, I think it can help us quite a lot to be better in that. Stefan Beer has developed the concept of teams integrity, a communication structure, and the concept of an operations room, which was at that time a physical room that he established also in Chile under Allende before Pinot bombed it. And that kind of decision, decision room, be it virtual or physical, where you have filters that you tell yourself when your attention needs to go somewhere, rather than us finding information in hundred pages of information, right? Of data, of reports, um, computers that tell us when our attention needs to go somewhere where we can simulate, where we do not forget, where we have a memory, where we have all these things also, uh common pictures changing of our perceptions of the environments and so on. So I think there's a lot of music in that. And uh PIMS, for example, PIMS London is working on these things also to establish it in organizations. So that's why I am in the advisory board there. That's what I why I think it's interesting.

Mike Jones 45:16

Yeah, yeah. It needs to be, and you bring up a really good point about memory. And I think that's one thing that we need to get better at, and you know, an AI can help with that. Is that I can guarantee you're gonna see it a lot more now with the rise of notebooks and stuff, AI notebooks or not uh note takers and stuff, that um leadership conversations will start to

AI Governance Operations Rooms And Memory

Mike Jones 45:40

be recorded. Yeah, and so we could we could finally have a memory for why we made those decisions. Because at the moment we we post-rationalise our decisions, and we don't really have that memory, that organizational intelligence to really understand what's caused us to move and adapt.

SPEAKER_01 45:57

Yes, it's an interesting discussion. We we have also a group in Metaforum that is dealing with these questions. And uh there's there's a lot of music in it, a lot of danger also in it. I mean, we're all are aware of dangers of AI, I think. And the more important even it becomes to use AI in functioning steering structures, functioning governance structure. I absolutely agree to that. And and now regarding these operations rooms, yes, there are there are pictures like I think we could talk about visions here, where you have Evas, three-dimensional holograms uh you can talk to and you can simulate things in your organization and you have all the information available and so on. Maybe we're not too far away from scenarios like that. It still sounds science fiction to us, but uh times currently show us that things are developing much faster than we have expected.

Mike Jones 46:53

But before you go, what would you like for our listeners to um go away and reflect on from this this session?

SPEAKER_01 47:02

I think my professional life's mission, so to speak. Um my English. No, what I think what is important is that we really reflect on if you talk about organizations on these three dimensions. I think we're really missing something out. That third dimension, based on the science, is available and so on. So I think my personal mission really was to shed light on that, to make it applicable in organizations, which I try to do in my book and in my trainings, and also just to inform people that there did this this is to your usage, it's there. We have the technology, we have the practical experience, we have the success stories, we had everything, so to speak. And I think it's a time where these things are just becoming necessary. So that's that would be my suggestion to the audience to to start thinking about that dimension.

Mike Jones 48:02

Yes, yeah, definitely, and I think they need to,

Final Reflections And Next Steps

Mike Jones 48:05

and they've got um loads of opportunity too if they want to to, and I'll link your book in where you do talk a lot about that in the book, um, and also to Metaforum if people want to get involved in Metaforum. Um there's a great resource there on the YouTube channel you've got and the actual site for for the discussions and understanding uh neurology of the business and also viable systems model, which I think is really, really and the underpinning of cybernetics. Um yeah, so it'd been absolutely fantastic to have you on. For our listeners, if you've enjoyed this as much as I have, please share so other people can get value from Martin's great perspective. So once again, Martin, thank you so much for being a great guest on the podcast.

SPEAKER_01 48:49

Thank you, it was a pleasure. Thank you, Mike. It's always a pleasure to talk to you. Thank you. Yeah, yeah. Same. Thank you. Take care. Ciao, ciao.