Task C6.3: Check the Policy | Balance Power: Balance of Systems 3 and 4

What is Task C6.3?

Task C6.3 is part of the "Decide" phase in the Viability Canvas methodology, specifically within the "Create the Adaptive Space" step (Step C6). This task instructs you to "Look at the allocation of resources between Systems 3 and 4. Is there a balance between the need for an efficient internal environment and an effective System 4 to ensure adaptation to change?"

Purpose of Checking Policy Balance

The purpose of this task is to ensure appropriate resource allocation between operational management and future-focused functions, creating a sustainable balance of power between present needs and future adaptation. This serves several important functions:

1. Preventing dominance: Ensuring neither operational concerns nor future planning disproportionately influences organizational direction
2. Resource optimization: Allocating limited organizational resources effectively across time horizons
3. Capability maintenance: Ensuring both operational excellence and adaptive capacity receive adequate support
4. Risk management: Balancing the risks of operational failure against the risks of strategic obsolescence
5. Sustainable adaptation: Creating conditions for ongoing organizational evolution without compromising current viability

By checking policy balance between Systems 3 and 4, you ensure that the organization maintains appropriate attention and resources for both current operations and future adaptation.

Understanding Power Balance in VSM

In the Viable System Model:

• System 3 Power refers to the influence, authority, and resources allocated to operational management functions focused on current performance, optimization, and internal stability.
• System 4 Power refers to the influence, authority, and resources allocated to development functions focused on the external environment, future trends, and organizational adaptation.

A proper balance ensures that neither immediate operational concerns nor future planning dominates the organization's attention and resources. This balance is not necessarily equal, but appropriate to the organization's context and environment.

How to Complete Task C6.3

To check the balance of power between Systems 3 and 4:

1. Assess resource allocation between the systems:
   • Financial resources (budgets, investments)
   • Human resources (headcount, skills, seniority)
   • Time allocation of leadership attention
   • Physical resources (space, equipment)
   • Political capital and influence
2. Evaluate decision-making influence:
   • Whose perspective typically prevails in conflicts?
   • How are trade-offs between current and future needs resolved?
   • Who has greater access to key decision-makers?
   • Whose metrics and goals receive more attention?
   • How are resources reallocated during constraints?
3. Examine organizational signals:
   • Status and positioning of System 3 vs. System 4 roles
   • Communication emphasis in organizational messaging
   • Career progression paths related to each system
   • Recognition and rewards associated with each system
   • Crisis response patterns (which system dominates?)
4. Consider environmental context:
   • Rate of change in the external environment
   • Competitive pressures on current operations
   • Disruptive threats on the horizon
   • Historical patterns of adaptation or stagnation
   • Industry norms for innovation vs. optimization
5. Document your assessment of the current balance:
   • Relative strength of each system
   • Areas of imbalance or concern
   • Context-specific considerations
   • Recommendations for rebalancing if needed

Example Balance Assessment

In a technology company's assessment:

• Resource allocation: 90% of resources dedicated to current product maintenance and incremental improvements (System 3), with only 10% allocated to exploring new technologies and market opportunities (System 4).
• Decision influence: Product roadmap discussions heavily weighted toward short-term feature requests and operational concerns, with future-focused initiatives repeatedly deprioritized.
• Organizational signals: Top leadership positions all filled with operational backgrounds, innovation teams positioned as "side projects" rather than core to the business.
• Environmental context: Industry experiencing rapid technological disruption with multiple startups gaining traction with newer approaches.
• Balance assessment: Significant imbalance toward System 3 dominance, creating substantial risk of strategic obsolescence despite current operational excellence.

This assessment revealed that while the company maintained strong operational performance, inadequate resourcing and influence for System 4 functions had created vulnerability to disruptive market changes.

Factors to Consider in Balance Assessment

When checking the balance between Systems 3 and 4, consider these contextual factors:

1. Environmental velocity: Faster-changing environments typically require stronger System 4 capacity
2. Organizational maturity: Newer organizations may need stronger System 3 to establish operational foundation
3. Industry position: Market leaders may need stronger System 4 to maintain advantage, while challengers may need to balance both
4. Resource constraints: Limited resources require more careful consideration of balance
5. Historical patterns: Past success or failure in adaptation provides context for current balance
6. Strategic intent: Explicit growth or transformation strategies may justify temporary imbalance
7. Competitive landscape: Disruptive threats may necessitate stronger System 4 despite operational pressures

The goal is not perfect equality between Systems 3 and 4, but an appropriate balance that enables the organization to operate effectively today while adapting successfully for tomorrow. The right balance varies by context and may need to shift over time as circumstances change.

Signs of Imbalance

Watch for these indicators of unhealthy imbalance:

System 3 Dominance (Operational Focus):

• Innovation initiatives consistently underfunded or delayed
• Environmental scanning treated as optional
• Strategic discussions immediately redirected to operational concerns
• Future-focused roles marginalized in the organization
• Little attention to emerging trends or disruptive threats

System 4 Dominance (Future Focus):

• Operational issues neglected in favor of new initiatives
• Resources constantly redirected to "next big thing"
• Current customer needs sacrificed for future possibilities
• Frequent strategy shifts without operational implementation
• Insufficient attention to maintaining core operations

Identifying these patterns can help diagnose imbalance and inform targeted interventions to restore a more effective equilibrium between operational management and future adaptation.