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Why Innovate ?

A Summary Excerpt from Source: The Inner Path of Knowledge Creation

What is the Source of the entrepreneurial impulse? What is the Source of
our capacity to access the knowledge for action we need at the moment?

In the spring of 1998, I was sitting in the back row of a large auditorium in the Shell Learning Center at the Woodlands just north of Houston. Eighteen months earlier, Shell Oil Company Texaco, Inc., and Saudi Aramco had announced their intention to form an alliance of all their refining, distribution, and marketing (their “downstream” operations) in the United States. The “Alliance” would be the largest downstream organization in the world, with annual revenues approaching $40 billion. The Alliance hired Generon, a firm I had cofounded, to help develop its senior leadership and to assist in the integration of the units into a cohesive whole.

On that spring day, about 250 senior officers, who were members of the transition team, had gathered for the kickoff of the new venture. The chief operating officer of Texaco, Glenn Tilton, gave the opening remarks. In those remarks, Tilton identified the greatest challenge facing the Alliance – how to compete effectively with the newer and more nimble entrepreneurial downstream operators that had appeared in the marketplace in the last five years.

“We in this room have been operating in major oil companies as ‘elephants.’ But starting next week, we’re going to have to act as ‘gazelles’—to become true entrepreneurs – or we won’t be in the phone book in five years.”

You could have heard a pin drop. Tilton continued, “We’ve got to rise to the occasion – but to be honest – I’m not sure how to begin. I’m counting on each of you to help figure this out. We’ve got our work cut out for us in more ways than we can ever imagine.”

In that instant, the question flashed before me: “What is the Source of the entrepreneurial impulse? What is the Source of our capacity to access the knowledge for action we need at the moment?”

Although I didn’t know the answer, I absolutely knew there were important hidden implications I would discover if I stayed committed. In that very instant, my energy completely shifted, as if an internal rheostat had been turned up to the maximum.

I had an utter lack of self-concern, a sense of complete freedom, and a sense of overwhelming urgency. Nothing else mattered to me but to follow this opening, even if I didn’t fully understand why.

And that’s what I did for the next ten years.

“For the big decisions in life, you need to reach a deeper region of
consciousness. Making decisions then becomes not so much about
‘deciding’ as about letting an inner wisdom emerge”
∞ Brian Arthur

As the session broke up, I found the chief learning officer, Gary Jusela, and over lunch, described to him the opening I saw – to develop a process whereby teams could sense the way the future wants to unfold, and to enable that unfolding. I felt that teams could guide this process by their intention, their way of being, and their choices. I told him we would be on a search for the process by which transformational breakthroughs in any field occur, the creation of knowledge that changes the world as we know it. Gary instantly understood what I was talking about.

The next morning, we went to see the joint CEO of the Alliance. I summarized Tilton’s remarks and of the challenges he had laid down to the senior leaders. I said, “I can help you develop the entrepreneurial impulse in your people. I need eight months to finish the research, develop the process, and run a pilot. We can create a leadership laboratory, a learning environment that can help these managers ‘act like gazelles,’ enabling them to create significant new growth platforms for the Alliance and to significantly improve their operational performance.” Right there, on the spot, I was given the green light.

The following day, I flew home to Boston and hired C. Otto Scharmer, who was studying with Peter Senge, with whom I was working at the MIT Organizational Learning Center, recently reorganized and named The Society of Organizational Learning (SoL). In designing the research agenda, Otto and I decided to seek out and interview at least fifty of the most remarkable thinkers and practitioners in the field of innovation, discovery, high performance, and entrepreneurship. We agreed it would be my responsibility to tap the network I had been building since my founding of the American Leadership Forum at the beginning of the 1980’s.

Late one night at the office, I created a prioritized list. When I had finished, I packed my briefcase and was on my way out the door when I glanced over at a table in the hallway and noticed a magazine. Its title read Fast Company. On pure impulse, I picked it up and flipped it open. There was a sidebar article about a brief conversation the editor, Anna Muoio, had had with W. Brian Arthur, a pioneer of the new science of complexity. Arthur had also played an instrumental role in establishing the Santa Fe Institute in 1987, when he was teaching at Stanford. The institute was founded by several of the major figures of twentieth-century science. In Arthur’s own words, the mission of the Santa Fe Institute was for science as a whole to achieve a kind of “redemption and rebirth.” In 1988, Brian was invited by the Institute to be the first director of the interdisciplinary economics program.

The article in Fast Company recounted Arthur’s early training in operations research, which is a highly scientific, mathematical method of strategy formation and decision making. “I once thought,” Arthur was quoted as saying, “that I could make any decisions, whether professional or personal, by using decision trees, game theory, and optimization. Over time, I’ve changed my mind.”

Arthur said that for the day-to-day work of running a business – scheduling a fleet of oil tankers, choosing where to open a new factory – scientific decision theory works pretty well. But “for the big decisions in life, you need to reach a deeper region of consciousness. Making decisions then becomes not so much about ‘deciding’ as about letting an inner wisdom emerge.” He concluded the interview by noting, “This approach to decision making requires time, patience, and another key ingredient: courage. It takes courage to listen to your inner wisdom. But once you hear that wisdom, making a decision becomes fairly easy.”

The words “deeper region of consciousness” and “inner wisdom” leapt out at me. Brian Arthur had rocketed to the very top of my list. In that moment, I knew that I needed to start with the Santa Fe Institute and proceeded from there.

“In a sense, there is no decision-making. What you do just becomes
obvious. A totally different set of rules applies.”∞ Brian Arthur

A week later, Otto and I were in Palo Alto meeting various people on the prioritized list. We were in a car near Menlo Park when my business partner, Susan Taylor, called me. She had located Brian Arthur at Xerox PARC and learned that he was writing a book and wasn’t taking any meetings. Susan informed me that I was going to have to call Brian directly.

I called immediately and managed to get through to him, introducing myself and explaining our project. When I said that we needed two hours of his time for an interview, he politely declined, explaining he was working on a new book and wasn’t taking appointments. I pressed him, telling him of the others who had agreed to see us. There was silence on the other end for a moment – then he said, “Okay, you can come by this afternoon for a couple of hours at two o’clock.”

I immediately called Gary Jusela and told him of the importance of this meeting. To this day, I don’t completely understand why I did that, except to say I was operating spontaneously from a deeper source, without conscious thought or control.

Gary, to his credit said, “If it’s that important, I’m going to be there. Postpone the meeting until tomorrow morning. I’ll catch the red-eye and meet you at the Xerox PARC.”

That next morning, Dr. Arthur was extremely cordial. He introduced us to John Seely Brown, the director of Xerox PARC, showed us around, and took us to the large conference room. We set up the recorder and explained to Dr. Arthur that I would lead the interview.

He settled back in his chair and said, “Good. Now, what can I tell you about increasing returns?”

I hesitated for a moment and said, “No, Dr. Arthur. We’re here to talk about the source of the entrepreneurial impulse – how to sense and actualize emerging futures.” I showed him the Fast Company article and said, “This is what led us to you.”

He glanced at it, and then there was a long silence in the room. He grew quiet. Finally, Arthur said, “This is not what I expected – it’s going to take much longer than we had planned.” He then asked us to be extremely protective of the audiotape – that this conversation would involve personal reflections he had shared with no one else.

From that moment, the atmosphere in the conference room shifted in an unmistakable way. We were together in dialogue with Arthur almost five hours, and over this time, the energy field became palpable. I felt completely connected to Arthur, as if we were joined together by the same umbilical cord.

Since that day, Brian Arthur and I have spoken about this phenomenon many times, even using the word “sacred” – a time when all of us felt deeply committed to one another in a singular way. It was as if we were acting together as agents to deliver important new knowledge into the world. For me, it was the fulfillment of the promise I had made in the back of the auditorium at the Woodlands.

∞ ∞ ∞

Arthur began to outline the process for tapping into this source – what he called “knowing.” He said, “This inner knowing comes from here,” pointing to his heart. “In a sense, there is no decision making,” he said. “What you do just becomes obvious. A totally different set of rules applies. You hang back. You’re more like a surfer or a really good racecar driver. You don’t act out of deduction, you act out of an inner feeling; you’re not even thinking.”

Arthur described the process to us in unmistakable terms, explaining that it entails three major stages of “elements.” The first thing you so, he said is “observe, observe, observe.” This kind of intense observation “might take days, or hours, or fractions of a second as in martial arts or sports”; then you “reflect and retreat – allow the inner knowing to emerge.” Finally, he said, you “act swiftly, with a natural flow.”

The conversation around each of these three elements went deeper and deeper as the hours passed. We were communicating on a different plane. It was unmistakable, powerful and deeply moving.

The dialogue at Xerox PARC ended with my committing to reconnect with Brian as soon as reasonably possible.

When we walked from the building and got into our car, Gary, Otto and I sat in silence. I was in the driver’s seat, and finally looked to Otto who sat next to me. “This is the Holy Grail,” I said. “Brian just gave us the very essence of what we’ve been seeking!”

Then with a sense of high excitement, Otto pulled a tablet from his briefcase and said, “Look – we can model Brian’s three elements along a U.”

We drew the first U-process model right there in the parking lot of Xerox PARC, a three-stage sequence around a big “U” on the tablet. On the left side of the U, we wrote “Observe, observe, observe.” At the bottom of the U, we wrote “Go to that place of deeper knowing.” And on the right side of the U: “Act swiftly in flow.”

“These past two years we couldn’t make a wrong decision.
It was effortless. Our premonitions were consistently correct.”

∞ Gary Wilson

We had allotted four months for the interview and research phase of the project. With the U-process Brian had shared with us, the balance of the interview phase flew by. During these months collaborating with Gary and his deputies, we created a design team consisting of managers from key business units across the Alliance. Meeting with the design team regularly over several weeks, we co-created the learning process for the project, calling it “The Leadership Lab for Competing in the Digital Economy (Lab).” Twenty-three managers from twenty-one business units were selected to participate in this program. These managers represented a microcosm of the whole system.

In a memo to those selected for the Lab, the design team said that they saw the Lab as an opportunity to “create a new paradigm for executive learning.” It was designed to “model the concept of leader as teacher” and “leverage the learning of the twenty-three participants to all fourteen thousand employees, through acting as role models and creating subsequent living examples of profound innovation and change in their respective business units.”

The Lab enabled the team to create and propose new growth platforms for the Alliance, and, of equal importance, to develop the team’s skills to unleash and engage the full creative potential of their respective business units.

One refinery, for example, went “from worst to first” among the eighteen refineries in the Alliance. The refinery was losing, on average, $20 million annually and within two years, swung to a $38-million profit, directly due to people’s performance, not market fluctuations.

Gary Wilson, the deputy manager of the refinery, attributed his capacity to lead this transformation to the principles and processes he learned during the Lab experience. Referring to Brian Arthur’s process for reaching a “deeper region of consciousness” and “letting an inner wisdom emerge,” Wilson told me, “These past two years we couldn’t make a wrong decision. It was effortless. Our premonitions were consistently correct.”

After the Lab was concluded, Otto and I took stock of all that had occurred. We realized we had uncovered a process that could be enormously powerful, with implications not only for business applications, but for society as a whole. We decided that an important next step would be to publish our findings. We had documented all of our interviews, and a report had been prepared by the Shell facilitation team for internal publication. So at that moment, we started preparing a monograph, which ultimately became known within Generon simply as The Red Book (link). The Red Book was written early in May 2000 and has served as my guide over the ensuing years, as I’ve worked with the U-Process.

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