In this way, the vertically integrated firms of yesteryear are transforming themselves into the virtually integrated supply chains of today. As such, many businesses are moving from producing all of their final products’ components and services internally to buying them from a network — or supply chain — of external suppliers. Why are so many companies taking this dramatic step? The benefits of this new business model include lower parts or service costs, lower up-front investment, and less financial risk if expected sales volumes do not materialize. But outsourcing has hidden drawbacks that may take several years to emerge. Ultimately, these “outsourcing traps” may actually increase a firm’s cost structure, reduce its products’ competitiveness, or in the worst case, lead to the emergence of new competitors.

How can businesses manage this major shift without falling into an outsourcing trap? Research shows that the design of a company’s supply chain is of decisive importance. In his book Clockspeed: Winning Industry Control in the Age of Temporary Advantage (Perseus Books, 1998), Massachusetts Institute of Technology professor Charles Fine argues that supply chain design may be a business’s most important competency, and that deciding which components to make and which to buy profoundly influences long-term corporate survival. While conducting research for Professor Fine, we discovered that the key to making wise sourcing decisions is to understand the short- and long-term trade-offs of different choices.

Although supply chains are now hot topics within Fortune 500 companies, smaller firms have long recognized their importance. For example, consider a mortgage company. As soon as a home-buyer applies for a mortgage, the mortgage company requests a customer credit report from a supplier such as Informative Research. The supplier compiles its reports from several credit databases maintained by credit repository companies such as Trans Union. At this point, the mortgage bank that will actually fund the loan (which is often separate from the mortgage company) must examine and provisionally approve the loan. In most American states, once the bank provisionally approves the loan, the mortgage company orders a property appraisal, a flood certification, and a title insurance policy, each of which is provided by a separate firm with its own supply chain. Finally, at closing, the mortgage company collects its commission and turns the loan over to the mortgage bank. Many mortgage banks in turn sell their mortgages to another investment institution.

Coordinating all of these firms to provide the end customer with a complete product is a complex process, but similar transactions occur throughout the business world. Designing a supply chain to operate as efficiently and profitably as possible is a difficult but potentially fruitful endeavor. For example, a normal mortgage company takes two to three weeks to go from application to closing. However, one mortgage company we work with has brought both the mortgage bank and appraisal functions in-house. By underwriting its own loans, conducting its own appraisals, and establishing close relationships with local builders, this company can “crash” a mortgage from application to closing in 48 hours if necessary, thus improving customer service. Mortgage companies that do not have these internal capabilities cannot equal this performance. This “simple” example illustrates the critical importance of supply chain design resulting from sourcing decisions.

Although outsourcing has been extensively examined in the academic literature, most of this work has focused on topics such as the economies of scale that it can offer. We are aware of few sources that examine outsourcing from a systems perspective, taking into account the intricate relationships, time delays, and feedback processes that relying on a vendor sets into motion. Systems thinking and system dynamics provide the perfect tools to examine the trade-offs. Companies that fail to apply this level of analysis to the decision-making process may seriously undermine their competitive position by falling into one of the outsourcing traps.

Common Outsourcing Traps

As part of our research, we developed a system dynamics simulation model that identified several circumstances in which an organization may experience short-term gains from outsourcing followed by devastating — and unexpected — long-term consequences. We call these “outsourcing traps.” Three of the more interesting traps are:

An organization may experience short-term gains followed by devastating longterm consequences. We call these “outsourcing traps.”

1. A company loses its market dominance when its supplier acquires its proprietary technology and diffuses it to its competitors.
2. A company relies too heavily on a single supplier, which weakens its ability to negotiate favorable purchase agreements.
3. A company outsources a component or service to a vendor to reduce costs, only to encounter higher expenses or reduced functionality when putting the final product together.

We examine each of these dynamics in more detail below.

Boosting — or Creating — a Competitor

One possible consequence of outsourcing is that a competitor may gain access to critical technology through a common supplier. This can occur when the supplier offers the technology for purchase or when the supplier’s engineers bring the knowledge gained from working with the original firm to projects with other companies. If a competitor then uses the information to duplicate or improve on the original product, it may erode the first company’s market position (see B1 in “The Secret’s Out” on p. 1).

The classic example of this dynamic occurred when IBM was developing its new personal computers (PCs) in the early 1980s. The company made what turned out to be a crucial decision to outsource production of the PC’s microprocessor to Intel and development of its operating system to Microsoft. Little did IBM know that by doing so, it was opening the door for direct competitors such as Compaq and Dell to purchase the two components of the PC that are most difficult to duplicate. The result is that IBM today is only the third-largest maker in an industry that it created.

General Motors and Ford may have fallen into this trap when they decided to spin off their component divisions. The two new companies, Delphi and Visteon, are busily expanding their customer base beyond their parent corporations. As they do so, the risk of another automaker gaining access to once-proprietary technology grows. GM and Ford’s knowledge of the components may also become obsolete, leaving them helpless to make any innovations in component performance.

Auto companies may be most vulnerable in the area of automotive electronics, which has become the decisive factor in advancing car comfort, safety, and performance. Toyota is avoiding this trap by bringing some of its automotive electronics back inhouse after 45 years, even though its supplier, Denso, is the world leader in cost and quality. Toyota sees electronic components as critical to automobile performance and wants to keep at least some of its technology proprietary to gain a market advantage. It has made this move just as U. S. manufacturers are divesting themselves of this same capability.

“The Secret’s Out” also shows another twist on this situation. As the supplier grows more efficient at making the component and learns more about the component’s functionality, it may become sufficiently skilled at manufacturing the entire product to become a direct competitor (B2). U. S. consumer electronics firms fell into this trap in the 1960s and 1970s when they outsourced production of televisions and other electronics to Japanese suppliers. Ultimately, as domestic suppliers failed to develop their own capabilities, they fell further and further behind their own vendors. The suppliers eventually began to sell products under their own names — including Sony, Panasonic, and Mitsubishi — driving U. S. manufacturers such as Zenith and General Electric out of business. Today’s U. S. electronics and software companies may be repeating the same mistakes, as they increasingly outsource design activities to international suppliers.

Held Hostage by a Supplier

Another common but subtle outsourcing trap occurs when a supplier holds a firm hostage. If a company — or an industry — becomes too reliant on a particular vendor or set of vendors, power may shift to the supplier, allowing it to reap most of the profits. This dynamic is an extension of the IBM PC example above. Little did IBM know that the PC assembly industry would become primarily a commodity business, as the functionality that differentiated performance migrated from circuit boards to semiconductor chips and software.

As Professor Fine emphasizes — and as IBM presumably learned the hard way — the key is to “outsource capacity, not knowledge.” When IBM farmed out the bulk of the PC’s intellectual property to the software and semiconductor houses, it gave up a great deal of power in the supply chain. Intel and Microsoft could sell to any number of circuit-board manufacturers that could readily duplicate IBM’s design, but IBM could purchase Intel-compatible processors only from Intel and Windows-compatible operating systems only from Microsoft. This virtual monopoly enabled Intel and Microsoft to capture the bulk of the profits in the supply chain.

IBM tried to buck this trend by developing OS/2, its own operating system, in the late 1980s. It was arguably a better operating system than Windows. However, customers would not buy it because most software applications available at the time functioned only on Windows. Furthermore, because Windows had many more users than OS/2, Windows customers could more easily trade documents or software with other users than could OS/2 customers. In the end, the OS/2 system did not offer enough new features to convince users to switch. Because of the difficulties in competing with Microsoft and Intel, IBM and many other PC firms are instead trying to expand beyond the unprofitable PC business by moving into the maintenance and technical support of PCs, which offers more comfortable profit margins. Others are outsourcing as much of their production as possible to Asian contract manufacturers with lower personnel costs.

Another possible adverse consequence to outsourcing is that a company may lose the ability to intelligently purchase components — and suppliers may take advantage of this ignorance and price them at a premium. An executive for a top PC manufacturer recently stated that when the company first outsourced its notebook computer manufacturing, it could do so efficiently. However, after three years, the technology had changed sufficiently that internal people no longer knew enough about the product to determine whether a contract bid was competitive — especially because they suspected their vendors of engaging in price collusion and price gouging. The suppliers had the PC company in a difficult position, because they knew that the firm could no longer make the product themselves and that they had even lost the ability to determine the cost of the products they were buying.

As shown in “Paying the Ransom,” outsourcing initially decreases the cost to purchase the product (R3). As the supplier gains leverage and the firm loses it ability to determine the component’s cost, the supplier may eventually boost the price above what it would have cost the original company to produce if it had not outsourced it in the first place (B4).

The danger of falling into this trap is especially acute for companies that outsource a component to one supplier for a long period of time. Lack of expertise within the original company about creating the component leads to increased in-house manufacturing costs, which makes outsourcing even more attractive (R5). This “Success to the Successful” dynamic can prove costly if the firm ever desires to make the part again. As time passes and the knowledge of how to make the component diminishes, it can become prohibitively expensive to reverse the outsourcing decision. If the firm determines in the future that this component is vital to the performance of the product, it may need to invest heavily to bring the knowledge back in-house. However, this penalty may be necessary to regain some bargaining leverage with suppliers.

Reassembling Humpty Dumpty?

A firm also needs to know enough about its components to effectively integrate them into a single coherent product. As stated earlier, firms commonly choose to outsource because they can purchase a component from a supplier for much less than they can make it themselves. However, outsourcing may weaken more than just a firm’s ability to make and price a component; it may damage its ability to integrate multiple components into a final product.

Industry experts believe that one of the reasons Toyota decided to bring production of its electronic components back in-house was so that it could better integrate those components into a coherent whole. Forty years ago, automobile electronics were confined primarily to radio, lighting, and starter systems. Understanding electronics was not essential to automotive design. However, electrical systems control nearly every aspect of modern cars — from engine responsiveness to suspension behavior. Without understanding the intricacies of automotive electronics, it is difficult for manufacturers to design and produce cars that will meet customers’ expectations of automotive performance and comfort.

In another example, SAP, a German provider of enterprise-wide integrated software packages, experienced serious implementation problems with many of its North American clients. These software packages, often known as enterprise resource planning programs (ERPs), integrate all the information processing activities in a firm, from purchasing and manufacturing to order fulfillment and accounting. SAP ultimately traced its difficulties to its outsourcing of implementation to third-party consultants. Because SAP did not participate in the implementation process directly, the company did not gain knowledge to feed back into product improvements. Many of these problems have lessened since SAP began to join its alliance partners in actual implementation projects.

Manufacturing a component or performing a service can thus give a firm a decisive edge in knowing how to integrate it effectively into the final product (for more on this topic, see E. G. Anderson and G. G. Parker (2000), “Learning, Product Integration, and the Dynamics of the Make/Buy Decision,” University of Texas McCombs School of Management Working Paper, available from the author). Many of Microsoft’s detractors claim that the software giant uses its in-depth knowledge of the Windows operating system to give it an edge over its competitors in designing the features of its applications software. If this is true, then splitting Microsoft into an operating systems company and an applications software company may have a hidden cost to the consumer. The new applications company may become less familiar with Windows as the operating system changes over time and former Microsoft employees leave, leading it to design less effective products.

The third trap can lead to a possibly fatal balancing loop (see “All the King’s Men . . .”). As a company’s knowledge of its products’ components diminishes, integrating those components to provide a high-quality product or service can become prohibitively expensive (B6). Because the total product cost is the sum of the cost to make or buy components plus the cost to integrate them into the final product, any benefit received from cheaper components may be eliminated by increased integration costs.

Overcoming Outsourcing Traps

How does a firm overcome these outsourcing traps? One way is to avoid outsourcing altogether. This approach may be necessary for firms concerned about the leakage of proprietary knowledge through a supplier. If the company still wants to pursue outsourcing, it may need to have vendors sign binding nondisclosure agreements. However, even the best of these will only slow, not stop, the diffusion of knowledge. Companies cannot prevent suppliers from transferring personnel to projects for different clients. And, even if transfers could be stopped, as long as the supplier is selling to more than one customer, some information leakage will necessarily occur.

On the other hand, complete insourcing may not be the right solution. Companies that make components in-house may avoid the supplier hostage and systems-integration traps, but they must assume all the costs of producing the component or service. So, are there ways to obtain both the low risks and low integration costs of insourcing and the low component costs of outsourcing? We have found that there are (see, “Avoiding Outsourcing Traps” on p. 5). In many instances, by making just a small percentage of the components (or one of a number of similar components) in-house, a firm can maintain adequate knowledge to control many outsourcing risks and integration penalties while still reducing the average cost to make or buy those components. Toyota has pursued this strategy in its relationship with Denso. The automaker knows that it cannot produce electronics control systems more cheaply than its supplier, so it lets Denso produce most of the components. However, by designing and manufacturing others, Toyota can gain enough knowledge to utilize the full potential of its electronics control systems when designing new automobiles. This approach also helps prevent Denso from holding the company hostage.

Businesses can pursue a similar strategy when outsourcing services. Franchisers that also maintain company-owned stores are classic examples of partial outsourcing. For example, in 1988, Dunkin’ Donuts operated only 2% of its 1500 locations itself. However, it specifically used its company-operated sites to pilot all new distribution and marketing programs before asking the franchisees to adopt them.

The success of the partial outsourcing strategy depends on a number of variables, including economies of scale, the pace of technological change, and the modularity of components. But most important are the fixed costs associated with the component or service. If both the firm and its suppliers incur high fixed costs, then pursuing this partial outsourcing strategy may not be feasible. For example, silicon wafer fabs, which make semiconductor chips, cost several billion dollars to build and are unsuitable for low-volume production. Because of such huge capital requirements, partial outsourcing is unlikely to be cost-effective in this industry. On the other hand, in the software design industry, the majority of fixed costs—such as providing workers with high-end computers and Internet access—are based on the number of programmers employed. Hence, maintaining a small fraction of programming activities in-house is unlikely to be prohibitively expensive.

There are other possible solutions to the outsourcing dilemma as well. For example, a firm can lower its integration costs by hiring and training people with certain specific systems-integration skills, such as systems engineering. If employees carefully design a product so that its component interfaces are well defined and well understood, then the organization can avoid many thorny integration problems. For example, products that are designed to use “snap-in” components are usually much easier to assemble into a final product than those designed with parts that must be screwed into place. HewlettPackard has pursued this approach in tandem with increased outsourcing over the past five years.

Avoiding the IBM PC’s Fate

In this article, we have looked at just a few of the difficulties that can result from a decision to outsource. The outsourcing traps highlight how a seemingly simple decision to have a vendor produce a component or service can have devastating effects on a company’s future well-being. Using system dynamics, we can look beyond the short-term benefits achieved by outsourcing and analyze the long-term consequences, including what effects these decisions may have on future economic and market positions. We can be almost certain that IBM’s management did not envision the future that it created when it chose to farm out its microprocessor to Intel and its operating system to Microsoft. Perhaps IBM’s fate in the personal computing market and the structure of the entire industry would have been different if the company had used the tools that system dynamics and systems thinking offer to anticipate the potential pitfalls— and promise—that supply chain design can offer.

Edward G. Anderson Jr., Ph. D., (Edward. Anderson@bus.utexas.edu) is an assistant professor of management at the University of Texas McCombs School of Business. His research focuses on employing systems thinking and system dynamics in outsourcing and other knowledge management issues. Mary Ann Anderson (CABS@texas.net) is a principal consultant with the Computer Aided Business Strategies Group in Austin, Texas. The firm provides strategic solutions to businesses utilizing system dynamics.

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A Self-Organizing Event

The virtual conference was the brainchild of Holger Nauheimer, creator of the Change Management Tool book. It was the simplest of acts; Holger put out an invitation to his contact list, and RTVC was born. The conference was the collaborative design of a self-organizing group of independent consultants, facilitators, and technologists who met online; most still have not yet met face-to-face. In addition to Holger, who is from Germany, the RTVC steering team consisted of Stephan Dohrn, (Belo Horizonte, Brazil), Lucy Garrick (Seattle, US), Hans Gaertner (Bremen, Germany), Suresh Fernando (Vancouver, Canada), and Sofia Bustamante, (London, UK).

The hosts created an online portal where participants organized before, during, and after the event (see “Online Portal”). Links led people to conference registration, pre-session preparations, places to post session topics, and technical help. Because this gathering was an experiment, conference registration was free.

We used principles from Open Space Technology because of its simplicity and flexibility. Ironically, Open Space Technology, as originally conceived, has nothing to do with computer technology, but is a convening methodology consisting of a space to meet, a group with a shared theme or topic around which conversations can be focused, and time to achieve a desired result. Before our conference began, participants posted sessions related to our conference theme on an online discussion board. Time was scheduled for two tracks of self-organizing breakout sessions, where interested parties would participate using a variety of social media.

Imagine, if you will, a sort of virtual conference hotel where Skype Chat is the lobby and general convening space. Participants from around the globe arrive and sign into the opening session on Skype Chat. Other virtual rooms are designated as self-service places to get information on how the conference is organized, how to convene an Open Space session, technical support, and so on. Two tracks of breakout sessions are posted and convened in other virtual spaces using free social media such as virtual white boards, writing spaces, and mind maps as well as online video, audio, and text chat. In a closing session back in the general convening space, participants post outcomes from each breakout session.

ONLINE PORTAL

The hosts created an online portal where participants organized before, during, and after the event. Links led people to conference registration, pre-session preparations, places to post session topics, and technical help.

On the day of the event, we had no idea what would happen. About 30 minutes before the posted start time, 53 participants representing 19 different countries began to “arrive” and greet each other with no assistance from the facilitators (see “Participants from 19 Countries”). After the opening session, conveners held nine breakout sessions using a variety of social media platforms.

To be candid, I expected chaos. After all, in chat rooms, everyone can post simultaneously. Each social media tool has its own idiosyncrasies. To my surprise, the event was at least as orderly as any physical gathering I have attended, maybe more so. During the closing session, I asked participants for one-word reactions to the conference. Their reactions ranged from “thrilling, encouraging, and engaging” to “like riding a roller coaster, technically challenging, and disruptive.”

Our team was delighted by the responses and the success of the collective experience of conference attendees. We believe that virtual collaboration holds tremendous promise for code signing solutions to some of society’s most challenging issues, and because social media is a co-dependent environment, its strategic potential will continue to unfold as more and more people learn how to convene and co-create in it.

Lessons Learned

We realized somewhere along the way that we had been virtually collaborating in order to design our virtual collaboration conference. Since the conclusion of the RTVC conference, our team continues to work together on new projects. We still have not met in person. We get together daily in a private Skype Chat that we call our “office” to plan projects and discuss business matters. We recently facilitated an online brainstorm with people from around the world on the topic of participative government. We are openly sharing our expertise, learning from new experiences, and developing strategies to help individuals and groups who might otherwise have no way of working together.

Here are some of the things we’ve learned from convening the conference and other experiences with social media:

Ten Tips for Virtual Collaboration

1. Make It Cost Effective: You can do a lot with free and low-cost online tools. You can run global real-time meetings and automatically record the contents effectively and efficiently. Our first public conference was designed and implemented in four weeks with six volunteers and two part-time contractors at various levels of technical skill. You could not put on a physical conference in that timeframe for that budget. Our second event was a much more elaborate design and took approximately the same amount of time to plan.
2. Wade Before You Dive In: There is a dizzying array of social media. Pick a couple of platforms and experiment, ask questions, and get comfortable. This can be a time-consuming effort, so be patient.
3. Google It: Take advantage of free advice published on blogs and websites about how to use social media.
4. Prepare by Writing: If you’re a convener, consider pre-writing some text ahead of time in a simple text editor. Having prepared material that you can easily cut and paste into a chat or discussion can allow you to focus on the conversation instead of on the tool.
5. Hold a Technology Orientation: Allow time in advance of a meeting or conference as well as at the beginning of breakout sessions to familiarize participants with the tools being used. Test them ahead of time. This is particularly important when running multiple sessions utilizing different social media platforms.
6. Learn to Run Multiple Channels: Collaborating in small groups in virtual space involves running parallel channels simultaneously. Some, such as text chat, are synchronous (real-time), and others, such as wikis, are asynchronous. Some, such as most blogs, are one-way, and others, such as VOIP, are two-way. Experiment and have fun with these different media.
7. Hone Your Facilitation and Virtual Skills: The culture that has evolved from virtual collaboration features openly sharing expertise with a generosity of spirit. People share and help each other. As in the physical world, skillful facilitation supports communication, makes meaning, and creates the conditions for people to take conversations beyond talk to achieve goals. Your prowess in virtual-land will be aided by unlearning old beliefs about protection and control, and learning new ways to contribute and share the work. It is a practice—something you will never completely master but will improve with experience and curiosity.
8. Share Your Systems Thinking Skills: The virtual world is nothing if not self-organizing and emergent. Those lessons we’ve learned about being aware and present and testing assumptions are essential for successful leadership and engagement in the culture of virtual collaboration.
9. Designate Communication Conventions: Designating a few simple communication conventions can be enormously helpful when communicating via text. We use “ALL CAPS” to get the attention of the group; we use “@name” to address a comment to a specific person; and we use “#” at the end of a sentence as a virtual talking stick to indicate we’re through speaking. Abbreviations and incomplete sentences are common and part of the online chat culture.
10. Document and Keep the Conversation Alive: One advantage of all social media is that most of it automatically records the content of a meeting, whether text, voice, or image. To keep a synchronous conversation alive, we synthesize key themes and next steps, then cut and paste them into a community discussion board, blog, microblog, or community website.

Different and the Same

Virtual convening is part of virtual collaboration, but holding a meeting with geographically distant participants is just the tip of the iceberg. Conveners and participants have varying perceptions about what it means to collaborate. Our model of virtual collaboration continues to evolve in the virtual world, and so will yours. We change the virtual tools as they change us. Collaboration implies that real value is created for both conveners and participants.

In the virtual space, value is rarely limited to finances. It includes things like openness, generosity, respect, and reputation. Creating real value with virtual collaboration, as with in-person collaboration, is greatly enhanced through a thoughtful design and skilled facilitation process linked to the purpose of your gathering.

What is surprising is that an amazing amount of real material value is not only possible but has already been generated from virtual collaboration without the benefit of the traditional organizational systems and structures. By this I mean things like no org chart, no department heads, and no decision trees. These are emergent qualities in the virtual world.

In the virtual space, value is rarely limited to finances. It includes things like openness, generosity, respect, and reputation.

Consider what has already happened with Wikipedia and the Mozilla browser, Firefox. Wikipedia is a high-quality global encyclopedia published in 10 languages and three alphabets that was created by volunteers with a passion for its subject matter. For more than 10 years, Mozilla has been an open source, non-profit community creating and innovating on key Internet technologies where large commercial vendors could not. Mozilla has become the software provider of choice for more than 170 million people, creating products such as the Firefox browser and the Apache web server. Something revolutionary is going on in terms of what open social media can accomplish, and I have no doubt that in ways both subtle and obvious, it is likely to transform our institutions and organizations around the world.

In the closing epilogue of his book, Here Comes Everybody (Penguin Press, 2008), Clay Shirky tells the story of Aldus Manutius, a Venetian printer who in 1501 published the first translation of Virgil’s works in a format small enough to fit into a gentleman’s saddle bags, thus making the written word portable. Shirky, who studies the impact of media on society, goes on to say, “The lesson from Manutius’s life is that the future belongs to those who take the present for granted . . . The mistakes that novices make comes from lack of experience. They overestimate mere fads, seeing revolution everywhere, and they make this kind of mistake a thousand times before they learn better. But in times of revolution, the experienced among us make the opposite mistake. When a real once-in-a-lifetime change comes along, we are at risk of regarding it as a fad.”

Virtual collaboration is here to stay. It provides a bridge that goes well beyond geography. It is a way to connect what we have in common across space, time, generations, and organizations of every type and style. Virtual collaboration calls upon those of us who are learners to unlearn things because they have stopped being true and to tap into collective sources of wisdom facilitated by breaking through arbitrary institutional boundaries.

Lucy Garrick is a founder of NorthShore Group, a Seattle-based consulting and coaching practice in leadership and organizational change, and a cofounder of Radical Inclusion, which provides international education, social media strategy, and consulting services in the use of social media for positive organizational and social change.

For Further Reference:

Slide Show of Lessons and Outcomes from Real-time Virtual Collaboration Radical Inclusion Blog 50 Social Sites That Every Business Needs from Focus.com Skype: How To Make Free Calls Anywhere How To Participate in a Twitter Chat from TwitTip.com

The post Opening Space for Virtual Global Collaboration appeared first on The Systems Thinker.

Partially as a result of the different settings in which these activities take place, the VCR has remained an underused piece of electronics, while the automobile continues to play a central role in our culture. This example is just one of many that the authors cite in weaving a cautionary tale about relying exclusively on technology — especially information technology — to drive the future of our organizations, institutions, and societies. Instead, we must recognize how social needs — especially around learning — influence our acceptance and successful application of new technologies. If we fail to do so, we’ll continue to build products that people can’t use, design strategies that people won’t implement, and recommend changes that people fail to embrace — regardless of how elegant or sophisticated those solutions may be.

Broken Promises of the Information Age

To bolster their argument, Seely Brown, director of the famed Xerox Palo Alto Research Center, and Duguid, research specialist in social and cultural studies in education at the University of California at Berkeley, explore some of the broken promises of the Information Age. What ever happened to visions of the “paperless office”? Or predictions that the organizations of the 21st century would be flatter and less centralized than their 20th-century counterparts? Or the idea that most of us will soon be working for “virtual corporations,” dialing into the office every day from our homes? Despite now having the technical means to make such divinations realities, we have yet to do so. Are we merely creatures of habit, stubbornly standing in the way of progress? Or are there deeper reasons why the digital revolution hasn’t changed our world as quickly and as completely as some soothsayers had prophesized?

Seely Brown and Duguid believe that many of the predictions about the transforming impact of bits and bytes fail to take human needs and desires into account. They state, “The tight focus on information, with the implicit assumption that if we look after information everything else will fall into place, is ultimately a sort of social and moral blindness.” The authors argue that “rather than condemning humanity as foolish, primitive, or stubborn for sticking with the old and rejecting the new, it seems better to stop and ask why.”

Their probing questions produce interesting — and sometimes counterintuitive — results. For instance, why has the rise of digital communication corresponded with an unfortunate jump in paper consumption, when many predicted that computers would replace the need for printed documents? In exploring this query, Seely Brown and Duguid found that paper is more than just a carrier of information; it offers certain qualities that are challenging to duplicate in electronic form. Documents bear smells, textures, and smudges that convey meaning. For instance, think of the reactions that a letter on high-quality bond, a perfumed notecard, or a tearstained letter can provoke in the recipient — characteristics that are difficult to emulate by computer.

The authors sense that we have found cutting-edge technologies and old-fashioned pen and paper to be complementary rather than competitive. They cite the case of the fax machine, which has grown in popularity even as seemingly more efficient modes of communication have evolved. People still find it useful to be able to scrawl comments on a document and drop it in the fax for instant — and accurate — transmission.

Likewise, for years, pundits have predicted that the rise of e-mail, the Internet, and the World Wide Web would lead to flatter organizations, with information systems replacing middle managers. What these futurists failed to recognize is that managers add value to the flow of information; they aren’t simply conduits that can easily be replaced by machines. And technology can actually lead to greater centralization. With the compression of space and time made possible by digital communication, the main office can now maintain tighter control over branch offices than it could when information flowed more slowly. Thus, technology won’t automatically cause more egalitarian organizational structures; managers still must choose to share power and authority with others.

Knowledge and the Knower

Seely Brown and Duguid also address the topic of knowledge management. In an effort to leverage employees’ learnings and insights, numerous companies have invested fistfuls of money in knowledge databases. But many have found that, despite their best intentions, they have created only static repositories of information. True knowledge is notoriously difficult to “detach” from the knower. As a case in point, the authors cite several companies that have successfully identified best practices in one plant but have been unable to implement those practices in another factory just across town.

Why is transferring knowledge from one plant to another, or from one person to another, so difficult? This question brings us back to the example of the video-cassette recorder — and the social nature of learning. Seely Brown and Duguid refer to anthropologist Julian Orr’s study of the spread of knowledge among Xerox technical representatives — which occurred in spite of the company’s information systems. Orr found that the company-supplied documentation was inadequate for all but the most routine tasks that the reps faced. So the reps found ways to engage in collaborative problem-solving, knowledge sharing, and knowledge creation outside the organization’s formal processes — through telling stories over breakfast or while troubleshooting breakdowns together.

“Become a member of a community, engage in its practices, and you can acquire and make use of its knowledge and information. Remain an outsider, and these will remain indigestible.”

The reps formed a community that was linked by their common practice of servicing copiers. “The members of this community spent a lot of time both working and talking over work together. . . .The talk made the work intelligible, and the work made the talk intelligible. . . . Become a member of a community, engage in its practices, and you can acquire and make use of its knowledge and information. Remain an outsider, and these will remain indigestible.” The reps ultimately adopted a knowledge database that succeeded in becoming a valuable resource because they themselves determined what tips and insights to include. In this case, the technology supported — rather than sought to replace — the workers’ social network and processes.

Learning as a Social Process

Based on their findings, the authors have several recommendations for moving from an information-based to a knowledge-based model of learning. They highlight the power of collaboration, storytelling, and improvisation. They cite the example of a problem-solving session at Xerox that resembled “a series of alternating, improvisational jazz solos, as each [rep] took over the lead, ran with it for a little while, then handed it off to his partner, all against the bass-line continuo of the rumbling machine until finally all came together.” This kind of learning would be difficult to glean from a user’s manual or information database.

Seely Brown and Duguid also advocate balancing formal and informal processes, as well as structure and spontaneity. Too many constraints can limit creativity; too few can hinder productivity. They comment that “The use of deliberate structure to preserve the spontaneity of self-organization may be one of humanity’s most productive assets.”

The authors are careful to point out that knowledge creation and sharing mustn’t remain the purview of the folks in product development. “Businesses have to create new business models, new financial strategies, new organizational structures, and even new institutional frameworks to deal in these new markets.” Companies must look beyond their own walls to view their formal and informal connections with other businesses — especially those located close by. Seely Brown and Duguid point out the synergies present in “clusters” of companies in similar industries, such as the high-tech cluster in Silicon Valley, the Formula 1 cluster of race-car designers outside of London, and the golf-club cluster outside of Los Angeles. Such hotbeds of knowledge on a particular subject can offer economies of scale and broad-reaching networks of practice for all players.

Far from being a pessimistic diatribe about the limits of technology, The Social Life of Information highlights the potential that exists in the human mind and spirit. Time and again, though, the authors remind us that machines, software, and datalines must serve human needs — and that humans don’t exist merely to fulfill a destiny predetermined by our tools. In order to make the most of the incredible technical resources that we’ve created, we need to tailor them to help bring us together rather than allow them to push us farther apart. By remembering that learning and knowledge creation are social processes, we can ultimately leverage the promise of technology to build a better future for all.

Janice Molloy is content director at Pegasus Communications and serves as managing editor of THE SYSTEMS THINKER.

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Rarely will a company retrospective be written by someone whose involvement with an organization’s senior management team can compare to Ed Schein’s relationship with DEC. From 1966 through the early 1990s, Schein coached DEC’s senior management team on problem solving and worked with founder and president Ken Olsen on a wide range of other matters relating to organizational behavior. Schein’s perspective on DEC is supplemented by those of the supporting authors, a bevy of historical documents, and interviews or correspondence with an extensive list of former DEC employees.

All told, what emerges from DEC Is Dead is an insightful, three-dimensional picture of Digital through its growth and maturity. Although the book is well organized and well written, be prepared for some hard thinking. Unlike so many business case studies that oversimplify the story, DEC Is Dead presents a sophisticated view of the company and rich lessons for other organizations.

Three Developmental Streams

Schein centers his analysis of Digital on three developmental streams that can be used to uncover the forces behind the evolution of any organization: technology, organization, and culture. Here’s how the author describes these streams:

The Technology Stream. The technological environment in which a company operates and its own contribution to that environment through its products

The Organizational Development Stream. The ways in which an organization working in this technological context begins, grows, evolves, and, in the case of DEC, dies; the structures and processes that result from success, growth, size, and age

The Cultural Stream. The founding values that are shared through early and continued business success and eventually become embedded as shared, taken-for-granted assumptions about how an organization should be run

The author’s primary proposition is that early on, these three streams were aligned at Digital, creating a highly innovative and entrepreneurial organization. But the streams evolve at different rates. Technology can advance rapidly, sometimes through spurts of extremely rapid change. Culture, on the other hand, is slow to change; by serving as the “brakes” on an organization’s development, it can gradually erode the company’s capability to succeed in the marketplace and can cause an increasingly poor alignment among the three streams.

At DEC, the powerful culture stream had served the organization well during the formative years of commercial computing. But following the emergence of open architectures, microprocessors, and numerous other innovations in the industry, the culture became a barrier to making the changes in the technology and organizational streams that were required for ongoing success. A look at DEC’s formative years describes the culture and how early success entrenched the cultural beliefs.

The Early Years

Technologically, DEC was at the cutting edge and was responsible for many of the innovations in computing that moved the industry from mainframe to networked minicomputers. Its engineering prowess enabled the company to continually churn out new products that delighted the technically oriented buyers of the era.

Organizationally, DEC was structured around product lines, driven in large part by the engineering focus of the leadership team. Supporting business functions, such as finance and marketing, were centralized. Decision making was decentralized, with Ken Olsen preferring to let his management team wrestle things out. Olsen typically played the role of devil’s advocate, challenging any stance his managers would take to ensure that it was robust. Because the organization was still relatively small, local leaders felt responsible to the whole of DEC, and decentralized decision-making usually resulted in decisions being made by the most informed party.

Underlying the technology and organizational streams was DEC’s engineering-oriented culture, which adopted many traits from MIT. As Schein makes clear in his account, in the early years, there was tremendous harmony among DEC’s three streams. The culture suited the organizational structure, which in turn buoyed an engineering effort that was giving the nascent IT market well-made and highly desirable products.

Resistance to Change

Nevertheless, as the marketplace evolved and the technological context shifted, the strong culture impeded DEC’s ability to match these changes. Success in its early years reinforced the belief in and support of the “DEC way of doing things.” Any attempt to effect a change that violated a core cultural tenet triggered the “cultural immune system,” a host of behavioral responses that resist the intended alteration. The statement “That’s not the way we’ve done it before” is perhaps the most common example of an immune system response. Such responses are not explicitly designed by anyone; rather, they usually arise from the well-meant defense of an organization’s core cultural assumptions.

Perhaps the most important example of how the dominant culture was hampering the organization’s development had to do with marketing. Because like in many engineering-dominated environments, marketing was almost a bad word at DEC, early attempts to strengthen its role were met with stiff resistance. DEC engineers held the long-standing beliefs that good products will sell themselves and that customers just needed to be educated on the features and quality of DEC products in order to be persuaded to choose them. Marketing executives arrived, found it virtually impossible to make a dent in the way DEC’s products were presented, and left for more receptive environments. Meanwhile, DEC was beginning to fall behind its competitors in terms of technological innovation and fulfillment of customers’ needs.

Too Little, Too Late

By the time Olsen left DEC in 1992, the alignment between technology, organization, and culture had deteriorated dramatically. In an effort to save the company, new CEO Robert Palmer made wholesale changes to the organization and culture in order to bring them in line with the realities of the current marketplace. Many DEC employees, recognizing that the changes meant an end to the company they knew, moved on to other firms in the computer industry. Although these changes were inadequate to provide for DEC’s survival as an independent entity, they helped the company hang on long enough to be acquired by Compaq in 1998.

Lessons Learned

What does the DEC experience teach us? Schein identifies 15 lessons for other organizations (see “Lessons from DEC”).

Depending on the reader’s background and interests, DEC Is Dead is more than a comprehensive case study of one company’s growth, maturity, and eventual decline. Organizational development consultants are offered fascinating historical accounts of Schein’s early innovations in the realm of change management and process consultation. Leadership coaches can draw insight from the book’s extensive coverage of Ken Olsen’s management and leadership style and its strengths and weaknesses across time. System dynamicists are offered a detailed example of how structure drives behavior. And strategists can benefit from seeing the company’s evolution from an entrepreneurial organization with an emergent strategy to one with a more modern, analytical one. The richness of the tale — and of Schein’s telling of it — will surely make it a classic for a variety of audiences long after the computer industry has moved on to its next set of established technologies and companies.

Greg Hennessy is president of Speed Circuit Training Associates, a provider of motorsports-themed organizational and professional development workshops covering team effectiveness, change management, and competitive strategy. Speed Circuit partners with indoor karting centers across the country to integrate the development of vital skills with the excitement of wheel-to-wheel racing.

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Shifting the Burden to Science and Technology

That moment in Vienna seems very real to me this morning, as I think about the keynote presentations given at this extraordinary conference. As I pondered their messages, I found myself drawing a simple picture that has lingered in my mind for many years now, but that I have never shared with anyone. Perhaps it seemed too simple or obvious. Now I think it was just too soon, and it might be of some use as we try to understand the world today.

This drawing is a “Shifting the Burden” pattern that seems to go some way toward explaining the direction Western and, increasingly, worldwide culture has taken over the past 500 years—as well as some of the profound difficulties we face today as a result. As many of you know, a “Shifting the Burden” dynamic unfolds when real problems must be addressed and a meaningful distinction exists between “symptomatic” and “fundamental” solutions. When we implement symptomatic solutions, what we often call “quick fixes,” we attempt to remove the symptoms of a problem without necessarily dealing with its underlying causes— similar to taking aspirin to get rid of a headache or cutting costs to improve profits. An “effective symptomatic solution” makes things look better in the short-term but masks the need for more fundamental actions. Usually, the problem symptoms return, thereby calling for still more, and perhaps different, symptomatic responses and setting in motion a cycle of crisis and response. Because it’s easy to become dependent on quick fixes, “Shifting the Burden” articulates the underlying structure that produces addiction.

To understand how this dynamic can help make sense of our present world situation, I’d like to share some other stories. At that same conference in Vienna, a woman approached me after the session had concluded and asked, “Have you ever thought about the effect the Plague had on the growth of Western science? After the Plague, people felt compelled to learn how to control nature.” Having lived in Europe, I have some appreciation for the deep cultural impact of the 14th-century Great Plague, which decimated nearly 50 percent of the population in certain areas. But I had never thought about the fear of nature that it engendered, nor about the imperative to dominate nature that some would say now motivates much of Western science.

The Plague occurred about a hundred years before the beginnings of what we know as modern science— inspired by Galileo, da Vinci, Kepler, and Newton. Gradually, modern science took off and became the dominant current of society, culminating in the Industrial Revolution, which restructured the social order and led to the modern age. Technology not only became integral to society, it ultimately defined our culture. For example, most of us consider anything new and exciting somehow connected to technology and think that all of our problems must have a technological solution.

A few years back, a Chinese Confucian scholar told me that 2,000 years ago, Chinese culture had reached a level of mathematical sophistication roughly equivalent to that of 17thcentury Europe. But further development of empirical science in China did not occur. According to this scholar, it was intentionally stopped by Han-dynasty emperors. These emperors reasoned that continued advances in empirical science would lead to new technologies that would improve people’s lives materially, but would increase their suffering by fueling their desire for things they didn’t have. As a result, they would become more and more dependent on that type of science and technology, and less and less happy. To the ancient Chinese emperors, it was clear that this was not a wise course to follow, so it was discouraged.

The West, of course, has taken a different path. For the last 500 years at an accelerating rate, the last 150 to 200 years at an astounding rate, and the last 20 years at an unbelievable rate, we have been developing a dependence on a particular type of science and technology. This has given us an extraordinary level of technological prowess. But at what cost?

The premise behind my diagram is that, as human beings, we have a deep desire to have an impact on our world, for example, by helping a sick child or a poor person, or taking care of ourselves when we have a problem (see “Desire for Efficacy” in the diagram “Reliance on Science and Technology”). To increase our efficacy, we pursue science and technology; but in that pursuit, we move away from another way to gain efficacy— “growth.” What kind of growth? Obviously, I don’t mean material or economic growth. I mean integrated human development (emotional, mental, physical, and spiritual). This kind of growth allows us to connect fully with one another and with nature, and to learn to live together in ways that lend meaning to our lives and that cultivate our capacity to be human.

So, this diagram suggests that a “Shifting the Burden” dynamic underlies our desire for efficacy, linking it to a dependence on a Western approach to science and technology (a symptomatic solution) and away from human development (a more fundamental solution).

By the way, there’s one more element to the generic “Shifting the Burden” pattern—unintended consequences. As we become more dependent on the symptomatic solution, unintended side effects occur. What might some of the side effects be here? Consider how science and technology produce isolation. We might think communications technology connects people more directly, but by increasing our control over whom we communicate with, it also isolates us. I recently spoke with Meg Wheatley about a study she was doing of virtual, or online, communities. She concluded that they were actually the antithesis of community. Why? Because, as she put it, “a community is what happens when human beings are stuck with one another.” Virtual communities have zero cost of entrance and exit. So they can easily become anti-communities, because the people involved are all comfortable with one another. Community for Meg is what starts to develop when we are initially uncomfortable with one another.

Waste is another side effect of our shifting the burden to modern science and technology—in the U. S. one person produces about one ton of waste every two weeks. So is a false sense of security. Obviously, we could create a long list. In this drawing, what are the consequences of side effects? An even stronger urge for efficacy and a reduced capacity for fundamental solutions. Once we recognize our insecurity, we are driven to want still more technology to ease that insecurity. To the extent that we are isolated, real human growth becomes harder to achieve.

Three Premises About Complexity

Today many wonder if we are not at a historic moment, a period of great awakening. Of course, time will tell. But September 11 surely provides a tragic testimony to the state of our world—what people must do to get their voices heard. Historically, human beings have sorted out our social and environmental issues in community. If we were damaging the local river, the pollution was right there for all to see. We either cleaned it up or we were in trouble. Our problems, however severe, were relatively local to where we lived. But in the last 50 to 100 years, suddenly many of the negative social and environmental side effects of our actions have begun to manifest themselves on the other side of the world. Learning about these effects becomes more difficult and complex, because in systems thinking, complexity is defined as a situation in which cause and effect are no longer close in time and space.

I want to share three basic premises about complexity:

• Living itself is complexity.
• Our evolution as a species is interdependent with the evolution of the very complexity that we are a part of.
• We have an immense untapped capacity to deal with this complexity.

Let’s examine the idea that life is complex and interdependent. Farmers naturally accept the premise that cause and effect are separated in time, as do most traditional cultures around the world. The seasons and rhythms of sowing and reaping separate in time our actions from their future consequences. This is part of the core perennial wisdom of human beings, and it is a reality we all confront, starting as young children. Human relationships are probably the first domain where most of us encounter real complexity: Why did this person who was so nice to me suddenly turn cold? Because we fail to understand the systemic nature of relationships, we find it exceedingly difficult to see the effects of our own actions. So most of us struggle with relationships throughout our lives. That’s complexity. But it’s important to notice how good we can get at relating if we continue working at it. We have immense capacities for connecting and relating.

RELIANCE ON SCIENCE AND TECHNOLOGY

As we try to increase our effectiveness in the world, we become more dependent on a Western approach to science and technology. As a result, we become less connected to and focused on developing our own capacity to impact the world.

So, I don’t agree with those people in the systems field who suggest that a gap exists between complexity and our innate capacity for understanding complexity. That gap is at best a hypothesis. I deeply believe we have no idea of our innate capacity to understand complexity. In light of the “Shifting the Burden” dynamic that we have been living out during the modern age, especially in societies most shaped by modern technology, we have grown so used to our reliance on technology that we easily confuse our innate capacity with our manifest capability. So we tend to conclude that we’re clueless about complexity. But think about this: Have you ever driven in traffic, with your life in your hands and cars darting all around you, while carrying on a conversation with the person next to you? That’s a pretty complex situation, and by and large one we handle quite well.

The complexity of living is not just a product of the modern world. But two important modern developments have made complexity much more difficult to manage: (1) distant cause and effect and (2) a focus on controlling our immediate environment rather than on expanding our understanding of the world we are creating. I believe the rise of these two phenomena have led us to underestimate our innate capacities.

I do think a different gap exists, however. I first heard this one described many years ago. A senior official of the United Nations said that, as he traveled the world, he consistently saw the same underlying problem in many different guises: a large and growing gap between our technological prowess and our ability to understand technology’s effects on our lives—in other words, a gap between our power and our wisdom. That’s the gap I would assert does exist and that the “Shifting the Burden” diagram points to. And as long as it exists, creating the world we want to live in will be difficult, because in our addiction to the power of our technology, we neglect another, different source of power.

A senior official of the United Nations said that he consistently saw the same problem: a large and growing gap between our technological prowess and our ability to understand technology’s effects on our lives.

So that’s what I’ve been thinking about the last few days and years. Hearing your thoughts in our question-and-answer period today has been quite helpful. One person mentioned the danger of implying that technology itself is the problem, because through the pursuit of technology, we can more deeply understand the nature of the universe, which can enrich our lives. I agree completely. I want to emphasize that this gap is not about science and technology per se, but a particular approach to science and technology that has dominated our world for the past several hundred years.

Another person mentioned the need to be cautious in assuming that a symptomatic solution is “bad.” Again, this is an important point. A physician treating someone who is dying does whatever it takes to save the person, even though she knows her actions address the symptoms and not the underlying causes that caused this person’s crisis. Similarly, my “Shifting the Burden” diagram is not implying that Western science and technology are bad or should be stopped, only that our current approach to them is dangerously incomplete as a strategy for achieving efficacy.

Wholism and the “Implicate Order”

Johann Wolfgang von Goethe understood deeply this gap between modern science and wisdom. Most of us know Goethe as an extraordinary writer and philosopher, a giant of 19th-century literature. But Goethe considered his efforts in literature trivial compared to his work as a scientist, in understanding light and color, in working in botany, and in rethinking the scientific method. Much of his life he spent traveling throughout Europe, continually observing certain types of plants. Years ago, when I went to the Goethe Museum in Germany, I was stunned by his extraordinary collection of plant specimens. His approach to science, however, so contradicted mainstream Newtonian-Cartesian thought that it was dismissed as the dabbling of an eccentric genius.

The essence of Goethe’s science lay in his idea of scientific understanding, what is now called “wholism.” Wholism is a way of knowing that is a close cousin to what most of us call “systems thinking.” I believe they are natural and essential complements.

Imagine looking at the night sky. We all know that the pupil of our eye is probably less than a centimeter across. But few of us realize that the entire night sky exists in that tiny space of our pupil. No matter how infinitesimally small we make that space, still the entirety of the night sky is contained within it. This is the first principle of wholism: the whole is enfolded in each element or “part.” This idea, by the way, foreshadowed the theory of the “implicate order” articulated by quantum physicist David Bohm.

As we ponder wholism, we can see the programming to which we’ve been subjected as a result of growing up in a Newtonian world. Even most of our systems thinking efforts are essentially Newtonian: We study the extended world and see the interrelatedness between different things. That approach can be a powerful tool for understanding interconnections among parts, but it still doesn’t account for something else going on in the world—the mutual evolution of the parts and the whole.

Goethe tried to understand this mysterious element in living systems. For example, he would focus on a particular plant such as coldsfoot, observing how it grew in northern and central Germany, the Alps, and the Mediterranean. In each place, the plant looked different and unique, yet Goethe observed that its essence was always the same. He would focus on each concrete manifestation of the plant until he could see, as he describes it, the true or generative plant in his imagination. He concluded that there is a single coldsfoot. Similarly, for Goethe, there is a single human being, manifesting continually and uniquely.

Goethe’s science harmonizes uniqueness and universality. Nature produces extraordinary variety and uniqueness, and seems never to produce sameness in the manufactured sense. No two leaves are identical, just as no two cells, or no two human beings, are identical. Yet, the essential generative order is universal. There is only the human being or the coldsfoot. The whole is present in each concrete manifestation. Goethe believed that the fundamental aim of real science is to see nature in this way, at its essence—to see it, as David Bohm would say, as an interplay between “the implicate and the explicate order.” When we can perceive the interdependence between the whole and its concrete manifestations and how they evolve together, we expand our capacity to deal with complexity.

My first experience seeing in this way occurred 10 to 15 years ago. One morning I skied onto a frozen lake in the middle of Maine. It was beautiful, and the sun was just rising. I looked across the wind-blown snow on the lake, gazing out toward the mountains in the distance. Suddenly—and I don’t know how to explain this to you—I saw that the shape the wind had made in the snow was identical to the shape it had made on those mountains. My sense of time shifted profoundly as I recognized the generative order of that pattern in the snow, produced two or three days ago, and the same pattern on the mountain, produced perhaps 300 million years ago.

Primary Knowing

The time for Goethe’s wholistic ideas may now be arriving. In the last five years, Otto Scharmer and Joe Jaworski of the Society for Organizational Learning have been doing “deep interviews” with thought leaders around the world, many of them eminent scientists. So far they’ve done over 130 interviews, 25 of which are up on a new web site called “Leadership Dialogues,” which you can access through SoL’s web site (www.solonline.org). I believe these interviews provide compelling evidence that a profound shift is occurring in the scientific worldview today, a shift that could eventually lead to a movement toward what I call “growth” in my diagram and that could support a very different capacity for living together on this small planet.

To illustrate new views that are emerging, I’d like to share an excerpt from an interview with Eleanor Rosch, a leading cognitive scientist at the University of California at Berkeley, whose work on how people perceive color has challenged mainstream theories of perception. More recently, Rosch has started to articulate a theory of two types of knowing, primary and secondary, which correspond to two ways of understanding complexity. Secondary knowing includes understanding “extensive complexity,” seeing patterns of interdependence in the world around us. The archetype diagram that I drew is an example of this. Primary knowing involves seeing from within the generative process that produces the pattern, or seeing with the heart.

Most of us fail to notice how a leaf, for example, is continually being reproduced, how a tree is being generated or disappearing literally before our eyes. Because we have not cultivated our capacity for primary knowing, we see phenomena as fixed, rather than seeing into their source. But Rosch contends that this is a matter of social conditioning, not innate capacity. “If you folyour nature enough,” he says, “so that you’re continually integrating, you find you come to the original being. And the original being knows and acts and does things in its own way. It actually has a great intention to be tself and will do so if u just allow it.” Primary knowing is about cultivating the capacity to see deeply in Goethe’s sense.

This type of knowing is what Goethe considered seeing so deeply into what nature has produced that you can see its generative essence and begin to transform it. For example, if you can see the complexity of the “Shifting the Burden” dynamic—that you are part of society’s addiction to modern science and technology, it’s not just something occurring “out there” separate from you—you can begin to shift away from addiction toward growth.

Years ago I heard the famous inventor Buckminster Fuller say that all of us are scientists; in other words, we all have the capacity for primary knowing, for seeing the generative processes of life. Today, we have put science on a pedestal, occupying a similar position to religious institutions of the past. Scientists have become people who tell us how things “really” are, and most of us have become passive recipients of their knowledge. Bucky had a very different view. He believed the future lay in cultivating the scientist in all of us.

Today, as our scientific foundation shifts, the underpinnings of modern society are starting to shift. But such a shift may take 300 to 400 years, as with the first scientific revolution. I’d argue that we don’t have that much time left if we’re going to ensure that our society survives. Accelerating this shift is up to those of us serious about cultivating our capacity to see what is occurring all around us. Both systems tools and primary knowing can help us pay closer attention to and effect profound change in the world.

The Generative Nature of Reality

I want to close by sharing two events in South Africa that illustrate some shifts that are already occurring in our social reality. The first took place in the early 1990s. On the day when former South African President F. W. DeKlerk announced the ending of apartheid, Bryan Smith and I were in South Africa, doing a three-day leadership course. The group was mixed, about half white business leaders and half black community leaders. One black and one white South African cofacilitated the training with us. During the last day, we heard that DeKlerk was going to make an important announcement on TV, although no one knew what it was about. So we took a break to watch it. As we sat and listened to him give his famous speech, people’s jaws dropped. At one point, DeKlerk listed all the political organizations that were being unbanned, such as the African National Congress and the Pan-African Union. I watched the face of my dear friend Ann Loetsebe, a community leader and teacher, light up as she visualized all of her cousins and relatives who could finally come home.

We then finished the course with Martin Luther King Jr.’s “I Have a Dream” speech, something we had done for 15 years. Because the video was actually illegal in South Africa at the time, few participants had ever seen it. Afterwards, people stood up and shared their reflections. One white man looked Ann right in the eyes and said, “I have been brought up to think of you as an animal.” Then he broke down in tears. In that moment, I knew things were going to change in South Africa. When you get so inside the phenomenon of reality that you realize you are part of the phenomenon itself, you see that even the most “stuck” parts of reality can unfold. When he said this, I had a strange image of chains falling away from him.

When I heard Wendy Luhabe talk yesterday about the Truth and Reconciliation Commission, I was deeply moved. I know of no other example in history where people whose relatives had been killed stood facing the people responsible for their deaths and just listened, with complete understanding that these admissions were not about punishment, but about telling and reconciling. That’s what it’s like when you see together deeply into the generative nature of reality. You see that reality is like a flower: It is becoming. So why are we working like mad to “fix it”?

What will it take for us to once again become indigenous?

I want to leave you with a question. Bill McDonough is one of the world’s best-known green architects. His buildings generate more energy than they use. Right now he’s leading the redesign of the famous Ford Rouge plant, where Henry Ford first produced the Model T. Two weeks ago at MIT, McDonough gave a group of us a gift. He said he had been working in the field of green design for more than 20 years and had finally concluded that everything could be articulated by a single question. It lies at the heart of everything he’d been doing and maybe much of what we’re all trying to do. McDonough’s question is, “What will it take for us to once again become indigenous?”

This simple question gives each of us much to ponder. What does it mean to be indigenous? I think it means to be connected—to place, to nature, to life. It also has to do with stewardship and responsibility. The book Ishmael (by Daniel Quinn) tells the story of a man who goes to be taught by a teacher who turns out to be a gorilla. Most of the book is about their conversation. In the very first scene, the gorilla’s cage has a sign that says, “With man gone, will there be hope for gorilla?” It’s another way of saying that human beings have lost a sense of having a purpose as a species. So maybe that’s what it will mean to become indigenous again.

One other thing this question might lead us to understand is why each and every part is important. A native elder recently told Bill Isaacs that indigenous Americans have a very clear idea of why all the people of the world are here. The brown people, meaning the indigenous people, are here to connect humans and nature. The yellow peoples of the Orient are here to connect mind and body. The black peoples sang the universe into existence and are the generative force. And the pale faces? It is their job to bring them all together. No one is left out.

Peter Senge is a senior lecturer at the Massachusetts Institute of Technology. He is the author of The Fifth Discipline: The Art and Practice of the Learning Organization and coauthor of the three related Fieldbooks, most recently Schools That Learn. He lectures throughout the world about decentralizing the role of leadership in organizations to enhance the capacity of all people to work toward common goals. He is a member of the Society for Organizational Learning (SoL) and founding chairperson of SoL’s Council of Trustees.

Editorial support for this article was provided by Kali Saposnick.

Suggested Further Reading

Bortoft, Henri. The Wholeness of Nature: Goethe’s Way Toward a Science of Conscious Participation in Nature (Lindisfarne Books, 1996)

Quinn, Daniel. Ishmael (Bantam-Turner Books, 1992)

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