Executives today are constantly seeking to predict how their organizations and the marketplace will behave. But because many leaders continue to use traditional reductionist methods to understand organizational behavior ones that focus more on symptoms than on causes of a company’s success they fail to gain real insight into how to build and sustain that success. The result is often reactive, crisis driven management with unanticipated side effects and unforeseen outcomes.

Contrary to this rigid perception of organizations as predictable machines, some management thinkers have come to view them as complex and evolving organisms. Accordingly, the tendency in the business world to define companies in terms of simple formulas and numerical results is slowly being replaced by the recognition that, to be effective in leading organizations, we must think of them in terms of the underlying structures and dynamic patterns of behavior that produce those results. In other words, we must begin to complement or replace linear thinking about how our businesses work with nonlinear approaches by applying the principles and tools of system dynamics.

System Dynamics Theory

Why do so many brilliant management strategies lead firms directly into decline or not produce the anticipated results?

In his classic 1961 book Industrial Dynamics, Massachusetts Institute of Technology professor Jay Forrester originated the ideas and methodology of system dynamics. He pointed out that the traditional approaches of the management sciences could not satisfactorily explain the causes of corporate growth or decline because they focused on simply explaining behavior. He believed that a system’s behavior is actually a product of its structure and that leaders should seek to identify where changes in structure might lead to significant, enduring improvements. They could then design organizational policies and processes that would lead to even greater success.

In order for managers to undertake this design process, Forrester advocated that they must analyze their organizations using dynamic models. For this purpose, he developed tools such as causal loop and stock and flow diagrams. These tools serve to illustrate the interconnected feedback loops that form a complex system. By identifying these feedback loops, management can figure out a system’s basic patterns of behavior, which include growth(caused by positive feedback), balance(caused by negative feedback), oscillations(caused by negative feedback combined with a time delay), and further complex interconnections.

Applied to organizations, this way of thinking challenges the notion of measuring success only through financial results. Because people can see financial results, they think they have control over them. But these results are actually produced by the organization’s underlying structures. These structures consist of:

• Organizational Architecture: the basic organizational design (such as the functions or divisions that the company includes) and the governance system (such as the planning and control system)
• Organizational Routines: standard operating procedures, decision making processes, behavioral archetypes
• Tangible and Intangible Resources: financial capital, human resources, buildings, machinery, land, brands
• Organizational Knowledge and Value Base: patents, core competencies, cultural beliefs, attitudes

When we focus on systemic structures and behavioral patterns, we gain the knowledge to design our organizations to produce desirable day-to-day results in areas such as profits, employee motivation, customer satisfaction, and so on (see, “Structure, Behavior, and Results”). The basic idea of the dynamic approach is that, although people shape their organizations, their behavior is ultimately influenced, and therefore limited, by the organizational framework in which they operate. Consequently, leadership means much more than optimizing businesses for short-term outcomes; it involves creating and cultivating structures and enabling organizational behaviors that guarantee the viability of the whole firm. Therefore, in order to manage their organizations successfully, leaders must realize that the best way to achieve sustainable results is not by relying only on what they see or measure but by:

• Describing and assessing the observable behavior of the system;
• Understanding the interdependencies between a system’s behavior and its underlying structure;
• Making assumptions about and modeling these interdependencies using system dynamics tools; and
• Finding and implementing policies to redesign the structure of the system in order to improve its performance.

Building on this system dynamics foundation, we propose to take leadership one step further, to what we call evolutionary leadership. The natural process of evolution offers a compelling model of how leaders might intentionally design and guide growth and balancing processes to create a viable organization. Evolutionary leadership involves the deliberate interplay of two management functions: strategic management (designing structures and processes that stimulate growth) and management control (guiding the external and internal factors that regulate growth). But before we explore the synergy between these two functions, we need to talk about how evolution works in nature and in organizations.

Evolutionary Theory in Organizations

Evolutionary theory has been the predominant paradigm in natural sciences for more than a century. Recently, theorists and practitioners in the social and management sciences have begun to adopt the ideas of evolutionary theory as a framework for describing and analyzing organizational development. The basic concept these pioneers have set forth is that processes of variation, selection, and retention as well as the struggle for scarce resources trigger the evolution of an organization.

Sociocultural evolution differs from biological evolution in that it allows for the intentional variation and selection of ideas. In this context, an organization’s fitness its “viability,” or ability to survive and thrive depends on how its decisions and strategies affect its position in product and resource markets and on its legitimacy from the point of view of important stakeholders. Chilean neurobiologists Humberto Maturana and Francisco Varela have deeply influenced thinking about viability with their theory that living systems are complex systems that can self-generate. A system dies when it loses its ability to renew itself. In the business world, a company that fails to renew itself by changing its strategic orientation and/or internal structure in response to shifting conditions will die. In contrast, a viable organization is one that can continually create its own future and there by assure its fitness in an evolutionary sense.

But how does a viable organism develop this capacity to self generate? According to Maturana and Varela, it happens when the organism

• Preserves its identify by repeatedly drawing system boundaries (i.e., defining what is “internal” and, “external”); and
• Maintains its ability to adapt to a changing environment.

Within ever-changing environments, external forces constantly threaten the existence of a species by altering its living space. To survive, a species must adapt to the changing conditions successfully without losing its identity. For example, in nature, many kinds of birds have adapted from natural to urban environments, but not all have managed to do so. In the banking industry, banks have profoundly shifted their strategies in the past decade in response to technology changes and new competitors. Many brick and mortar institutions have gone “virtual.” In doing so, they are able to maintain their existence by simultaneously preserving their identity while adapting their strategy and structure to a changing environment.

The key to an organization’s survival lies in mastering the trade-off between preserving its identity and adapting to a changing environment. Leaders do so through strategic thinking and acting, and by asking how they can maintain the fit of the organizational structure and its environment. There are two ways to achieve this goal:

• Maintain your identity and structure and avoid fundamental adaptations by changing the environment or searching for an appropriate new environment.
• Fundamentally change your structure and redefine your identity to reestablish a fit between the organization and its ever changing environment.

In reality, most organizations choose adaptation strategies that lie somewhere between these two extremes.

Organizations can only make alterations to the extent that their structures and resources make modifications possible. A firm has a good chance to successfully adapt to a changing environment when it has a strong learning capacity, that is, the ability to anticipate, influence, and quickly react to environmental changes, along with the ability to recognize, vary, and advance the underlying mechanisms of the learning process itself. For example, Shell Oil enhances its learning capacity by combining strategic planning and organizational learning through scenario planning. Scenario planning provides a mechanism for thinking in alternatives and making underlying assumptions explicit. This process reduces the company’s risk of encountering negative surprises and increases the speed with which it can implement changes. In short, organizational learning is a dynamic feedback process that can help organizations remain viable and therefore survive the external pressures of natural selection (see “The Evolutionary Cycle in Organizations”).

Growth and Balance

In addition to having the ability to adapt and learn, systems must be able to grow. Generally speaking, growing means incorporating more and more available resources like nutrients for a plant or natural or human resources for a company in order to become larger and larger. For a company, growth can mean an increase in market share or market value. But is growth in itself sufficient for survival? Clearly, the answer is no, because nothing grows forever. But where and what are the limits to growth?

In nature, reinforcing processes, such as population growth, are slowed by balancing processes, such as limited food supplies and the spread of diseases. If normal balancing processes aren’t blocked and assert themselves before a population reaches the limits of its habitat, that species can maintain a harmonious relationship with its environment. Such balancing processes ensure that the evolving system remains within a viable range of activities, in this case, healthy population density. Indeed, these balancing processes are more crucial than reinforcing processes, in that they keep the overall system alive. If, on the other hand, important balancing processes are missing, the species might become extinct by overtaxing the resources in its environment.

Are there similar natural boundaries to the development of social systems? The answer is yes. For example, a firm’s development can be limited by its production capacity, the size of its market, or the number of its competitors. The faster the company grows, the more rapidly it reaches these boundaries. From time to time, such limits to growth can change. For example, shifts in market conditions, such as those created by the Internet boom or the world oil crisis of the 1970s, can increase or decrease the time it takes an organization to reach a certain limit, unless people find ways to use their limited resources more efficiently.

We can say that an organization is evolving when its configuration, routines, tangible and intangible resources, knowledge, and value base develop in accordance with the changing external environment. Scientists now know that most healthy living systems follow a developmental path described as punctuated equilibrium periods of balanced growth that are interrupted by periods of exponential growth (see “The Stages of Organizational Evolution” on p. 4).

We regularly underestimate the tremendous power of exponential, or reinforcing, growth. We tend to assume that growth is linear and increases consistently over time. However, exponential growth happens much more precipitously. If we observe the two over a short period of time, exponential growth approximates linear growth. Over a longer period, however, the gap between the two becomes enormous.

Because human beings tend to perceive short term rather than long-term changes, we often reach the boundaries of exponential growth faster than we anticipated, often completely unexpectedly. We see this happen to companies when booming success is followed by equally dramatic failure. For example, cellular telephone companies experienced this phenomenon when they projected that their sales would continue to increase at a high level. But they eventually saturated the market and experienced declining sales. For this reason, unless we understand and anticipate the impact and boundaries of exponential growth, we will have a distorted perception of the evolutionary process, leading to unpleasant surprises and even to an existential crisis for the whole enterprise.

Organizations sustain themselves when they attain a balanced evolution off setting reinforcing growth action with timely balancing impulses. Sustaining this balance is the only way to ensure that companies remain in the realm of “sound growth” as they develop and that they don’t exceed the limits of their environment or resources. Balanced evolution plays an especially critical role during periods of exponential growth, when the organization is at a much higher risk of losing its viability than in periods of balanced growth, when the stakes aren’t as high.

For example, when a leap in growth occurs for a limited time(through external factors such as deregulation or new developments in technology, or through internal factors such as changes in top management or a merger and acquisition), leaders need to off set that growth by intentionally introducing balancing feedback loops. They can do so through control and coordination systems as well as productivity enhancement programs. These loops keep the organization’s growth from consuming the company.

Leadership in Organizational Evolution

But how can leaders help firms achieve the balanced growth they need to evolve? Through strategic management, leaders expand the business; through management control, they regulate the growth process, making sure that it remains within a sustainable range. Together, the two functions form a balanced leadership cycle for guiding and controlling the company’s evolution.

Strategic Management. Through strategic management, leaders cultivate the conditions for a company’s sustainable growth. Specifically, they perform the following three functions:

1. Set Direction. As mentioned earlier, leaders need to preserve or redefine the organization’s core identity and develop its structures in ways that lead to lasting success. They do so by communicating the company’s values and beliefs to employees and external stakeholders through shared vision and mission statements, and by strengthening internal rein forcing processes such as employee morale. They also formulate and implement strategy, not by detailing a map of action but rather by defining a corridor of learning opportunities.
2. Build Resources. Leaders need resources to support entrepreneurial activity. They can acquire them externally (such as machinery or capital) or develop them internally (such as people or policies). From a resource based perspective, only internally built resources can provide the basis for competitive advantages and above average returns, because they are specific to the company and therefore more difficult to imitate. On the other hand, resources that are available on the open market are available to all competitors.
3. Create Infrastructure. Leaders must not attempt to drive growth but rather to influence the factors that can block or support it. As such, they need to design an organizational context that eliminates barriers to company development (such as fear, distrust, centralized decision making, too tight control, and insufficient resources) and develop processes to promote learning (such as organizing flexible teams, supporting communities of practice, creating incentive systems for transferring knowledge, and creating learning spaces).

From a system dynamics perspective, these three functions combine to form a reinforcing process called the “Strategic Management Loop,” which strengthens the company’s growth(see “The Balanced Leadership Cycle”). But for the organization to remain viable, this reinforcing loop must be reined in by balancing processes, such as those that make up the “Management Control Loop.”

Management Control. Management control acts to bring equilibrium to the expanding system. To do so, leaders must perform three central functions:

1. Assure Internal Consistency of Infrastructure, Resources, and Direction. Leaders need to maintain the coherence of a system, particularly in large companies where management functions often get split among different organizational units or departments. To handle this specialization of functions, they must synchronize the development of strategy, resources, structure, and systems. They do so by working with others to develop a shared view of the system, which acts as a basis of companywide activity. However, this model is necessarily a subjective simplification of complex reality, so it can easily become selective and distorted.
2. Compensate for Selective Perception. Therefore, leaders and their teams must compensate for their selective perception by continually enriching their assumptions with relevant new information and challenging their mental models. For example, they might use management information and decision support systems, which provide comprehensive data and make blind spots of organizational perception visible. Management control thus leads to more informed decision making and better anticipation of the consequences of those decisions.
3. Appropriately Limit Developmental Dynamics. Designing appropriate limits on developmental dynamics involves two realms: content and time. Leaders must analyze whether the firm’s expansion exceeds the limits set by its internal conditions (for instance, the number of staff with expertise in certain areas) and the external forces of its environment (for example, the size of the market), thus endangering its boundaries. They also must regulate how fast the firm grows. They do so by pacing the speed of growth so it doesn’t over tax the current management capacity (resources and infrastructure) or environmental limits (size and growth of the market).

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Leaders put these functions into action using different diagnostic tools, such as the balanced score card and budgeting. The balanced scorecard helps them see the inter connections among the key measures of the business, for instance, between employee capacity and customer satisfaction, or between customer satisfaction and market share. Executives can then ensure that key measures stay in balance. Through the budgeting process, they translate strategic direction into financial objectives, setting the frame work for the allocation of resources and the utilization of infrastructures to assure internal consistency. By limiting and balancing developmental dynamics as well as by assuring internal consistency, these tools contribute to the fulfillment of the management control function in the balanced leadership cycle.

In order to avoid survival threatening oscillations between growth and decline, leaders need to take into account the time delays that occur before balancing impulses take effect. Working properly, the interplay of strategic management (growth actions) and management control (balancing impulses) assures a synergistic rhythm of a company’s evolution, a characteristic of particularly successful firms in dynamic environments.

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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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