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Chapter IX

Managerial choices between systems, knowledge and viability*

9.1. Introduction: complexity and knowledge in business

management

In the context of business management, a need for new paradigms is widely recognized and leads to be aware of the relevance of knowledge as a key resource to face conditions of complexity and to maintain the organizations’ viability. Scholars seem to agree on recognizing the relevance, especially in terms of complexity, of an attitude of the governing body to encourage organizational flexibility and adaptability to change, through the dissemination of a business culture based on shared knowledge at all levels of the firm (Maggioni, and Del Giudice, 2006:171). In such a context, the network organization appears as the best solution to exploit opportunities of knowledge creation (Rullani, 2003). Nevertheless, many questions still remain unanswered, with complexity studies and their implications for management that seem do not reach to a final point.

Recent contributions developed in the field of studies on the Viable Systems Approach (VSA) offer insights useful to a deep understanding of complexity and of how knowledge can help to face it by adopting a systems management approach (Barile, 2009b; Barile, and Saviano, 2010, 2011a). Opposite to a dominant orientation that, moving from an objective and quantitative (structural) view of complexity, assumes its measurability (Tainter, 1988; Ardigò, and Mazzoli, 1990; Olivotto,

* By Marialuisa Saviano and Francesco Caputo

220 Chapter IX

2000), an emerging systems view of complexity suggests instead to put focus on its subjective and qualitative dimensions, highlighting how the phenomenon is linked to that of knowledge and how a systems view can support understanding (Barile, and Saviano, 2011b). In particular, from this perspective, it appears that it is not complex the observed phenomenon/object in itself, but the conditions the decision maker/observer faces when he/she shows a lack of understanding of the experienced phenomena due to the incapacity of his/her cognitive schemes in supporting interpretation (Barile, 2009c). This reformulation, in a subjective perspective, of the problem of complexity, leads to focus on the cognitive abilities of the decision maker/observer and to identify relevant dimensions of the knowledge process behind the decision. The result is a framework in which the traditional paradigms, when strongly conditioned by a dominant ‘structural’ view, reveal a growing inadequacy in supporting the understanding of complexity as well as decision making under conditions of complexity.

From this perspective, complexity and knowledge appear as two strictly connected problematic areas, whose understanding can show several limits when the traditional ‘structural’ view is adopted. The traditional view of organizations, in fact, as an expression of the reductionist paradigm, offers representations adequate in a scenario characterized by conditions of high stability. In a context of continuous change and growing complexity, management needs to refer to more general schemes based on invariant schemes and universal principles in order to reinforce the foundation of interpretation.

On the basis of these premises, we propose the adoption of systems thinking as a possible reference to outline a knowledge management approach that could support decision makers in facing the challenges of complexity by shifting from a structural to a systems view of business phenomena. A management approach that recovers its roots in the view of organizations as systems (Saraceno, 1970) as a fundamental reference to build a general theory of firm.

By following such a line of research, starting with the early work of Golinelli and Barile in the second half of the nineties of the last century, the stream of studies of the Viable Systems Approach (VSA)

Managerial choices between Systems, Knowledge and Viability. 221

(for the main references see Golinelli, 2000, 2010, 2011; Barile, 2000, 2008, 2009a; Various Authors, 2011) has been developed in Italy on the basis of a view of organizations as viable systems (Beer, 1972; Saraceno, 1972). Viable systems are entities capable of surviving in a dynamic environment, gaining access to the resources necessary for systemic functioning (Adinolfi, 2003). They live by establishing relationship with other entities of the environment according to a general paradigm oriented to harmony (consonance) and value co-creation (Normann, 1979; Baccarani, 1991). An interpretative proposal that was stimulated by a widespread dissatisfaction towards the current paradigms and directed not to the development of new models but to the search of solid references in the roots of business economics literature (Zappa, 1956; Saraceno, 1972; Fazzi, 1982). A unitary representation of the firm that captures universal traits of systems functioning. A solid base of interpretation, because it is founded on the shoulders of giants in the tradition of systems thinking studies. A paradigm of reference for business management, which can lead to the construction of a rigorous decision making methodological framework.

On this basis, we propose the adoption of the VSA basic principles and models as a conceptual reference for building a knowledge based management approach useful to decision makers when facing conditions of complexity. In sum, the key points of our reflections are based on the following assumptions on management under conditions of complexity:

- the network as adequate organizational solution (structure-based view);

- knowledge as a key resource (resource-based view); - systems thinking as an appropriate management approach

(system-based view). In what follows, we illustrate the VSA contribution through the

discussion of a specific business phenomenon that appears to us as particularly representative of the current scenario and useful to understand the way in which knowledge can help network organizations to face complexity by adopting a systems approach

222 Chapter IX

(Saviano, and Caputo, 2012). We refer, in particular, to franchising as a case study useful to highlight the relevance of:

- network as structural organization; - know how as key knowledge resource; - systems as the required management approach. Therefore, by referring to the specific case of franchising networks,

in this contribution we highlight, in particular, how a traditional management approach characterized by a myopic market logic can dramatically reduce the potentialities linked to the network formula that require the management of the network as a whole system centered on knowledge creation.

9.2. Franchising networks between theoretical view, legislation and empirical reality

Starting from the recognition of the network as an organizational

solution representative of a globalized and interconnected economy (Lomi, 1991; Lorenzoni, 1992), we discuss certain issues related to the phenomenon of franchising (Pilotti, and Pozzana, 1990; Piciocchi, Saviano, and Bassano, 2004) illustrating the interpretative contribution of the VSA both as methodology of investigation and as methodology of governance.

The case of franchising is particularly significant for our purposes for two main reasons. On the one hand, because the theoretical and normative traits of franchising offer a good example of dynamic and flexible organizational solutions that can be, when adequately governed and managed, successful in dealing with complexity by leveraging on knowledge (Pilotti, 1990; Rullani, 2003). On the other hand, because the managerial practice of franchising – except for cases of greater success – often reveals a distorted interpretation of the formula (Saviano, 2003), specifically with the reference to a speculative behavior of partners that, usually, reduces the potential linked to the network organizational solution.

For these reasons, we analyze the essential theoretical profiles and regulatory requirements of franchising, trying to grasp the distinctive

Managerial choices between Systems, Knowledge and Viability. 223

features, in order to analyze the foundations of its success as well as to understand the effective exploitation of the business formula potentialities (Ravazzi, 2002). In this respect, a gap in current research appears yet to be filled (Hendrikse, 2004).

9.2.1. Theoretical view and normative regulation of franchising

Although conceived on the basis of the paradigm of standardization

(Tripodi, 2006), franchising, initially an atypical formula, has spread across most areas, being characterized by obligations, constraints and different contractual solutions with reference to the distribution of financial risks, to the forms of allocation of operational and strategic control, and to the access to the wealth produced (Sabbadin, and Fossati, 1990). Subsequently, despite the formula was introduced in Italy in 2004 by Law 129, there is a highly different characterization of its specific features when it is put in practice (Hendrikse, and Windsperger, 2008).

Franchising in Italy began to spread only in the nineties of the twentieth century as a result of political, economic and social factors that slowed down development (Pellegrini, 2001). These factors compromised the logic of sharing that characterized the approach, causing a degradation of the formula, with it being defined, even in literature (Martin, 1988; Lafontaine, 1992; Baldi, and Venezia, 2008), as an instrument of risk delegation and regulatory agreement rather than a formula for widespread and collaborative entrepreneurship.

Several contributions of literature have focused on the potential relational effect offered by the network organization (Capra, 1997; Di Nicola, 1998; Polese, 2004) and, in particular, by franchising (Norton, 1988b; Amoroso, and Gandolfo, 1991; Quattrociocchi, 2011b). They steam from different research areas that adopt different perspectives focusing on:

- marketing (Norton, 1988a; Sorenson, and Sørensen, 2001; Dant, and Kaufmann, 2003);

- systems (Bogdanov, 1922, von Bertalanffy, 1969; Guatri, and Vicari, 1994; Cafferata, 1995; Mercury, and Head, 2000; Massaroni, and Ricotta, 2009);

224 Chapter IX

- service systems (Spohrer, Vargo, Caswell, and Mallet, 2008; Ng, Parry, Wild, McFarlane, and Tasker, 2011);

- Knowledge Management (Windsperger, 2002, Szulanski, and Jensen, 2006; Cumberland, and Githens, 2012).

These different views appear to converge towards a change in perspective that – moving away from the traditional structural view – emphasizes the implications of a proper management of network relationships (Caselli, Ferrando, and Gozzi, 1990) which should not be limited to a mere information management but open to a more meaningful approach of knowledge management as a general philosophy of governance based on value co-creation according to a systems perspective (Barile, Franco, Nota, and Saviano, 2012).

Since its classification within the framework of Vertical Marketing Systems (Kotler, 2007), franchising qualifies, in fact, at least formally, the emergence of a ‘systems’ logic (Saviano, 2003).

It is interesting to note that, in regulating a contractual formula until then atypical, the Law of 6 May 2004 n. 129 (article 1), in defining franchising as a contract between two entities, economically and legally independent, under which one party grants to the other a set of rights, refers to the franchising as a system consisting of a plurality of franchisees.

Although formally referring to a systems logic, in franchising practice, there still prevails a perspective focused on the parties and on their rights and obligations rather than on the systemic dynamics that the relationship is potentially capable to generate.

It is also important to note that the key element of franchising regulation is the ‘know-how’ that is defined (article 1, section 3, sub-paragraph a) of the 129/2004 Law) as practical knowledge assets resulting from experience and tested by the franchisor, which is secret, substantial and identified; where ‘substantial’ means that includes knowledge essential to the franchisee for the use, sale, resale, management or organization of goods or services that are the objects of the contract.

In essence, franchising is a contract that, having as object the use of know-how, should be intrinsically based on knowledge management. Nevertheless, a possible distortive adoption of the formula appears

Managerial choices between Systems, Knowledge and Viability. 225

[1]

when interpreted from a systems perspective. In the next section, our arguments are discussed.

9.2.2. The possible distortive adoption of franchising

The majority of studies on franchising reports data on the success

of the formula (see Table 9.1.), also in terms of survival rates compared to the independent activities, generally neglecting to bring back the data on the mortality of affiliates (Quattrociocchi, 2000). Furthermore, the studies are conducted by adopting different computing systems that often lead to a distorted representation of the phenomenon (Bates, 1990, 1998; Scott, and Der Foo, 1999). Obviously, neither franchisor nor franchisees have interest in publishing this kind of data, but it is precisely on this point that we want to draw attention in order to highlight that a management approach that does not fully capture the potential of franchising and, generally, of the network solutions, can be observed.

While, in fact, it is typical of franchising expansion of the network through the duplication of the formula into new markets, a growth trend of the network, for total sales and number of affiliates, that be the result of an apparently positive ‘balance’ between new and terminated affiliations during the period would not confirm the success of the formula. In this case, evidently, a growth of the number of affiliates (see Fig. 9.1) is associated to the mortality of ‘old’ ones.

This information, of course, can emerge only by calculating the turnover rate of franchisees [1].

ࢋࢇࢌࢌࢇ�ࢋ�ࢌ�ࢋࢀ ൌ � ࢊࢋ�ࢋࢎ��ࢇࢌࢌࢇ�ࢋࡺ

ࢊࢋ�ࢋࢎ�ࢍࢊ�ࢊࢋࢎࢌ�ࢇࢌࢌ ��

Indicators Measure Year Difference

2009 vs. 2008

2007 2008 2009 Absolute Values

Values %

Sales Volume Millions of € 21.219 21.419 21.774 355 1,66%

226 Chapter IX

Italian operating franchisee Nr. 847 852 869 17 +2,00%

Franchising store in Italy Nr. 52.725 53.434 53.313 -121 -0,23%

Italian franchising stores abroad Nr. = 5.113 6.091 978 19,13%

Italian networks abroad Nr. 200 211 222 11 5,21%

Foreigners networks in Italy (Master) Nr. = 53 56 3 5,66%

Foreign networks with franchisee in Italy and registered office in another country

Nr. = 33 31 -2 -6,06%

Employees working in networks including the franchisee

Nr 182.908 182.215 180.525 -1.690 -0,93%

Average size networks (calculated only with reference to the franchisee stores)

Nr. 62 62 61,3 -1 -1,13%

Tab. 9.1. – Main indicators of franchising in Italy (Years 2007-2008-2009),

Quattrociocchi B. (2011a), “Introduzione”, in Sinergie, p. 10. Also in Saviano, Caputo (2012).

By referring to this indicator, we argue that there may be reported

an expansion that can mask the reality of a geographical ‘mobility’ of network. This geographical mobility, while apparently showing a dynamism of the formula, in fact, may express an inability to consolidate its success in the market, at least in cases where the mortality appears not attributable to other specific causes. The positive data of geographic expansion may be related, therefore, more to a certain dynamism in the exploration of new market spaces than to a real success of the formula.

Fig. 9.1. – Dispersions of franchising networks in Italy (Years 2007-2008-2009). Elaboration from Quattrociocchi B. (2011b), cit. Also in Saviano,

Caputo (2012).

Managerial choices between Systems, Knowledge and Viability. 227

So, the growth of the network, coupled with a ‘mobility’ of its

geographical boundaries, can be a deceptively positive indicator of the growth and development capability, when, in fact, it hides the inability of survival of certain affiliated nodes. Of course, the phenomenon cannot be reduced to a simplistic interpretation of summary data, with it requiring a case-by-case assessment of the viability dynamics of the single nodes and of network as a whole. However, there is the need to systematically include the data of affiliates mortality in the set of basic indicators of the success of the formula inasmuch they are very important for those who want experiment franchising as a business opportunity.

The reference to the turnover of affiliates (Holmberg, and Morgan, 2003) as an indicator of the degree of consolidation of the network, combined with careful analysis of the viability dynamics of the franchisees, can provide important information about the ‘health’ state of the network and its real prospects of success.

When a franchisor proposes a business formula to potential affiliates, he/she, obviously, tends to provide positive indicators of performance, being principally interested in the expansion of the network.

This behavior betrays a ‘market’ logic (almost a ‘selling of the formula) rather than a ‘systems’ logic (Barile, and Saviano, 2012), turning what should be a collaborative project of widespread entrepreneurship into a mechanism of speculative entry into new markets by transferring risk to affiliates. Despite the regulation intervention aimed at limiting speculative behaviors within the franchising network, the phenomenon is not solved, demonstrating that the contractual instrument, by itself, is not sufficient to regulate the behavior of parties. To a closer look, the discussed practice appears also to be allowed by a counterparty profile of affiliate that indulges the franchisor ‘speculative’ logic, evidently being not so much attracted by the prospect of an entrepreneurial involvement into the network but by an opportunity of “employment”.

228 Chapter IX

The international literature, probably less ‘close’ to the interests of franchisors that generally are the purchasers of such studies, has long reported these pathological traits of franchising. Since the release of the results of a research conducted in 1994 by Timothy Bates on 20.554 small businesses in which it was shown that franchising businesses generally have lower success rates than independent ones, numerous studies have been produced that reported misleading data based on certain calculation methods, that do not reveal the pathological traits of the franchising business (Caves, and Murphy II, 1976; Scott, 2001).

In our view, it is not the efficacy of the formula itself under discussion but its governance and management approach which reflects a subjective interpretation of the system of values that inspire the various actors involved in the network.

It follows that the current scenario of franchising, beyond the mentioned positive overall performance, can reveal a variety of cases in which the formula potential is not exploited, also due to a diffuse imitative approach (Saviano, 2003). The existence of an approach in which both the parties tend to be speculative should be recognized.

Undoubtedly, these market behaviors, within certain limits, are expression of legitimate entrepreneurial and managerial choices. In our opinion, however, a ‘speculative’ interpretation of the franchising relationship ends up hurting not only what is still the weakest part of the relationship – the franchisee – but also the franchisor, in the most valuable resources of credibility, reputation and image of the network. Such reflections are emblematic of a reality of doing business that is often far from ideal behavioral patterns, revealing the myopia of a speculation oriented market competitiveness.

It is, for this reason, useful to adopt a wider perspective of interpretation, in order to illustrate how the possible biases reported in the case of franchising threaten the validity of theoretically effective models. Networks managed on the basis of an appropriate approach, allow developing systems that draw their strength by achieving a balance between competitiveness and consonance, leveraging on knowledge as a key resource to operate in highly dynamic environments.

Managerial choices between Systems, Knowledge and Viability. 229

On the basis of these premises, in next section we illustrate the potential contribution of the VSA as a knowledge-based methodology of governance of franchising networks aimed at achieving a durable, sustainable success. 9.3. The interpretative contribution of the Viable Systems

Approach

The interpretative paradigm of VSA, developed into a structured methodology of government, summarizes its fundamental premises and key concepts in five postulates (see Table 9.2).

According to these five propositions, the key concepts of VSA are: the survival as ultimate purpose of the system; the dual structure-system perspective; the isotropy of the viable system consisting by a governing body and an operative structure; the system’s context as composed by sub- and supra-systems; the consonance and the resonance as criteria of governance of intra- and inter-systemic relations; the recursion of systemic levels as characterizing the system’s structure.

Survival A viable system, embedded in a specific context, has the primary purpose of survival.

Eidos The viable system in its ontological qualification may be designed in a double perspective: that of the structure and that of the system.

Isotropy The viable system is characterized by two logically distinct areas: that of decision and that of action.

Interaction

The viable system, in its existential dynamics, is influenced in the pursue of goals and in the achievement of objectives by the interaction with the supra- and sub-systems from which and to which, respectively, elicits and provides guidelines and rules.

Exhaustiveness For a viable system all external entities are viable systems or rather they are components of an upper level viable system.

Tab 9.2. – The VSA Postulates. Adaptation from Barile S. (2008), cit., p. 24.

230 Chapter IX

A central point in the governance methodology framework, which

is relevant to the discussion of the franchising phenomenon, is the evaluation of the viability of the system through the investigation of the relative degree of completion in terms of capability of governance of the system and of operative capacity of the structure.

The investigation of the degree of completion of the viable system can lead to different qualifications of the observed system as embryonic, in completion or accomplished (Golinelli, 2010), essentially depending on the dominance of governance schemes inspired to a ‘market’ logic (competitiveness) or a ‘system’ logic (consonance).

Through this analysis, it is possible to understand how from a network there may not emerge an accomplished system when a unitary systemic functioning and an effective connectivity of the operative structure are not achieved.

In this respect, we argue that the discussed mobility of the franchising network, through the geographic expansion, could, in fact, depend on a non-consolidation of the operative structure of the network and/or on an inadequacy of the governing body in promoting the accomplishment of the system.

The systemic accomplishment, in effect, allows a better exploitation of the economic and structural potential of the network, with it being favored by the ability of the nodes to develop cognitive synergies useful in ensuring the viability of the overall system (the whole network). A network survival associated with a high turnover of franchisees determines unstable performances and a high risk. It is therefore necessary to verify whether, and to what extent, the network is engaged in creating the minimum conditions of viability in order to ensure the survival of the individual nodes allowing for the capitalization of investments in terms of internal relationships and relations with the market.

Managerial choices inspired by a logic of consonance, to be understood as structural compatibility/complementarity (Golinelli, 2005:209), point to a careful monitoring of the relational conditions inside and outside of the network in particular for the purpose of

Managerial choices between Systems, Knowledge and Viability. 231

development of knowledge processes, essential to the viability of the network.

In order to propose a knowledge based management approach to franchising, we illustrate the VSA interpretative contribution to the management of networks as a cognitive systems. 9.4. The management of franchising networks as cognitive systems

The interpretation of franchising in the perspective of VSA leads to a

view of the network as a knowledge-centered system targeted at exploiting the dynamism linked to complexity as a source of opportunities rather than of threats (Saviano, 1999).

The processes of knowledge management in franchise networks are usually focused on the transfer of know-how from the franchisor to the franchisee, which is based on codifying operational knowledge through the definition of standardized management procedures and the development of the operations manual. Less attention is paid to flows of knowledge that go from the franchisees to the franchisor (feedback), generally limited to the periodical transfer of business data. Conversely, they are precisely the nodes that manage the relationships with customers that are critical for the viability of the network.

An advanced program of knowledge based management of franchising networks, which would be functional to the achievement of the requested degree of consonance inside and outside the network, and thus to the completion of the system, should develop all the phases of the knowledge cycle (Nonaka, and Takeuchi, 1995).

In this perspective, franchising takes up the configuration of a distributed knowledge network (Franco, Maresca, and Nota, 2010) whose management, from a viable system perspective, requires the adoption of appropriate models that duly take into account the peculiarities of a learning context where an internal and external virtuous interaction should be achieved. Such a model is offered by the VSA-DKMF Hypercube (Barile, Franco, Nota, and Saviano, 2012) that is an interpretative tool capable of highlighting the relevant

232 Chapter IX

management and governance dimensions within the context of a distributed knowledge network. The model, in summary, integrates:

1. The Top Level Knowledge Management Framework of Stankosky and Murray (2005) that shows the phases of the KM life cycle (generation, encoding, use, transfer, insurance) and the KM pillars (leadership, organization, tools and learning).

2. The Distributed Knowledge Management Framework (DKMF) (Franco, Maresca, and Nota, 2010) developed from the model of Stankosky and Murray and applied in the context of distributed knowledge networks, requiring the inclusion of ‘social influences’ (identity, negotiation, trust and communication) for analyzing the influence of social dynamics on the KM processes in the network.

3. The VSA as meta-model for evaluating the different problematic contexts of KM on the basis of the information variety model (Barile, 2009a) adopted as a reference to monitor the consonance dynamics within the network.

The integration of the VSA information variety as a fourth dimension in the DKMF model leads to the formalization of VSA-DKMF Hypercube, as represented in Fig. 9.2.

Managerial choices between Systems, Knowledge and Viability. 233

Fig. 9.2. – VSA-DKMF Hypercube, Barile S., Franco G., Nota G., Saviano

M. (2012), cit., p. 14. www.asvsa.org. Reprinted with the permission of ASVSA – Associazione per la ricerca sui Sistemi vitali.

The use of the model, described in more detail in the original

reference (Barile, Franco, Nota, and Saviano, 2012), is particularly useful in the case of franchising as typical distributed management network. The model essentially suggests that the KM processes developed on the basis of consolidated methodologies, be supported by an evaluation of the consonance level in the different relational contexts. Thanks to the information variety model, the critical

234 Chapter IX

dimensions for an effective interaction can be identified (categorical values, interpretation schemes and information units) by evaluating the nature of interaction and through the assessing of the weight of social, rational or technical factors in the learning process.

Therefore, for example, in the case of franchising, the process of know-how transfer from the franchisor to the franchisee through the operations manual with the support of information technology considers the transfer (KM life cycle) and technology (KM pillars) as critical dimensions (Fig. 9.3.a). The interaction enabled in the system can be affected by various social influences creating many different problems (from simple noise in the communication flow to cognitive dissonance). The emergence of such problems requires, in the VSA perspective, to make an appropriate choice that would take into account the characterization of the information variety of the franchisee and the context in which interaction takes place.

The alternative choice of mentoring as a solution through which to favor socialization between the new affiliate and consolidated franchisees may represent a further example of the KM process based on socialization and aimed at the transfer of tacit knowledge. In this case, the critical dimensions of the process are transfer (life cycle KM), learning (KM pillars) and trust (social influences) (Fig. 9.3.b).

Fig. 9.3. – Examples of application of the VSA-DKMF Hypercube. Saviano, Caputo (2012). www.asvsa.org. Reprinted with the permission of ASVSA.

[a] Transfer of knowledge through information technology

[b] Transfer of knowledge through coaching

transfer

KM Pillars: Learning KM Life Cycle: Transfer Social Influence: Trust Information Variety: Categorical Values

KM Pillars: Technology KM Life Cycle: Transfer

Managerial choices between Systems, Knowledge and Viability. 235

In such a learning context, it is essential to assess the potential of

consonance between the two affiliates during the coaching relationship, especially in terms of alignment of the categorical values as factors that have a significant impact on trust (information variety). 9.4.1. The knowledge potential of the network

In the management of the network as a cognitive system, it is

possible to refer to a further VSA general scheme: the knowledge curve (Barile, 2009a).

Also known as the curve of “four C” (see Fig. 9.4.), it describes the dynamics of knowledge in terms of process where the overcoming of initial conditions of complexity (if not of chaos) is attributed to the occurrence of abduction (an intuition emerging from existing variety) that leads to a possible resolution scheme and, therefore, to the generation of new knowledge.

Fig. 9.4. – The knowledge curve. Our elaboration from Barile S. (2009a),

cit., p. 53. www.asvsa.org. Reprinted with the permission of ASVSA.

236 Chapter IX

dynamics of individual node dynamics of network

information information

entro

py

entro

py

In the subsequent phase, the hypothesis is verified through induction and, if validated, allows the formalization of a model, and the transition to a deduction phase, in which the model is effectively adoptable under conditions of certainty.

Through the curve of knowledge, it is also possible to represent the synergistic network effect that could be achieved, if there are the described conditions of consonance. In Fig 9.5, we compare a hypothetical individual dynamics of knowledge with a network one, illustrating the possible synergistic effect.

We can observe that in the first case (see Fig. 9.5.a) the inflection point, which corresponds to the formulation of a possible interpretation key necessary to the rationalization of the information units in input and, consequently, to the definition of a possible solution, occurs only after that the decision maker has faced a high level of entropy. In the second case (see Fig. 9.5.b), the moment of abduction may occur at lower levels of entropy, thanks to the synergistic effect of harmonically interacting nodes, linked to the combining of varieties that may facilitate the development of new interpretation schemes.

Fig. 9.5. – The cognitive potential of network in the dynamics of knowledge. Our elaboration from Barile S. (2009a), cit., p. 38. Also in Saviano, Caputo

(2012).

Managerial choices between Systems, Knowledge and Viability. 237

9.5. Concluding remarks Our reflections on management through the discussion of the case

of franchising network, can be easily generalized offering insights useful to relate the phenomenon of complexity with that of knowledge.

Our interpretation of complexity is based on a general assumption of a subjective understanding incapacity of the decision maker due to his/her inadequate variety to effectively interact with emerging phenomena. In such a context, knowledge represents the process itself through which the system overcomes the limits of deciding and acting in conditions of complexity, by leveraging on his/her information variety.

Thus, variety results the key of a knowledge process suggesting the opportunity to explore news pathways by creating new variety from the combining of existing ones. Network organizations have privileged opportunities to explore new knowledge in addition to exploit existing one. However, they should be fully aware of the network potential and of the necessity to really adopt a systems logic in managing it, instead of remaining anchored to a market logic so losing the main opportunity linked to the network configuration: that of co-creating knowledge by exploiting the synergistic potential of interacting varieties.

Of course, our hypothesis should be empirically verified by carrying out further research that would be aimed at valorizing the network as well as the franchising formula in a context of growing complexity. References

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