Rethinking growth: social intrapreneurship for sustainable performance

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Copyright material from www.palgraveconnect.com - licensed to University of California-CDL - PalgraveConnect - 2011-04-14

Rethinking Growth

10.1057/9780230235793 - Rethinking Growth, Walter Baets and Erna Oldenboom

Also by Walter Baets: A COLLECTION OF ESSAYS ON COMPLEXITY AND MANAGEMENT COMPLEXITY, LEARNING AND ORGANIZATIONS: A Quantum Interpretation of Business

KNOWLEDGE MANAGEMENT AND MANAGEMENT LEARNING: Extending the Horizons of Knowledge-based Management ORGANIZATIONAL LEARNING AND KNOWLEDGE TECHNOLOGIES IN A DYNAMIC ENVIRONMENT THE HYBRID BUSINESS SCHOOL: Developing Knowledge Management Through Management Learning (Co-author with Sent Van de Linder) VIRTUAL CORPORATE UNIVERSITIES: A Matrix of Knowledge and Learning for the New Digital Dawn (Co-author with Sent Van de Linder) WIE ORDE ZAAIT ZAL CHAOS OOGSTEN: EEN VERTOOG OVER DE LERENDE MENS (Dutch language; translated title: ‘HE WHO SOWS ORDER, WILL HARVEST CHAOS: An Essay on the Learning Human’)

The Diversity, Leadership and Responsibility Series Series Editor: Walter Baets is Professor of Complexity, Knowledge and Innovation, and Associate Dean for Innovation and Social Responsibility at Euromed Marseille Ecole de Management, France. Over the last decade we have seen an extraordinary focus on the short term, including an almost exclusive interest in the shareholder value of a company. As a consequence, the shareholdership of a company changed in nature, and so did management. But with this perspective we are unable to address the real issues of economic development over a somewhat longer horizon – or pay attention to the sustainability of this development. Companies are challenged with these problems today, and so is the world economy. The Palgrave Macmillan Diversity, Leadership and Responsibility Series seeks to publish cutting edge ideas, approaches and practices that contribute to a more responsible and human-oriented view on management development – a key success factor for the decade to come. The aim of this series is to enrich our understanding of management in diversity, building on a holistic concept of business, being relevant for both academia and business practice.

Titles include: Walter Baets and Erna Oldenboom RETHINKING GROWTH Social Intrapreneurship for Sustainable Performance The Diversity, Leadership and Responsibility Series Series Standing Order ISBN 978-0-230-23574-8 You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difﬁculty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England.



INFORMATION TECHNOLOGY AND ORGANISATIONAL TRANSFORMATION: Innovation for the 21st Century Organisation (Co-editor with Robert Galliers)

Rethinking Growth

Walter Baets and

Erna Oldenboom



Social Intrapreneurship for Sustainable Performance

© Walter Baets and Erna Oldenboom 2009

No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2009 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN-13: 978-0-230-20139-2 hardback ISBN-10: 0-230-20139-3 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Baets, W. R. J. (Walter R. J.) Rethinking growth : social intrapreneurship for sustainable performance / Walter Baets and Erna Oldenboom. p. cm. Includes index. ISBN 978-0-230-20139-2 1. Social responsibility of business. 2. Sustainable development. 3. Management—Environmental aspects. I. Oldenboom, Erna, 1954 – II. Title. HD60.B333 2009 658.4’08—dc22

2008041037

10 9 8 7 6 5 4 3 2 1 18 17 16 15 14 13 12 11 10 09 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne



All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

List of Figures

vi

List of Tables

vii

Preface

viii

Acknowledgements

xiv

1 The Thermometer Causes Sickness 2 The Biology of Business

1 29

3 Emergence and Dynamics: A Quantum Ontology of A-causality 55 4 Non-Violence and Co-Creation

74

5 Management by Values

100

6 Sustainability Principles and Leadership in Management

121

7 Sustainable Performance

143

8 Social Entrepreneurship: A Micro Example

176

9 Social Intrapreneurship for Sustainable Performance

188

Appendix: Blueprint of a Workbook

195

Notes

226

Index

227

v



Contents

6.1 6.2 7.1 7.2 7.3 7.4 A.1 A.2 A.3 A.4 A.5

Holism according to Wilber A holistic management model Cassandra diagram: The holistic diagnoctic for personal sustainable performance Key figures 2006 Alliance Renault–Nissan worldwide sales 2005 Cassandra diagram applied to Renault Europe Automobiles The roadbook to social intrapreneurship Blue Ocean Strategy extended The process of creativity and innovation The learning contract The learning coach

vi


129 134 150 159 160 165 196 200 203 218 221


Figures

4.1 5.1 7.1 7.2 7.3 7.4 7.5

Convictions per group Unconscious and conscious attitudes The Cassandra axis (sample) Test of the factorial model adequacy for each one of the constructs Renault Europe Automobiles (Case analysis made by Carina Richards) ‘Classical’ analysis Cassandra values Questionnaire findings

vii


91 119 151 152 158 165 166


Tables

Sustainable performance is clearly one of the leading contemporary issues yet it has limited coverage in the literature and research, and what little there is doesn’t link well to managerial experience. This was brought home to me two years ago when I (Erna) was asked to ‘teach’ a course called Sustainable Performance and Leadership. This invitation arose when an ‘expert’ in this specific field did not show up at the very last moment. I had no real experience in this area, but then nobody really had. Having been employed for many years as a Human Resources Manager with a leading international company, I had experience in the leadership part and the incentive to explore something that had aroused my curiosity and seemed central to sustainability: how managers make distinctions between themselves in a private setting and themselves in the business world. How could it be that people in ‘normal’ life have certain values, but believe that the same values need not be respected in business? Or, more personally, how comfortable are you in sharing with your children the decisions you make, and how you behave, in your business environment? In business we can hide ourselves behind rules, articles, procedures, and systems as if they created themselves. Unfortunately, while we can claim authority and rights, not many people take responsibilities as a logical consequence. The most economically developed countries, for instance, created a world based on their concepts, ideologies, and belief patterns. This extended to calling other countries, which may have an impressive cultural and historical background, ‘underdeveloped’. This label is applied to countries which do not fit our idea of economic wealth. And so we call their people ‘poor’, based on our own culturally created concept of poverty – a concept designed to convince that there is not enough – whereas, as Mahatma Gandhi pointed out ‘The world offers enough for everybody’s needs, but not enough for everybody’s greed’. One result is that we live in a continuous confusion between the two and, instead of living life to the fullest, many work harder and harder to earn more money that will never be enough to satisfy artificially created desires. Take the example of outsourcing and legislation. When travelling to Morocco recently, I noticed the following sign in Marseilles airport: ‘It is forbidden to import false copies of well-known brands. Imprisonment viii



Preface

ix

can be the consequence’. In Marrakech I saw some very well made ‘Lacoste’ T-shirts and asked whether these T-shirts were ‘real’. The salesman responded: ‘All these shirts are of a very good cotton quality’. I smiled, agreed, and bought some of his T-shirts. He was absolutely right. They were made of the best cotton quality. Almost certainly all the Lacoste, Polo Ralph Lauren, and other well-known brands are produced by the same tailors in the same low-cost countries in the world. It illustrates how our Western world legislation defends the rights of the big industries to profit by the fact that people elsewhere are not very well paid and work under horrible conditions. Before starting the Sustainable Performance and Leadership course, I thought about the issues to be covered. I was very surprised that there was so little (almost nothing) written about sustainable performance. There was certainly literature on sustainable development and substantial bodies of work on leadership. However, these are not the same. I felt disappointed that my need for a body of research and theoretical investigation in this area was not met. Instead of feeling excited by the fact that this ‘wheel’ was not invented yet, I doubted my own wisdom and knowledge even after so many years of theoretical and practical experience in many different countries. Then I recalled the experience of creating, with Walter, an earlier management course ‘Quantum Physics and Management: A Holistic Management Approach’. We learned to teach innovative material and about which not everybody was as enthusiastic as us (it was even called ‘weird’ by a minority). We learned to stay calm in the strong storms that sometimes followed due to our creative and ‘different’ view on management. We learned to be patient and curious, never trying to convince others. During that time we noticed that our ‘students’ were almost always present, including the ones who ‘did not believe’, and we felt very aware of the learning that was taking place especially in our own brain cells. This book will consider evidence from quantum physics that the observer has a crafting impact on the ‘object’. It suggests that ‘objectivity’ does not exist but that through the notion of objectivity, we have created an image which allows us to separate ourselves from others and the rest of the world. If we separate ourselves from others we have little awareness of their suffering since it is not ours. Stuck perceptually in the concept of poverty, for example, nothing will ever be enough to satisfy our needs/greeds in life. My own path goes back to the time when, as a young child, I dreamed of grace and beauty. My first school assignments were about



Preface

Dr Albert Schweitzer and Mahatma Gandhi and when, for example, we role-played cowboys and Native Americans, I wanted to be Winnetou or another Native American. It was much easier for me to connect to them. I learned that Columbus discovered America in 1492 but I felt this was a bit strange, since many people already lived there. The discoverers brought their habits, attitudes, and fears, based on their thinking and as a result the richness, wisdom, and knowledge of the native people almost disappeared. I thought it was normal to share without thinking about giving it any value. When I received a present, everybody else was allowed to play with it or to keep it. I never ‘owned’ something without thinking in that way. In fact, I ‘thought’ very little. I dreamed! I dreamed of a world where people loved each other, where people never suffered, where people served others, and where nature was the best place to be in. I was a horserider, and was always outside, somewhere near the river, or in the forest. Perhaps as a manager, or management student, this personal approach strikes you as unusual, or even inappropriate. However, our book seeks to present a new management paradigm and to provide managers with a framework able to bridge the divide between personal and professional responsibilities, between delivering profits and protecting the planet; a framework able to illustrate how to integrate healthy selves, healthy businesses, and healthy societies in a planetary context. With this in mind, this preface provides a largely subjective account of the journey that led to this urgent questioning of how we live and work. I seek to precede the practical applications of later chapters with a personal narrative of what lies behind the questioning of existing systems and the writing of this book. Personal involvement, personal development, and consciousness in management start with self-awareness. Just as the book sets out practical directions to the achievement of integrated living, so this preface subjectively combines elements of autobiography, human resources experiences, university teaching, and spiritual practices. From early in life, I knew what it meant to suffer, to fear, to realise what it means to be neglected, ignored, and denied. At unexpected moments, the secretly hidden undeleted files, full of pain, anger, frustration, jealousy, and grief spontaneously open up for me. I appreciate what a great gift it is to have these, in order to better understand others. It enables me to feel tremendous respect, compassion, and love. I feel it a delight to serve others, to be connected to the nobodies, the untouchables, and the ones who are called ‘poor’ and who suffer. I felt deeply connected to Mahatma Gandhi and Martin Luther King and I was completely in love with Ernesto Che Guevara. An enormous



x Preface

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painted picture of Che decorated the wall of my room. Peace and (violent) action at the same time are inside me. A few years ago I bought a red motorbike and called it ‘Ernesto’. There are parts of me that I like and others that I appreciate less. By learning to embrace my shadow parts, accepting that they are all part of me, I found an inner peace. I suggest that a similar route lies ahead of a manager-leader, ready to contribute to a shift in perspective. She or he will seek to give more meaning to his or her work and to that of his or her employees and colleagues, and to offer a perspective on sustainable performance. This book’s way to self-development includes the acceptance of our own feelings and emotions. Brought up with Second World War stories and all the horrible events that took place, and the knowledge of so many innocent people, led me to ask myself: ‘What makes us do these kinds of things?’ I asked the same questions about what happened in Vietnam and remember that, in 1965, influenced by my oldest sister in Amsterdam, I participated in a ‘non-violent demonstration’ (screaming ‘Johnson Murderer’) against the American politics of President Lyndon Johnson in Vietnam. Some years later I smoked some marihuana and thought that war and violence would not exist if more people would do the same. I had opinions about generals and the army and I could not imagine ever sharing ideas and thoughts with them. In Indonesia I met the Dutch military attaché, who was a very friendly, non-violent person. How lucky I was! I was so pleased to listen to many opinions and ideas, and I was always able to learn when I allowed myself to listen from the heart. Life is a life-changing project in itself! I studied Political Sciences, Peace and Conflicts at the University of Granada in Spain and learnt from that, and my own experiences, that underlying dissatisfaction can explode at any moment in time. How often do we neglect these symptoms? According to Ayurveda (Indian medicine), young people, especially at a certain age, develop a lot of (pitta = fire) energy. Often they have too few possibilities to transform this energy into ‘healthy’ activities. In school we ‘teach’ them technical, theoretical, and conceptual knowledge but how much time and money do we spend on communication, philosophy, music, sport, arts? Would it be helpful to put more money into education and training instead of into weapons? It is a choice we can make, every day, every single minute of our lives. We can easily find figures and calculations about our expenditure. Especially in the Western world it should be easy to calculate where our focus is. How much do we spend on education, personal development, environment; and how much do we spend on armies,



Preface

Preface

weapons, police, and guard? These priorities are consequences of how we look at the world. They can be explained as originating in our collective thoughts. Why young people are aggressive and turn violent should be answered in the first place by considering our own actions, thoughts, and manifestations. It all starts with awareness of ourselves. The European Football Championship has just finished. I always love watching such events with my son. As someone born in Holland, I was, of course, hoping for the Dutch soccer team to be victorious. I like the competition element since it gives some special attraction to the game. I very much like the existence of other teams since who would we play ‘against’ otherwise? However, the violence seen between supporters of the different teams is based on the fact that we see our ‘counterparts’ as enemies instead of friends who make our life much more interesting and attractive. Instead of hoping that the keeper will badly miss a save it is not so difficult to wish that the striker will score a brilliant, beautiful goal. It is that simple. I also like to play chess with my son and respect him very much as a ‘counterpart’ but there is no doubt that I want to win. I still do win most of our matches but can only win due to his willingness to play with me. Sometimes he feels very disappointed, especially in his own game, but sometimes afterwards I hear him talking to his friends, telling them how much he appreciates my playing. Competition in itself does not create violence. Our thoughts about it are the basis of how we react and behave. Fairness, fair play, and fair trade are the essential key factors. We can forget the basis, the mission, and the vision of the ‘game’. Every game is about sharing, laughter, creativity, pleasure, friendship, collectiveness, relationships, discipline, focus, and the beauty of the unknown. The game was never meant to be about money. This collective ‘mistake’ brought us drug scandals, hooligans, physical and mental attacks and many other disasters. Inside me I have never given up hope; Divinity has never given me up. What we recognise as negative, bad, wrong, disgusting, horrible, terrible, and ridiculous are all learning possibilities. Thank you for letting me share my thoughts, ideas, concepts about richness, poverty, values, consciousness, spirituality, nature and about what I experience as our true nature, although from another consciousness. I hope this personal underpinning will inform the ideas for change that follow. *** I would like to thank my parents for giving me life on Planet Earth and for all they did for me. I would like to thank my sisters for being true mirrors for my actions, thoughts, and manifestations. I thank my



xii

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friends – especially Astrid, who is always with me – for their neverending compassion, love, and respect. I thank all the ‘teachers’ I had and still have, realising that I had only the very best. I should like to thank all the authors of the many good books I have been able to read, all the composers who created the melodies of my life, and all the artists who painted my soul. I should like to thank all the ‘students’ who were present on the courses for their curiosity, creativity, intelligence, as well as, without any exception, for their irritation, frustration, anger. I should like to thank Walter for his never-ending support, tenderness, and discipline. Without him this book would never have been finished. I should like to thank our children for giving us so many challenges and such great pleasure: ‘Perfect Beings of Light’. I should like to thank David McKie for his spontaneous offer to edit this book and to (re) write it in ‘real’ English, but even more so for his friendship and love. Thank you, Divinity, for loving me so much. How grateful I feel. For Sai Maa: Small particles in oceanic world How small you are, tiny simple sparkling masterpieces of emerging energy Changing in the world of imagination and observation Dancing for my eyes, moving in all directions, playful potentialities in an endless sea of creator’s souls expressions Waves and gravitation, millions distances beyond our senses, in the glorious splendid hopeful direction of causality naked for almighty God Laughing singing voices whispering the melodies of evolution which are limitless of space and time in a boundless place of love The alchemy of gold and violet light, in the heat of transformation, transition is a joyful melting fireplace of new beginnings of an endless present state Footprints of genetic rhythms, pulsations in the empty space of miracles in the majestic field full of light that never but ever touched my smiling heart Erna Oldenboom



Preface

The authors are grateful to the following for permission to reproduce copyright material: © Ruth Bebermeyer Source: Nonviolent Communication: A Language of Life by Dr Marshall Rosenberg, 2003 – published by PuddleDancer Press. For more information visit [www.CNVC.org] and [www.NonviolentCommunication.com]. Author: Laurence Brahm Source: Searching for Shangri-La © by Higher Education Press The Renault Retail Group Belgium

xiv



Acknowledgements

1

In the 1970s, I (Walter Baets) graduated in Econometrics and Operations research. That science had crossed the ocean, after having produced big successes in real life in the US. The Air Bridge to Berlin, at the end of the Second World War, and comparable non-complex, but sometimes complicated, problems were dealt with successfully. The problems were similar in nature: they were linear – or could be made linear – and non-dynamic. Who knew, and who cared? Those of us involved had the impression we could model the entire world; worse, we had the impression we could craft the whole world. Later on I found out that there were few grounds for this assumption, and it was not true. The world was not a big complicated machine with us looking to describe how this machine should operate. We experienced an euphoria similar to that of writing a first program that successfully does what it is intended to do. I learnt programming in those days (in Fortran) and my first program (by the way, programmed on punch cards) was the solution of a quadratic equation. I went into business and I constructed econometric and optimisation models: stock exchange forecasting, scenario analysis, risk management, assets and liabilities management, portfolio management, etc. It all worked perfectly but it did not really describe reality. I found that you always seem to run one step behind. It even became somewhat frustrating. For instance, you can make a perfect model. The better you are the more you can influence the outcome of your models. But the more you do that, the further you move away from the reality that you try to model. I found out much later that it was like the difference between playing music and playing an instrument, but knowing the difference doesn’t make it easier to switch from one to the other. After a number 1



The Thermometer Causes Sickness

of commercial successes in modelling, but with increasing doubt about the real-life validity of it, I decided to quit my life as econometrician. I set out on a quest to find out why econometric models work perfectly, but do not fit reality. I studied for a PhD (at Warwick Business School) where I experimented with the use of artificial intelligence as a research methodology. In those days (and we were in the 1990s by then) this was still not an evident choice. I will skip that part of the story. Anyway, I found out that there is something like emergence in phenomena, and that neural networks seem to visualise some of it. So I went on in my exploration. I was invited as visiting scholar to what was then the only centre in Europe in Complexity Studies, at Aix en Provence, France. I discovered the theories of Simon, Le Moigne, Morin, and what I would like to call the French school of complexity. It was very constructivist and one of the precious gifts I still carry with me from that period is the poem of Antonio Machado to the effect that there is no road, you make your path as you walk. I also came across complexity theory in physics, initiated by Prigogine (a fellow Belgian), and was unexpectedly invited (again in Aix en Provence) to be keynote speaker, together with Francesco Varela, to a conference on the Learning Organisation. As a result, a world of biological complexity opened up to me that I continued exploring afterwards. In the meantime, my interest in artificial intelligence, or complex adaptive systems (things like neural networks, genetic algorithms, agentbased simulations, artificial life, fuzzy logic, etc.) became more and more important. I experimented a lot with those techniques in management applications and they appeared to give a way to visualise emergence. They all shared the remarkably strong quality of autopoiesis, the way Varela describes it. And slowly but surely a number of things came together. The assumptions necessary for successful use of quantitative methods (like econometrics) are so limiting (and often not discussed) that they are hardly applicable in any real-life situation. This has everything to do with the fact that real-life situations are non-linear and dynamic and in no way Newtonian. This is particularly the case in social sciences (such as management, organisational behaviour). Complex adaptive systems seemed to do a better job and the reason for that (at least in my understanding) was that they better fit the reality in the sense that they visualise dynamic non-linear systems. The reason they might work, the mechanism on which they work, is the one of complexity in its largest sense: non-linear dynamic systems behaviour (Prigogine); biological



2 Rethinking Growth

concept of autopoiesis and enaction (Varela); and the interconnected structure of agent-based simulations (Holland, Langton). To keep the story short I will skip my encounters with all different kinds of interesting communities (the artificial intelligence one, the noetic sciences, etc.). What was missing was a larger picture. That is what I found in quantum mechanics. Puzzled by the questions that most quantum mechanics asked themselves about ‘spooky physics on the background’ (Einstein) or ‘complementary physics’ (Pauli), an entirely new world opened up. This world seemingly gave sense to most of what I had explored before. Could reality be considered from a quantum perspective, or what I call a quantum ontology? That is what I did in my previous book: Complexity, Organisations and Learning: A Quantum Interpretation of Business. But I still had the open question of meaning. In fact, at least in my interpretation, the most challenging of all quantum mechanics’ contributions is precisely their questioning of meaning. I would say that the circle is almost closing now and my personal journey links into a wider movement across different areas of knowledge which Taylor (2001) codified as The Moment of Complexity: Emerging Network Culture. As part of the shift, a lot of managerial thinking is questioning the meaning of things, products, and actions. Sense making and meaning are rapidly becoming one of the main corporate issues of today. This book is of course not value-free at all. I am seeking to question a number of fundamental managerial beliefs, concepts, and consequences that, in my understanding of conventional management thinking, are still based on the mechanics of the 1970s (what I will call later a Newtonian view on the world). They assume that we can construct the world precisely the way we want it to be. But the opposite is true. Unlimited growth as ultimate predicate of our liberal capitalist economy is no longer affordable. Nor, once we start considering ourselves as members of a much wider interconnected world, is it even ethical. What is the meaning of ever-continuing growth? Don’t all countries have the right to unlimited growth? However, if they (e.g. China, India) do, and leading Western nations continue their growth, how devastating will the impact on our economic system (e.g. oil prices) and the environment be? The planet is giving us warning signs that we cannot continue as we have done. I will argue in this book that if we want to respond to the planet, we not only need to adapt our growth figures, but we have to change fundamentally the concept of growth itself, and the entire set of values and assumptions on which our managerial thinking and practice is based.



The Thermometer Causes Sickness 3

Growth has become the fetish of the day in economics and corporate life. Any government leader, regardless of the country, expresses pride about his or her nation’s growth figures. They seek to convince their citizens, their economic partners, and, probably above all, their financial partners/investors about how impressive their growth is. This goes on despite dire economic situations, and with little attention to how stable, or temporary, that growth may be. China boasts of its doubledigit growth over recent years. India’s results don’t quite reach double digits, but are still impressive economically. And much of the rest of the world has benefited from the cheaper commodities which have resulted. However, economic growth shows precisely what it shows: economic growth. It does not give any indication of how that growth is created nor at what expense. Has the country chosen for a short-term, immediate, and possibly forced growth? Has there been any consideration for the longer term, the sustainability of that growth, and the harmony of that growth with the natural resources which we need for a decent life on the planet? Economic growth indicators do not give insight into how it is translated into wealth, or for whom. They do not talk about the population’s level of education, the degree of illiteracy, the quality of the health care, the amount of pollution, or the general well-being of the population. The third largest gross domestic product (GDP) per capita, and, hence, by the readings on our economic thermometer, the third richest country in the world is Norway (IMF, World Economic Outlook database, April 2007). Norway also has a suicide rate of 19.5 males per 100,000 inhabitants (WHO Mental health, suicide rates, 2003; [http://globatlas.who.int/globatlas/default.asp]). France, with the twenty-first largest GDP on the list has a suicide rate of 26.1 males per 100,000 inhabitants. El Salvador, 101 on the GDP list, has a suicide rate of 10.4 males per 100,000, and Honduras, at 124 in the GDP ranking has 0 suicides per 100,000 inhabitants. Of course, this latter number is wrong, isn’t it? And maybe it is, but which of these countries is the ‘richest’? It all depends on how you measure. If the thermometer indicates a high temperature, we ‘know’ we are sick, don’t we? But if it doesn’t indicate a high temperature, does it mean we are healthy? The United Nations Development Programme has developed the Index for Human Development ([http://hdr.undp.org]). It details more than 200 items that can roughly be gathered under the following headings: demographic issues; health care; water; inequality in birth-related health issues; risks (industrial, natural, etc.); crises; technological developments; education; economic development. Using a



4 Rethinking Growth

thermometer sensitive to such broader dimensions allows, at the least, for more systemic, richer interventions with the aim of progressing to a fuller health that takes into account equity, happiness, and well-being. Indeed, while I have not stressed these so far, there might be a chance that we are on this world in order to contribute to it and to be happy while doing so. I will come back to that. An illustration of the growing interest in more systemic thermometers than a restricted economic concentration on GDP was the conference, organised by the European Union and a few other partners, titled ‘Beyond GDP’, in November 2007 in Brussels ([http://www.beyond-gdp. eu]). The conference dealt with issues of progress, ‘true’ wealth, and well-being. Anyway, enough about ‘the wealth of nations’ since that is not what this book deals with. This book deals with ‘sustainable performance’, how to understand it, how to measure it and how to manage it. This book addresses managers, people responsible for other people, inside and outside their companies. Yes, it is maybe worth repeating: managers are people, responsible for other people inside and outside the company. An assumption, indeed, but at least a clear one up front. An assumption that refocuses the role and purpose of the manager and even of the company. Is a company a ‘corporation’ as seen in the 2003 movie The Corporation that seems to live a life on its own, with its own purposes and rules, detached from the social network within which it is active? Does it recruit only its employees and deliver output for its clients? Can a corporation only have one goal: to improve profit in order to be able to pay dividends, and to attain this at any price? If it does then working inside a corporation is contributing to this purpose; and living outside this corporation is suffering its outcomes. This individualistic view of a company and a society contrasts with a socially embedded one and, as a consequence, provides an individualistic role for a manager inside the company, rather than one which is socially embedded, outside, as well as inside, the company. Let us accept, for a moment, the earlier suggestion into an additional assumption: that we are in this world in order to contribute to it and to be happy while doing so. I am sorry if this starting point bothers you, but to me it seems a simple and straightforward one. It is this starting point that makes Corporate Social Responsibility logical and evident. It is these assumptions that invite ethical behaviour. It is such a view that makes space for sustainable performance. But we are still far away from this sustainable performance. We are only at the assumptions.




A while ago, I participated in a panel discussion of the French Employers’ Federation (Medef), which was titled: ‘Should We Rethink Growth?’. The panellists mostly agreed that we should. Moreover, they had some very interesting ideas about some issues related to how to rethink growth. I was a bit astonished still to have this question in 2007 instead of to be asking how to rethink growth. But the apotheosis of the day, the president’s speech, made it all clear: growth is the only driver of our economies, and if we do not manage to beat the two digit Chinese growth, French companies will be in big trouble. Company growth is the credo. But let us go a step back, since I had a very remarkable experience during the panel. At a certain point in the discussion, I asked the audience (around 150 entrepreneurs and managers): How do you add value to the economy? What is your contribution to society at large? In other words, what is society missing if tomorrow you are bankrupt? And to my deep surprise, I rendered the audience of more than 100 managers completely silent. I repeated the question, but still no answer. Then I invited them to take the weekend to think this question over and over. ‘If you do not have any value to add, if society doesn’t miss you, then what are you doing?’ And if they could not find any value added, any contribution, I suggested to them that on the following Monday morning, they gather their employees together and start a process of identifying the value added by the company and its contribution to society at large. Since if you do not make such a contribution, you will be forced to market yourself vacuously, in order to sell stuff that customers don’t want and, even if they do buy, certainly don’t need. Such practices are what have caused the overwhelming phenomenon of mind-boggling and unprecedented overconsumption in our society. We left it there. I do not know whether any of the managers present took up the challenge and did this exercise and, if they did not find a contribution, whether they took the time to co-create one. Anyway, the challenge remains since, in the absence of a socially valuable purpose, someone is unable to take any socially responsible decisions. When Alice in Wonderland asks the cat which road to take, the cat asks her where she wants to go. Since she doesn’t know where she wants to go, the cat can only tell her that any road is a good one. If you do not know where to go, all roads are good ones. You need a purpose in order to be able to make decisions here and now, not necessarily in order to reach that purpose. The future will show that. But only the present urges for decisions; there is no past and no future.



6 Rethinking Growth

There is only a present, and in that present you need to know where to go in order to take any decision. If the only purpose you have is to grow, and/or to make profit, you limit your actions to that purpose. Independent of its devastating consequences, growth will be what you receive and/or profit is what you are going to receive. You purposefully limit your focus to a few ‘people-independent’ variables: costs, revenue, accounting, and manipulation of accounts (for fiscal reasons). Even humans are transformed into human resources (the current phrase) in order to become a cost. You disconnect yourself from the entire social raison d’être of your company. And, consciously or not, the path is chosen. Consequences can include stress and burn out. These are diseases which have a lot to do with choices made in disconnecting economic activity from the people for whom we do it all (in theory). These diseases lead to a series of interconnecting questions. Do you still feel happy when you get up in the morning and drive to your job? Do you feel that you matter? Would the company and society change for the worse if you were not there any more? Isn’t the economy sick in its fetishistic admiration of growth, a blind growth at any price? And isn’t it that growth and the management indicators that go with it that do not allow for a change? In following this blind drive for growth, do we do anything other than just apply our economic theory, our managerial theory, and indeed, I want to stress, our theory? In summary, therefore, a thermometer only measures what it is made for. A thermometer measures fever, not sickness. A GDP measures gross domestic product, not wealth nor health nor even the sustainability of that growth. Profit measures profit, and not social contribution or the value added by the company. That would not be so bad if it weren’t true that you always get what you measure. Measuring is what makes reality, not mere existence. It is observation that in quantum mechanics turns the wave into a particle. Without observation, without measurement, everything is a large pool of infinite possibilities. But once a phenomenon is observed, measured, it becomes an unchangeable particle: the particle that you want to observe. The observer creates the observation, and since we often take the observation for reality, the observer creates reality (Baets, 2006). However, reality might be different, richer, broader, more systemic, not visual, and not causal. When the Australian railways were privatised, the railway company encountered the same problem most railway companies encounter: the trains ran late. When new, ‘privatised’ management took charge, they made immediate and drastic decisions. Each driver who gained time on




his or her train’s trajectory was paid a cash bonus at arrival. The bonus system was realistic but not exaggerated, because it was designed to really motivate people. Say Paris–Marseilles normally takes 3 hours by high-speed train. The train leaves 10 minutes late, but arrives on time at Marseilles: the driver is paid for 10 minutes. And to nobody’s surprise, the problem was about to be solved in a few weeks’ time. More than 90 per cent of the trains were on time. The downside: clients were very angry. If we ask this question to a live audience we get a lot of equally possible explanations for this which are all wrong: people missed their train; there were security problems; the price of the tickets went up; the train didn’t wait if a last passenger wanted to jump on. No, very simply, the trains didn’t stop at intermediate stations any more. Hence the driver gained time (and a bonus) and did exactly the job for which he was appreciated/evaluated. And don’t say too rapidly it would not happen in your company. What is a train being on time? The ‘being on time’ issue is only created since we have timetables. Without timetables, a train is never on time or late. Imagine that there is a train connection every half an hour between two cities. The trains run exactly half an hour late. From the customers’ perspective, are those trains late or on time? Being on time, or being late, is only a question of agreement; it is not an essential part of a train journey. Of course, you would like to arrive on time, but there are other ways to organise that. For sure, we think/hope that air traffic control is one of the best planned activities, but most probably it is not. On questioning Dutch air traffic controllers (during a seminar we held for them) about what percentage of aeroplanes fly within slot-time, I found, to my surprise, they responded with a bare 20 per cent. I had hoped it would be at least around 40 per cent, or even, 50 per cent. No, only 20 per cent of the aeroplanes leave within a reasonable period around their planned departure time. Does this mean that air traffic control is not working well? Of course it does, since it is self-organised. The aeroplane is ready, it asks for clearance, the air traffic controller puts it in the queue, and off it goes. Real delays are often caused by too much traffic in the area: there is no solution to physical limits. Or is there? By extending our earlier assumption, one solution would follow: fly less. After all, do we really need to make every one of the flights that we make or is this also just another example of consumerism? If we translate all this to a company, we of course see exactly the same behaviour. A manager is going to manage precisely that for which he is evaluated, and in practice evaluation means salary or bonus. If managers get excessive bonuses for shareholder value, they are going



8 Rethinking Growth

to do everything, indeed ‘everything’ – however artificial – to raise shareholder value. Shareholder value is a non-existing variable: it means you cannot manage it. You can only influence it indirectly. Higher revenues (or ‘expected’ revenues), lower costs (huge lay-offs) and good press (the Enron case, the Lernout and Hauspie case) all often have a positive influence on shareholder value. A manager can influence these three variables, but if this would be physically difficult or impossible (hampering sales), they could make it up by artificially raising the sales figures (and again the Enron and Lernout and Hauspie cases act as illustrations). The manager no longer manages the business; he or she manages the figures, the accounts. How many companies are managed by accountants and financial managers? Finance and accounts (even more, since they are only a reporting tool) are only the derivatives of the corporate operations which are based on corporate decisions. This book argues that the focus should be on corporate decision making, the vision, the shared dream of where to go, the real value added that the company creates in the economy. If there is a real contribution, the company will generate sales, revenue, and margins. A first refocus should be on the business and its societal valued added and not on finance and accounts. That is what might give the company a sustainable focus, and a sustainable performance. Inside companies we have seen comparable efforts to achieve sustainability. They manage via balanced score cards, ‘improvement factors’, etc., whereby the performance of managers (or even employees) is measured and evaluated using a series of ‘objective’ measures. The experience that most companies have with these approaches is that the managers do everything to optimise the measured items, and neglect the others. If a job description is not detailed, and if all items are not expressed in a measurable variable, it is not managed. If too many items are defined, they often act in opposition to each other, and the entire system becomes counterproductive. Many companies have returned to more classical evaluations of their managers. However, the shareholder value plague is still running through the country: albeit on a lesser scale, or in a more hidden form. We live in a time when people have become increasingly aware of the ‘limits of growth’. I deliberately use this term, since it refers to the first report of the Club of Rome in the 1960s. It all appeared to be a bit pessimistic, but a serious realistic view was the basis for it. We have thrown the baby out with the bathwater and haven’t paid attention to some of the fundamental assumptions which the report challenged. We hit the wall today, harder, and with less time to find solutions.




One lesson from the report, and the reactions to it, is that we have a hard time to challenging and/or managing our assumptions. Further in this chapter I will come back to this, but I suggest that we rarely question our assumptions and doubt whether there is even an awareness of key assumptions. What are the economic laws behind our most important managerial decisions, if any? What managerial theories are at the basis of our managerial decisions, if any? If there aren’t any, why do we try to teach our business students all these wonderful analytical and rational approaches to management, which they seldom recognise afterwards in their daily managerial practice? If we say that leadership is so important, why don’t we have a concept of management that is built on that leadership paradigm (and not on a financial performance paradigm)? I leave the question for now, and promise to return to it later. Since the opening shot of the Club of Rome, various initiatives have been developed to make managers at least aware of other options. In the shift from TINA (There Is No Alternative) to TALA (There Are Lots of Alternatives), the latter all have their value in changing, and in transforming, our society and its managers. Different people have been looking differently in different directions, and without any attempt to be exhaustive, we offer six examples. 1. Hazel Henderson – founder of Ethical Markets Media and currently series creator and co-executive producer of Ethical Markets multimedia productions – is a futurist, evolutionary economist, columnist, and consultant on sustainable development. She has published worldwide, and developed alternative indicators for quality of life, national wealth, etc. ([www.ethicalmarkets.com]). Among many other honours, she shared the 1996 Global Citizen Award with Nobelist Perez Esquival. Ethical Markets’s mission is to foster the evolution of capitalism beyond current models based on materialism, maximising selfinterest and profit, competition, and fear of scarcity. As we move further into the Knowledge Society we learn that information and knowledge are not scarce, and our economic models can move towards sharing, cooperating, and a new abundance. Ethical Markets believe capitalism combined with humanity’s growing knowledge of the interdependence of all life on Planet Earth can evolve to serve today’s new needs and our common future – from beyond maximising profits for shareholders and management to benefiting all stakeholders. They deliver this message to the global market by featuring



10 Rethinking Growth

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stories of success. Ethical Markets showcase the organisations, trade associations, shareholder activities, the mutual funds and pension funds asset managers, financial planners, venture capital groups, innovative technologies and companies, as well as this vision of maturing, socially responsible, ethical capitalism fitting humanity’s aspirations for a more peaceful, just, and ecologically sustainable world. 2. Another illustration is the Global Reporting Initiative (GRI) ([www. globalreporting.org]). This is a large multi-stakeholder network of thousands of experts, in dozens of countries worldwide, who participate in GRI’s working groups and governance bodies, use the GRI Guidelines to report, access information in GRI-based reports, or contribute to develop the Reporting Framework in other ways – both formally and informally. GRI have pioneered the development of a sustainability reporting framework which is used worldwide, and they are committed to its continuous improvement and application worldwide. This framework sets out the principles and indicators that organisations can use to measure and report their economic, environmental, and social performance. The cornerstone of the framework is the Sustainability Reporting Guidelines. The third version of the Guidelines – known as the G3 Guidelines – was published in 2006, and is a free public good. Other components of the framework include Sector Supplements (unique indicators for industry sectors), Protocols (detailed reporting guidance), and National Annexes (unique country-level information). Sustainability reports based on the GRI framework can be used to benchmark organisational performance with respect to laws, norms, codes, performance standards, and voluntary initiatives; to demonstrate organisational commitment to sustainable development; and to compare organisational performance over time. GRI promote and develop this standardised approach to reporting to stimulate demand for sustainability information. The demand, and the standardisation, will benefit reporting organisations and those who use report information alike, and also help to distinguish between lip-service to sustainability and tangible progress. 3. The Centre for Sustainability and Excellence (CSE) (www.cse-net. org) offer a further illustration. They are a leading advisory organisation and think tank (with offices in Athens, Brussels, and Dubai) specialising in providing sustainable development solutions to various corporations and institutions. They present outcomes of the cooperation between experts and scientists who deal with, apply,




and provide support in the most advanced practical methodologies for moving towards sustainability, while simultaneously adhering to social and environmental criteria. Through its network of international partners, CSE offers coaching in a vast array of advising services promoting sustainability and excellence to organisations, society, and governments. In their own terms: management is a combination of art and science. Everyone who runs a business is ultimately interested in achieving success and sustaining it. This success is based on the ability to thrive in today’s uncertain economic climate, and what it brings with it is increased stakeholder value and growth. Although there are plenty of theories based on the subject of business success, there are still winners and losers. Nowadays, what is required to achieve sustainable success is effective collaboration and CSE aims to assist the organisations, society, and governments in that respect. 4. The Global Footprint Network (GFN) – (www.footprintnetwork.org) – focus on the dilemma or paradox central to development of demand and the available biocapacity. GFN are committed to fostering a world where all people have the opportunity to live satisfying lives within the means of Earth’s ecological capacity. They are dedicated to advancing the scientific rigour and practical application of the Ecological Footprint, a tool which quantifies human demands on Nature, and Nature’s capacity to meet those demands. Created in 1993 by Mathis Wackernagel and William Rees, the Ecological Footprint is now in wide use by governments, communities, and businesses to monitor current ecological resource balances and to plan for the future. In line with the project of this chapter to re-evaluate what we value, GFN’s vision is to make the Ecological Footprint as prominent a metric as the GDP. By 2015, through its flagship Ten In Ten Campaign, GFN aim to have ten countries managing their ecological wealth in the same way they manage their finances. Since its inception in 2003, GFN have made significant progress towards their goals. Currently 22 countries – including Australia, Brazil, Canada, China, Finland, France, Germany, Italy, Mexico, Russia, South Africa, Switzerland, and the United Kingdom – are likely to be the early adopters of the Ecological Footprint and are already working with GFN. Over 70 organisations, spanning six continents, have become formal GFN partners. Many of the world’s largest environmental agencies and constituencies are already using the Ecological Footprint to accelerate global sustainability including: EPA Victoria




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(Australia), the European Environment Agency, the Finnish Ministry of Environment, Wales in Great Britain, and large non-governmental organisations such as the Network of Regional Governments for Sustainable Development (with 50 regional government participants), International Council for Environmental Initiatives (with 650 local government members worldwide), and WWF (the global conservation organisation with 5 million global supporters). 5. The Vigeo Group (www.vigeo.com), to cite a French example, claims to be a company ‘measuring social responsibility’. They assess both the performance of companies and organisations and their level of corporate social responsibility (CSR) management. They assess the degree to which companies and public corporations take into account environmental, social, societal, and corporate governance objectives, which constitute risk factors for them in the definition and implementation of their strategy and policies. Their analysis makes it possible to • evaluate the level of commitment shown by organisations towards all CSR or sustainable development goals; • identify any risks incurred by the company or organisation in this area; • evaluate their level of management. They provide companies with mechanisms for decision making and specific operational management tools by • providing socially responsible investment (SRI) analysis for investors and asset managers on 1,500 European, Asian, and American stocks in order to assist them in selecting their portfolios • performing social responsibility audits for companies to provide assistance with their strategic management • carrying out sustainable development audits for local authorities to provide guidance for subsequent improvement. Then we get to other kinds of organisations that have less of a focus on companies and corporate performance, but pay attention to community development and the leadership roles they offer for individuals. ‘Common Purpose’ (www.commonpurpose.org) are one of these. 6. Common Purpose aim to improve the way society works by expanding the vision, decision-making ability, and influence of all kinds of leaders. They run a variety of educational programmes for leaders of all ages, backgrounds, and sectors. Common Purpose’s goal is to





All of Common Purpose’s activities are deliberately cross-sectoral. They have been specially designed to help people in leadership and decision-making positions to be more effective: in their own organisations; in the community; and in society as a whole. The community is both their subject and their venue. The participants don’t just sit in meeting rooms studying abstract management problems or wrestling with intellectual exercises. They go out into their own community and grapple with real-life problems at first hand, and will visit prisons, housing developments, businesses, hospitals, and manufacturing plants in order to find inspiration outside their usual experience. Together, they tackle topical issues (often with the people who carry responsibility for them), they trade leadership experiences and strategies with other leaders from a variety of fields, and they build wider networks. According to them, what is different about Common Purpose programmes? All the programmes help leaders learn to lead beyond their authority, both as professionals and as citizens. People who lead beyond their authority can produce change beyond their direct circle of control. This is very different from other leadership programmes. They are committed to looking for leaders in unexpected places – and then to exposing them to the information and the perspectives they need to be more effective. In the process, they meet new people, make new connections, and find new ways of working with people who may not view the world in the same way. Diversity underpins everything they do. All Common Purpose programmes and activities share the same long-term ambitions: better decision making in all sectors, more effective solutions to common problems, more engaged and active citizens, and, ultimately, stronger communities. Since 1989, more than 120,000 people have been involved in Common Purpose worldwide and over 23,000 leaders have completed one or more of the programmes. They, and their organisations, consistently report better strategic thinking, better decision making, dramatically enhanced leadership competencies, and a greater ability to apply them in new situations as a result of their experience of Common Purpose. Without any attempt at offering complete coverage, it is clear that a lot of initiatives have existed, do exist, will continue to exist, and even to blossom, to improve the environment and society. They aim either



provide them with the inspiration, information, and opportunities needed for changing the world.


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Life on the edge Symptoms and diagnostics Despite all the good news of increasing interest in social responsibility, responsible management, etc., there is something more fundamental at stake in our opinion. While humanity is living in the turmoil of what is possibly the most decisive period in history (sanitary risks, ecological risks, experimentation with the living, etc.), Viverot (2005) diagnoses a kind of a widespread depression, or world at the edge of a ‘universal nervous break down’. In what might be seen as a form of manic depression, our society suffers from not being, not living, at the right moment, the right time. In other words, it is incapable of intensely living the present, feeling good in this time-span and in contemporary ‘shoes’. This ‘dis-ease’ transforms us into rational mammals, but even worse, into endlessly consuming mammals. The consumer society in which we live and simultaneously feed continuously makes for eternally unsatisfied people. This ‘poverty’ of the daily poisons lives. In Viverot’s terms, there exists a relationship between the culture of economic warfare and the large psychic destabilisations. These are today at the roots of a new faintness in the civilisation of the young century. The crisis is not economic, but cultural and mental. For Viverot, the so-called economic crises are, in fact, cultural crises which are linked to the outcomes of our economic system. Thanks to this cultural crisis, the world has gone back half a century, and is scarred by unemployment and poverty, while, at the same time, consuming at levels not even imaginable only a few decades ago. And consume is what the world does. The Talk the Walk study (UNEP, UN Global Compact and Utopies) gives us an idea of the role that marketing plays in that overconsumption, but, equally, it suggests the role that marketing could play in contributing to a different consumption pattern. Over recent decades, both in terms of volumes and quality, consumption has radically evolved. Average household consumption expenditures increased from US$4.5 trillion in 1960 to US$ 19.5 trillion in 2000. World population doubled over the same period. Half of that growth is due to a dramatic change in consumption patterns, which are today mainly produced by a consumer class of roughly



to rank companies differently, to help them to be ranked differently (addressing some new and annoying stakeholders for instance), or just simply to share the idea that the thermometer itself indeed creates sickness, and explore pathways to holistic health.

1.7 billion people, half of whom live in the so-called developing world. Recently that consumer crowd expanded significantly in countries like India and China. The breakdown of household expenditures has changed. The strong increase in incomes has led to expenses in areas such as leisure activities and devices, services, and transportation. The percentage of household expenditure dedicated to basic needs is decreasing. However, this growth is unsustainable, since the ecological footprint has grown larger than the world population. Since the mid1980s we have crossed the Rubicon. If all humans were to consume like the Europeans, they would need three planets the size of Earth to live, and if they were to consume like the North Americans, they would need five more planets (WWF figures, 2004). One gift of overconsumption patterns is obesity. Obesity already affects 30 per cent of the US population and grows at a triple digit rate every ten years (UNEP, 2003). Food-related cancers, which account for 30 per cent of all cancers in industrialised countries and 20 per cent in developing countries, also grow rapidly (ADS, 1998). The worldwide reorganisation of supply chains has disconnected consumers from the labour force, and is creating various social and economic side effects in both developed countries (delocalisations) and developing countries (exploitation). Talk the Walk expect energy consumption, carbon emissions, waste production, and water resource shortages to increase over the next decades. The single main reason for this is overconsumption to the service of an almost fetishistic growth credo, and the world still remains far away from what the UN CSD International Work Programme (1995) defined as ‘sustainable consumption’: The use of services and related products which respond to basic needs and bring a better quality of life while minimizing the use of natural resources and toxic materials as well as the emissions of waste and pollutants over the lifecycle so as not to jeopardize the needs of future generations. Products can be made cleaner, and there is growing interest in buying these kinds of ecoproducts, but still the trend of unprecedented overconsumption remains unbroken. In Europe, the market share of green cars has grown from close to 0 per cent in 1999 to 14 per cent in 2005; and the market share of green electricity has grown from 1 per cent in 1997 to almost 8 per cent (anticipated) in 2006 (Talk the Walk, 2005). SRI’s market share, however, remained stable at roughly 12 per cent between 2000 and 2006 (after a 13 per cent peak in 1999, and coming





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from 8.5 per cent in 1997). It is also revealing that advertising budgets, as a percentage of sales, remain at astonishing heights: spirits at 15 per cent; detergents at 11.5 per cent; office supplies at 10 per cent; food at 10 per cent; beers at 8.5 per cent (Schonfeld & Associates, 2003).

The Institute of Noetic Sciences’s (IONS, 2007) Shift report is not only a highly readable document on the transformation, but offers positive ways forward. On the one hand, the Institute observe how our materialistic and scientifically based world view has led to lower infant mortality rates, eradication of many fatal diseases, explosion of new technologies, broader access to the accumulation of wealth, and greater individual freedoms and rights. At the same time, they see that not all its effects have been beneficial; and may lead us beyond the edge of extinction for humans. The rise of capitalism and modern technology have fuelled heightened global consumerism, which is stripping the Earth of its resources and filling our land, seas, and skies with polluting ‘externalities’ of production. Fear of scarcity has driven nations to fight over resources, and modern weapons development has made war more lethal and widespread. Income disparities, species loss, the disappearance of indigenous wisdom, and global warming are all by-products of a materialistic and self-centred world view which continues to be propelled by ignorance, denial, and its own momentum. And to all that, the Institute of Noetic Sciences add the ongoing and escalating clashes among both ethnic groups and religious fundamentalists, which are not new to this century but further reflect a world in disorder. According to Willis Harman, a past president of IONS and renowned futurist: Very central to our modern myth is the idea that it is perfectly reasonable that the economy should be the paramount institution around which everything else revolves and that economic logic and economic values should guide our decisions. It turns out that if you look at the assumptions underlying our economic system – especially the ones regarding the prerogatives of ownership – and then you look at the goals we humans have about how we want to live our lives, there is no compatibility. The assumptions can never lead to the goals. (IONS, 2007) Joachim Wolf (2003) sees it as humankind that is now wrestling to resolve the seemingly insurmountable differences between its parts.



Extinction or transformation?

The mindsets of many are so focused on differences that they cannot identify with the whole that unifies all. At the same time, many of us are dealing with too many changes, too many decisions, and too many things to think about. A 2006 KidsHealth survey found that 40 per cent of children (in the US) reported feeling stress all or most of the time because of ‘too much to do’. More and more people are being diagnosed with mental illness. One of the most telling indicators that levels of stress have exceeded our ability to cope is the mushrooming sales of antidepressants and prescription drugs (although that is also driven by pharmaceutical spending on advertising): an estimated US$1.9 billion in 2005 on television ads alone (in the US). US spending on prescribed drugs (Kaiser Family Foundation) went from US$40 billion in 1990 to US$189 billion in 2004. Our biological systems were not meant to handle stress as a lifestyle, nor as a persistent feature of daily life. ‘Fight or flight’ was meant to be a tool for handling crises, not a permanent state of mind or way of being. Other facts highlight allied concerns: the richest 2 per cent of adults in the world own more than half of global household wealth (Helsinkibased World Institute for Development Economics Research of the United Nations University). The richest 1 per cent of adults owned 40 per cent of global assets in the year 2000, and the richest 10 per cent accounted for 85 per cent of the world’s total assets. There have been more than 250 major conflicts since the Second World War which have resulted in over 23 million deaths and countless millions injured. Since 1945, 90 per cent of the war casualties have been civilians. Economic data are also useful for putting the annual cost of war in perspective: the ongoing Iraq War, US$200 billion; Universal health care for all US people, US$100 billion; universal preschool in the US, US$35 billion; cancer research, US$6 billion; immunisations worldwide, US$0.6 billion (IONS, 2007). Credit market debt in the US reached US$36.91 trillion in 2004 compared to US$13.77 trillion in 1990 (IONS, 2007). Perhaps the most sobering statistic is the World Health Organisation (WHO) report of a 60 per cent increase in suicide rates worldwide over the past 45 years. They estimate that approximately 1 million people per year die from suicide, and that suicide attempts occur 20 times more frequently.

Connecting business When all that information is connected to corporations, the results are paradoxical. Many consultants and innovators are among the first to




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embrace new, even radical, models of change. At the same time, the dominant paradigm rests on a model of competition that prioritises short-term gain over long-term sustainability. Today, the Newtonian model of business, among others characterised by Taylor’s theories – that is to say, dominated by efficiency and obedience, command and control, and thinking of organisations and people as parts in a machine – is facing challengers for whom systems thinking and organic processes are primary. At the UN Global Compact Summit in Geneva, July 2007, economists and politicians, in unlikely harmony, pleaded for thought leadership in the area of management theory. Responsibility will only flourish in a managerial ontology that makes responsibility foundational. This book argues that such a new conception of business, and such a new managerial ontology, will be based on what we have learnt from quantum physics and evolutionary biology. Together, these provide the theoretical groundwork for developing a new managerial ontology, one that, in this book, will be based on social ‘intrapreneurship’ using such key concepts as: self-organisation, networks, wholeness, interdependence, and entanglement. Evidence of the idea of responsibility as a major issue has begun to emerge through the business community’s involvement in Corporate Social Responsibility (CSR). The UN Global Compact Summit in Geneva (2007) bears witness to hundreds of companies’ growing interest in becoming more responsible through CSR, and starting to manage their companies as part of an interconnected reality. According to Aron Cramer, CEO of Business for Social Responsibility (in the IONS Report), companies are today in the fourth stage of implementing Social Responsibility. He calls it ‘strategic’ CSR, which he defines as value creation and the development, research, and development that looks for solutions to critical social problems in a way that has a dollar-andcents impact on the bottom line. However, from the perspective of this book, companies are not yet into understanding how ‘happiness’ can contribute to that bottom line, and how that bottom line itself is most probably the biggest issue in becoming a more socially responsible company. This book aims to develop this fifth stage, a stage where social responsibility becomes an aim and is no longer just a derivative. Indeed, companies need to refocus on creating wealth, on contributing to the wider economy and society, and should no longer be focused on the short-termism of that famous bottom line. The bottom line is nothing but an indicator, it is not a purpose. Unfortunately, it is often the indicator that while becoming a purpose causes illness. What is measured will be obtained, and if the bottom line is the holy




benchmark, it will be reached, and reached at any cost, regardless of its sustainability. A company that contributes to the economy and to the society is almost by definition sustainable. It considers itself as part of a larger interconnected economic and social reality, in which it has a role to play. That role is creating wealth for that society. A pure Newtonian business model, which considers the economy as in Chaplin’s Modern Times (i.e. that suggests that past and future are completely interlinked, and that management therefore becomes an act of rational command and control), has no space for responsibility. It might allow it as a side effect, but only as long as it does not hamper the bottom line. The 2007 Shift report does observe a growing interest in retraining (or training) leaders, using various approaches based on values such as integrity, authenticity, social and emotional intelligence, and selfawareness. Similarly, Senge et al.’s (2005) notion of ‘presencing’ asserts the primacy of deep inner experience; and Scharmer’s (2007) book Theory U (2007) goes further to advocate an ongoing cyclical process of listening and observing, processing, and acting. In the processing stage, Scharmer’s (2007) emphasis is on stillness and reflection. All these moves reflect another paradigm: linking being present with processing, and with stillness and reflection. Interest is growing; goodwill is manifesting. But more than just goodwill is needed. To develop further will require a theory, a conceptual framework, able to support an alternative, and an associated methodology or metrics will be necessary to manage it. The McKinsey report ‘Shaping the New Rules of Competition’ is based on in-depth interviews with CEOs and executives of 38 organisations throughout the world. It shows that 31 of the companies, or 61 per cent of the respondents, think that increasing environmental concern, greater demand for, and limited supply of, natural resources (38 per cent), and the emergence of China and India in the global marketplace (37 per cent), are going to influence society’s expectations on business. Furthermore, the following environmental, social, and political issues were considered as the most critical to address for the future success of their business: educational systems and talent constraints (50 per cent); poor public governance (44 per cent); climate change (38 per cent); and making globalisation’s benefits accessible to the poor (36 per cent). Some 59 per cent of the respondents say they want to incorporate ‘much more’ environmental, social, and governance issues into their company’s core strategy; and 34 per cent say they already incorporate ‘somewhat more’ of it.





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But most enlightening in the McKinsey report is what those CEOs believe are the barriers. They see the obstacles to implementing an integrated and strategic company-wide approach to social responsibility as: competing strategic priorities (43 per cent); complexity of implementing strategy across various business functions (39 per cent); lack of recognition from the financial markets (25 per cent); and differing definitions of CSR across regions and cultures (22 per cent). Freely interpreted: they do not see it as a priority. Each function in the company operates autonomously and there is no real interconnectedness; the focus is short-term financial performance; and there is difficulty in recognising and using diversity as a creative force. What else would you expect to see if you carefully consider our mainstream managerial thinking? As Kuhn and others, among them a number of quantum mechanic physicists, have said: one cannot explore a new paradigm from within the borders of the existing mainstream paradigm. Galileo Galilei could never have explained or discovered that the planets were turning around the Sun if he had stayed within the prevailing paradigm of his time (i.e. that the planets and the Moon would be turning around the Earth). Einstein could never discover or prove his relativity theory within the current Newtonian view of physics. Quantum mechanics doesn’t make any sense within a Newtonian concept of physics. Similarly, longterm responsibility makes little sense within mainstream managerial thinking. For example, what we know as business economics, the theory that forms the basis of our managerial thinking, seems to be of extremely limited help for contemporary conditions. Standard business economics is based on four main assumptions (Arthur, 1990; 1996; 1999). The first one assumes that all economic agents show rational behaviour. Though this is certainly partly true, it is also obvious that, for instance in buying behaviour, there is not always a lot of rationality. Marketing in practice aims to influence so-called rational behaviour, with mostly emotional elements. Accordingly, the acceptance of marketing itself as a valid activity and even a managerial discipline contradicts this rationalistic assumption fundamentally. As argued in my earlier work (Baets, 2006), no observation, no measurement, and, even more so, no interpretation can be objective, therefore the assumption of full rationality cannot hold in reality.



Shifting barriers and undermining assumptions

The second assumption states that the different economic players are fully informed (a necessity in order to be able to act rationally). In this specific era with massively expanding Internet information, this assumption seems highly theoretical at best. Not only is it virtually impossible to have all information, but even more so the interpretation of all available information brings us again to the non-rationality of information. Indeed information can only be transformed into knowledge by individuals, as knowledge that allows the user to enact behaviour (e.g. action and shaping). The expectation of being fully informed, independent of the knowing subject, is not feasible. The next assumption is the alternative use of resources. In practice this means that once a resource is used in one product, it cannot be used in another product any more. This is a clear industrial era point of view, in which we mainly produced material products. In the knowledge economy, this is different. Information and knowledge are alternatively usable and, what is more, the more they are shared, the more their value can rise. That is an essential constituent of the law of increasing returns (Arthur, 1996). The law of diminishing returns, a basic one in classical economy, doesn’t hold in the knowledge economy and doesn’t hold in the ‘today’ economy, where nodes increase value. The fourth assumption, which is more a question of convenience and probably causes least harm, is that there are a limited number of goods and services. It is clear that, certainly in the knowledge economy, services are often used for different purposes. Any service defined might therefore become a set of different services, according to the use that the clients imagine.

A new Mandelbrot set: Chaos perspectives, catastrophic consequences, and macroeconomic mistakes Mandelbrot and Hudson (2004), particularly in respect of financial markets, identify a similar set of assumptions that modern financial theory makes in order to justify their financial models. Mandelbrot and Hudson illustrate the catastrophic consequences of those assumptions on dayto-day financial portfolio management, and en route, destroy both the theoretical concept of those models and their financial performance. The assumptions he identifies behind classical financial theory are: • People are rational and only aim to get rich. • All investors are alike. • Price change is practically continuous.





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In general, the strong assumption behind most financial processes, but equally behind many managerial processes, is the normality of phenomena (99 per cent of the observations fall between the mean, plus or minus three times its standard deviation). Observational reality certainly does not conform to this assumption in most volatile markets. In addition, these assumptions all fit in a reductionist framework that limits reality to a theoretically viable environment. As a consequence, observations in such a limited framework do not allow extrapolation into a real world, which, inconveniently, does not obey the assumptions. As The Economist (17 April , 1999) article, ‘Quarks and coaches’, observed: ‘The one group of people to whom most businessmen rarely turn is economists. Big firms ask economists to predict the ups and downs of national economies, but when it comes to finding ways to run their own company better, many managers would sooner consult an astrologer’. Furthermore, there are a number of concepts defined that don’t really matter, that are acceptable but not really relevant, or do not add any value to the understanding of a particular problem. One example of such a concept is ‘the circular flows of income and spending between business and households’, whereby banks and governments play the role of ‘multiplier’ or ‘catalyst’. Both multiplier and catalyst are concepts based on different assumptions. Multipliers indeed fit equations and causal relationships. A catalyst is not always as determined as assumed. A catalyst brings a situation to acceleration, without always precisely knowing where it moves to. The use of the word ‘catalyst’ in fact suggests a different kind of reaction, where what is meant, when analysed in more depth, is really a multiplier. Reality has shown that tax policy, possibly based on these theories, does not always work in the manner intended. In fact, it has become a political debate, and hence a political choice, whether one believes in a more important role for the government (always via taxes) or not. Independent of whether economic theory would work, tax policies are political choices, where all different parties in fact assume, or invent, possible side effects that would make crucial differences. The claimed aims of macro-economic policy, again a set of political choices, are full employment, stable prices, economic growth, and a balance of payments equilibrium. So-called macroeconomic models



• Price changes follow a Brownian motion (independence of consecutive observations; statistical stagnation of price changes; the normality [Bell shape curve] of changes).

prove particularly unable to catch the dynamics of those markets. Therefore, they become highly irrelevant if a country enters any highly dynamic environment (hyper-inflation, political treaties, threat of a revolution, etc.). In the case of a stable situation, of course, those models would work, but they aren’t necessary in that case, since behaviour is stable. The essence of monetary theory is based on the equation MV = PQ (quantity of money * velocity = price * quantity). This is neither untrue, nor wrong, but it is not particularly helpful for the manager. And that summarises the essential ‘axioms’ of business economics.

Business economics and textbook lessons Similar illustrations can be drawn from what is known as business economics by briefly going over the structure of a standard business economics textbook. Typically, such a textbook would start describing the ‘international economic environment’ by concentrating on such high-level aggregations as: average wage level, labour cost per unit, trading price, competitiveness, and efficiency that would not be discounted in any other variable. Such a chapter would finish up with the role governments play in business practice, referring to legislation, taxes, trade zones, etc. Most textbooks contain a chapter on macro-economics, which is interesting, but not really part of business economics. In a chapter on the organisation of firms and markets, where we expect to see some organising principles, mechanisms on how processes emerge, etc. we mainly find legal issues. In effect it offers a summary of a business law course. The chapter on business objectives is the one that builds foremost on the assumptions and axioms (stated or hidden) of business economics mentioned earlier. The chapter starts with a discussion about mission statements, carefully not identifying whether we talk about a goal or a path. Referring to the ‘rational behaviour’ assumption, a company is claimed to pursue the profit maximisation principle. This maximisation is based on a number of equally impossible assumptions, which, in fact, limit reality to an artificial (i.e. unrealistic) but above all linear and stable situation (highly unusual). Those assumptions are: • No division between ownership and control (which in practice is, of course, years out of date for any larger company). The ownership (the shareholdership) is represented in a general assembly of shareholders




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but the daily management (the control) is done by professional managers. An interesting discussion here is whether a different kind of management can be observed in Small and Medium Enterprises (SME) (where ownership and control are often either in the same hands, or close to each other) and larger companies. Most research indeed suggests a difference. • Full knowledge of costs and revenues (referring to the full information general assumptions) which is often neither reached nor reachable. An additional problem is that even if we can identify a fully correct picture at any moment, this would deny the dynamics of this process (certainly on the revenue side). • No problems with fixed cost allocation (since there is theoretically only one product). In most companies this is far from the reality. • Rational behaviour and only one objective, which, as already argued, are weak assumptions. The difference between ownership and control – not to mention other stakeholders who are dramatically ignored in business economics – also opens the debate between sales revenue optimisation and growth maximisation, or sustainable development. Simon, for example, talks in this context about ‘satisfiers’ instead of maximisers. The classical mistake, or weakness, resides in the process description of how to get to the corporate goal, due to oversimplified assumptions and presumed static, linear behaviour. Business economics focuses on fixing the path, instead of explaining the emergence in networked systems. Next the fixed path should be realised and management reduces itself to the control mechanism of the realisation of the path (not even always of the goals any more). The law of increasing returns (described earlier) in a knowledge economy is only one example of how disastrous the classical law of diminishing returns is when discussing the knowledge economy. The illustration of this type of mistake can be found in the classical aspects of business economics: demand analysis; cost theory; and pricing theory. Demand analysis is often done using linear regressions (in best cases, as described in textbooks), denying the dynamic behaviour of markets. Apart from the basic assumptions already mentioned, a number of technical assumptions (often hidden) need to be fulfilled in order to be able to apply linear regression. Homoscedasticity (normal distribution of the error term) and the absence of multicollinearity (collinearity between explanatory variables) are only two of them. Nonfulfilment of these assumptions causes numerical deficiency on the




results that cannot be observed in the classical statistics of the regression analysis. In quasi-stable, quasi-linear markets, all those models work, which only serves to illustrate that this situation is a special case (a simplified form) of a more generally valid quantum interpretation. In fact, the regular business economics theory is a special case of the more general quantum economics theory, only applicable to quasistable and quasi-linear situations. The fixed and variable cost theory, based on oversimplified assumptions of no cross relationships and full information, is again a special case of a more general cost behaviour structure. Once we accept cross relationships between products (services) and human production actions, we automatically fall into the network paradigm.

Emerging differences and guiding frames Other than in oligopolistic markets, which are again a special case of fully interacting markets, pricing in non-linear dynamic markets becomes a question of strategising. The best example of strategising games can indeed be found in game theory. The best known case is the prisoner’s dilemma, in which two ‘players’ play against each other, each having two possible strategies (reality, of course, is infinitely more complicated, with a huge number of possible strategies for each player.) The unknown in the game is that each of the players ignores what the other plays. Game theory knows zero sum games or non-zero sum games. Game theory has been used to illustrate pricing games. As the law of increasing returns suggests, strategising of prices goes much further. According to Arthur’s theory, the aim is to get a snowball effect going, at the right moment. If a company strategises a market correctly, it should be able not only to price correctly, but to do so at the correct moment. That kicks off the dynamic process of market penetration, often leading to important market shares. A wrong strategy (price or timing) causes the product to die out. The law of increasing returns explains why demand analysis and pricing cannot be considered differently. In dynamic situations (knowledge markets), market behaviour and price interact in continuous feedback loops and can therefore only be studied jointly. It is clear that this market behaviour, incorporating pricing issues, will become the backbone of a quantum interpretation of business economics (Baets, 2006). Most classical textbooks have two more chapters. A chapter on investment analysis, concentrating on investment appraisal, which is highly dependent on a lucrative anticipation of the future expected returns.




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A final chapter needs to discuss corporate strategy formulation, discussing goals, but most often fixing paths. Porter’s chain of value analysis, and/or his five forces model have survived the major quantum revolution. It still identifies a number of generic strategies: cost leadership, and differentiation and focus, that, if all assumptions indeed worked, would lead automatically to a fully transparent market with all players having all information. This would reduce strategic choice to the one and only really plausible strategy in such a situation of fully informed markets and players, which is a pricing strategy (hopefully based on a cost leadership). In a case where these assumptions proved true, and the model worked, it would push the remaining players to minimal profits and eventually into losses, which we can indeed observe in certain markets. The airline market is just one illustrative example. As much as markets are emergent and pricing is one of the many loop variables in such markets, strategy cannot be identified, but equally emerges out of the interaction of market players. One purpose of this book is to give the business community a conceptual framework, an ontology, and tools to be able to manage for sustainable performance in an interconnected world. Where current managerial theories seem to be part of the disease, we need not only another conceptual frame, but also other metrics in order to allow a company to manage for sustainable performance, from a more holistic point of view. Only within a more holistic view on management is there space for sustainability, for Corporate Social Responsibility, and for ethics. These offerings are designed to contribute to the call of the UN Global Compact programme to take part in the development of a new conceptual understanding of responsible management. Chapter 2 of the book discusses its underlying theories of biology and complexity that allow us to suggest a quantum ontology of acausality in Chapter 3. Chapter 4 introduces concepts of non-violent communication, interrelationship, networks and co-production. Chapter 5 deals with an emerging practice of management by values and discusses the central role of values in corporate strategy, while Chapter 6 develops the concept of sustainability and leadership. This enables Chapter 7 to design and test a holistic diagnostic for sustainable performance; to construct a technology for analysing the company differently. Leadership, as will be argued, is playing a key role in sustainable performance once we have defined the latter from a systemic perspective. Chapter 8 draws some interesting lessons of social entrepreneurship, before ‘social intrapreneurship’ – a new kind of management, targeting





different goals, with different activities, and piloting the company with different tools – is defined in Chapter 9.

Arthur, B. (1999) ‘Complexity and the Economy’, Science, 2 April. Arthur, B. (1996) ‘Increasing Returns and the New World of Business’, Harvard Business Review, July–Aug. Arthur, B. (1994) ‘The End of Certainty in Economics’, Talk delivered at the conference Einstein Meets Magritte, Free University of Brussels. Appeared in Einstein Meets Magritte, D. Aerts, J. Broekaert, E. Mathijs eds, (1999) Kluwer Academic Publishers, Holland. Arthur, B. (1990) ‘Positive Feedbacks in the Economy’, Scientific American, Feb. Baets, W. (2006) Complexity, Learning and Organisations: A Quantum Interpretation of Business, Routledge. Institute of Noetic Sciences (IONS), (2007) The 2007 Shift Report: Evidence of a World Transforming, IONS. Mandelbrot, B. and Hudson, R. (2004) The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward, Profile Books. McKinsey and Company, (2007) Shaping New Rules of Competition: UN Global Compact Participant Mirror. Scharmer, O. (2007) Theory U: Leading from the Future as it Emerges, The Society of Organizational Learning. Senge, P. Scharmer, O., and Flower, B. (2005) Presence: An Exploration of Profound Change in People, Organizations, and Society, Currency. Simon, H. (1996) Sciences of the Artificial, MIT Press, 3rd Edn. Taylor, M. (2001) The Moment of Complexity: Emerging Network Culture. University of Chicago, United Nations Environment Programme, (2005) UN Global Compact, Utopies, Talk the walk: Advancing Sustainable Lifestyles Through Marketing and Communications. Viverot, P. (2005) Pourquoi ca ne va pas plus mal, Editions Fayard. Wolf, J. (2003) Understanding the Grand Design, Trafford.

Internet sites ADS: www.bls.census.gov/cps/ads/1998/stabtop.htm Economist: www.economist.com IMF: www.imf.org Schonfeld & Associates (2003): www.saibooks.com/ UN CSD International Work Programme: www.un.org/esa/sustdev/natlinfo/ indicators/isd.htm UNEP: www.unep.org WHO: www.who.int/en/ WWF: www.wwf.org



Bibliography and further readings

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Exploring an interconnected world, as we suggested in the first chapter, immediately makes the link to biology and the lessons we can learn from biology. Ecosystems, life itself, and nature are interesting models of interconnectedness. The interactions that take place between different elements (be they amoebas, cells, animals in a colony, the process of photosynthesis, etc.) at different levels of existence suggest some ideas to explore in order to improve our understanding of the interconnectedness between people in markets and companies. In this chapter we consider some biological concepts that are challenging for the study of human behaviour and in particular for human behaviour within the context of groupings. Does something like self-organisation exist? The answer to this question opens revolutionary possibilities for business. The relevant research for answering it comes from biology in general and neurobiology in particular. While Maturana and Varela are perhaps the best-known representatives for the perceptual innovation known as self-organisation or autopoiesis, the concept has been applied by several people in different domains and in different ways. In their work, the two neurobiologists did not examine the systems from genes or ‘species’ perspectives, but from the most simple biological element, the amoeba. For them, the amoeba has a central role in each living being and so they studied how cooperation between these amoebas creates (complex) behaviour. Each amoeba has individual autonomy at the centre of a certain organism, and what appears to happen is that the living system basically functions in a mechanical fashion. In effect, the total behaviour of the system is generated by its elements and their interaction. As a result, observers find themselves entirely outside the system and, therefore, perceive the unit as well as the environment. 29



The Biology of Business

The elements of a system react uniquely in interaction with other components. Each declaration of a living system cannot therefore be based on either the idea of the goal or the direction or the final function. In this layout the systems seem to be autopoietic, they are circular, selfproductive, self-conservative but also self-referring. Here we have a few points of reference to see how people collaborate in a company or an organisation. Perhaps, effectively, in a company there is a more important objective than profit, or the creation of value, for the shareholder. A company cannot be anything other than a collaboration of a number of individuals who are trying to attain their own individual goal and who use a certain number of rules of interaction. If this is the case, then it is remarkable, for such a system creates its own order and maintains itself in a good state (like our body) on the condition that no artificial order is imposed (something we could call an organisation). By contrast, scientific management does precisely that. We impose an organisation, which we are then going to control if the requisite results are to be attained. It is perhaps sometimes the reason for failure.

Questioning organising and observing theories At this stage we must advance in the understanding of the process by asking key questions: What does autopoiesis need to be true? What conditions must be satisfied to produce this self-production and selforganisation? The answers lie in the theory. All perceptions, observations, and experiences happen to us via our body (our senses) and our nervous system. The body then becomes the medium of transport. Once in the system, therefore, it is impossible for human beings to have a pure description of anything that is independent of themselves. Each experience is always a reflection of the observer. There is no object outside the field of the observer, but this observation belongs only to them. What is therefore true in an autopoietic system and how can we face up to knowledge and truth? What does the truth signify? Who supports autopoiesis in maintaining a system in a good state? The survival of the system becomes a key criterion for measuring knowledge and success. Each apparently scientific approach can only clearly describe what the observer sees: in effect, the observer plays a crucial role. The comparison with the external world makes no sense. Therefore the methodology and the manner of leading our investigations are specific. They cannot be detached from the view of the observer. In a company situation, each truth can be just as precious, and just as important, as




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another. It is not certain that the manager has more reason or a better understanding than someone who is closer to the company process, or to the customer. Consequences follow from this. Autopoiesis really says more about the observer than the subject (or should it be object?) which is observed. In the case of autopoiesis, at least this is clearly accepted, but what about other scientific paradigms? An ulterior consequence is, of course, that any absolute claim of objectivity cannot be made, by whatever approach. All of this has already been confirmed by Gödel’s theory. Both belief and theory are pure human constructions, which then construct a reality instead of being a reflection of an existing reality. For this reason we sometimes speak of a paradigm of radical constructivism. Reality is created and not perceived. Constructivism as a research paradigm is obtaining increasing support in social sciences research, but is also subject to a lot more discussion in the classical sciences.

Theory in action: Computers, law, and linguistic animals Self-productive ideas have been successfully applied in the construction of self-generating computer applications. The application manipulates itself to be in an optimal situation at every moment: in this case we are talking about genetic software. A telephone switchboard, for example, must at any moment of the day deal with a volume of swiftly changing traffic. We can easily imagine making a program which takes account of the multitude of possibilities, but in practice it appears rather difficult. We can now develop a software program that manipulates itself in relation to specific volumes of traffic that the switch intercepts. We do not produce a program which resolves the specific problem, but it is a program which uses ideas of self-reproduction. Legal systems, for example, organise themselves in the best manner to ensure their survival, and the survival of their practitioners, rather than (exclusively) furthering their expressed aim of enabling justice. A legal system reproduces itself and establishes its own frame of reference. In order to make a legal system more efficient, a common language (the law) and a number of procedures are created. The professionals of a legal system (judges, lawyers) who work daily with such procedures know the language and the systems. Common understanding and efficiency increase within the legal system. But the citizens, who are only seeking justice (and have no a priori interest in the survival of the system itself) do not understand the jargon and




ceremonies around what they consider to be a very down-to-earth facility. For these outsiders, the insiders become extraterrestrials. For the insiders, the outsiders don’t understand the importance of the system’s own survival. We have already mentioned the idea of self-reference as a strong, but potentially destructive, idea. By analogy with the legal system, we can regard each human being (a society, an organisation, a meeting, etc.) as an autopoietic system. People seem to be ‘linguistic animals’ (and that refers to communication and interaction in a network) who do nothing other than play the game that could be called the ‘practice of (artificial) living’. Human experience as an observer is not only crucial, but is more important than what really happens in the world. The role of language and communication is core. All understanding happens through language and its representation, but, in addition, all communication with others in a network takes place through language. The number of misunderstandings in the world, in the same group of languages, is symbolic in relation to this central aspect of interaction. Even in the centre of the same group of languages, the Dutch and the Flemish, for example, use the same words differently. Sentence structure is different, which leads to gathering the same ideas in different ways. The network of ideas which a speaker tries to transmit is a function of the construction of sentences, even the sequence of sentences. But also, from the listener’s side, how they make sense of the phrases determines the understanding of the message received. Communication is constituted by a network of agents (people) exchanging a network of thoughts, with, perhaps, some hopes of being able to learn something, develop knowledge a little, or get something done. In order to get to a real understanding of communication, we should not ignore common intention. For facilitation of communication, we have to create formal ‘languages’ (a set of rules). These languages have the intention of standardising and therefore facilitating communication. However, they do not grasp the common intention, and by formalising the exchange of ideas they sometimes obscure common intention. Children who communicate between themselves in different languages, without speaking those languages, may consequently make far fewer mistakes in the formal language and seem able to conceptualise more rapidly. It seems evident that the messages children want to transmit are easier than those which politicians want to transmit. Here, too, we immediately fall into the positivist trap: if we can measure, then we can




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know. But it would now seem that communication is not at all organised in the same way as thoughts are. Is non-verbal communication not equally efficient and less structured? Does the extreme order help the process of communication, compared to a higher intensity of communication? If everyone in a Spanish café seems to be talking at the same time, and no one seems to be listening, is the communication less significant and less precious? Do similar interlocutions lead to not-so-good decisions? Do we always have the intention of rational exchange, or do we use language for emotional connection? And would the latter add less value in communication?

Cognitive connections and artificial intelligence Contemporary cognitive psychology seems to prove a good number of these ideas. A lot of research is done around language and interlocution, showing that language and action are tightly linked. Language is our ‘existence in the world’. Language is really the entire thinking of humans. Even on the subject of language, we think using language, about language (a good example of self-referencing). Knowledge is not linguistic representation, because it is possible to distinguish between different things beyond language. Language is, in fact, a social act. Organisations are therefore networks of recurrent interlocution constructed between individuals and groups of individuals. This thinking has parallels with a certain reorientation in the developments in artificial intelligence. The reigning paradigm of objective observation, and the associated possibility of drawing up optimum rules, led to the research of ‘machines based on rules’ in expert systems. The assumption is that all people’s decision processes can be captured in rules. While these expert systems have known moderate success, the achievement of the objectivist orientation of artificial intelligence has certainly been overestimated. Current developments lead in two rather different directions. One goes in the direction of research, which we can regard as looking for a selflearning behaviour of systems (emergent behaviour), and makes use of connective structures. This development is seen in artificial intelligence in particular. The connective structures are structures with which a lot of simple tightly connected elements and communication make sense out of chaos. In practice, this involves such techniques as neural networks, or networks of agents. The second direction in current research also builds on the selflearning behaviour of systems. In this case, it is perhaps better translated




as constructing behaviour, based on ‘enacted’ technologies. ‘Enaction’ here refers to what Varela calls ‘enacted cognition’ as an actor ‘enacts’ a theatre play. An amateur asked to play the role of Hamlet might try but would be unlikely to achieve a satisfying theatrical outcome. If an actor is asked to play Hamlet, he does not ‘play’ Hamlet, he becomes Hamlet. Each evening he re-creates another Hamlet. Maybe the two find each other in the character of Shakespeare. A manager can no longer ‘play’ the role of manager. A manager can simply ‘enact’ his role. He ‘is’ his role and it is therefore very difficult to learn this ‘behaviour’. You become a manager by experience. You cannot teach someone to become a manager and, as will be argued later, something which is based on skills and competence cannot be taught.

Developing knowledge: Pathways, platforms, communities For this reason, the personal development path of a manager is so crucial. A ‘learning’ manager will only be up to playing the role of the spider in the web: the inspirer and creator of good conditions for others. The manager must and should strive to continuously improve himself in this task. Operations or instruments only have a very limited utility and can never play a driving role in dynamic situations. Worse still, they can, therefore, never have a general validity. Knowledge is only knowledge if it offers a reasonable representation of action and creation. Otherwise, it is possible to speak only of information. In this case, therefore, the use and the analysis of communication (conversations) as well as a strong focus on the support of communication (by platforms, for example) only gives the context within which the actors create knowledge. To illustrate: the ‘communities of practice’ experiment carried out by numerous companies, seems to conform well to this preoccupation. This experiment was not uniquely led by artificial intelligence. Nevertheless, the interest in dynamic re-creation in two directions appears in artificial intelligence research. Things are not fixed, but are produced afresh each time. If someone is asked their age, the information is not stored somewhere particular in the brain. Each time the question is asked, the person is going to produce the reply again. This seems inefficient, from the point of view of a recurrent question. That is, in fact, the case. However, a question is rarely truly repetitive, even if it is asked using the same words, since in the majority of cases it is looking for another signification. The intonation, for example, very often gives a big hint about the question and the expected answer.




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This dynamic reproduction as an approach therefore leaves open the possibility to reply very quickly (and differently) to similar or slightly changed questions. For an authentic, real-time conversation this principle is therefore a lot better and more efficient. Furthermore, if the brain needed to store all possible information in order to be able to answer all possible questions, it would need a lot more storage capacity (and hence a larger head to accommodate that). From a rational and positivist view of the conversation, this seems an aberration and an error of thinking. Language in general plays an important role in this research. The research methods themselves are more self-learning. The general validity of the observations is less declared; something which is done more quickly in classical science. Contemporary theories of artificial intelligence on how to think about the subject of reasoning offer a different stance. They take more distance from earlier, rather positivist approaches. Possible interaction between reason and the soul are looked for, which was unthinkable before in cognitive psychology. Reason (intelligence) is considered as a behaviour: behaviour is what counts. The link between the brain and reason (intelligence) is broken: reason is not only present in the brain but in the whole body (distributed intelligence). We are speaking here about the concept of ‘embodied mind’. Reason, the brain and intelligence, are considered less and less to be a sort of computer which refers to the thinking of the machine behind reasoning. The interpretation, which is generally always vigorous, becomes, in effect, more and more based on shifting sands. Intelligence is strong in the organisation of ‘the next step’. It is weaker in the planning of a number of next steps (multiple) and weaker still in the execution of subsequent multiple steps. Intelligence is the organ of control for an autonomous agent. The structure was formed in a descending manner or by a combination of some elements. A common example of a combination occurs when different people sit around a table. The result is something like a structure as it sets up a network of different elements (people). In addition, intelligence is something continuous, and not only a sort of metaphor for a machine which functions with zeros and ones. Intelligence does not function with numbers and symbols but with vague notions like tall, taller, smaller etc. Intelligence reacts to these sensations, which can be translated into sensorial perceptions. Then all of that is translated into information. It is not the action on the senses themselves which creates information, but the liaison of a specific perception with the existing network of perceptions and information.





Sensorial perception, action and knowledge go together and this is summarised in the notion of ‘enacted cognition’.

Self-organisation and self-production are concepts which are strongly embedded in neurobiology; concepts which, when translated into social systems, receive more and more attention, but which are radically different from the tradition of Western management. In this tradition, everything must be organised and controlled, based on whichever intellectual tradition is inspiring. But in practice that does not work and can lead to frustration. Through Varela’s concept of enacted cognition, it is possible to see how intelligence recombines old information and experience to produce new actions. Intelligence is positioned in a diffuse way in the whole body, but it seems that, even if the modules are independent, they collaborate through connections between each other. These notions undermine what is used most of the time as a basis for our management, especially specifically concerning structure and control. In particular, it raises one crucial question: can a social system be organised from outside? From enquiries into the behaviour of autopoietic systems, the answer seems to be ‘no’. Instead, it appears that each system, even if examined at the level of the simplest components, can only organise itself, replicate itself, and assure its own survival. Although this could be taken as negative at first sight, it represents an undeniable strength. Systems do not necessarily need a tight direction with a lot of complicated rules, at least if we dare to give back the control and the direction to the system itself. Therefore, the shocking conclusion for traditional management is that intervening in such a system should probably be avoided. Just as people are often not aware of the self-organisation within themselves, management of large companies are largely not aware of the self-organisation within. Many reorganisations of traditional companies directed from ‘outside’ or ‘above’ actually risk destroying the very organisational fabric that has allowed them to operate as an integrated whole. However, careful experiments in certain companies seem to indicate how a more self-organised management could succeed. In practice, how can this be related to knowledge management? Or, to put it in more specific terms: how might knowledge be organised in a ‘self-searching’, and preferably self-finding way (in opposition to the branch structure implemented in very large databases)? Groups



Biology lessons and enacted cognition

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responsible for the conception of new products seem to be more creative and efficient if they have more liberty. This is not to claim that nothing can be learnt from the past with regard to successes and errors – on the contrary. However, the difference is that the lessons learnt from previous experience are not translated into typical outcomes such as the ‘ten commandments of innovation’. Instead, they are used rather like stories from which, according to individual interests, advantages can be extracted.

The gift of learning and ‘walking’ to learn The potential of learning in itself, in companies, is an interesting gift. More and more companies try to provide a more flexible range of training and support better linked to the profiles of particular individual roles. They seek to provide ‘just-in-time, just-enough’ learning, based on the development of necessary managerial competencies. Other research, including my own (Baets, 2005), has illustrated that workplace learning is a very effective and efficient way of continuous learning. This is particularly marked if it is related to the development of managerial competencies. E-learning by itself (without speaking of classical e-teaching or of distance or correspondence learning) is a promising development through which a manager, while doing her or his job, is supported by the learning environment. To those who want to learn, it will offer potentially effective support, adapted to their needs. Such situations also abolish the classical teacher role, which is designed to transmit to classes of pupils how the real world is (or should be). Those who want to learn find what they want and need to learn, and then do so by doing. All these developments are promising on condition that the organisation has the courage to relax control at all levels. This does not translate into saying that everyone does just anything, and then see what happens. Let me refer again here to Alice in Wonderland. If, effectively, employees do not know where they, or their organisation, want to go, then each path is equally relevant and good decision making difficult. Nor can organisations be too rigid with direction as in Western management’s tendency to fix the paths to follow. This leads to problems when these paths change – as they quickly do in current conditions of rapid change – and organisations forget the need to adapt and to change themselves, because they concentrate on the destination to reach instead of the path to follow. From an autopoiesis perspective, the path that goes towards the goal will be made by walking, in the network of employees. As Antonio




Machado says: ‘Caminante, no hay camino, se hace camino al andar’ (There is no path, the path is made by walking). Management, or organisational strategy, must concentrate on the goal to be reached, and should also share ideas with the network of employees. In practice, this does not often happen. Strategy is often considered as secret, and so employees cannot even help management to attain the goal. The agents in the network each have their own preferences and capabilities. In the interaction with other elements of the network they can walk on the path which will lead to the goal by different little steps. If the goal is clear and realistic, the path could be adapted each time it is necessary in practice, and sometimes this could be very often. Knowing the goal, employees can take their responsibility in contributing to this network of walking paths.

The search for an underlying theory Chaos and order As already noted, certain contemporary disciplines challenge the tradition of Western management and its propensity to organise and control. Another understanding of the functioning of social systems is possible and can give us other ideas for management if we are able to observe from another paradigm. Is there therefore a paradigm which is scientific (based on scientific discovery) and which provides a vision of social self-organisation? In seeking to ground this vision theoretically, I found inspiration for this book in what is known as the theory of complexity and/or chaos. Scientists, effectively starting from a positivist paradigm, but with an open-mindedness which lets them really see, have made remarkable observations. A number of them, for example Prigogine, have received the Nobel Prize for their research, but very often their knowledge remains essentially within their own circle of researchers in hard sciences. Only during the last few years have we seen little by little what their theories, especially the application of them, can mean for social systems. This aspect orients us towards ‘the search for an underlying theory’. Look at the chaos of daily life, a point of common contact where writers and readers can, supposedly, agree. But how does it work? Chaos is clearly present at times, but fortunately we also regularly have order. Certain things often play out in a well-organised way. The administration is organised, the trains are well organised and planes leave more or less on time. Isn’t that order, and how does chaos play a role in that? Is there a theory of chaos? As we have already stated, positivism goes





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Sometimes small differences in initial conditions produce very large differences in the final observations. A minor change in the former can cause a tremendous error in the latter. The phenomenon is becoming unpredictable; we have random phenomena. He could not prove it, but he could clearly see remarkable things happening. During the simulation of certain mathematical models when very small differences in the initial values appear, big differences can be found in the final results. Poincaré could not explain the cause. Nor did he appear to have the least idea that he was making an observation which would later lead to what became known as complexity theory. It should also be remembered that Poincaré did not have computers at his disposal to experiment rapidly with all sorts of simulations. It was not until 1964 that Lorenz, an American meteorologist, discovered and identified the problem with supporting data. In between these dates, in 1931, Gödel’s theory had sowed confusion by proving that any axiomatic system, let us say a mathematical system of variables and equations, would not be up to accepting or rejecting all possible statements one day. Therefore, there could be no unique perfect model of the world. This discovery was much more than a huge question mark, making a new turning possible for mathematicians. Mandelbrot’s fractal algebra is just one of these new orientations. But Gödel’s theory, while adding to its significance, does not give a response to Poincaré’s problem. Lorenz, however, did add clarity. As a meteorologist he worked with a simple system of three dynamic non-linear equations. Dynamic means, for example, that today’s temperature is a function of yesterday’s. Nonlinear means that somewhere there is a variable with an exhibitor. With his system, Lorenz tried to predict the weather. He made a number of observations and simulations on this subject. Lorenz had a computer, which was not common in 1964, and thanks to this he could clarify what Poincaré had suspected. The use of computers was indispensable for making sufficiently large simulations. During these simulations Lorenz had to interrupt his research. In fact, since computers did not have screens at this time, they produced a mountain of paper. When he wanted to pick up the simulation later, he wanted to take the last value the computer had produced as the initial value of the rest of the simulation. He had, as a good scientist, a certain



perfectly with the Cartesian attitude. It is, however, in the positivist sciences that the first doubts emerged. As early as 1903, Poincaré made a remarkable observation.

doubt. This is how, instead of taking the last value, he took the result of the previous 100 observations and started from that. During this new simulation of the 100 last steps, he wanted to be sure that everything went as well as previously before going further. To his great surprise, Lorenz discovered something scary. Nothing went as expected. In the first period, he saw little differences appearing, but they were not always the same. They were rather arbitrary. Although the range of discrepancies was at first quite limited, the same values were a little random. The biggest and smallest values alternated in a previously unknown pattern. But while the simulation continued, he observed some remarkable occurrences. The new simulation seemed to suddenly react in a strange way. The values showed huge differences in the two directions and the differences between the first and the second simulation became bigger than the values simulated. Therefore, these values became incoherent. The whole exercise became totally futile. Lorenz had hit on what might be described as ‘the bug of unpredictability’. In certain systems it seems impossible to predict. From a certain moment, and we do not really know which moment, the system becomes entirely incomprehensible: it displays ‘chaos’. Therefore a prediction can work very well for a certain period, and then, suddenly, and seemingly unpredictably, become completely useless. What had happened? Lorenz had certainly entered the correct number. But although he had used the correct number printed on the list, it was not really the same thing. It was a rounded figure, compared to the one the computer had used in the first series of calculations. It calculated, for example, with precision up to sixteen figures, but only printed eight. Therefore the number with eight figures after the decimal point was slightly different from the true figure. In real life, calculations are often done with rounded figures, rather than with the precise number, which may include several figures after the decimal point. It appeared to be a question of non-linearity and of the dynamic characteristics of the system, and so, just like that, Poincaré’s worry had a name. Dynamic and non-linear systems cause, by their very structure, unpredictability. A complex system is hereby defined as a non-linear dynamic system.

Management paradox Company managements constantly confront complex (or, in other words, non-linear and dynamic) systems. Is there a phenomenon in management for which the current value will not be dependent on yesterday’s value? The current value is, in part, always a function of




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yesterday’s value. The level of salaries (this year) is without doubt a function of the previous year’s levels. The market share which you can achieve today is without doubt a function of the market share you could achieve the previous month. The phenomena of management are, in consequence, dynamic until proven to the contrary. In addition, each management phenomenon is not only dynamic but also non-linear, except for the processes (production lines, for example), which are constructed to be linear. Such processes have been built specifically to perform specific tasks, in a way that can be checked and controlled. Although, even there, experiences of control going off the rails can be found (e.g. nuclear plants), and all the interesting phenomena are non-linear. Market behaviour, competitors’ behaviour, employee collaboration in their daily work, and the processes of decision making through dialogue, etc. are non-linear and dynamic and, therefore, essentially unpredictable and uncontrollable. So a paradox of management is the attempt to direct and control something which cannot be controlled and directed. That would not be so terrible if its failures were not found to be surprising. In fact, it is impossible for management to guarantee success (in markets and/or dynamic companies) through control and prediction. Consequently, it is called into question as a way of facing up to such dynamic systems. What can a manager’s role be if everything is unpredictable and uncontrollable? In essence this is the main question of this chapter: what can a manager do if no control approach works? One possible response is to adopt a learning approach. The cause of chaos, which intervenes in a system for the same reason as order, is the very characteristic of a dynamic system. A system does not have a problem with that. It does not have a problem containing order as well as chaos, sometimes demonstrating order, sometimes chaos. It is human beings who have a conceptual problem with trying to consider systems as organised entities which are therefore manageable, and who have ongoing practical problems in trying to deal with a complex system with control and prediction mechanisms. In practice, the phenomenon emerges though trying to reach understanding through models. It happens when a manager uses models (even simple ones), or rules of thumb. Those simple models are often linear and non-dynamic, and they cannot deal with the simultaneous presence of order and chaos in a system. Certain mental models of managers, like automatic pilot behaviour, are naturally also models. The phenomena studied in management are continuous (they never stop and constantly change) and not discontinuous. But what




measurement can be taken? As precisely as possible, this should always be a point of discontinuous measurement. We therefore continually approach societal processes which are themselves continuous (market behaviour, buying behaviour, human interaction) with variables and decisions based on discontinuous measurement. The point of measurement (of observation) is never really correct. Using the phenomenon Lorenz revealed, which we could call ‘the dependence of initial values’, we know that, since the observation is never correct, the simulation is going to produce chaos. But there is still something else. In practice, we cannot approach a reality which is by definition continuous (e.g. market behaviour) other than by a discontinuous approach. In other words, although managers may try to do the maximum, and to be precise, observation and data can never be correct. In managerial applications, there is no immunity from the virus of unpredictability. Accordingly, the approach advocated by this book aims, to an extent, to incorporate this virus in the model. Any systematic approach will always demonstrate order at certain moments and complete chaos at others.

Characteristics of complex systems Learning from the Lorenz Butterfly At this stage, having established that these observations are not only scientifically important, but also, and especially, that they have consequences for companies (and also for social life, politics and law, etc.), the rest of this chapter looks at what we can learn from the theory of complexity. This theory is not new, but in the management of companies or other general social sciences it is still growing and relatively recent. This is why it is important to revisit key figures. Through his research, Lorenz, for example, shed more light on what Poincaré had suggested and gained a little more comprehension of complex systems’ behaviour. Lorenz captured the dependency on the initial values: little differences in the initial values led to big differences in the subsequent sequence of events. But Lorenz found yet another characteristic of complex systems. Apparently, complex systems can also demonstrate moments of relative calm (stability) in the middle of chaos. Sometimes the simulations turn around points of attraction, let us say points or fields of local stability, then suddenly change and orient themselves towards a more chaotic sequence of events, then calm down again around another point of stability. We call these points of local stability ‘attractors’, even ‘strange attractors’, since we do not know when, how, or with what strength




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they attract the phenomenon. Certain complex systems have only two attractors (points of stability) but certain other systems have a much higher number of attractors. The name of Lorenz remains linked to a very remarkable phenomenon in respect to weather forecast systems. In a certain simple simulation (three equations with three unknowns), Lorenz observed that the phenomenon being studied centred around two attractors. The phenomenon moved around the first attractor one moment and suddenly whizzed off to then settle itself around the second attractor. Next, the phenomenon moved back suddenly to the first and then back towards the second. In fact, in doing that, the phenomenon created a sort of butterfly-shape. This therefore became known as the Lorenz Butterfly after his 1972 paper title ‘Predictability: Does the Flap of a Butterfly’s Wings in Brazil Set off a Tornado in Texas?’ (cited in Lorenz, 1993, p. 14). It would be comforting to be able to say that such speculations are impossible; that they do not make any sense. In theory, at least, however unsettling, it is possible as simulations show and no one, at the time of writing, has ever been able to prove the contrary. In fact, despite the formidable progress of science, weather is still totally unpredictable a few days in advance. So why should it still be necessary to emphasise again that this is also the case in management? Consider the stock market. Do expert analysts know why the stocks do what they do? Is there one person who can do better than the ‘random walk’ in anything other than the short term? Could it be true that the lack of understanding of stock market behaviour has a relationship with the manner in which we approach it, and, therefore, with the perceptual glasses used to observe it? In the 1960s and 1970s we considered the Soviet Union to be the bogeyman, which allowed the examination of the world with a certain perspective, a certain pair of glasses. These glasses were not necessarily correct but they perceived what they perceived; except that, this is also not necessarily true. The Berlin Wall fell and at that moment the military and economic power of the Soviet Union could really be observed. To represent the Soviet Union as the great danger for the world and development has come to seem, at least in retrospect, a little unjustified. At the time, however, this vision served all sorts of goals and justified massive investments in, for example, the arms industry and the defence sector. This, of course, happened to the detriment of other possible expenditure. The point of departure chosen will justify our action. By choosing the glasses, the field of vision is restricted to them or by them.




After the fall of the Berlin Wall, another pair of glasses was required. And in the meantime perhaps yet another pair has focused almost exclusively on Muslim fundamentalism. It is a lot simpler to consider the world in terms of huge aggregates, like the free West, the Communist world (although now it is a lot smaller), the Islamic world, the problem states (Iraq, Iran, etc.). However, what if the world is just a game played by a collection of individuals, organised or not in groups at a local level; groups which are linked in various networks where each individual (or group) can continue to live life in the best possible way, with a minimum of rules of behaviour? Perhaps the search for theoretical understanding takes place at too elevated a level of aggregation? The theory of complexity, and notably the work of John Holland on agentbased simulations, provides contrasting points of reference which open other fields of vision.

Prigogine, liquids, and time Up to this point, two characteristics of a complex system have been identified: it is strongly dependent on initial values and it displays local stable moments around what we call strange attractors. These can be extended by the ideas of a man who is closely linked with the theory of complexity: Ilya Prigogine, a Belgian Nobel Prizewinner, Professor Emeritus of the Faculty of Science at the University of Brussels (ULB), who (unfortunately) died a few years ago. His research was oriented to the dynamic of liquids. At first sight, these theories are a long way from managerial thinking. In fact, Prigogine’s research on the behaviour of liquids (during the process of heating) discovered dynamic characteristics of liquids in this phase, which in turn led to remarkable conclusions of wider relevance. Prigogine’s best-known conclusion, and the most important for the study of complexity, is the principle of the ‘irreversibility of time’. In short, he showed that the future cannot be extrapolated from the past, at least in dynamic systems. The reason is that a dynamic system recreates itself all the time and can branch off at any moment. A dynamic system develops in a non-linear way, and thereby obscures its historic development. It makes reference to the concept of the constructive role of time, what he calls ‘the arrow of time’. Time plays a constructive role in dynamic processes. Over time, or rather, as time moves gradually on, something new happens in liquids, something with new characteristics; the initial characteristics are never found again if we stop the heating (or if we cool it down). For example, once a cake is cooked it will never again return to being a paste. Coffee, once made, will never go back




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to being powder and water, but it will also change again when it is reheated a second time. In the heating process, liquid takes on other irreversible characteristics. Time plays a constructive role. Time contributes to a new creation. Despite the two great scientific revolutions – relativity theory and quantum mechanics – most thinking in physics is still Newtonian: the space–time couple is seen as a fixed one. In Newtonian thinking time is reversible and so the future can be predicted from the past and, in theory, also vice versa. In fact, the past can be predicted from the future, and, therefore, past and future are immutably and deterministically linked. In practice, in companies, that is naturally not the case. In fact, no one has ever succeeded in predicting a market potential, or market shares or future relationships between competitors. The financial markets are the most eloquent examples of failure but, for whatever dynamic market, it is equally impossible to forecast other than in the short term. The more dynamic a market, the more difficult the forecasting, because, in this case, time plays a ‘more’ constructive role. This does not mean that the past is totally insignificant. The past, and more particularly the experiences of the past, are the raw material for human learning (see Chapter 3). But the past does not let us predict the future at all (other than in the very short tem, or in stable situations where forecasts are therefore useless). The characteristics of a liquid, according to Prigogine, are created anew each time. These characteristics are a type of knowledge and consequently knowledge is created anew each time. It is not enough to mix powdered coffee with water to obtain coffee. We have to go through a process using a coffee machine and in the course of this process the qualities of coffee are introduced, by the dynamic behaviour of the system in question. After Gödel’s observations, the principle of the irreversibility of time is the second important phenomenon in thinking around complexity. Prigogine also investigated the behaviour of systems far from their balance point, far from equilibrium, in comparison with systems close to equilibrium. By way of comparison, and this is in opposition to classical economic thinking, a system in balance is a totally uninteresting system. It contains all information, it is dead, and can therefore not be moved from its balance. In the theory of information, it can be said that the system understands all the information, or contains all information. There is nothing else to add. A society (or company) in balance is therefore a dead society and it is extremely difficult to revive it or innovate. Therefore a system is interesting if it is not in balance. It is the same thing for a company. Nevertheless, there is also a difference




between a system close to equilibrium in comparison with one which is further away. Prigogine introduced the notion of entropy and the production of entropy. Entropy is an indication of the ‘amount’ of chaos in a system. A system where entropy is equal to zero is dead and in a balanced position. A system far from balance has a high level of entropy. Prigogine observed that systems far from equilibrium are more interesting because, in this state, a lot of things happen. It is not, strictly speaking, a question of entropy, but rather the production of entropy, the progression (or diminishing) of entropy. This is important to bear in mind, but, for the purposes of this book, there is no need to go further on this point or the detail of Prigogine’s work.

Holland, the game of life, and fitness How does this apply to management? Well, in mature markets, for example, increasing market share is a lot more difficult than in emerging markets. In dynamic markets (chaotic markets) such as, for example, in Eastern Europe, market share is won more easily simply because the entropy of these markets is higher. Of course, it is also possible to fall a long way, but this is essentially the risk the entrepreneur takes: those who take risks will be rewarded (won’t they?). Companies are therefore theoretically encouraged to actively look for markets with higher entropy (i.e. rather chaotic markets). In practice that goes against the thinking which controls and dominates current management behaviour. The current preference is to choose the long and rather difficult path of a more stable (and expensive) approach to win market share. The tendency to control everything in management aligns with that thinking. ‘Controlled growth’ with a ‘calculated risk’ typifies the contemporary credo but runs the risk of neglecting market characteristics. In practice, as the subprime mortgage market has only too graphically illustrated, that often does not turn out as expected. Shifting to discuss new products and new markets, the innovatory force of a company is immediately invoked. Innovation does not go well with a stable company and a culture of strong control. To explore new possibilities necessitates a rather chaotic company culture, a culture with a lot of entropy, a culture where one can learn and fail. To limit innovation by detailed and defined procedures (as is often the case in practice) becomes a contradiction in terms: the so-called management of innovation. To develop beyond this requires introducing new ideas. Besides the ideas of Varela and those of Prigogine, another major current of ideas related to the theory of complexity is linked to the name




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of John Holland, the father of genetic algorithms. Indeed, Holland’s theories, along with those of Prigogine, are accepted by the majority of people in the Anglo-Saxon world as the theory of complexity (although the development of genetic algorithms cannot be seen disconnected from the research of ‘artificial life’, which is closely connected to Chris Langton’s work). The research on artificial life highlighted remarkable characteristics of systems, notably the functioning of so-called complex systems, on the basis of a number of simple rules. It is possible that a system with simple agents (say people), in which everyone follows their own simple goal (to survive, for example) and where everyone follows rules of simple interaction, produces complex behaviour. To take two simple examples: the flight of birds and the game of football. In general observation, the flight of birds flying in V formation appears to be well organised. However, the individual behaviour of the birds is not very organised. It can be reduced to simple rules such as birds not losing sight of each other while not touching each other. Trying to write a programme to simulate this process, based on reductionist ideas and an associated procedural approach, will never succeed. The birds’ behaviour can never be understood at a sufficiently detailed level. However, it is perfectly possible to simulate a flight in V formation with the following two rules: Always keep a distance between 15 and 25 cm from each other. If a bird wants to move away, it can do it up until it hits the 25 cm barrier when it risks losing its neighbour. The 25 cm rule links this bird with its neighbour. When the birds risk touching each other, the 15 cm rule maintains a sufficient distance between them. We can immediately see the movement in waves of the entire flight. When a flight approaches a post, first of all, the 15 cm rule keeps the bird at a sufficient distance and pushes it around the post. The 25 cm rule avoids them flying off into the distance. At the other side of the post, the 15 cm rule again prevents them colliding and the flight continues on the other side. The game of football has precisely the same qualities. Because it is impossible to understand the rules of footballers’ decisions, programming classically, in terms of procedural thinking, does not provide any solution. Once again a few simple rules can provide the solution. They all want to win, remembering that there are therefore 22 players with the same aim. A few simple rules of interaction are determined between them; for example, not to play the ball with their hands, not to kick each other, etc. These rules are identical for all 22 players, only there is one difference. Eleven players play in one direction, the other 11 in the other direction. What happens now is that these 22 cooperating




agents can develop a very complex game, while each one of them has a simple aim in front of them (in this case, the aim is, of course, to score a goal). The world’s most popular sport is based on a few simple rules of interaction. The coach does not determine the rules or how someone must play. The coach transmits his understanding of the game and shares his experience, after which the players themselves must act. That is what happens in genetic software, genetic algorithms or ‘artificial life’. It appears that a given network of agents (entities, software, people, etc.) with a certain aim in mind, and with a few simple rules of interaction, is capable of very complex acts. It is the underlying principle of agent simulations, a development in artificial intelligence, for which Holland is in part responsible. These (artificial) agents appear to be able to learn by themselves and to produce behaviour which is adapted and geared to learning, like the footballer who gradually acquires experience during his training. Accordingly, such a system based on simple rules of ‘fitness’ (i.e. geared to Darwinian notions of the survival of the fittest) can demonstrate a capacity for learning and for solving complex problems. Agents’ systems are therefore an imitation of methods of organisations noticed in human ‘colonies’ (football players, companies, employees, etc.). The search for rules of decision making becomes useless. Determining objectives for each individual, linked with rules of interaction, seems to produce the work required. Two important developments stem from this: genetic software programmes as well as genetic algorithms. A genetic software programme is therefore software which self-regulates in such a way as to optimise the execution of the task in relation to the environment at a given moment. The software of a call centre, which genetically self-regulates to be able to manipulate the flow of continually changing communication, is one example. Another interesting development is the use of genetic algorithms: algorithms which genetically manipulate chains of 0s and 1s to provide a multitude of possible solutions. The different possibilities are compared on the basis of their ‘strength’ (fitness). By constantly manipulating the information, and keeping the better solutions, the best solution can finally be found. This system is remarkable in its simplicity and strong in its capacity to resolve complex problems. The basis of these developments, and the interesting applications which stem from them, have implications. They imply that, where the hierarchical and organised structures are not capable of completely understanding this type of system, it is no longer necessary to look in the classical direction: a number of alternatives already exist elsewhere.




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Companies, or any kind of network or social entities (society, country, international community), can be considered as agent networks. These agent networks demonstrate emergent behaviour (or self-creating behaviour) which is produced anew each time by the network (in line with Prigogine’s illustrations). The role of a manager in such a network is therefore no longer to provide good solutions (if that was indeed the case before). Instead her or his job is to create the best conditions and circumstances for the network to be able to work in freedom in the best way possible. These networks are self-creating and self-organising, and based on principles already found in neurobiology. These networks demonstrate behaviour which is sometimes very complex, but the rules of piloting are very simple. The strength is not even in the links in the network (the agents) but more in the quality of interaction (in the network itself). Effectively, it is the quality of agent interaction in a company, and not the quality of individuals, which will build the quality of the company. Recruiting very intelligent employees brings nothing to the company if they are not prepared to collaborate. It is clear that the supervision mechanisms for such networks are different from classical management. What is most important is not what is good or better, but rather how to speed up the process of learning. It is therefore important to learn from mistakes and successes while each time leaving the network the possibility of creating a new space (with the solution). This network must be held as far as possible away from balance, in order to maintain high entropy and therefore creative potential, but that can only be done with good conditions of basic support. The key word is: learn. The basis of management is learning; but learning quicker than competitors with the best support of collaborators in their learning. However, the more order is sown in the network; the more chaos will be harvested. Only a learning human – a human prepared to learn, and capable of learning – can play a role in such a network in the best way. The manager is ‘only’ one element in the network. Prigogine’s work on the one hand and Holland’s on the other was considered by the majority as the theory of complexity (in AngloSaxon terms). We have also seen in other sciences (such as physics, chemistry or information technology) how evolutions in the same sense are produced, notably with the works of Maturana and Varela in neurobiology. The autopoietic principle (of self-reproduction and self-organisation) conforms perfectly to the character of permanent creation in a system (Prigogine) as well as the emergent behaviour of agents in a network




(Holland). Neurobiological research is not a negligible fundamental aspect to take into consideration in comparison with what is developed here. Varela himself made parallels between human organisation and the functioning of the human brain (the neural network), which is a very dense network linking billions of ‘knots’ (neurons). Each neuron is in fact very simple (stupid) and can only execute very simple actions (yes or no to pass on energy). Connected (in a network), these neurons are capable of marvellous things. The idea of neural networks and their use for understanding organisations has already been studied in my other publications (most of them available on my blog, [http://euromed. blogs.com], or see Bibliography and further literature below). This metaphor of the organisation as a neural network not only goes well with Varela’s theories, but also with the metaphorical aspect of Prigogine’s and Holland’s theories.

Towards a new paradigm A number of more recent theories seem to be forging a new strong paradigm; a paradigm which has rather a lot of consequences for management and managers. Prediction and control become useless, since they are not realistic in dynamic systems where they cannot be correctly calculated. As a result, managing some parameters or variables, (and the associated slogan ‘we can only manage what we can measure’) does not make sense any more. But what is the role of a manager then? Which qualities must a manager have to be a good manager? If the manager effectively looks at companies with another pair of glasses (another paradigm) he could see other things. The things that are seen now, but cannot be well understood in the classical paradigm, could suddenly make sense. This opens opportunities to do something with them today which will be different, without a doubt, from what has been done so far. Market behaviour and the behaviour of the agents in the network can be better understood. Everything therefore becomes a question of learning, learning more quickly, learning continuously, and inviting others to learn alongside: the learning manager as an inspirer in a learning network. Applying this new paradigm in companies allows a better understanding. At present, it is not much applied. A few research centres and even a few companies follow this evolution with interest, but proportionately this is still very limited. Sometimes little companies manage to organise themselves in an ‘organic’ manner. These companies seem to open more possibilities for self-creation and self-organisation. There are even





51

virtual companies which have succeeded, although in general they are very small.

On the scientific economics plane, Brian Arthur has for several years studied the economic theory of complexity by looking at market behaviour. He therefore observes things completely differently from traditional approaches. Other contemporary economic thinking is based on a number of simplifying assumptions, none of which are realised in practice. Man is supposed to be entirely rational, possessing all the information, working in a market with a limited number of goods (or services) and a limited number of players. This continues, despite the fact that not many people any longer believe that buyers are rational, or that they possess all the information. This has been further undermined by the spread of the Internet. It is not only difficult to possess all the information, to the regret of the Internet, and also thanks to the Internet, but there is a continual ‘overload’ of information. Information is not so important in itself, but rather it is the interpretation of this information that makes the difference. All these assumptions of rational economic man, which seem to be innocent at first sight, are necessary to be able to work with non-dynamic models (or to assume dynamic behaviour to be static). Based on knowledge about the faults of a static and linear approach of a non-linear dynamic phenomenon, there can be little hope that these models will give an understanding of real market behaviour. A fourth assumption of our economic theory is the law of diminishing returns. Under this law, physical goods (or services which are not based on knowledge) are such that if one consumes more of one, then one will obtain less satisfaction (marginal) for each additional unit. Having eaten five tarts, the sixth is not really very enticing. That is to say, that, if one has already seen ten films, the eleventh is no longer so attractive. The latest new unit produced less of a plus-value than its predecessors. The same is true in the production sphere. If we have the necessary amount of steel in order to produce a car, any additional unit of steel will not create any more value. This economic theory does not pay attention to the fact that, in an economy based on knowledge, where the products are principally based on knowledge (even if it is not pure knowledge), this law no longer holds. The characteristic itself of knowledge is different compared to the raw material of an industrial product. Knowledge increases in



Arthur, economics, and returns

applicability the more one shares it. With products based on knowledge, the prefinancing is very important (the research part) even before the product can exist. Let’s take medicine as an example, where, at first, investment in research is very important. After this first phase one can market the medicine, sell it, and it will then be necessary to hope that the revenue pays back the investment made. The price of the first copy (of the first product) is very high, but each following copy is very cheap in ‘production’ (copying). Since the sales prices remains the same, each additional unit sold can therefore provide an increasing added value per unit (and not decreasing as suggested in the law of diminishing returns). The first copy of Microsoft Windows costs a fortune. Each following copy cost a few dollars: the time to make the copy and a CD. To return to the earlier example of the eleventh film, the assumed loss in pleasure or utility takes no account of how increasing appreciation of a genre, or an auteur, can frequently increase viewing pleasure. A delight in Hitchcock movies, for example, often means looking forward to the next, or even an early, poorer quality film by the master. In knowledge-based markets some reinforcing element appears. It can be caused by ‘positive feedback’, or a market strength which does not lead to a balance, but creates a sort of snowball. At the beginning of the video era there were different standards. VHS and Betamax fought a battle where Betamax was really of better quality and price, but VHS won. What happened is that more videos of the VHS standard invaded the market, then more video equipment manufacturers chose the VHS standard, thanks to which more filmmakers produced films to the VHS standard. This snowball led to VHS becoming the market standard today. Microsoft DOS was not the better operating system for PCs. At the moment when IBM chose DOS as their operating system they were far from the standard, and far from a product considered as good quality. The IBM decision led many developers to create their software programs using the DOS system. The other PC manufacturers (Olivetti, Philips, etc.) then also chose the DOS system. Windows still works on DOS (though it is well hidden). A more current example in the politico-social sector is the pre-election campaigns for the US presidency. Why did all the new candidates make such huge efforts to win voices in tiny states such as Iowa and New Hampshire at the beginning of their campaigns when, obviously, states like Florida or California would deliver many more delegate votes? The reason is very simple; they hoped to start out with victories, a snowball in ‘funding’ to buy more television time, thanks to which they could




53

attract more attention, and then get more financing etc. Often, in effect, this approach really works. In the world of business, where Microsoft has clearly won the battle of the PC standards, the phenomenon of positive feedback no longer leads to the usual market share of 15–20 per cent in industrial leaders’ markets. In the knowledge markets it is closer to 60–80 per cent and – effectively, in the Microsoft case – there are even higher percentages. Continuing to think in the industrial paradigm is surely due to misappropriation. The justice system that only understands the old paradigm, by which it operates itself, very quickly supports so-called allegations in the knowledge market. If Microsoft were divided into several little companies, there would very quickly be another majority player emerging in this market. It is the logic itself of these types of markets. A classical approach has great difficulty understanding this; complexity-based theory has no such problem. Nor is the difficulty restricted to economics. Western thinking about science and organisation in general does not fit easily with the theory of complexity. Although opposed to Western philosophical and scientific traditions, complexity-based theories are not only interesting, but could also very well contribute to a better understanding of social phenomena. Managers will have difficulties accepting a number of aspects and the consequences of these theories. But very few concepts of Western managerial thinking seem to contribute to finding solutions in a dynamic world. It is systematically difficult to seize on what really happens, and the classical instruments do not always necessarily help towards a better understanding. How can a manager apply all that? When managerial control puts a brake on innovation, is there an alternative? This chapter has argued that there is, and that it has a direct relationship with learning: how to keep learning yourself, how to simultaneously stimulate others to learn, and how to create an environment that supports learning. These are managerial attitudes and skills required to cultivate creation and innovation.

Bibliography and further readings Baets, W. (1998) Organizational Learning and Knowledge Technologies in a Dynamic Environment, Kluwer Academic Publishers. Baets, W. (1999) A Collection of Essays on Complexity and Management, World Scientific. Baets, W. (2005) Knowledge Management and Management Learning: Extending the Horizons of Knowledge-based Management, Springer.




Clippinger, III J. (ed.), (1999) The Biology of Business, Jossey-Bass. Gleick, J. (1987) Chaos: Making a New Science, Heinemann. Holland, J. (1998) Emergence from Chaos to Order, Oxford University Press. http://euromed.blogs.com Lorenz, E. (1993) The Essence of Chaos, University of Washington Press. Maturana, H. and Varela, F. (eds) (1980) Autopoiesis and Cognition: The Realization of the Living, Reidel. Maturana, H. and Varela, F. (1992) The Tree of Knowledge, Scherz Verlag. Merry, U. (1995) Coping with Uncertainty, Praeger. Mingers, J. (1995) Self-Producing Systems: Implications and Applications of Autopoiesis, Plenum Press. Nicolis, G. and Prigogine, I. (1989) Exploring Complexity, Freeman. Stacey, R. (1992) Managing Chaos, Kogan Page. Stewart, I. (1989) Does God Play Dice?, Basil Blackwell. Varela, F. (1979) Principles of Biological Autonomy, Elsevier-North Holland. Waldrop, M. (1992) Complexity, Penguin.




Emergence and Dynamics: A Quantum Ontology of A-causality

The previous chapter has opened a quest for a new paradigm, or even possibly for a new ontology. If we would like to understand the world differently, we might need a new set of basic assumptions, beliefs that we hold about how nature itself functions. It is generally accepted that the world functions according to the laws of Nature given to us by Newton. We would operate in a fixed time-space concept. Events are causally related, and if we know what happens today, we know with certitude what happened yesterday and what is happening tomorrow. Clearly, however, our relationship with the past is a much easier one than our relationship with the future. We know exactly what happened yesterday; we have no clue what is going to happen tomorrow. In reality, in practice, a Newtonian world does not seem to hold. Nevertheless, our managerial thinking is still heavily based on causal thinking. We claim that we can only manage causalities. But in reality again, what a manager, a leader, deals with is interconnectedness of people, and that seems to follow its own pattern of logic. We have known the revolutions of relativity and quantum mechanics in physics during the previous century. How do the findings of quantum mechanics allow us to adjust our basic assumptions on the functioning of companies and markets?

Introduction Management theory and practice today are facing the challenge that linear and deterministic ways of thinking about managerial problems may create more problems than they solve. Strategy studies, for instance, display a growing interest in learning and organisational flexibility, and IT gives importance to distributed cognition and adaptive systems. 55



3

Management theorists are keenly observing developments surrounding the complexity and chaos theory in science; management researchers are attempting to apply emerging theories to managerial problems. The ideas that many simple, non-linear deterministic systems can behave in an apparently unpredictable and chaotic manner is not new. It was first introduced by the great French mathematician Henri Poincaré. Other early pioneering work in the field of chaotic dynamics is found in the mathematical literature by scientists such as, among others, Birkhoff, Levenson, and Kolmogorov. More recently, Nobel Prizes (to Prigogine and Kauffman) have been awarded in this field of research. One of the difficulties for management theory and practice engaging with complexity theory lies in its attachment to causality. Complexity as an emergent organisational paradigm in the knowledgebased economy primarily questions the concept of causality. Despite relativity and quantum mechanics, most physics (and certainly all managerial thinking) is still Newtonian, based on a fixed space-time frame. In the meantime, further developments have taken place in the area of biology (such as the concept of Sheldrake’s morphogenetic fields) and mind/body medicine which all seem to point to a federating idea of a quantum interpretation of social phenomena (non-locality, synchronicity and entanglement). Could a-causality form the basis for a quantum ontology of complex systems? This chapter attempts to explore the essence of such a quantum ontology, enabling the development of a systemic concept of sustainable performance and diagnostics that go with it.

The philosophy of quantum mechanics: Challenges and opportunities The foundational concepts in the complexity realm emerge from such fields as neurobiology, cognitive sciences, physics, and organisational theory. New developments in knowledge management – such as connectionist approaches (complex adaptive systems) for the visualisation of emergence – give promising results (Baets, 2005). In fact, instead of causality, it appears that the networked economy is ruled by synchronicity (appearing at the same time) in line with findings in quantum research. Could it be that economy and management in general, and the more dynamic aspects of it like innovation, in particular, are indeed based on a quantum ontology? The insight into complexity which developed over the last decade, and its consequences for management – discussed earlier in the book




and in previous publications (Baets, 2006a; 2006b) – provide a platform for this chapter to explore the ontological basis of complex systems. What Prigogine and complexity theory in general discussed fundamentally was the existence of any causal relationship. In fact Prigogine was surprised that despite the two fundamental revolutions in physics in the twentieth century (relativity theory and quantum mechanics), physics still remained mainly Newtonian. Physics presumes a fixed time and space concept in which the future is causally related to the past, while complexity theory and quantum mechanics show the impossibility of this assumption. In both the special and the general theory of relativity, the notion of causality, in which a cause precedes its effect, remains intact in the relativistic formulations of electrodynamics and mechanics and of gravitation. In quantum theory, the usual meaning of causal connection between one event and another is therefore called into question. The discontinuity versus continuity dichotomy can be seen as contingently rooted in philosophical commitments and in the physical phenomena studied. By the late nineteenth century, there were already significant, even if not overwhelming, philosophical precedents for the concept of indeterminism (including the possibility of inherent chance) in Nature. These opposed the straightforward determinism often associated with classical physics. Soren Kierkegaard believed that objective uncertainty can force one to make a leap into the unknown so that decisions cannot always, ‘even in principle’, be based on a continuous chain of logic. For example, one of Hoffding’s tenets was that, in life, decisive events proceed through sudden ‘jerks’ of discontinuities, an idea incorporated into Bohr’s view of atomic phenomena (Cushing, 1998). As Schrödinger concluded: this means nothing else but taking seriously the de Broglie-Einstein wave theory of moving particles, according to which the particles are nothing more than a kind of ‘wave crest’ on a background of waves (Klein, 1964). Einstein, de Broglie, and Schrödinger shared a commitment to a continuous wave as a basic physical entity subject to a causal description. There was a split in philosophical outlook along generational lines: on one side was the ‘older’, essentially classical, world view of people like Einstein, Schrödinger, and de Broglie; on the other was a radically different, eventually indeterministic, conception of physical processes engendered by a generally younger generation (Bohr and Born being exceptions here), including Heisenberg, Pauli, Jordan, and a new member of the group, Dirac from Cambridge University (Polkinghorne, 1990).



Emergence and Dynamics 57

On the standard, or Copenhagen, interpretation of quantum mechanics and, in particular, the Schrödinger equation, there is no longer event-by-event causality and particles do not follow well-defined trajectories in a space-time background. The theory predicts, in general, probabilities, not specific events. Dirac argues that an intrinsic distinction between large and small is related to the effects produced on an object when it is observed. The act of observing the system – the cat, in Schrödinger’s famous experiment (Schrödinger, 1935) – has forced the system into a given state (Dirac, 1958).

Beyond causality This leads to one of the most profound issues in the interpretation of quantum mechanics – that of causality (in the sense of a specific, identifiable cause for each individual effect). As Dirac (1958) observes, causality applies only to a system that is left undisturbed. If a system is small, it cannot be observed without producing a serious disturbance, and hence observers cannot expect to find any causal connection between the results of their observations. In this same spirit, Heisenberg too felt that, since the mathematical structure of quantum mechanics is so different from that of classical mechanics, it is not possible to interpret quantum mechanics in terms of our commonly understood notions of space and time with classical causality (Heisenberg, 1927). This sudden and discontinuous change of the state of a quantum-mechanical system upon observation or measurement is an example of one of the central and long-standing conceptual difficulties of the standard interpretation. It is termed the ‘measurement problem’. The Heisenberg uncertainty principle (see above) and the lack of absolute predictive power are an inherent feature of quantum mechanics. In principle there is no deterministic scheme to predict the exact future trajectory of an electron. Bohr developed this idea further. Today, this dependence of the outcome of a measurement upon the means used to effect it is referred to as contextuality. An obvious rhetorical question now presents itself. What does the wave function represent – our state of knowledge of the system (in which case quantum mechanics is incomplete) or the actual physical state of the system (in which case there must be a sudden change of the system upon our observation of it)? Although the system may appear in either of two states (or ‘components’) before the measurement, Nature has (in the




image suggested by Dirac) been forced to ‘make a choice’ when observed. Since the system is thereafter in a definite component, no subsequent interference with the other component is possible. The ‘collapse’ of the wave function has taken place. An issue of ontology, isn’t it? EPR (Einstein, Podolsky, and Rosen, 1935) introduced the deterministic hidden-variables theories. They assume that there is a set of variables, or as yet undiscovered properties, of a system and that the exact space-time behaviour of the system is causally determined by the values of these ‘hidden’ variables. The introduction of such a large number of hidden variables may seem to be a high price to pay to maintain locality and realism. John Bell proved a remarkable theorem in 1965. Simply put, no determinate, local hidden-variables theory can agree with all the predictions of quantum mechanics. Consequently, it can now be asserted with reasonable confidence that either the thesis of realism or that of locality must be abandoned. Either choice will drastically change our concepts of reality and of space-time (Clauser and Shimony, 1978). It is generally believed that a causal interpretation of quantum mechanics is impossible, although no proof of this currently exists. The standard, or Copenhagen, view of quantum mechanics is characterised as requiring complementarity (say, wave-particle duality), inherent indeterminism at the most fundamental level of quantum phenomena, and the impossibility of an event-by-event causal representation in a continuous space-time background. So, on the Copenhagen interpretation of quantum mechanics, physical processes are, at the most fundamental level, both inherently indeterministic and non-local. The ontology of classical physics is dead. The heart of the problem is the entanglement (or non-separability) of quantum states which gives rise to the measurement problem. This entanglement makes it impossible to assign independent properties to an arbitrary isolated physical system once it has interacted with another system in the past – even though these two systems are no longer interacting. The non-separability characteristic of quantum systems can be seen as an indication of the holistic character of such systems. Some claim the need of a new concept of causality, but it is not clear what that would be. Heisenberg long ago suggested introducing a new class of physical entity, potentia, into our theory (and into our ontology). Eventually, a Bell-type theorem is proven and taken as convincing evidence that non-locality is present in quantum phenomena. Quantum mechanics has undeniably introduced us to non-locality, entanglement and synchronicity; concepts that thus far have not been applied in business, economics or social sciences at large.





Earlier work (Baets, 2006a) suggested that an interesting path of exploration might be, in effect, to go as low as possible on the aggregation level (and work on the level of human emotions, team members) to allow innovation to produce itself through the emergence of processes. In fact, we want to explore the quantum reality of management, and by extension of any other social phenomenon more generally. A double question remains: can, and how can, you make the concept of innovation holistic? The answer would encapsulate the personal emotional side; but, on a deeper level, this question can be asked with reference to conscience and causality, and the ‘seat’ of consciousness. At a more grounded level, the questions are: on what level can we find consciousness? Is there something like a collective consciousness (for example, in a company; on the subject of innovation)? Does everyone have a sort of essential element of incorporated consciousness with a possibility of connection with others (at the level of consciousness)? These can be directly translated to companies: do consciousness, engagement, and emotions make a difference for a company? Does a company have a ‘soul’, a consciousness? Is there a link between this ‘consciousness’ and the success of a company? Are vision, emotions, and consciousness linked? More concretely, who determines the choice of a client who has a preference for one company rather than another? What enables potential clients to make a distinction between two companies, which in fact offer the same services (for example, two big banks such as BNP and ING; or two consultancy companies such as PWC and Accenture)? And finally, can we arrive at an approach, accepted as scientific, that gives at least the beginning of a response to these questions? Although the questions are, of course, a little metaphysical, this does not prevent them from remaining important ones. This chapter will now explore some evolutions in different types of sciences, each interpreting the suggested new ontology. Once holism, constructivism, and emergence are accepted as fundamentals of a new paradigm, a paradox – perhaps the most important one in science – emerges. Despite the two great revolutions of the twentieth century – the theory of relativity and quantum mechanics – almost the whole scientific community is still focused on Newtonian principles, that is to say fixed space and time. If what happened yesterday is known, then so too is what will happen tomorrow (and also what happened the day before yesterday). Science still does very little with the space-time



Extending spirit, the fifth dimension, and other implications of a possible new ontology

continuum that these revolutions have offered us. In the hard sciences, at least, there are groups of researchers working on this subject. In economics and managerial and social sciences this revolution seems to have been completely sidestepped. Our managerial thinking is still the Marshallian economic thinking of the nineteenth century (Arthur, 1998). At the end of his scientific career, Wolfgang Pauli (as described in de Meijgaard, 2002) asked himself how we can know if human cultures can live with a clear distinction between knowledge and belief (an idea, moreover, of Max Planck). For this reason, according to Pauli, societies are in difficulty if new knowledge arrives and puts the classical spiritual values in question. The complete separation between the two can only be a solution in the short term, and one of facility. Pauli had predicted that there would be a moment in the near future when all the images and metaphors of classic religions would lose their strength of conviction for the average citizen. In that situation classic ethical values would explode and result in a period of hitherto unknown barbarism. He was touched by, and very interested in, what he called ‘background physics’: the spontaneous appearance of quantitative concepts and images concerning the physical in fantasies and dreams. He admitted he also experienced them himself. Their character was very dependent on the dreamer. Background physics has an archetypal origin and that leads (always, according to him) to a natural science which will work just as well with matter as with consciousness. He was also sufficiently realist to say that if a researcher in physics has observed a sub-system, the observations are as much dependent on the observer as on the instruments. According to Pauli, the physical concept of ‘complementarity’ physics (de Meijgaard, 2002) illustrated a profound analogy with concepts such as conscience and the unconscious. Two extreme cases which can never be attained in practice are ‘someone with a perfect conscience’ (Eastern philosophy suggests that this can be attained uniquely in death, also called Nirvana) and something like a ‘bigger spirit’ which will never be influenced by a subjective consciousness. This ‘bigger spirit’ is what Eastern philosophy calls the ‘consciousness’, and Western psychology calls ‘collective unconsciousness’. Pauli accepted that physical values, as much as archetypes, change in the eyes of the observer. Observation is the result of human consciousness. Pauli wrote a book with Jung on this issue (1955). Where Jung talks about defined archetypes as primordial structural elements of the human psyche, Pauli introduced the notion of the ‘collective unconsciousness’.





They both believed that humans were moving towards a joining of the psyche and the physical.

The introduction of the notion of ‘synchronicity’ in this co-authored work is not only interesting in itself, but recurs in other authors and also in other disciplines. According to Pauli, synchronicity (being united-in-time) appears in all the sciences and the techniques in which simultaneity plays a role. What must be taken into account here is that this is not about a causal coherence (from cause to effect) but about a coincidence (being together in time), This coincidence must be considered as useful even if the deep cause of the simultaneity cannot be explained. It needs to be remembered that references to synchronicity are always if the events concerned occur in the same time period. The concepts of statistics or the theory of probability are of another order. Probability can be calculated with mathematical methods, which is impossible when speaking about synchronicity. Synchronicity (according to Meijgaard) is considered as the basis of many phenomena which are difficult to explain and which are often called non-scientific. However, they will not be considered further in this context. The concern here is that the widening of consciousness and the dissolving of borders are only possible when, besides (classical) energetic causal thinking, there is also a space kept for synchronicity and information. It is to Pauli’s great credit that he indicated the necessity to create space for the concept of synchronicity in scientific thinking, and Jung speaks about this as the ‘a-causal’ link. Sheldrake later confirmed these ideas with his theory of morph(ogenet)ic fields. Pauli and Jung proposed that the classic triad of physics (space, time, and causality) be extended with synchronicity to then form a tetrad. This fourth element works in an a-causal manner, and it is, in effect, the polar opposite of causality. Pauli and Jung believed that these oppositions were orthogonal in time and space. The idea of an a-causal link, or non-locality, are new concepts which should contribute effectively to the science of management (and specifically to the management of innovation) enabling its practical application. The term ‘non-local’ comes, in fact, from Einstein’s opposition to his own grandchild (quantum mechanics). The majority view (of researchers, Einstein excluded) concludes that the observation of one particle produces a direct and immediate effect on the second. In effect, there must be a ‘togetherness-in-separation’ against the intuitive



Ideas without borders (1): Synchronicity

(a theory which was refused by Einstein, who called it ‘spooky action at a distance’). Even Nature seems to attack pure and simple reductionism (Polkinghorne, 1990). The subatomic world can no longer be treated in a purely atomic way. The implication of these observations is that the phenomenon of ‘entanglement’ (non-locality) includes a real remote activity, not simply epistemological, but in fact ontological in nature. Recently, the Bogdanov brothers (Bogdanov and Bogdanov, 2004) have published an interesting book that summarises their PhD work (in theoretical physics and mathematics): Avant le big bang. In their book, which is, of course, discussed by many attached to more classical theories, they attempt to take the understanding of the quantum interpretation a step further. Their theoretical work makes an attempt to explore what could happen beyond Planck’s Wall (

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