This study presents a Viable System Model diagnosis of the academic structure in the form of Knowledge Environment focusing on digital transformation. Data has been collected through interviews complemented with document analysis. This research has identified several challenges mainly in terms of structural alignment between two recursive levels. In addition, we discuss how the viability of the Knowledge Environment can be strengthened by redefining roles and responsibilities of different systems. This research contributes to the scholarly work on the Viable System Model application to academic institutions. The case in focus cuts across several faculties and departments raising known challenges as identified in related research and new challenges found through the diagnosis. In this research we apply a soft systems lens combining two systems approaches, Rich Picture from Soft Systems Methodology and Viable System Model to diagnose and discuss the complexity of the dynamic knowledge environment, as well as to explore initial ideas for further enhancing its viability.