In addition, converting to ABC can be quite intrusive. Tracking activity-based costs requires a thorough understanding of the processes that go into making each car. Thus, setting up an ABC method means interviewing and surveying people throughout a plant to find out what work they do and how they do it. Because of the challenges and threats posed by ABC, it has experienced a 70% failure rate in companies across the U.S. At Chrysler, our finance staff knew that in order to make ABC work, we needed to do more than just communicate its nuts-and-bolts; we had to establish a process for handling the changes in assumptions and operations that the conversion required.

Early Warning Signs: Resistance from Within

We vastly underestimated the potential resistance to ABC throughout the company. The finance people who joined the ABC team thought they were embarking on a leading-edge project, but as the resistance to ABC compounded throughout the company, they began to question their career move. Stress and fear of failure ran high among team members, and some of us considered recommending that management abandon the project.

About that time, we started working with Fred Kofman at the MIT Center for Organizational Learning. Because Fred’s background was in accounting, we thought he might be able to help us identify the roots of the resistance. After talking to people throughout the company, Fred concluded that it wasn’t the plant managers’ resistance that was hindering the ABC effort — it was actually the finance team’s way of working with them. We were asking people to think in dramatically different ways about how they ran their business, but how willing were we to consider new ways of doing our work?

We realized, with Fred’s help, that large-scale change such as the kind we were proposing had to begin with each of us on the finance team. We needed to model new ways of working together and thinking about change if we were to expect the same of others. By practicing the tools and disciplines of organizational learning, we hoped not only to improve our ability to function as a team, but also to enhance our effectiveness in implementing ABC throughout the company.

The Tools of Organizational Learning

Since many of the ABC team members were finance MBAs who were now spending most of their time serving as teachers and coaches, we knew they needed support and practice in learning new skills. With Fred’s help, we designed several workshops on organizational learning to develop our skills in areas such as systems thinking, effective conversations, dialogue, and stress management.

Each two- to three-day workshop focused on specific tools or techniques of organizational learning. We asked people to come to the sessions prepared with actual case studies. For example, if several people had just experienced a difficult conversation or meeting, the group might focus on improving their conversational skills (suspending assumptions, using the “Left-Hand Column” exercise, balancing inquiry and advocacy, etc.). If we felt that people needed a stronger grounding in how to think in terms of interconnections and unintended consequences, we might focus on the tools of systems thinking. In addition to these focused work sessions, we held seminars every few months on stress management, to help people handle the demands being placed on them. This included teaching them reflection tools such as journaling and meditation.

We also worked extensively on the disciplines of personal mastery and dialogue to build our internal team. We held some Outward Bound-type sessions and created practice fields for role-playing tough conversations. For example, if I were anticipating a difficult conversation with a plant manager, and I wanted to practice that dialogue with a colleague, we would run through the scenario with one of us first playing the part of the plant manager. Then we’d switch. Role-playing let us practice what we wanted to say in a non-threatening setting, and helped us appreciate both sides of the issue.

The Implementation Process

After spending some time developing our own skills, we began using the tools of organizational learning to redesign how we implemented ABC in the company. In partnership with our external consultants (who also received organizational learning training), we reevaluated how we were engaging our “clients” in launching our projects.

Traditionally, we would arrive at a plant, sit down with the plant manager, and say, “We know you’re really busy — your operations are running seven days a week, twenty-four hours a day — so we don’t want to bother you. We’ll just go ahead and change your cost and reporting systems for you, and here’s how we’ll do it.”

Six months later, however, we might discover that the plant manager didn’t understand the leadership role he or she had to play in supporting the change, didn’t feel committed to the project, and didn’t understand how to use the new information—all of which led to problems in applying ABC throughout the plant. We knew we needed to change our approach, but we didn’t think the plant managers would commit to the time we needed up front. Our mental model was, “They’re too busy, they’re not going to be interested, let’s not even ask.”

So we practiced making requests properly. We learned how to sit down with the plant managers and say, “Listen, if we’re going to do this right, we need three full days of your time and your plant management team’s time.” This type of request was unheard of — plant management teams never went off site for one day, let alone three. But after practicing the conversation, we went out and asked, and much to our surprise, all of the teams agreed to give us the time we needed.

“Flying” ABC

Once we had tackled the initial engagement process, we turned to improving how we communicated the benefits of ABC. Rather than use a traditional overhead slide presentation to “convince” the managers of the need for an activity-based costing system, we developed a management “flight simulator.” With this tool, plant managers could experience for themselves the operational consequences of the old finance system versus the ABC approach. Much to their surprise, the managers discovered that, because of the way overhead costs are allocated in the different cost systems, the old approach might lead them to continue investing in unprofitable product lines, or to underinvest in profitable ones.

The simulator was also a great way to introduce plant managers to the concept of systems thinking. Moreover, it encouraged a new way of learning, by getting people engaged in an interactive tool for understanding the advantages of ABC. In some cases, we went one step further and created a simulated microworld of a portion of their plant. This involved process mapping and costing a key operation to teach them about ABC using their data, not a text-book case or another Chrysler plant. Providing relevant information worked well in breaking down defensive posturing. So although the creation of individual microworlds was time consuming, the investment paid off.

In order to support the ongoing work of ABC, we created several additional seminars that were scheduled throughout the conversion process. For example, the “midstream” seminar, which was timed to coincide with the release of the first ABC-based reports, addressed the fear and anxiety people might feel when deluged with new information. At this point, we emphasized that the objective was to provide measurement for learning (as part of a Plan-Do-Check-Act process), versus measurement for reporting.

Finally, a transition seminar was held at the end of the project to deal with issues around ongoing commitment. This session was particularly valuable because in many cases of ABC implementation failures, we found that the breakdown occurred not because someone committed to an action and then didn’t follow through, but because the “conditions of satisfaction” for the request had not been clearly articulated and agreed upon up front.

In none of these seminars did we focus explicitly on “teaching people about organizational learning.” Instead, we simply used the tools of organizational learning as part of our everyday activities. For example, at the start of a workshop or meeting we would have a “check-in,” where we would go around the room and ask everyone to say what they are bringing with them to this meeting (see “Check-In, Check-Out: A Tool for ‘Real’ Conversations,” May 1994). Many people had never taken part in a check-in, so it signaled a very different way of acting with people. It is worth noting that we did not use the word “check-in- to describe this process, and in general we learned not to use organizational learning jargon. In our experience, the use of such terms actually increased resistance, and was unnecessary.

Management Involvement and Commitment

A critical success factor for this project was the active involvement of senior management and their role as a support network. Bob Lutz, the president of Chrysler, was a major spokesperson for the effort. He also created an environment that enabled the ABC team to productively share our concerns and beliefs. For example, at one point there was a very frank conversation about the need to slow down the project in order to allow time for the cultural changes that were necessary.

Jim Donlon, the corporate controller, and Gary Valade, the CFO, were actively involved in both the technical and cultural side of this effort. Their contributions included everything from persistently using the ABC approach in a variety of corporate decisions to learning and practicing many of the tools of organizational learning.

From Failure to Success

As a result of our work in organizational learning and team building, there was a dramatic change in the acceptance of ABC throughout Chrysler. Among the finance team, the difference could almost he felt in the shift in energy and stress levels. Pushing people around and trying to force change on them is an exhausting process, whereas listening to people and working with them around change is energizing. After some early successes, in which ABC data was used for cost reductions or investment proposals, plant managers began seeking us out to help them implement the new system.

Over time, people started to notice that the ABC group’s failures seemed to be turning into successes, and our work gained wider attention throughout Chrysler. Members of the ABC team appeared more relaxed than before, and they were no longer trying to tunnel their way out of the department. Outside people even expressed interest in joining the group, and their enthusiasm generated further excitement. As people noticed these changes, they began asking if they could attend our seminars. Based on the acceptance of ABC at Chrysler, we are now redesigning our financial systems to fully embed ABC principles throughout the costing systems.

The last thing we learned from ABC is that the rate of organizational change is limited by the rate of personal change — not by the rate at which we can introduce new technology.

Eventually, Chrysler decided that it would sponsor its own internal five-day Core Competency Course (based on the course offered by the MIT Center for Organizational Learning). To date, more than 600 people have attended the program, and many have begun applying the tools to their everyday work. An organizational learning approach is now being used in other large-scale change initiatives at Chrysler, including manufacturing and engineering.

Lessons Learned

In our experience with ABC. We learned that organizational transformation starts with personal transformation. We had to stop focusing solely on why the system is so dysfunctional (“What’s wrong? Who goofed up?”) and begin looking at how we each contribute to that dysfunction.

We also learned that change agents require a support network. Before the ABC initiative, we would typically take some bright person from a leading university, put that person in a plant and say, “OK, go ahead and make things different.” After about six months, that person would burn out because there would be nobody to help, to offer support, or to share experiences. It was just the individual against the system.

We found that, in addition to providing them with a support network, the change agents themselves can benefit from improving the way they make requests, offers, and promises. This helps create an environment in which people can feel more comfortable asking for help or offering assistance.

The last thing we learned from ABC, a lesson that is hard to swallow, is that the rate of organizational change is limited by the rate of personal change — not by the rate at which we can introduce new technology. Putting new information systems on the floor, incorporating a new technology into a plant, or designing a new product is a fairly straightforward process. It is how fast you can transform people that will govern how fast you can change the system in which they are operating.

The ABC initiative has been a five-year journey for us. One thing that we’ve all come to realize is that patience is essential when you’re facing large-scale change. It took us decades to form the mental models we have today, and we can’t expect them to change in one four-hour class. This work is really about deep-seated change, and that sort of effort takes time.

Dave Meador is manager of financial and performance measures at Chrysler Corporation, which involves redesigning many of Chrysler’s financial systems and implementing new performance measures. He is Chrysler’s liaison officer to the MIT Center for Organizational Learning.

Editorial support for this article was provided by Colleen Lannon.

The post ABC: Initiating Large-Scale Change at Chrysler appeared first on The Systems Thinker.

Since the 1940s, Sandia has been one of three government-owned labs that provide national security for the United States by developing nuclear weapons and atomic energy technologies. A program of the National Nuclear Security Agency (NNSA), a semi-autonomous part of the Department of Energy (DOE), and operated by contractor Lockheed Martin, Sandia has a budget of approximately $1.7 billion and 7,700 employees. Its goal is to help parts of the U. S. government, universities, and private industry secure a peaceful and free world through developing technology in four mission areas: nuclear weapons, nonproliferation and materials control, energy and critical infrastructures, and emerging threats.

Changing Needs

After the Cold War ended and the U. S.’s needs for national security broadened, Lynn and her colleagues responsible for infrastructure—which accounts for approximately $600 million of Sandia’s total budget and 2,500 people—recognized significant limitations in how they provided services to the mission areas. For one thing, infrastructure units (human resources, information, financial, legal, and so forth) rarely coordinated work efforts. For another, the lab struggled to sustain staff diversity and creativity in the face of strict compliance and oversight requirements. This restrained culture often stifled innovation and added costs for items such as high security checks and constant auditing that some customers didn’t need.

During the last decade, infrastructure leaders diligently sought ways to improve their organizations, including participating in an Infrastructure Council (which Lynn chairs) to set strategy and discuss change initiatives. Nevertheless, they continued to fall short of meeting the mission areas’ needs. In the fall of 2000, many of the council members attended a leadership development program to figure out how Sandia’s infrastructure could work as an integrated system. At the seminar and with subsequent coaching, they discovered several barriers to achieving their goal and ways to overcome them:

• They neglected to coordinate their change initiatives. They realized they had to lead change initiatives together as well as develop a shared vision that propelled the entire infrastructure system forward. Focused on ensuring a world-class workforce, fostering a robust work environment, and providing common sense governance, they now devote significant attention to building trust, openness, and accountability among group members.
• They were ambiguous about their goals. Council members now spend more time clarifying their objectives, using specific language to articulate their expectations about each other and the new organization.
• They were afraid of failure so they rarely took big risks. These leaders learned how to commit to a goal even when they’re unsure how to achieve it. Although some actions have initially felt like jumping off a cliff, they have continually discovered a greater capacity for innovation when they do things collaboratively.

As a result of these discoveries, council members sponsored a study to investigate more fully how Sandia’s infrastructure might reorganize itself to operate as an integrated system. The study took nine months to complete, after which the Infrastructure Council recommended radical improvements in the infrastructure to meet the mission areas’ needs for agility, improved technical productivity, less hassle, and more cost-effective services.

The infrastructure leaders then began to think deeply together about the study’s recommendations. From these dialogues came the decision to merge all infrastructure support and services into one enterprise called Integrated Enabling Services (IES). Spearheading this project is the newly created IES Program Office, which consists of a small, handpicked team of highly qualified change leaders in the organization. Lynn gave up her previous position to launch the risky new initiative; she now heads the IES Program Office and serves as vice president of IES and chief security officer of Sandia.

A New Framework

The first step that Lynn and her team took was to develop a framework for how they would lead the IES change together. During another team-building workshop, they established personal and group accountability, methods for resolving internal conflicts, and an agreement to value each other’s perspectives, work, and time.

Instead of waiting passively for instructions, managers are taking more initiative to solve problems and collaborate across departments.

With this framework in place, they have begun to design the lab’s new system on three different levels:

1. They’re implementing a new structure for enabling services. The Infrastructure Council’s vision required the team to transform departments from silos to integrated service providers. For example, setting up a location for a new group typically required calls to 5 to 10 departments, each of which handled different pieces—getting space, setting up phones, ordering keys, and so on. Since the departments rarely talked to each other, any move was laborious and disjointed. To improve this service, the IES group is designing a system that integrates the various functions. All the processes involved in moving will be contained in one “package”; another package will include recruiting, hiring, training, and security clearance for new employees; a third will handle business travel procedures. Combining complementary functions in this way will let Sandia’s service staff better meet the mission areas’ needs.

2. They’re developing a new governance system for the lab. Team members are collaborating with DOE/ NNSA to come up with ways that lab professionals can take more responsibility for their work with less DOE oversight. Both groups believe the increased technical productivity that will result (while still managing operational risks appropriately) will mean more national security solutions for each taxpayer dollar spent at Sandia.

3. They’re transforming their management and communication styles. The group is working systemically to introduce the concept of integration to managers. Focusing on building pride, IES members are engaging people in the mission to help Sandia better support U. S. security. Through a series of workshops bringing managers of different service functions together, the group is addressing questions such as, How can we deliver more services and higher quality performance more cost effectively? In small groups, they’ve imagined the lab’s future together and elicited managers’ ideas for making the new process work.

At the same time, a new sense of leadership and teamwork is evolving. Instead of waiting passively for instructions, managers are taking more initiative to solve problems and collaborate across departments.

Lynn recalls that, two years ago, Sandia’s executive leadership had set a strategic goal for Sandia to be the lab that the U. S. turns to first for technology solutions to the most challenging national and global security problems. Since September 11, Sandia has been increasingly called on to do just that, with efforts that have ranged from hardware products delivered to the Afghanistan front; to bomb-squad techniques used to disable the “shoe bomber’s” shoe; to foam that decontaminated several facilities of the anthrax spores; and so on. As its new integrated infrastructure evolves, the IES group believes that the lab will become increasingly agile in providing these kinds of solutions to the nation.

Kali Saposnick is publications editor at Pegasus Communications.

The post Increasing Agility at Sandia National Laboratories: An Interview with Lynn Jones appeared first on The Systems Thinker.

Some leaders experience the wake-up call of radical change as an unpleasant shock. But even if a leader welcomes the new challenges with enthusiasm, he or she may not know what to do to address them. Being caught at this kind of transition point without knowing how to act quickly and effectively can be disastrous. During a two-year period, I witnessed four of California’s top leaders in higher education forced from their jobs. Each was challenged by rapid changes in their sector; each failed to adequately assess and address growing tensions in union-management relations, adapt their leadership styles to a changing reality, and set bold new courses for their institutions. Mired in internal struggles, these prominent individuals were unable to counter the state’s shift in spending priorities from education to prison construction.

Facing an unprecedented demand or opportunity for which there are no easy answers often signals that the tide is turning – one phase is ending, while something new is struggling to emerge. We might call this key moment in time an “inflection point.”

An inflection point represents a dramatic change in course, rather than a temporary fluctuation.

Facing an unprecedented demand or opportunity for which there are no easy answers often signals that the tide is turning—one phase is ending, while something new is struggling to emerge.

We can think of an inflection point as a fissure between past and future that creates an opening, a unique window of opportunity for leaders and companies. For example, in the 1980s, three competitors, Advanced Micro Devices, Intel, and National Semiconductor, experienced a precipitous slump. However, only Intel’s leaders recognized that period as a key inflection point. In response, the company dropped its DRAM product line and refocused the full force of its attention and resources to seize the market for the next generation of semiconductors. The company’s leadership recognized a particular combination of endings and emergent opportunities, and used this transition point to catapult itself into a new market space. The rest is history.

Recent research conducted by Generon Consulting and the Society for Organizational Learning found that the key capability for leaders in the new economy is an ability to “sense and actualize emerging futures.” To do so, they must be able to recognize critical shifts such as when a product line reaches the latter stages of its lifespan, even before sales have dropped. They must spot technological innovations and their likely implications for social and economic trends as well as changes in key industries and markets. Leaders must use these insights to guide their companies toward radically transformed goods and services and organizational designs. And to accomplish these ambitious goals, they must cultivate productive new ways to work with and lead others. Yet traditional leadership development has not addressed the need to build competency in these skills.

Intentional Metamorphosis

Fortunately, leaders can learn to evolve as individuals and to influence their organizations’ ability to adapt by becoming fluent in the principles and practices of intentional metamorphosis. The dictionary defines metamorphosis as “a complete or marked change of physical form, structure, or sub- stance; a transformation in the form of an organism as it develops into an adult, for example the change from a tadpole to frog or from caterpillar to butterfly.” A similar kind of transformation can occur in people and organizations. We can purposefully influence and accelerate this process in order to realize an inspiring vision or to meet the challenges of a changing environment.

To stay viable, living systems – including individuals and organizations – adopt new behaviors through a similar change process (see “Change in Living Systems”). First, the organism faces an Adaptive Dilemma – a demand or opportunity that exceeds its range of responses. This phase represents an ending to familiar ways of being. In the Initiation phase, new experiences awaken fresh possibilities, and the organism temporarily suspends familiar reflexes and habits.

Incubation marks a time when the organism experiments with new approaches. By continually performing the new behavior in the fourth stage, Integration, the organism strengthens the neural connections associated with the change. Finally, success over time leads the organism to add the new behavior to its repertoire, deepening the pool of resources it can call on in various situations – this last phase is Maturation. Eventually, even successful behaviors can become overly rigid, setting the stage for the next Adaptive Dilemma.

Leadership at the inflection point requires recognizing what is ending and then sensing and shaping what is emerging in advance of, or in response to, an adaptive challenge. Individuals can initiate the change process by consciously assessing their own way of living and of leading others. For instance, by evaluating his leadership style, the CEO of the semiconductor company found that he was bending over backwards to get his colleagues to buy in to the new software product even though no one, himself included, knew what they were being asked to sign up for. By working with a coach, he learned the difference between trying to force all executives to undertake an ill- defined mission and inviting the right contributors to join a generative process of discovery.

At the organizational level, metamorphosis means simultaneously altering product lines, organizational structure, and deep-seated corporate culture in anticipation of changing market conditions. Otherwise, leaders find themselves trying to fit the “new wine” of cutting-edge goods into the “old skins” of yesterday’s economic and organizational models. For example, the development and sale of software, which depends on technology that shifts every month, is not suited for the multiyear protocols associated with a high-end, capital equipment business. Yet many companies have made the mistake of trying to tack on a software division without adopting the processes and structures needed to support the constant shifts required in the software business.

Thus, to lead effectively through the metamorphosis of what is known in organizational life into something unfamiliar, leaders must simultaneously alter their own leadership styles and direct a radical refocus of the organization. Fortunately, a leader’s personal experience of the change process can provide the validation, confidence, and perspective he or she needs to guide the enterprise along its evolutionary path.

Personal Resiliency

But where do we start? The first step for leaders is to develop their personal resiliency – the capacity to adjust easily to change. Resiliency is especially needed during periods of transition, which require a broader range of skills and capabilities than needed during times of stability. But developing a new repertoire is more complicated than simply boosting performance within a known range of mastery, because we can’t always anticipate what abilities will be useful in the future.

Fortunately, we can develop the capacity to evolve who we are throughout our entire lifespan. Regardless of whether this transformation is inspired by internal creative impulses or provoked by external circumstances, we can learn to welcome what happens when we’re pushed beyond our familiar comfort zone. How? By becoming intentional about the process: by engaging in self-inquiry, evolving our reflexive responses, and broadening our repertoire of behaviors.

Engaging in Self-Inquiry.At key crossroads in our lives, we often question ways of being that characterized our earlier years, including our relationship patterns, responses to conflict, and work-life balance. This impulse becomes amplified if we con- front a serious illness or experience loss through divorce or death. Some people find that success factors that worked for them in the past (such as 60-hour work weeks) are no longer sustainable or that demands from the external environment exceed their inner repertoire of responses. Whatever the catalyst for self-inquiry, by necessity we begin to develop new ways to respond to life’s challenges and opportunities.

CHANGE IN LIVING SYSTEMS

To stay viable, living systems—including individuals and organizations—adapt new behaviors through a similar change process.

During such transitions, what we need most is to clarify vague or unexpressed desires and translate them into a clear aspiration, vision, or goal. For instance, we might wish to deepen our relationships; develop our own voice; be more flexible in the face of tension; or be less driven by immediate results. Some people want to cultivate aspects of themselves that they have kept in the background for years. Others may sense a larger calling that builds on their life experience thus far. For example, a trustee of a grant-making foundation recently declared that she wished to move from being a “producer” who raises money and instigates projects to becoming more of a “presence” who helps others be productive.

Understanding Our “Wiring.” To boost our capacity for resilience, we must first appreciate how we are “wired.” Our personal characteristics are innate/inherited, learned/conditioned, or a combination of the two. Frameworks such as Human Dynamics (developed by Sandra Seagal and David Horne) or Emotional Anatomy (developed by Stanley Keleman) provide maps and pathways for individuals to identify their constitutional makeup, appreciate their strengths, and work to develop new options consistent with their fundamental ways of being. Through deliberate inquiry and practice to discover, incubate, and develop new response patterns, leaders can learn how to alter their own physical-emotional “instruments.”

REFLEXES, MENTAL MODELS, AND BEHAVIOR

By intentionally altering our underlying, reflexive response to a triggering event, we can replace ingrained behaviors with new ones.

For instance, at a recent gathering of international leaders convened to address the ongoing conflict between China and Tibet, one participant almost precipitated a group breakdown by insisting that a press conference be called to force the Vatican to take a strong stand against Chinese oppression of the Tibetan people. Triggered by the intense dynamics of the gathering, his powerful feelings took the form of an urgent call to action. But this “script” failed to produce the desired response from others.

Fortunately, there were people at the gathering who were skilled in assisting individuals as they confront this kind of adaptive dilemma. During a 10-minute break, the participant who proposed the press conference was able to see both the immediate and potential long-term negative consequences of his insistent demand. What’s more, he learned to do some- thing that he had been struggling with for years: to ask for help, especially when the dynamic complexity of the situation exceeded his own ability to find a satisfactory solution. This individual discovered in “real time” how to evolve a more constructive way to work with others. His personal shift in turn contributed to a significant breakthrough for the group as a whole for addressing this complex international conflict.

Broadening Our Repertoire. An axiom of systems thinking is that an organization’s behavior is actually a product of its structure. Because humans are living systems, we can apply this principle to ourselves, too. By intentionally altering our underlying, reflexive response to a triggering event, we can replace formerly ingrained behaviors with new ones (see “Reflexes, Mental Models, and Behavior”). How does this happen? We first need to understand a little about key connections between human physiology and our behavior.

Our bodies – and our minds – react differently to different situations. Distinctive combinations of breath patterns, muscle tone, blood flow, and other so-called involuntary processes comprise the body’s structure. Changes at this level of physiology send signals to our brain indicating whether we are in a state of reserve, fear, receptivity, or attentiveness. In a matter of nanoseconds, the cortex uses this information to organize a repertoire of responses to employ and a story to support those responses.

By focusing on subtle changes such as gestures and breathing patterns, we can alter these reflexive responses and thereby influence our state of awareness, guiding ideas, and decisions and actions. For instance, the simple practice of counting to 10 before acting in anger interrupts the initial impulse and diminishes, but does not eliminate, the anger.

The goal is to evolve a more resilient or robust embodiment of our reflexes, not to ignore the inherent wisdom in our bodies’ response or to eliminate particular physical-emotional reactions. This high-leverage change work is similar to learning a martial art: Through repetition, we alter our “wiring” and generate the new neural pathways required to effect a change in behavior. Through continued practice, these neural connections produce new behaviors in a diverse range of situations.

As you develop new patterns of responses, you realize you have choices. For instance, if you tend to panic in the presence or anticipation of conflict, you can experiment with a broader range of responses, from collapse or withdrawal to viewing the conflict as a healthy way to surface breakthroughs. In Myth and the Body (Center Press, 1999), Stanley Keleman and the late Joseph Campbell describe how you can teach your body new responses and rewrite the stories you live by. You can do so by intensifying and de-intensifying different physical reactions, then quickly sorting through the possibilities or even generating alternative beliefs and responses to meet the challenge at hand. Once you have experienced and practiced applying different response patterns, you have increased your range of options and can make more informed choices more quickly than before.

This process is not about fixing anything; rather, it’s analogous to a caterpillar moving ever closer to becoming a butterfly. Leaders who engage in self-inquiry and who can intentionally evolve their own leadership style bring a depth and maturity that is desperately needed when facing the complexity of systems change.

Systems Change

Once we have experienced change in our own bodies, we have a better idea of how to lead the process of metamorphosis at the systems level. Just as the individual must recognize when some demand or opportunity exceeds his or her adaptive capacity, so must the leader recognize the key moments in organizational life that portend that the future won’t play out as it has up to this point.

Engaging in Strategic Introspection. First, we must learn to recognize when our organization is at an inflection point—which can be surprisingly difficult to do. In order to accurately sense what is happening in the seeming chaos of our work lives, we must take the time to pause, reflect, and seek clarity. In The Tao of Leadership (Bantam, 1985), John Heider quotes Lao Tzu as saying, “Leaders who lose touch with what is happening cannot act spontaneously, so they try what they think is right. If that fails, they often try coercion. But the wise leader who loses a sense of immediacy becomes quiet and lets all effort go until a sense of clarity and consciousness returns.” By engaging in what Michael Schrage, author of Serious Play (Harvard Press, 2000), has called “strategic introspection,” we can notice and come to terms with the fact that something is ending and focus on the new opportunities that are emerging.

Often, it’s the challenge of perceiving what is ending that keeps leaders stuck, especially because we often find it difficult to let go of the status quo. In such cases, simulations, enactments, and prototypes are especially powerful, in that they can generate a pull toward the future and create surprising results. For example, during deregulation of the U.S. airlines in the 1980s, NASA researchers examined the risks associated with increasing the lengths and frequency of transoceanic flights. As a result of simulated flight scenarios, they discovered that ensuring that pilot crews fly together may improve flight safety more than managing pilot hours – a counterintuitive outcome.

Modeling approaches can be less sophisticated than flight simulators. For instance, I recently worked with a management team that found itself struggling. The charismatic founder had announced that she was stepping down from her position as board chair. The change from a system driven by one person to one managed by a team disrupted relationships among staff members throughout the organization.

The management team used role plays and built physical models of their organization to examine the issues involved in making this transition. They realized that their struggles resulted from trying to conform to an outmoded organizational structure. This understanding helped them to reframe the problem and heal the rifts that had been dividing them. The team then focused on creating the kind of management system that would position them for future success.

Co-evolving the Future. Leaders who stop and listen often find many disconnected voices heralding a fundamental change in the organization’s life. For example, customers may be demanding new product functionality. The leader of the service organization may report the advent of a new model for warranties. The head of human resources may talk of increasing the department’s role in strategic initiatives. Underneath the myriad of diverse perspectives, the organization is beginning to articulate and describe a shift in the nature of its core product and organizational architecture.

Once they perceive the underlying sources of change, leaders need to know how to recognize and nurture emergent opportunities. They must walk the tightrope of optimizing the current system while at the same time cultivating new guiding ideas, capabilities, and structures for the organization of the future.

IBM’S METAMORPHOSIS

Management consultant Lou Pambianco has illustrated how IBM accomplished a radical shift in the 1990s under the leadership of Lou Gerstner. Focusing on customer choice and service, the computer giant was able to reposition itself as a market leader and fuel a successful revival. Key to this change was the recognition that IBM’s product architecture was evolving—from a hierarchical array of computers, all emulating or tied to Big Blue’s mainframes, to an amalgamation of productivity tools mass-customized to meet customer’s need for integrated solutions. IBM’s leaders realized that changes in the nature of their product required a radical departure in strategy, organizational architecture, and corporate culture (see “IBM’s Metamorphosis” on p. 5).

The insight that product (or service), strategy, and organizational architectures need to evolve together, and that leaders can shape this process, suggests a high-leverage arena for leadership attention and contribution. Successful executive teams meet regularly to learn from one another and to listen for what’s ending and emerging in the organization as a whole. They pose questions such as, What is the customer telling us about the changing nature of our product? What does the shift in our approach to service suggest about our business model? What does HR’s new focus tell us about the changing nature of our workforce and our organization design? By doing so, they come to see that the most powerful opportunities lie not in a search for problems to fix, but rather in sensing, cooperating with, and actualizing what is already emerging.

Integrating Self and System

When leaders integrate their own metamorphosis with that of their organizations, the benefits for each are amplified. I know of no better way for a leader to do so than to focus this co-evolutionary work on a real project. For example, the executive who wanted to develop new e-diagnostic software served as a mentor to the product development team. This project resulted in the successful introduction of three e-diagnostic tools that set new industry standards and generated unprecedented customer demand. The team accomplished their goal several quarters ahead of the competition. Just as important, by intentionally shifting from an emphasis on building consensus to exercising his leadership through focused mentoring, the sponsoring executive developed a more efficient and mature way to lead. The individual, product, and organizational architecture evolved together, creating exciting new possibilities.

All too often, good people end up outpaced by technology, industry trends, or new organizational priorities. When organizations support their leaders in engaging in self-inquiry and intentional metamorphosis – while at the same time making fundamental changes to their businesses – they create a vehicle for not only retaining those individuals but also creating the competency needed for leading into the future. Creating an ongoing infrastructure for learning and experimentation is essential for realizing the potential of leadership at the inflection point.

What’s at Stake

Experiences at the edge of what we know are uncomfortable. Each of us arrives at these points with deep affinity for our own personal style, tried-and-true approaches to leadership, track records with certain products and services, and degrees of success with particular organizational designs. To enable what is emerging rather than push our own agendas involves intensifying our appreciation for that tradition while, at the same time, intentionally departing from the moorings of the past to sense and give shape to what lies beyond. A leader’s task then becomes recognizing and responding adeptly at key moments in an organization’s history, quickly developing a wide range of individual and organizational responses to novel situations, and challenging long-held reflexes and mental models in order to help sense and influence the future.

The stakes are high, but it’s heartening to know that metamorphosis is a natural process already occurring and available in every leader and organization. When we link the process of individual and organizational change through the art and practice of intentional metamorphosis, we generate uncommon power, exponential synergy, and leverage strong enough to alter the trajectory of history.

Mitch Saunders (mitch@resilientsystems.com) is president of Action-Learning Partners, a network of diverse, experienced practitioners dedicated to building individual, relationship, and organizational resilience. Since 1985, Mitch Saunders has coached senior leaders and their teams, typically those try- ing to achieve unprecedented goals. He was for- merly a researcher and instructor at the Center for Organizational Learning at MIT. He is also the co-originator of Dynamic Dialogue, a systematic methodology for co-evolving fundamental reflexes and belief systems along with their corresponding institutional strategies and structures.

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Defining Prototyping

A form of action learning called prototyping involves figuring out how to come up with creative solutions by doing small experiments. Because the experiments are small, the risk is low, thus providing more control over possible negative ripple effects. Prototyping also saves time because teams don’t over plan and then find they need to revise plans because conditions have changed or something has been learned that alters how they think about the project.

To be effective, prototyping requires people to work together in a continuous state of ambiguity and complexity while exercising what we might call collaborative creativity. In his book, Serious Play: How the World’s Best Companies Simulate to Innovate (Harvard Business School Press,2000), Michael Schrage states that, “innovative prototypes create innovative teams.” Prototyping creates a shared space a collaborative medium hat two or more people share—that supports the process of shared discovery or creation.

In addition, prototyping operates on the paradox of slow down to speedup. The process seems slow in the beginning but has a surprising ability to speed up and cascade as time progresses. People figure something out, develop a prototype, test it in relative safety, modify it based on what they have learned, and then test it again. The testing is done with a group of people who are not necessarily connected with the team or project. The team takes the feedback, redesigns the prototype, and tests it again until the prototype works well enough to go to a broader application.

It is the testing process that creates acceptance of the prototype with a growing audience. The idea is to test it with a new group each time, thus spreading knowledge of the prototype as well as people’s connection to it, and creating cultural change and buy-in.

Prototyping Process

Prototyping is a structured and sequential process that is based on the principles of action learning. The goal is to develop a pilot version of a process, product, or plan. Because it is a trial version, it does not have to be perfect; it just has to be testable. Here is an example of how prototyping works:

1. A project team of 6–15 people gathers to start the process. The more diverse the group is in occupation and position, the better the dynamics are for unleashing collaborative creativity.
2. This project team meets to figure out the scope and timing of the project, how prototyping works, and what they need to know to start the process.
3. The project team meets for 3-4 hours at a time over several days to create the initial prototype. Several times during the course of meeting, the team outlines critical issues, ideas, and actions that shape their understanding of how to move forward. The team then seeks input from others on these key markers. The idea is not to get too far on any one idea or issue before testing the group’s thinking on it.
4. Once the project team has developed a viable prototype to test in a larger application, it launches a pilot project that is small yet representative of the reality in which the finished project needs to work. The group tests this first step as if it were a prototype rather than a finished project, making modifications as needed. Once the initial pilot achieves a certain level of success, learning and actions can be rolled out to more and more people. This is when the process starts to speed up. The key is to continue to roll it out using a prototyping stance, structured yet at the same time open.
5. At a certain moment, a shift occurs from the introduction of new learning to maintenance and continuous improvement. When this happens, there is a noticeable difference in the organizational culture from what was at the beginning of this project. At this point, prototyping as a work process becomes a part of the emerging culture itself.

Three Success Factors

To be successful, prototyping depends on three factors:

• Psychological Safety: This involves creating a level of concreteness, relevancy, and support so that people feel a sense of stability and, in turn, psychological safety. Psychological safety is important because it allows people to work in ambiguity and uncertainty and to be uncomfortable, to not know, and to express concerns with the initiative itself. A structured prototyping process creates psychological safety.
• Engagement and Alignment: This involves creating a level of continuous improvement and flexibility that lets people contribute ideas and expertise at a local level, while staying aligned with a broader organizational perspective. The shared space that occurs in the testing of the prototype creates engagement and alignment.
• Meaning and Cultural Change: This involves creating ways for people to achieve success together and focus on things that really make a difference. It also centers on pulling in diverse stakeholders and creating communities of practice in which ideas, issues, and methods are shared, so that people can learn at a more global level and apply that learning in their organization.

At certain times, some of the members of the project team may change, increasing the team’s ability to stay fresh in its thinking. This shift can be gradual, with one or two members changing at a time. In this way, if the project is complex and spreads over many months, the entire organization can become involved in the process, increasing the chance that people will welcome the cultural change.

Engagement in Change

Prototyping is always successful in dealing with limits in the current situation, because it focuses on learning as you go and on designing plans and actions that are doable within a highly constrained environment. In fact, it works best when the constraints are especially acute. Some of these might include:

• Little or no time to spend developing and learning something new
• Few resources available to be allocated to a new project
• Resistance to anything that might be perceived to be of little value or incapable of being implemented

Any prototyping initiative produces change at a number of levels, including the individual level (e.g., knowledge, attitudes, and behaviors), the team level (e.g., ways of working, communicating, and learning), and the organizational level (e.g., corporate culture). Prototyping produces measurable and sustainable results in both metrics (e.g., cost savings, increased production levels) and behaviors. It creates the conditions in which people become engaged in change and willingly embrace accountability.

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Like other observers, Oldenburg has depicted the modern trend toward increasing social isolation as troubling: “Ever since the solidifying effect of World War II passed into history, Americans have been growing further apart from one another. Lifestyles are increasingly privatized and competitive; residential areas are increasingly devoid of gathering places.” What are the effects of isolation on American lifestyles? Despite our material comforts, many of us suffer from boredom, loneliness, and alienation.

Oldenburg’s vision of restoring third places stems from his conviction that when we feel connected to one another socially, we become healthier as individuals and stronger as a society. Conversely, he argues that no matter how advanced technology becomes or how many public policies we implement, when we neglect the informal group experience, we disempower ourselves and weaken the democratic process.

Elements of the Third Place

In the last decade, The Great Good Place has garnered a growing readership among individuals and groups seeking to revitalize urban areas and public life. In 2001 Oldenburg edited Celebrating the Third Place (Marlowe & Company), a collection of essays from people around the U. S. who have been designing and creating public gathering places. Against great odds—many small businesses fail—these pioneers have sustained diverse enterprises by intuitively practicing or learning the principles outlined in The Great Good Place. As employers, they treat their staff with respect, encourage them to take responsibility for the business, and train them well. As hosts, they develop rapport with their customers and create a warm and fun ambience. Most importantly, their businesses embody what Oldenburg identifies as the main characteristics of a third place:

• Neutral ground. In a third place people can easily join in or disengage from the conversation.
• Leveler. All people, regardless of class and status, are welcome and intermingle.
• Engaging Conversation. Talk is the main activity and provides the greatest value. The rules are simple: Don’t dominate the conversation, be sensitive to others’ feelings, speak on topics of general interest, and avoid trying to instruct.
• Accessibility and accommodation. People can wander in almost any time of day or night and find someone to talk to.
• Regulars. The people who frequent the place give it character, set the tone, and welcome both old timers and newcomers.
• Low profile. The decor is plain and unimpressive, discouraging pretension and self-consciousness.
• Playful mood. Displays of wit are encouraged. The congenial environment makes it feel like a home away from home.

Informal Conversation and Organizational Change

What is the significance of third places for those interested in organizational change? For a number of years, observers have been discussing the importance of free-flowing, informal conversation among coworkers in order to share knowledge and spark innovation. For example, Juanita Brown and some colleagues gave birth to the World Café methodology, which links small and large-group conversations to enhance collaborative thinking (see “The World Café: Living Knowledge Through Conversations That Matter,” V12N5). According to Brown, key features of café conversations are that they take place in neutral territory where everyone feels included, and they serve as bridges for people of diverse perspectives and backgrounds.

Likewise, Etienne Wenger’s work on communities of practice highlights how we create and use knowledge through informal networks (“Communities of Practice: Learning As a Social System” V9N5). These networks share many characteristics with third places, in that individuals are bound by similar interests rather than organizational structures. Wenger cites the example of Xerox repair technicians who learn more about solving problems over breakfast together than from formal knowledge-sharing programs.

Oldenburg warns that we must be diligent in protecting third places: “Neglect of the informal public life can make a jungle of what had been a garden while, at the same time, diminishing the ability of people to cultivate it.” As these examples show, we break the bonds of community at our own peril, for they are vital to our success as a society and are extremely difficult to replace.

Kali Saposnick is publications editor at Pegasus Communications.

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What Are Unwritten Rules?

Whether you call them “undiscussables,” “tacit understanding,” “social norms,” or “mental models,” unwritten rules comprise an organization’s unconscious accumulation of vested interests, history, beliefs, deep feelings, and customs. These rules initially develop as logical coping strategies based on what it takes to succeed within a given corporate climate. Over time, these strategies become an unspoken code that people learn to imitate by observing the behavior and following the advice of others in the organization. According to Robert Hargrove, author of Masterful Coaching (John Wiley & Sons, 2002), “These are rules that no one really seems to be in control of and that may be difficult to even clearly articulate, let alone change.”

UNWRITTEN RULES OF DOWNSIZING

Fear of job loss leads to thoughts such as, “I must look competent” or “I cannot ask for help.” Such thoughts undermine teamwork, collaboration, and learning, ultimately eroding organizational performance. As a result, the company loses revenue and will more likely resort to further downsizing.

Unwritten rules can have a favorable, detrimental, or neutral influence on an organization. Some rules can undermine change efforts by swaying us to comply with “the way things have always been done around here.” In the worst case, they can lead to Enron-like corruption in which honor and accountability become subordinate to greed. On the other hand, unwritten rules can help organizations maintain coherence and their unique identity, as well as play a critical role in corporate success.

An example of how unwritten rules develop can be seen in the way employees respond to quick fixes such as corporate downsizing. What begin as simple thoughts, such as “I cannot ask for help; my team leader will think I’m incompetent at my job” or “I must look good or I’ll end up on the list for the next downsizing,” can systematically stifle learning and personal development. Ultimately, this behavior can lead to organizational failure (see “Unwritten Rules of Downsizing”).

The more employees want to succeed or survive in an organization, the more likely they are to adapt to and reinforce its unwritten rules. To keep their jobs, they will go along with the status quo. To climb the corporate ladder, they will observe how their predecessors did so and emulate their behavior. Regardless of an organization’s stated values and goals, most employees behave according to the unwritten rules that best support their ability to achieve their personal goals.

Uncovering Unwritten Rules

How does an organization address its unwritten rules? First, leaders need to expose them. They must do so carefully, because making explicit an organization’s inner workings can initially lead to ambiguity and emotional discomfort, conditions that most employees tend to fear and avoid. Leaders must be objective, highly empathetic, and employ methods that ensure that employees feel reasonably safe in disclosing their deep and sometimes previously unarticulated thoughts and feelings about the workplace.

Interview Employees. One way to elicit unwritten rules is to interview employees. As Peter Scott-Morgan states in The Unwritten Rules of the Game: Master Them, Shatter Them, and Break Through the Barriers to Organizational Change (McGraw-Hill, 1994), “The goal is to set the interviewee off on a stream of consciousness about the pressures he or she and others feel within the company and how these relate to specific aspects of business performance” (see “Sample Interview Questions” on p. 7). During the interviews, carefully document the responses for future analysis.

Meet with Groups and Distribute Surveys. Another technique is for a leader to conduct group meetings coupled with surveys. Meet with employees of an area undergoing a change initiative to discuss the nature of unwritten rules and workplace assumptions, putting them at ease as much as possible. Then hand out a survey, consisting of open-ended questions geared to extracting the rules, and give participants a week to submit their responses anonymously. Near the conclusion of the meeting, encourage participants to share some of their responses within the group to elicit additional input.

Solicit Feedback from the Edge. A third method is to seek out the thoughts of those on the “edge.” In Wide-Angle Vision: Beat Your Competition by Focusing on Fringe Competitors, Lost Customers, and Rogue Employees (John Wiley & Sons, 1996), Wayne Burkan defines the edge as “troublemaking employees, complaining customers, and fringe competitors who are constantly challenging the rules.” Solicit and analyze feedback from these groups because it often reveals unspoken norms. For example, a customer complaint might reveal that your customer service reps are abiding by the rule, “it is not safe to stick your neck out to address an unhappy customer’s request, so just regurgitate company policy.”

During the uncovering process, not all responses will reflect actual rules. Some may just illuminate symptoms, attitudes, or other unproductive behaviors in the organization. To determine the unwritten rule underlying any input you receive, continue to ask “Why?” until you get to the root cause. If someone says, “It doesn’t pay to work smart,” asking why can elicit, “Because there is no reward for doing so.” Why? “Because management doesn’t link bonuses or appreciation to going the extra mile.” And so forth.

Categorizing Unwritten Rules

Once you uncover an unwritten rule, identify whether it benefits, harms, or has no impact on the organization. To do so, ask whether the rule supports the organization’s best interest, goals, and strategy. If the answer is yes, you should further reinforce and reward it. If the answer is no, you need to determine whether it is neutral and can be ignored or whether it is dysfunctional and needs attention.

An example of an appropriate rule for a department striving for efficiency might be that the first person to arrive in the office each morning turns on the copier, thus enabling coworkers to avoid delays in using the machine. An obsolete/neutral rule might be to change the daisywheel printer ribbon when the type becomes illegible. Because of rapid technological changes, many rules related to technology rapidly drop off the radar screen of organizational memory.

I witnessed a dysfunctional rule in a corporation where the CEO wanted to establish teamwork as an organizational norm. Because he based his management team’s bonuses on their comparative individual performance rather than the organization’s overall performance, the following unwritten rule developed: “The better I look compared to my peers, the more spoils I win.” Consequently, the management team never worked effectively together.

Addressing Unwritten Rules

To counteract the power of dysfunctional rules, leaders must first acknowledge the concerted effort it will take to alter employees’ beliefs and actions.

Then they must choose the best approach for moving forward. In his video The Paradigm Prism, Joel Barker advocates that leaders intentionally reverse dysfunctional rules; for instance, “seeking assistance reveals incompetence” could be replaced with “learning from and respecting others is something we value.” Leaders then need to show employees they stand behind the replacement rules by consistently and meaningfully rewarding behavior congruent with them. In the example of the management team whose bonus system contradicted its stated goal of creating teamwork, the reward system could be adjusted to include individual, team, and organizational performance, thus encouraging synergistic effort.

Gaining Competitive Advantage

The bottom line when counteracting dysfunctional rules is to remember that rules drive behavior. Whatever action you take to reverse an unwritten rule must lead unequivocally to the desired behavior. Therefore, before implement- ing a policy, dictum, or action, carefully consider its possible systemic consequences. Also, routinely observe employee behavior and adjust the drivers of behaviors as necessary through performance metrics, leadership role modeling, or organizational policy. By removing as many obstacles as possible to employees’ efforts to make your organization successful, you can develop a committed, innovative, high-performance culture and gain a competitive advantage.

Unwritten rules and assumptions also exist at the industry level. It is in this realm that even greater potential competitive advantage resides. By transcending the rules and assumptions that shape our worldview, companies can evolve new products, breakthrough innovations, and major industrywide changes. Exposing and effectively responding to the unwritten rules of your industry could catapult your organization to the top of your field.

Jon Springer (jspringer@theglobal.net) consults in the fields of leadership, cultural change, and strategic planning.

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Peter Senge: Organizations will have to be much more in tune with and ultimately responsible for their impact on social and environmental wellbeing. In addition, to remain competitive and successful, they will need to tap the collective intelligence, spirit, and energy of their people. Bill O’Brien used to say that in the 20th century, to be effective, organizations focused on developing manufacturing, financial, and, to some degree, marketing sophistication, but they operated with mediocre people skills. In the 21st century, while manufacturing, financial, and marketing expertise will remain important, organizations that will thrive will have comparably sophisticated people skills.

These two imperatives will increasingly intertwine. As former Volvo and IKEA CEO Goran Carstedt said, the challenge is to develop organizations “worthy of people’s commitment.” Most of us can see that our current approach to globalization is creating great stress in the world. Organizations, especially businesses, that seek to tap the insight, commitment, and creativity of their people will need to be committed to enhancing social and environmental wellbeing, not just to making money.

TST: What changes are most needed in the next decade? Where is the highest leverage for bringing about the kinds of changes you think would help our world?

Any enduring change strategy includes building and sustaining networks of collaborators across many boundaries.

Senge: SoL (the Society for Organizational Learning) operates from the assumption that collaboration among organizations is, and will increasingly be, vital to sustaining deep changes in the traditional management culture. When I say management culture, I mean the prevailing and often unquestioned assumptions and taken-for-granted practices of management in Industrial Age organizations. One traditional assumption is that, rather than having several performance requirements, the sole purpose of a business is to maximize return on invested capital.

Another is that, to enhance performance, managers need to focus everyone on “the bottom line,” what accounting theorist Tom Johnson calls “management by results,” rather than on enhancing the capacities of people at all levels to understand complexity and to learn.

These narrow assumptions may have led to innovation and success in the past, but today, what any individual organization—whether a business, hospital, governmental agency, or school—can do alone to significantly break from the cultural mainstream is very small. Each one operates as if it were tied to a rubber band. Even if an organization innovates significantly for many years, it eventually gets snapped back to the norm. For example, at any one point in time, you can always find a small number of highly innovative schools in which kids are engaged and teachers love their work. But virtually all return to average within 5 to 10 years.

From my standpoint, any enduring change strategy includes building and sustaining networks of collaborators across many boundaries. For the past several years, SoL has focused on bringing together large multinational companies, prominent nongovernmental organizations, and key governmental agencies to work on significant issues around environmental sustainability. For example, oil companies that establish residency in a country, such as Nigeria, Angola, or Venezuela, to produce oil over 50 or more years, have traditionally justified their efforts by promising that the country would be better off as a result. But there are several reasons to challenge this premise. Many countries that have exported large quantities of oil for years have seen little real economic, social, and environmental progress. Many end up as permanent oil exporters with little modern industry and strained relationships with the oil companies. Much of the profit goes to corrupt regimes that squander it long before it benefits the society at large. “Rigged rules and double standards” in global trade, as a recent Oxfam report puts it, favor developed countries’ exports over developing countries’ exports, hindering industrial diversification in emerging economies. For oil companies to deliver on their promise for economic and social development in exporting countries, they cannot work alone, and SoL members are looking for ways to foster collaboration within these countries and among different multinational organizations to help this process.

Another project within the SoL community is based on German chemist Michael Braungart’s idea of “intelligent materials pooling.” In their new book Cradle to Cradle: Remaking the Way We Make Things (North Point Press, 2002), Braungart and U. S. architect William McDonough discuss the adverse environmental and health effects of current industrial products. They propose a business model in which companies collaborate to eliminate toxins from their products and integrate natural systems ideas, such as continuous reuse, into product design. This paradigm has become increasingly attractive to companies, especially in Japan and the European Union, where some governments have started passing legislation that holds private industries responsible for their products after the periods of use are over.

The basic idea is that if you produce something, you own it forever. Ideally, we’ll get to the point where every product we come in contact with can be indefinitely recycled or remanufactured, and nothing ever goes into a landfill. In this way, we start to “close the loops,” as the environmentalists would say, just as nature does. Nature doesn’t generate waste. End products or byproducts of one living system are nutrients to another. What companies can do on their own to support such changes is often very limited. There may be no cost-effective substitute for many widely used chemicals, like PVCs, and the research costs to a company for redesigning its products could be prohibitive. But a group of companies could pool their purchasing power and work collaboratively with chemical producers to find substitutes, just as they could pool research efforts.

TST: What are some of the challenges organizations face as they collaborate with multiple stakeholders?

Senge: Let’s look at the automobile industry. Part of the EU legislation I was just referring to requires companies to give a complete account of all the material components of a car they intend to sell. Why do we need to know this information? Well, probably about 90 percent of a vehicle’s materials, starting with the seat fabric, is toxic to people. For example, in most new cars today, you can see a thin film on the inside of your window in the morning. That is not moisture; rather, it’s outgassing from the dashboard’s components. Braungart and McDonough point out that many of the widely used materials in everyday products are carcinogenic substances that remain in living systems for a long time. In other words, they’re harmful to humans and other life. In the pharmaceutical industry, drugs are regulated to avoid the production of dangerous products. In most other industries from which we buy, use, and discard products, however, up until recently, little such regulation has existed.

But just the task of identifying material components is daunting. In making an automobile, you deal with a complex web of suppliers, few of who know the chemical composition of the products they’re selling. In addition, companies selling vehicles in Europe are now faced with phase-out schedules for particular chemicals, starting with heavy metals such as lead, mercury, hexavalent chromium, and cadmium. In many cases, nobody knows how to remove these elements from vehicles or what material can be used as a substitute.

As SoL member companies collaborate, we are finding connections and possible synergies. For example, we recently discovered that Pratt &Whitney has developed a product that eliminates hexavalent chromium from fasteners. But because this product was developed for the aircraft industry, it was unknown to auto and motorcycle manufacturers. Another collaborative project involves building common databases so that product designers can quickly determine the chemical constituents of different materials, their potential environmental and health consequences, and preferred alternatives, where they exist.

TST: Have any organizations successfully collaborated and designed sustainable product development processes?

Senge: About five years ago, Nike, Inc., began to address a serious discrepancy between its mission and its products. Founded on a vision of fitness and vitality, Nike was making products that included potentially harmful chemicals. Several Nike leaders started meeting with external and internal designers for the company to explore more sustainable practices in product design, manufacturing, and distribution. Eventually, this group evolved into a substantial network of designers and producers who are collaborating to figure out how to integrate sustainable product development into the company’s core strategy for success. Nike now sells an entire line of organic clothing made from cottons produced by small farmers around the world. It’s currently trying to figure out how to mass-produce nontoxic organic fibers so they can use these materials in more of their products. To pursue such large-scale collaborations, Nike initiated SoL’s materials pooling project.

TST: Who will be the movers and shakers making an impact in society in the next few years?

Senge: It depends on how you interpret the phrase “movers and shakers.” In our present society, the media tends to focus on the CEO, who is typically regarded as the key to the company’s success. But the types of leadership truly critical to an organization’s prosperity are not ones you usually read about in the newspapers or Fortune magazine. In the change efforts I’ve been engaged in, I’ve found that the local line leaders and what we call “internal networkers” are making the greatest impact on changing how our larger systems work.

They’re the ones operating on the ground implementing innovative ideas like materials pooling, turning schools around so students can excel, and creating community leadership organizations that eliminate gang warfare.

Many of us have the mental model that somebody—some senior leader or manager—must be controlling the organization’s systems, which we ourselves feel overwhelmed by. But from a systemic perspective, the reality is just the opposite. Most large institutions are so complex that no one person—no “mover or shaker” in a position of authority—can bring about the needed change. Rather, when lots of people at all levels of an organization start to do things differently, they begin to enact new systems.

TST: How do we get a critical mass of people doing things differently?

Senge: For one, through the sharing of generative ideas, ideas that can change how people think and act. The Industrial Revolution is a perfect example of how a set of ideas can produce wide-scale change without a single plan or group in charge of the process. Over a long period of time, hundreds and thousands and ultimately hundreds of millions of people started doing things a little bit differently than they had before. As a result, factories sprang up, assembly lines were developed, public schools were created, and entrepreneurial activity exploded. As these concepts grew in people’s minds, the way work was organized changed dramatically—for better and for worse.

How did these ideas spread?

Mostly through stories. Academic books usually have less short-term impact than a compelling story told informally over and over. Even more powerful is a reinforcing pattern of stories that gradually starts to build an idea in people’s heads. For example, many of us have begun to internalize the notion that we’re inextricably linked with others around the world because we all live on one increasingly smaller planet—a public consciousness that did not exist 50 years ago. Regardless of whether the idea evolved from seeing pictures of the earth from space or television images from the other side of the planet, or being able to work around the clock with colleagues from Asia and Europe—we’ve begun to accept the “story” that we are all to a certain degree interdependent. This is a historic change but it’s just at its beginning; we still to a large extent identify first with our own tribe or country.

Although we’re beginning to realize how interdependent we are, few people know how to transcend the boundaries that still separate people and institutions. Just like the beginning of the Industrial Revolution, where people embraced the idea of reorganizing production for efficiency without knowing how to accomplish it, we’re at the early stage of enacting systems that support an interdependent world. The idea has credibility, but we’re still not sure how to do things differently. As I mentioned earlier, one way is to build networks of people and organizations who are implementing diverse ideas of interdependency and sustainability. Then, sharing stories of projects such as the materials pooling initiative can inspire more examples.

There’s no end to what people can do. I’ve been particularly impressed with innovative projects in which young people are trying to think globally while doing things locally. Young people today have grown up acutely aware of the stresses in the world, especially those living in poverty or in countries with obvious social divisions. They’re beginning to network with each other internationally to initiate changes addressing social and environmental imbalances.

For example, Pioneers of Change, an emerging global network of people in their 20s and early 30s, is involved in significant social change projects to produce healthy communities around the world. One of its members is developing a network of villages based on sustainable agriculture in Rwanda. Another is starting the first management school in Croatia. Another group, Roca, located in Massachusetts, is composed of former gang members focused on helping teenagers leave their gangs and build their communities. If you listen carefully to these young people, you’ll understand that they’re all working on the same basic issue—how can we humans learn to live together in this world.

TST: The Fifth Discipline has been out for more than 10 years. Has its popularity resulted in the effects you hoped for? How do you view your own purpose now? Has it changed over the last 10 years?

Senge: I don’t think my sense of purpose has changed very much. But it does get clearer. If you pay close attention, hopefully you learn more each day about what you’re here to do in the world.

I have always been concerned with the imbalances in our patterns of development. I think the Industrial Age is a historic bubble, just like the “dot com” financial bubble. I don’t think it will continue, because I don’t think it can continue. The Industrial Age has ignored the reality that human beings are part of nature; instead, it has operated based on the idea that nature is a resource waiting to be used by us. If we go back to the idea of interdependency, human beings depend on nature in many ways for our survival. This is where traditional economics breaks down. Economics says that if the price of a commodity rises, demand for it will go down and a less expensive substitute will replace it. But there are no substitutes for air and water. There is no substitute for a healthy climate. These are common elements shared by everybody. Systems of management that do not value the “commons” cannot continue indefinitely. It’s that simple. We don’t know when we will hit the wall—we’re probably hitting it right now. By some estimates, private soft-drink companies now own rights to more than 10 percent of the drinkable water in the world. If these companies are allowed to continue their current system of management, which focuses on exponential growth of their products, this percentage will grow even further. We have not yet seen the implications of some of our patterns of development.

I never expected The Fifth Discipline to have as much impact as it did.

Partly, I attribute its success to a pervasive awareness of these sorts of problems. As the old adage goes, “There’s nothing more powerful than an idea whose time has come.” No one knows what is needed, but we sense that we face immense learning challenges, which are not just individual but collective and which concern how our institutions shape our collective actions. For example, if you live in China, where economic development is happening so rapidly, everyone can clearly see the social and environmental consequences in the pollution, congestion, and social stresses that have sprung up almost over night. Unlike past industrialization in North America and Europe, which unfolded over four or five generations, or longer, China’s industrialization is taking place within one generation.

Interestingly, The Fifth Discipline and the fieldbooks (The Fifth Discipline and The Dance of Change) have become quite popular in China. Schools That Learn is about to be translated, even though it contains nothing about Chinese schools. I have found that the ideas about rethinking our systems of management and leadership on a personal level hold a particular appeal in China. In the recent past, the Chinese education system has followed Western models—urban Chinese schools look pretty much identical to urban schools in the West, in terms of what they teach and how they teach. Yet, deep down, I feel the Chinese, like all people, long for a system of management and education that reflects their own distinctive culture. Personal and institutional learning offers an integrating thread that speaks to the diverse problems we all face.

TST: Can we really make the world better by making our organizations better, or is this a naïve hope?
Senge: I don’t think it’s naïve, I think it’s inescapable.

Turn the statement around: How are you going to change the world without changing organizations, since organizations are what shape how the world works today? For example, it’s impossible for one individual, or even a local community, to destroy an entire species, yet species around the world are becoming extinct at an alarming rate. Who is responsible for this critical situation? It’s clear that the destruction of Earth’s ecosystem is a result of millions and millions of individual actions mediated by the activities of our current global network of institutions. Governments are important but not adequate to meet the depth and breadth of the changes we face. To begin to shift our course, I believe, requires deep personal change in all of us, in the sense that we must “expand our circle of compassion,” as Einstein said, beyond tribalism. These personal changes, in turn, will shift how institutions such as businesses and schools function.

How are you going to change the world without changing organizations, since organizations are what shape how the world works today?

So if organizations don’t change, how can the world change? What is naïve is to believe that any one person has the answer for how to do it, that there’s a single strategy or way to do it, or that change can happen quickly. Going back to our earlier conversation, ultimately, large-scale transformation occurs when new ideas take root in people’s minds and inspire them to do things differently—many things by many people.

For example, today’s business leaders are recognizing that, in order for their companies to remain competitive, they must consider the health of their employees—not just medical issues but also personal well-being. They’re beginning to understand that having a group of committed, imaginative, patient people, who can work well together based on a strong sense of purpose, will make a bigger difference in whether the company is successful than any amount of money spent on technology and marketing. As this idea of employee well-being gradually grows in people’s minds, we’ll start to see changes in organization design and management practices. But it will not happen quickly. Promising innovations will come and go. Nevertheless, even as individual innovative firms struggle, the larger trend—the collective learning across many organizations and many cultures—will continue.

For example, Plug Power is a small manufacturer of fuel cells. It is struggling, as are all the firms in this critical but nascent industry. Its CEO comes from Ford and its senior technical officer from Xerox. Both accomplished remarkable results in those two companies, but they innovated faster than the overall company cultures could absorb. Together they, along with a few hundred other folks, are now doing something that stands to be much more important than either cars or copiers for our future creating commercially viable steps toward an environmentally sustainable energy system. They are now together because of a larger network of innovators that connected not only Ford and Xerox but several other firms, and eventually resulted in pathways for innovators coming together that otherwise would not have existed. This is exactly how change occurs in nature—the new grows up in the presence of what already exists and eventually becomes viable collectively, not as isolated individuals.

The idea that real change occurs in large networks of innovators has been one of the biggest surprises to me. I had originally thought that individual organizations could initiate and sustain significant innovation in management and culture. But I’ve discovered that, while an individual firm may run into difficulties with this process, once people cross the line into working in a way that touches who they are as human beings, and they know that this way of working together is possible, they do not go back. They may go elsewhere, but they do not go back.

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