Application of theory of spiral dynamics in management of integrative development of economic systems

1. Introduction. Growing integrative processes unfold on the world level in the form of globalization relations as well as within national territories through enhanced information sharing. From the system approach this means expanding boundaries of production systems and formation of so-called virtual network of business partners’ interaction with subsequent selection of business partners and connections around the enterprise – system integrator. Sophisticated technology, dependence on suppliers, marketing techniques of organizing output make all dependent on everyone. In these circumstances acting separately is not only impossible, but also detrimental to society.

Modern production-technological level of development of economic systems in terms of globalized environment objectively leads to integrative oriented economic development, which is reflected in uniting of different structures and processes (manufacturing companies, technologies, markets, territories) in a unified and coordinated developing formation. Therefore new management paradigm based on system and situational approach, considering open economic systems as systems that are exposed to many environmental factors. Changes in external environment necessitate timely integrative transformations accumulating all of critical mass of resources and strategic advantages to increase integrity and market efficiency of weak, unnecessarily separated manufacturing units.

We should note that modern changes in external environment where open economic systems operate are of radical nature and reveal across global economy. They led to the emergence of new flexible integrative organizational models which logic most adequately meets intensification and complication of competitive dynamics, first of all, characterized by decreasing predictability, traceability of behavior and interaction with external agents, negatively affecting the efficiency and economic risks, especially in large enterprises that combine a significant amount of vertical, horizontal, heterogeneous in nature-related activities. This requires theoretical and methodological basis and penetration into nature of these processes.

Studying this question at times is difficult due to immaturity of revealing of integrative transformations that doesn’t allow to see fully content of their cause-and-effect relations, and on the other hand, due to imperfection of existing research tools and often its non-existence. In this regard science is always faced with two-fold challenge of not only to conduct in-depth study of new phenomena and respective institutions but also to create a reliable tool for understanding and explaining of emerging new forms of development, disclosure of principles and mechanisms of mutual consistency (consensus) of multiple links between system components and systems themselves.

2. Problem statement. In the second half of 20th century there were many theories that describe individual evolution of consciousness on the basis of observable empirical data. Piaget researched line of cognitive development, Kohlberg – moral development, Loevinger – development of self-awareness, Maslow, author of the famous «pyramid of Maslow» – development of needs, Graves — development of system of values. In the ever changing and complex world increasing popularity are gaining models with property of system integral approach giving an opportunity to synthesize disparate facts and conclusions together and create complete image of one or other phenomenon on the instant and not only get information about system from different angles. In the context of business activity when we consider particular problem integral approach can be treated as an approach appropriate to make sure that all the possible prospects are understood and taken into account. The result of such research is creation of new natural areas in economic science, emergence of new scientific theories in the context of which we can justify regularity and need for integrative formats of development of economic systems. In this article we would like to focus on the theory of Spiral Dynamics as a unique and important contemporary methodological tool for management of integrative development of complex economic systems on the example of aviation industry enterprises of Ukraine.

3. Main results of the research. Spiral dynamics is model based on the theory of emergent cyclic levels of existence of human systems (individuals, communities, organizations, countries and humanity as a whole) of American scientist Clare Graves, later extended and amended by his followers – Don Beck and Christopher Cowan. Bio-psycho-social nature of theory makes it truly integrated, i.e. not only describing stages of development common to all systems – person, company, government, etc., but, more importantly, answering the questions how and why system thinks in certain way and makes certain choices, how and why they are happens their formation, transformation and shift. This theory is of great practical importance, in particular, for understanding the need of transformation of companies and controlling these processes in any organization.

Spiral dynamics can be useful in restructuring of the company, changing corporate culture, learning and developing team of top managers, communication with people from different cultures and value systems. In managing changes spiral dynamics as a tool shows what and when needs to be changed, from which and to what level in given period of time, and what values unite owners, management and employees of the organization in the framework of this social system. Its principles help in competition, allow us to understand psychology of consumers and employees, provide efficient and effective leadership; they are indispensable for the resolution of conflicts and problems both of intercultural and international integrative interaction.

So according to the theory of K. Graves development of human systems goes on double helix: the outer helix is a gradation of life conditions in which system exists. The second spiral characterizes gradation of cognitive styles through which system perceives world. These paradigms of thinking include definite ways characteristic only for them of apprehending world, decision-making and using of principles of organization and control. In Graves theory spiral of development is considered in the unity of two components — paradigms of thinking and living conditions. Thus harmonious functioning of the system is possible only at the coincidence of these two factors. Environmental conditions are constantly interacting with the paradigm of thinking (comprehension of the world). Position that occurs in course of this interaction, the setting, then determines level of existence or development i.e. interaction of first and second helix generates relatively stable pares of life conditions and modes of thinking. Graves marked them with pair of letters and described with system of values which for convenience are encoded with different colors from beige to yellow. Important system feature is that each successive stage of development of the system satisfies needs that were not satisfied (or suppressed) in the previous step in the development of civilization, and each level of development of society does not deny but includes the previous one. Moreover, levels of development do not describe what the system thinks but how it thinks – a “container” of way of thinking. The model is hierarchical that is vMems go in the order of increasing complexity open in character which means that the end point is unknown. As of today eight levels of individual development are described, in turn levels evolve from lower to higher, and each of them correspond to certain values and behavior patterns. It is impossible to miss any level – you can not, for example, move from the third to the fifth level immediately, skipping through the fourt [1]. And what’s also important – helix goes in integrative movement from I to We, from individual vMems to collective – from orange to green and even from yellow to motton blue.

Transitional factors are of particular interest in Graves theory i.e. driving forces, conditions that ensure smooth transition from one value level to another. Let’s note also that process of transition to new level is nothing inevitable or irreversible. For example company can get stuck in the “blue” level while an “orange” economic condition are pushing it to a completely different style of doing things, and usually if it is not taken into account then is ended with force majeure.

Let’s try to deploy internal evolutionary spiral for the socio-economic systems in the context of their integrative development. At the same time we note that if the systems will not change and adapt to the changing external environment, problems in companies are inevitable. Association of companies will be considered by us as an open production-economic system built into the environment as a holistic structured engagement of production elements (material, energy and information resources), ranked with organizational relations, providing meaningful and sustainable production of consumer goods under the strong influence of the continuously changing environment.

Practically this means that in the context of integrative development of economic system in the context of globalization of economic relations achievement of economic profit, strengthening competitive position and growth of value of the system is realized via finding its place in the economic system by the company, focusing on the integration strategy and developing broad industrial relations. They emerge under the influence of the external environment as a shift from the concept of structural-functional management to the concept of business processes with business processes of external participants (suppliers, customers, creditors, etc.). Emphasis in management is moved to the «personality» of the enterprise using its unique competitive advantage. Enterprise’s evolution in the direction of external and internal environment necessitates the development of internal company’s culture, management oriented on human needs and interests, and their realization in business practice. Logic of planning should be based on systemic-constructivist “theory of firm” that takes into account processes of profound changes in the enterprise, with a focus on monitoring and control by weak signals. Production management should be based on modern information technology and interactive (computer) system to support management decisions, providing integrative communications in the direction of the external environment. Core of management subsystem should be financial management, based on managerial accounting and budgeting [1, 3].

Thus enterprise as an open system steadily develops in a spiral from one balanced state to another. These states can be described as levels of development or levels of existence and yet each one successive level of development adds to the previous new elements that is, in turn, basis for next level. Nevertheless achievement of further level is probabilistic in nature – it may be achieved otherwise this may not happen. At each of these levels of existence an internal system of values is formed (vMems as a way of perception of the environment), or a specific paradigm of operating that defines principles of business management in particular historical conditions of existence. Paradigm forms enterprise’s ability to transform in directions that increase its chances for survival in definite conditions of external environment (via producing appropriate adaptation abilities of the enterprise) through peculiarities of decision-making process, principles of organization and management of business and power structures, ideas and ways to adapt to reality. Practically in the context of integrative development of the economic system in globalization of economic relations this means that for achievement of economic profit, strengthening competitive position and growth of value of the system enterprise should find its place in the economic system, focusing on integration strategy and developing broad industrial relations. They emerge under the influence of the external environment as a shift from the concept of structural-functional management to the concept of business processes with business processes of external participants (suppliers, customers, creditors, etc.). Emphasis in management is moved to the “personality” of the enterprise using its unique competitive advantage. Enterprise’s evolution in direction of development of external and internal environment necessitates development of internal company’s culture, management oriented on human needs and interests, and their realization in business practice. Logic of planning should be based on systemic-constructivist “theory of firm” that takes into account processes of profound changes in the enterprise, with a focus on monitoring and control by weak signals. Production management should be based on modern information technology and interactive (computer) systems for support of management decisions, providing integrative communications in the direction of the external environment. Core of management subsystem should be financial management, based on management accounting and budgeting [1].

As growing cyclical two-spiral model is developing (first spiral – is the gradation of environmental conditions in which system exists, second spiral – gradation of value systems, so called adaptive filters through which system treats the external environment) new system or level is activated. At this level company should change its strategy and paradigm of functioning in order to adapt to these new conditions. It is important that each previous state of the environment goes into subsequent with all the attendant changes in priorities, values and attitudes. But as the subsequent reality can be found anywhere on the Spiral question statement can sound as following: “What is the position of the company in the future, if at the moment it perceives environment in such a way and goes through a process of change?” or “How company plans to change in certain direction under certain conditions?”

As a rule evolutionary movement develops toward more complex higher levels that include previous, although in practice there are no guarantees, and sometimes regress to lower and less complex structures is observed. Meanwhile enterprises are raised from one culture to another but values of previous culture do not die but become “background” and new values begin to dominate saturated with energy and emotions [4].

In the framework of integrated model of spiral dynamics in context of eight systems of values that exist together by turn defining company’s strategy, we systemized conditions for occurrence and development of company’s values, as well as their impact on the format of choice of organizational structure and management style. Levels of institutional development in theory of Graves can be characterized in accordance with revealing of certain rules, norms and principles of interaction. Meanwhile as own part of research we added description of palette of organizational development and, in particular, stages of integrative development of aircraft construction enterprises of Ukraine (historic, past, along with prognostic) which operate under main challenge of our time – globalization of economic business conditions (Table 1, author’s version of ordering).

Application of spiral dynamics to studying problems of integrating aircraft construction enterprises of Ukraine into the world economy should give answer to the question «How to keep systems of first rank in state sufficient to ensure that the entire helix is open for movement when external conditions will trigger this movement?». In other words how to keep balance of vMems in micro-helix (integrative level of aviation enterprises) when the meso-helix (level of national states) transforms its vMems for moving up – to the level of vMems of macro-helix (level of world economic system).

From authors’ point of view object of study in the specific field of aviation industry requires adding to the theory of spiral dynamics the third helix – meso-helix. Thus, in our opinion, inner helix obtains name of “micro-helix” – this is level of integrative development of national aircraft construction enterprises. Since evolution and list of all levels were aggregated and presented in Tab. 1.

Table 1. Systematization of levels of development of Ukrainian aircraft construction enterprises in accordance with K.Graves theory (systemized on the basis of [1], [5])

Outer helix in our interpretation will be called “macro-helix” – level of globalization of world economic system that was also retrospectively given in Tab.1 as external conditions of economic system operating. And “meso-helix” in our opinion is nothing but national level of state regulation. Basing on this level state conducts necessary protective measures on strategic directions and is a source of strategic investments, strategic partnership and main mechanism of creating corresponding political, economic, legal conditions that facilitate processes of  internal and external integration of aircraft construction enterprises (Fig. 1).

Fig. 1.  Structure of triple helix

4. Conclusion. Summarizing given above it should be noted that economic systems are developing as well as human nature – from one balanced state to another. These states are stages of their development, each of which makes next and complements previous one. At each stage in turn lays potential for development and transformation to a higher stage, but due to changing environmental conditions it has likely nature of occurrence. Each level of economic system development defines certain way for creating, perception style and adaptation to the environment by economic agents through managerial decisions (business, political structure, social environment).

We had applied theory of spiral dynamics by K. Graves to explain processes of integration of aircraft construction enterprises of Ukraine in terms of globalization as main imperative. It is based on concept of growing cyclic two-helix model of bio-psycho-social systems development.

First helix – internal, describes system of values (vMems) of individuals, and external – vMems of external conditions of their existence. Status and movement along spiral occurs as a result of interaction between life conditions (historical conditions, socio-economic conditions, psychosocial problems) and sets of vMems that are available both for collective and individual mind. Thus spirals are closely interrelated since vMems of inner helix can also change and affect vMems of outer spiral. Although evolutionary movement happens in the direction of complexity, sometimes regression to the lower and complex structures can be observed [2]. Role of complication that arises at each level of spirals development is to provide systems with opportunities to operate more effectively within environment that eliminates emergence and existence of non-purpose complications.

Levels of development on spiral reflected in current vMems for convenience were coded in different colors by K.Graves.

Two-helix model of bio-phsyco-social  systems’ for economics was amended with third meso-helix by us.  

First spiral – internal, describes system of values (vMems) of individuals, and external – vMems of external conditions of their existence. Status and movement along spiral occurs as a result of interaction between life conditions (historical conditions, socio-economic conditions, psychosocial problems) and sets of vMems that are available both for collective and individual mind. Thus spirals are closely interrelated since vMems of inner helix can also change and affect vMems of outer spiral. Although evolutionary movement happens in the direction of complexity, sometimes regression to the lower and complex structures can be observed [1]. Role of complication that arise at each level of spirals development is to provide systems with opportunities to operate more effectively within environment that eliminates emergence and existence of non-purpose complications

Research on the example of integration of aircraft manufacturing enterprises in Ukraine showed that effective integration of aircraft manufacturing enterprises of Ukraine at the micro level (micro-helix) prevent both internal factors (poor financial and economic situation of serial enterprises, lack of qualified personnel, depreciation of fixed assets, imbalance of interests of developers and designers etc.), and external, named meso-helix – legal framework, level of centralization of decision-making at the state level, imperfection of management system etc. In course of the research was defined that current level of development of micro-spiral – Ukrainian aviation enterprises – meets blue-orange combination of colors, and meso-helix (state) – red-blue (on author’s opinion first colors are given as dominant). At the same time level of vMems of macro-spiral (world economy) correspond to yellow-orange (in accordance with table of colors developed by Graves and adapted by author).

To overcome these limitations we consider it’s needed to change color of active vMems of each helix to colors of higher levels of development in accordance with Graves theory. Thus integration of micro helices is need in order to change the color of meso-helix.

This approach is justified in terms of economic theory and supported by works of such researchers as James Stewart, Friedrich List (1789-1846), Erik Reinert. Effect of Vanek–Reinert or effect of  “death of the best” suggests that if after a period of relative autocracy suddenly begin free trade between relatively developed and relatively backward countries then most advanced and high-tech industrial sector of the least developed country tends to extinction [6]. Most developed sectors more than others are peculiar to increasing return, therefore, they are more sensitive to the cutting of output, which inevitably causes sudden appearance of foreign competition. While international production-distribution networks become increasingly weak due to outsourcing, developed countries specialize in production of capital-intensive and innovative using in full advantage of economies of scale and increasing return. Less developed countries specialize in the production of low-tech goods or are engaged in assembling finished parts, this activity has no option to save on scales. As a result free trade destroys more national wealth than brings. Therefore to prevent this situation in the area of strategic importance of aviation industry it’s needed to interact with companies of countries of the same level of development (for domestic aviation industry this is Russia).

References

[1]. Beck D. Spiral dynamics. Managing values, leadership and changes in XXI century. Мoscow, 2010. 424 p.

[2]. Spiral dynamics. Worldwide framework for managing complex issues [On-line resource]: http://spiraldynamics.info/eng/index.php (Date of request: 12 of October 2013)

[3]. Theory of levels of human existence [On-line resource]: http://www.12manage.com/methods_graves_spiral_dynamics.html (Date of request: 12 of October 2013)

[4]. Balyaev A. Spiral dynamics. [On-line resource]: http://metalevel.ru/?p=509 (Date of request: 12 of October 2013)

[5]. Morozova N. Spiral dynamics: colours and levels. [On-line resource]: http://www.cognitivist.ru/er/kernel/spiral_dynamics_colors.xml (Date of request: 12 of October 2013)

[6]. Reinert E. How Rich Countries Got Rich and Why Poor Countries Stay Poor. London, 2007.: Constable and Robinson. 2007. 424 p.