Leading from the emerging future : from ego-system to eco-system economies

Our Time Is Now We have entered an age of disruption. Financial collapse, climate change, resource depletion, and a growing gap between rich and poor are but a few of the signs. Otto Scharmer and Katrin Kaufer ask, why do we collectively create results nobody wants? Meeting the challenges of this century requires updating our economic logic and operating system from an obsolete "ego-system" focused entirely on the well-being of oneself to an eco-system awareness that emphasizes the well-being of the whole. Filled with real-world examples, this thought-provoking guide presents proven practices for building a new economy that is more resilient, intentional, inclusive, and aware. "A watershed! An inspiring, practical weaving of the inner and outer dimensions of the systemic changes so many around the world are now working toward." -Peter Senge, Senior Lecturer, MIT Sloan School of Management; Founding Chair, Society for Organizational Learning; and author of The Fifth Discipline "Scharmer and Kaufer have succeeded in writing the book that has the potential to transform civilization from one based on a rapacious, ego-driven economics to a viable, ecological, awareness-based model. This is a must-read for anyone who cares. It may well be the single most important book you ever read." -Arthur Zajonc, President, Mind and Life Institute, and author of Meditation as Contemplative Inquiry "Scharmer and Kaufer provide a creative and practical approach to shifting our economies. I see business as a movement, and this book shares that movement with the world, offering us inspiration to tap into the deeper levels of our humanity and urging us to transform the crises of our times." -Eileen Fisher, founder, Eileen Fisher, Inc. "The shift to an eco-system economy is emerging everywhere around us. Otto's and Katrin's clarity in identifying that this shift requires change-makers to expand our thinking from the head to the heart has helped me to be more intentional in designing processes to awaken the hearts of entrepreneurs everywhere. This is a necessary condition for the emergence of the new economy." -Michelle Long, Executive Director, Business Alliance for Local Living Economies "The purpose of business is to enhance the well-being of society. The 4.0 framework for transforming capitalism matters because it addresses a blind spot in our current discourse: how to create institutional innovations that could shift our economy from ego- to eco-system awa..

CHAPTER 1

Facing the Fire

When I left my German farmhouse that morning for school, I had no idea it was the last time I would see my home, a large 350-year-old farmhouse thirty miles north of Hamburg. It was just another ordinary day at school until about one o'clock, when the teacher called me out of class. "You should go home now, Otto." I noticed that her eyes were slightly red. She did not tell me why I needed to hurry home, but I was concerned enough to try to call home from the train station. There was no ring. The line was obviously dead. I had no idea what might have happened, but by then I knew it probably wasn't good. After the usual one-hour train ride I ran to the entrance of the station and jumped into a cab. Something told me I didn't have time to wait for my usual bus. Long before we arrived, I saw huge gray and black clouds of smoke billowing up into the air. My heart was pounding as the cab approached our long driveway. I recognized hundreds of our neighbors, area firefighters and policemen along with people I'd never seen before. I jumped from the cab and ran down through the crowd, the last half mile of our chestnut-lined driveway. When I reached the courtyard, I could not believe my eyes. The world I had lived in all my life was gone. Vanished. All up in smoke.

There was nothing—absolutely nothing—left except the raging flames. As the reality of the fire in front of my eyes began to sink in, I felt as if somebody had ripped away the ground from under my feet. The place of my birth, childhood, and youth was gone. I just stood there, taking in the heat of the fire and feeling time slowing down. As my gaze sank deeper and deeper into the flames, the flames also seemed to sink into me. Suddenly I realized how attached I had been to all the things destroyed by the fire. Everything I thought I was had dissolved into nothing. Everything? No, perhaps not everything, for I felt that a tiny element of my self still existed. Somebody was still there, watching all this. Who?

At that moment I realized there was a whole other dimension of my self that I hadn't previously been aware of, a dimension that related not to my past—the world that had just dissolved in front of my eyes—but to my future, a world that I could bring into reality with my life. At that moment time slowed down to stillness and I felt drawn in a direction above my physical body and began watching the scene from that unknown place. I felt my mind quieting and expanding in a moment of unparalleled clarity of awareness. I realized that I was not the person I had thought I was. My real self was not attached to all the material possessions smoldering inside the ruins. I suddenly knew that I, my true Self, was still alive! It was this "I" that was the seer. And this seer was more alive, more awake, more acutely present than the "I" I had known before. I was no longer weighted down by all the material possessions the fire had just consumed. With everything gone, I was lighter and free, released to encounter the other part of my self, the part that drew me into the future––into my future—into a world waiting for me, that I might bring into reality with my forward journey.

The next day my eighty-seven-year old grandfather arrived for what would be his last visit to the farm. He had lived in that house all his life, beginning in 1890. Because of medical treatments, he had been away the week before the fire, and when he arrived at the courtyard the day after the fire, he summoned his last energy, got out of the car, and went straight to where my father was working on the cleanup. He did not even once turn his head to the smoking ruins. Without seeming to notice the small fires still burning around the property, he went up to my father, took his hand, and said, "Kopf hoch, mein Junge, blick nach vorn!" "Keep your head up, my boy, look forward!" Then he turned, walked directly back to the waiting car, and left. A few days later he died quietly.

Only years later did I realize that my experience in front of the fire was the beginning of a journey. My journey began with the recognition that I am not just one self but two selves. One self is connected to the past, and the second self connects to who I could become in the future. In front of the fire I experienced how these two selves started to connect to each other. Today, twenty-years later and several thousand miles away in Boston, Massachusetts, the question "Who is my true self?" still lingers. I still ask, how does this self relate to that other stream of time—the one that seemed to draw me from the future that is wanting to emerge—rather than extending and reenacting the patterns of my past? And how does this self that connects to the future connect to my work? I believe these questions eventually prompted me to leave Germany for the United States in 1994 to continue my research at what was then the MIT Organizational Learning Center. And these same questions motivated the writing of the following chapters of this book.

CHAPTER 2

The Journey to "U"

Theory U • Interview with Brian Arthur at Xerox PARC • Francisco Varela on the Blind Spot in Cognition Sciences • The Inner Territory of Leadership

Theory U: Beginnings

As just discussed, the blind spot concerns the structure and source of our attention. I first began noticing this blind spot in organizations when I spoke with Bill O'Brien, the former CEO of Hanover Insurance. He told me that his greatest insight after years of conducting organizational learning projects and facilitating corporate change was that "the success of an intervention depends on the interior condition of the intervener." That struck a chord! So it's not only what leaders do and how they do it but their "interior condition," that is, the inner place from which they operate—the source and quality of their attention. So what this suggests is that the same person in the same situation doing the same thing can effect a totally different outcome depending on the inner place from where that action is coming.

When I realized that, I asked myself: What do we know about that inner place? We know everything about the what and the how, the actions and the processes that leaders and managers use. But what do we know about that inner place? Nothing! I wasn't even sure whether there were only one or many of these inner places. Do we have two? Ten? We don't know because it's in our blind spot. Yet, what I have heard time and time gain from very experienced leaders and creative people is that it is exactly that kind of blind spot that matters most. It is that blind spot that sets apart master practitioners and leaders from average performers. Which is why Aristotle 2300 years ago made a distinction between the normal scientific "what" knowledge (episteme) and the practical and technical "how" knowledge (phronesis, techne) on the one hand and the inner primary knowing of first principles and sources of awareness (nous) and wisdom (sophia), on the other.

Shortly after I came to MIT in 1994, I watched a live broadcast on organizational learning. In response to a question from the audience, Rick Ross, coauthor of The Fifth Discipline Fieldbook, went to the whiteboard and drew the following figure:

[ILLUSTRATION OMITTED]

Seeing that simple drawing made me realize that organizational change happens on different layers. In a flash I began mentally seeing these layers. Diagramming them helped because the changes from structure to process to thoughts present more and more subtle shifts. When I completed the drawing in my mind, I had added two more levels—above structure and below thought—as well as a horizontal dimension of change as we move from perceiving something to actually acting on it. This is how it began to look:

[ILLUSTRATION OMITTED]

I began calling the state at the bottom of the U "Presencing." We will learn much more about this in Part III, but for now, we can call it "seeing from our deepest source." That is, sensing and operating from one's highest future potential. It is the state each of us can experience when we open not just our minds but our hearts and our wills—our impetus to act—in order to deal with what is emerging all around us as new realities.

Whenever I used this framework in presentations and in my work with groups, organizations, or communities, I noticed how deeply it resonated with experienced practitioners. As they worked with this U image, people began to understand its two key dimensions. One is the distinction between perception and action that defines the horizontal axis, as we work from deeply connecting and sensing toward enacting and realizing. The vertical axis then shows us the different levels of change from the shallowest response: from "Re-acting" down through the deepest, "Re-generating."

Most change and learning methods are based on the Kolb Learning Cycle, which suggests a version of the following sequence: observe, reflect, plan, act. By grounding the learning process this way, the learning cycles are based on learning from the experiences of the past. The distinction of Harvard and MIT's Chris Argyris and Don Schön between single-loop and double-loop learning refers to learning from experiences of the past. Single-loop learning is reflected in the levels of reacting and restructuring, while reframing is an example of double-loop learning (which includes a reflection of one's deep assumptions and governing variables). However, the deepest level of the U graphic—referred to as regenerating—goes beyond double-loop learning. It accesses a different stream of time—the future that wants to emerge—and is what in this book I will refer to as presencing or "the U process."

The concept of the U, of course, didn't spring from nothing. It emerged from many years of change work in a variety of contexts and movements and some study, that are documented in two of my earlier books. Important sources that informed my early thinking about social development and change include a global learning journey across all the major global cultural spheres to study the dynamics of peace and conflict. This led me to India to study Gandhi's approach of nonviolent conflict transformation, and to China, Vietnam, and Japan to study Buddhism, Confuscianism, and Daoism as different approaches to development and life. I also had the fortune to work with unique academic teachers, Ekkehard Kappler and Johan Galtung, who taught me that critical thinking and science can function as a powerful force for social transformation and change. Other sources that influenced my thinking include the work of the avant-garde artist Joseph Beuys, and the writings of Henry David Thoreau, Martin Buber, Friedrich Nietzsche, Edmund Husserl, Martin Heidegger, Jürgen Habermas, as well as some of the old masters like Hegel, Fichte, Aristotle, and Plato. Among the philosophical sources, perhaps most influential was the work of the educator and social innovator Rudolf Steiner, whose synthesis of science, philosophy, consciousness and social innovation continues to inspire my work and whose methodological grounding in Goethe's phenomenological view of science has left significant imprints on Theory U. Another important inspiration source has been the work of Fried rich Glasl who, inspired by Steiner's work, developed the concept of the U-Procedure (Glasl 1997, 1999).

The key insight that I got from reading Steiner's foundational book, The Philosophy of Freedom, is the same insight that I walked away with from completing my first research project at MIT with Edgar Schein. In that project we looked at all the different theories of change that researchers at MIT's Sloan School of Management had come up with. When trying to summarize and conclude our findings from all these different theories and frameworks, Ed reflected on our result, a pretty complex integration of frameworks of various sorts, and said, "Perhaps we have to go back to data and to start all over again. Maybe we have to take our own experience in dealing with change more seriously." To paraphrase Steiner, we have to investigate our own experience and our own thought process in a clearer, more transparent and rigorous way. In other words, trust your senses, trust your observations, trust your own perception as the fundamental starting point of any investigation—but then follow that train of your observation all the way back to its source, exactly the same way that Husserl and Varela advocated in their work on the phenomenological method. Steiner's The Philosophy of Freedom focuses on individual consciousness. In Theory U, we explore the structures of collective attention.

Interview with Brian Arthur at Xerox PARC

In 1999, I started a project with Joseph Jaworski, author of Synchronicity: The Inner Path of Leadership. Our task was to create a learning environment to help a group of line leaders in an organization formed by the recent merger of Shell Oil and Texaco learn faster and develop the capacity to innovate in the changing business environment.

To do so, we interviewed practitioners and thought leaders on innovation, including W. Brian Arthur, the founding head of the Economics Program at the Santa Fe Institute. He is best known for his pathbreaking contributions to understanding high-tech markets. As Joseph and I walked up to the Xerox PARC building in Palo Alto, California, I couldn't help but think about all the revolutions that had begun in this very spot. Ever since the 1970s the original Xerox PARC team has been considered probably the most productive research and development team ever. It invented the Macintosh-type interface found on almost every desktop on Earth; it also invented the mouse, as well as numerous core ideas and technologies used by many successful companies today, including Apple Computer and Adobe Systems. The irony is that all these inventions and breakthrough ideas did not help the parent company, Xerox, which did not capitalize on these breakthrough ideas. Instead, these ideas were taken and developed further by people and organizations who were not distracted by the running of a once-successful copy machine company.

Arthur met us, and we immediately started talking about the changing economic foundations of today's business world. "You know," Arthur said, "the real power comes from recognizing patterns that are forming and fitting with them." He went on to discuss two different levels of cognition. "Most tend to be the standard cognitive kind that you can work with in your conscious mind. But there is a deeper level. Instead of an understanding, I would call this deeper level a 'knowing.'"

"Suppose," he said, "that I was parachuted into some situation in Silicon Valley—not a real problem, just a complicated, dynamic situation that I'm trying to figure out. I would observe and observe and observe and then simply retreat. If I were lucky, I would be able to get in touch with some deep inner place and allow knowing to emerge." He continued, "You wait and wait and let your experience well up into something appropriate. In a sense, there is no decision making. What to do becomes obvious. You can't rush it. Much of it depends on where you're coming from and who you are as a person. This has a lot of implications for management. I am basically saying that what counts is where you're coming from inside yourself."

What Joseph and I heard that day resonated deeply with what we had heard from other leading practitioners we had worked with across many sectors and industries. Leaders need to deal with their blind spot and shift the inner place from which they operate.

Arthur asked us to imagine what would happen if Apple Computer, for instance, decided to hire a CEO from, say Pepsi-Cola? That leader would bring one sort of cognition: cost down, quality up, whatever the mantra is. And it wouldn't work. But now imagine a Steve Jobs coming in—someone who can distance himself from the problem and think differently. "When he came back to Apple, the Internet was just beginning. No one knew what that might mean. Now look at him: he turned Apple around." Top-notch scientists do the same thing, Arthur continued. "Good, but not quite first-rate scientists are able to take existing frameworks and overlay them onto some situation. The first-rate ones just sit back and allow the appropriate structure to form. My observation is that they have no more intelligence than the good scientists do, but they have this other ability and that makes all the difference."

This "other way of knowing" shows up in Chinese and Japanese artists as well. Arthur said, "They'll sit on a ledge with lanterns for a whole week, just looking, and then suddenly they'll say, 'Ooohh' and paint something very quickly."
(Continues...) Excerpted from Theory U by C. OTTO SCHARMER. Copyright © 2009 C. Otto Scharmer. Excerpted by permission of Berrett-Koehler Publishers, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site. Our Time Is Now We have entered an age of disruption. Financial collapse, climate change, resource depletion, and a growing gap between rich and poor are but a few of the signs. Otto Scharmer and Katrin Kaufer ask, why do we collectively create results nobody wants? Meeting the challenges of this century requires updating our economic logic and operating system from an obsolete?ego-system? focused entirely on the well-being of oneself to an eco-system awareness that emphasizes the well-being of the whole. Filled with real-world examples, this thought-provoking guide presents proven practices for building a new economy that is more resilient, intentional, inclusive, and aware.?A watershed! An inspiring, practical weaving of the inner and outer dimensions of the systemic changes so many around the world are now working toward.? --Peter Senge, Senior Lecturer, MIT Sloan School of Management; Founding Chair, Society for Organizational Learning; and author of The Fifth Discipline?Scharmer and Kaufer have succeeded in writing the book that has the potential to transform civilization from one based on a rapacious, ego-driven economics to a viable, ecological, awareness-based model. This is a must-read for anyone who cares. It may well be the single most important book you ever read.? --Arthur Zajonc, President, Mind and Life Institute, and author of Meditation as Contemplative Inquiry?Scharmer and Kaufer provide a creative and practical approach to shifting our economies. I see business as a movement, and this book shares that movement with the world, offering us inspiration to tap into the deeper levels of our humanity and urging us to transform the crises of our times.? --Eileen Fisher, founder, Eileen Fisher, Inc.?The shift to an eco-system economy is emerging everywhere around us. Otto's and Katrin's clarity in identifying that this shift requires change-makers to expand our thinking from the head to the heart has helped me to be more intentional in designing processes to awaken the hearts of entrepreneurs everywhere. This is a necessary condition for the emergence of the new economy.? --Michelle Long, Executive Director, Business Alliance for Local Living Economies?The purpose of business is to enhance the well-being of society. The 4.0 framework for transforming capitalism matters because it addresses a blind spot in our current discourse: how to create institutional innovations that could shift our economy from ego- to eco-system awareness at the scale of the whole.? --Guilherme Peirão Leal, founder and Cochairman, Natura Cosméticos For fans of the New York Times bestseller I Quit Sugar or Katie Couric's controversial food industry documentary Fed Up, A Year of No Sugar is a "delightfully readable account of how [one family] survived a yearlong sugar-free diet and lived to tell the tale...A funny, intelligent, and informative memoir." --Kirkus It's dinnertime. Do you know where your sugar is coming from? Most likely everywhere. Sure, it's in ice cream and cookies, but what scared Eve O. Schaub was the secret world of sugar--hidden in bacon, crackers, salad dressing, pasta sauce, chicken broth, and baby food. With her eyes opened by the work of obesity expert Dr. Robert Lustig and others, Eve challenged her husband and two school-age daughters to join her on a quest to quit sugar for an entire year. Along the way, Eve uncovered the real costs of our sugar-heavy American diet--including diabetes, obesity, and increased incidences of health problems such as heart disease and cancer. The stories, tips, and recipes she shares throw fresh light on questionable nutritional advice we've been following for years and show that it is possible to eat at restaurants and go grocery shopping--with less and even no added sugar. Year of No Sugar is what the conversation about "kicking the sugar addiction" looks like for a real American family--a roller coaster of unexpected discoveries and challenges. "As an outspoken advocate for healthy eating, I found Schaub's book to shine a much-needed spotlight on an aspect of American culture that is making us sick, fat, and unhappy, and it does so with wit and warmth."--Suvir Sara, author of Indian Home Cooking "Delicious and compelling, her book is just about the best sugar substitute I've ever encountered."--Pulitzer Prize-winning author Ron Powers It's Dinnertime. Do You Know Where Your Sugar is Coming From? Most likely everywhere. Sure, it's in ice cream and cookies, but what scared Eve O. Schaub was the secret world of sugar--hidden in bacon, crackers, salad dressing, pasta sauce, chicken broth, and baby food. With her eyes open by the work of obesity expert Dr. Robert Lustig and others, Eve challenged her husband and two school-age daughters to join her on a quest to eat no added sugar for an entire year. Along the way, Eve uncovered the real costs of our sugar-heavy American diet--including diabetes, obesity, and increased incidences of health problems such as heart disease and cancer. The stories, tips, and recipes she shares throw fresh light on questionable nutritional advice we've been following for years and show that it is possible to eat at restaurants and go grocery shopping--with less and even no added sugar. Year of No Sugar is what the conversation about "kicking the sugar addiction" looks like for a real American family--a roller coaster of unexpected discoveries and challenges. "As an outspoken advocate for healthy eating, I found Schaub's book to shine a much-needed spotlight on an aspect of American culture that is making us sick, fat, and unhappy, and it does so with wit and warmth."--Suvir Sara, author of Indian Home Cooking "Delicious and compelling, her book is just about the best sugar substitute I've ever encountered."--Pulitzer Prize-winning author Ron Powers Shows how leaders can access the deepest source of inspiration and vision • Includes dozens of tested exercises, practices, and real-world examples We live in a time of massive institutional failure, one that requires a new consciousness and a new collective leadership capacity. In this groundbreaking book, Otto Scharmer invites us to see the world in new ways and in so doing discover a revolutionary approach to leadership. What we pay attention to and how we pay attention is key to what we create. What prevents us from attending to situations more effectively is that we aren't fully aware of and in touch with the inner place from which attention and intention originate. This is what Scharmer calls our blind spot. By moving through Scharmer's U process, we consciously access the blind spot and learn to connect to our authentic Self—the deepest source of knowledge and inspiration—in the realm of “presencing,” a term coined by Scharmer that combines the concepts of presence and sensing. Based on ten years of research and action learning and interviews with over 150 practitioners and thought leaders, Theory U offers a rich diversity of compelling stories and examples and includes dozens of exercises and practices that allow leaders, and entire organizations, to shift awareness, connect with the best future possibility, and gain the ability to realize it.

In this ground-breaking book, C. Otto Scharmer invites us to see the world in new ways.

What we pay attention to, and how we pay attention is the key to what we create. What often prevents us from 'being present, ' is what Scharmer calls our blind spot, the inner place from which each of us operates. Becoming aware of our blind spot is critical to bringing forth the profound systemic changes so needed in business and society today.

First introduced in Presence, the U methodology of leading profound change is expanded and deepened in Theory U. By moving through the "U" process we learn to connect to our essential Self in the realm of 'presencing' - a term coined by Scharmer. When 'presencing' we are able to see our own blind spot and pay attention in a way that allows us to experience the opening of our minds, our hearts, and our wills. Through this process we are able to shift our awareness to allow us to connect with our best future possibility--and to realize it.

Annotation In this ground-breaking book, C. Otto Scharmer invites us to see the world in new ways. What we pay attention to, and how we pay attention is the key to what we create. What often prevents us from 'being present, ' is what Scharmer calls our blind spot, the inner place from which each of us operates. Becoming aware of our blind spot is critical to bringing forth the profound systemic changes so needed in business and society today. First introduced in Presence, the U methodology of leading profound change is expanded and deepened in Theory U. By moving through the "U" process we learn to connect to our essential Self in the realm of 'presencing' - a term coined by Scharmer. When 'presencing' we are able to see our own blind spot and pay attention in a way that allows us to experience the opening of our minds, our hearts, and our wills. Through this process we are able to shift our awareness to allow us to connect with our best future possibility--and to realize it "We have entered an age of disruption. Financial collapse, climate change, resource depletion, and a growing gap between rich and poor are but a few of the signs. Collectively, despite our best efforts, we are producing results that nobody wants. We must move away from an obsolete "ego-system" awareness that focuses entirely on the well-being of the individual-be it a single person, group, organization, or country-to an eco-system awareness that emphasizes the well-being of the whole. To free ourselves from outmoded ways of perceiving the world, we need the capacity to sense and actualize emerging future possibilities, both individually and collectively. Scharmer and Kaufer here describe a method they call presencing (a combination of the words presence and sensing). It enables the development of institutional innovation and new leadership capacities so leaders can connect to the highest future possibility and become part of what brings it about." -- Publisher's website The author of Theory U shares a practical guide for leaders who want to forge a path to a better future for the world. We have entered an age of disruption. Financial collapse, climate change, resource depletion, and a growing gap between rich and poor are but a few of the signs. In Leading from the Emerging Future , Otto Scharmer and Katrin Kaufer show us how to lead the shift out of an economy designed to collectively create results nobody wants. Meeting the challenges of this century requires updating our economic logic and operating system from an obsolete "ego-system" focused entirely on the well-being of oneself to an eco-system awareness that emphasizes the well-being of the whole. Filled with real-world examples, this thought-provoking guide presents proven practices for building a new economy that is more resilient, intentional, inclusive, and aware. On The Surface: Symptoms Of Death And Rebirth -- Structure: Systemic Disconnects -- Transforming Thought: The Matrix Of Economic Evolution -- Source: Connecting To Intention And Awareness -- Leading The Personal Inversion: From Me To We -- Leading The Relational Inversion: From Ego To Eco -- Leading The Institutional Inversion: Toward Eco-system Economies -- Leading From The Emerging Future: Now. Otto Scharmer And Katrin Kaufer. Includes Bibliographical References (pages 259-273) And Index.