Basic concepts of Theory U include emerging complexity, the blind spot, and the changing economic context in which companies and institutions co-evolve.
Emerging Complexity
Dynamic complexity is at the vertical axis in fig. 7 and means that “there is a systematic distance or delay between cause and effect in space or time” (Scharmer 2007, p. 59). In the programme “Learning Regions – Providing Support for Networks” this meant that the project aimed at solving regional problems that were caused years ago, when for example the lack of integration and language courses for immigrants resulted in young children not being taught German at home. This lack of language proficiency oftentimes caused their unsuccessful educational and professional careers. As young drop-outs they hardly find jobs and thus became for example a target group for “mobile educational counsellors” who try to arrange a different way back into participation in the educational system, society and the labour market. The timely length of the chain of cause and effect is different for different problems and the interventions that may have an impact, need to penetrate this complexity. So, if dynamic complexity is low, a stepwise approach can be chosen; if it is high, a whole-systems approach needs to result because the interdependence between subcomponents is high (Scharmer 2007).
Figure 7: Three Types of Complexity (according Scharmer 2007, p. 60)
DYNAMIC COMPLEXITY
Whole-System Approach
EMERGING COMPLEXITY
Sensing and Presencing Approach
Emerging complexity is characterised by 3 challenges:
1. The solution of the problem is unknown. 2. The problem statement itself is still
unfolding.
3. Who the key stakeholders are is not clear.
SOCIAL COMPLEXITY
Multistakeholder Approach
DYNAMIC COMPLEXITY
Whole-System Approach
EMERGING COMPLEXITY
Sensing and Presencing Approach
Emerging complexity is characterised by 3 challenges:
1. The solution of the problem is unknown. 2. The problem statement itself is still
unfolding.
3. Who the key stakeholders are is not clear.
SOCIAL COMPLEXITY
Multistakeholder Approach
At the horizontal axis, social complexity is pictured. This form of complexity refers to the stakeholder’s interests, worldviews, values and mental models. Scharmer (2007) points out that the lower the level of social complexity, i.e. the more homogenous the group of stakeholders and their interests etc. are, the more adequate traditional forms of governance are: “The lower the social complexity, the more we can rely on experts to guide decision and policy making.” (p. 61). If the group of stakeholders and their interests etc. are more diverse and heterogeneous, i.e. social complexity is high, all of their voices must be heard and taken into account. Thus, on a managerial level, a multi-stakeholder approach is more suitable.
The blind spot and changing economic context
Scharmer (2007) argues that organisations and institutions are confronted with these three forms of complexity plus they need to deal with different spheres of value creation each of which requires another organisational structure and managerial mind-set (see table 1). As so often, when presented with differing options, there is a tendency to make a decision for the one or other option because it provides a quick solution but the possibility of an integrative solution is left out here because it might be more time consuming or just not part of the potential options perceived. This is where the blind spot is located: at the option individuals are not aware of in a certain situation.
Table 1: The Changing Economic Context (according to Scharmer 2007, p. 77)
Goods Services Innovation
Focus of value creation Make standardized products Deliver customized services
Stage and co-create personalized
experiences
Customer as Target for mass
marketing
Target for mass customization
Partner for co- creation
Economics Economies of scale Economies of scope Economies of
presencing Organizational model Functional, single sphere: mass production Divisional, two spheres: production; customer interface Networked, three spheres: production; customer interface; innovation Locus of entrepreneurial impulse
Centre of one’s own organization (product focus) Periphery of one’s own organization (customer focus) Surrounding sphere of one’s own organization (co- creation focus) Relationship logic with customers Product-driven
(push) Service driven (pull)
Co-creation driven (presence)
Primary class Working class Service class Creative class
Managerial mind- set
The world is as it is (self = onlooker)
The world evolves as people interact (self = participant)
The world arises as we choose to attend (self = source of co- creation)
The resulting question that institutions have to adequately answer now is, how to integrate these value dimensions in the context of an ever changing emerging complexity. At the same time this appears to be an insurmountable task:
We must face the sobering fact that we, as leaders and managers, do not have a methodology for approaching the key challenges that surface in emerging complexity. We just do not know what it takes to lead effectively from ‘in front of the blank canvas’ when the ground under our feet erodes and pulls away. (Scharmer 2007, p. 79).
In terms of organisational or institutional structures this means that for most of the key challenges there is no way of organizing, planning and controlling at the level of the organisation anymore. Scharmer (2007) states that most of today’s organisations are too big to solve adequately the small problems; these are better addressed at a local level. And in addition to that, other organisations prove to be too small to cope with the big problems created by emerging complexities. These problems are adequately dealt with by the larger ecosystem that surrounds the organisation. So Scharmer concludes, that the blind spot, that which is actually missing are “The ‘cross-institutional places’ in which we could enable productive conversations among all key stakeholders, including supply-chain members, customers, the community, investors, innovators, and the stakeholders that are marginalized or voiceless in the current system.” (Scharmer 2007, p. 80). These cross-
institutional places could be regional networks as in the learning region's programme that connects different organisations and institutions on a local level. And while that idea sounds like a great solution, in practice it needs certain people who start to create and manage these networks between organisations and it takes time. In chapter 4, this task and the required skills as far as there is information and evidence in management and scientific literature is introduced. In referring back to Scharmer (2007) Theory U provides some tools and ideas of how to arrive at a commonly created social reality as portrayed in the next section.