Byron's Babbles

Organizing

The following is an excerpt from The Essentials of Theory U

Organizing

Guest post by Otto Scharmer

Global organizations are a new species on the face of our planet—a species that in less than two centuries has progressed to rule the world. Organizations are essentially geometries of power. They structure our collective decision making. When we look at the evolution of organizations, we see four different stages: centralized, decentralized, networked, and eco-system, which reflect different stages or qualities of how organizations operate. Again, the art is to develop tools that allow the organization to change and evolve into these different stages, depending on what is needed.

Centralized

In 1.0 organizational structures, decision-making power is located at the top of the pyramid. It is centralized, top-down, often with formalized roles. These 1.0 structures work well as long as the guy (or core group) at the top is really good and the organization is relatively small and agile. However, once organizations or companies begin to grow, they need to decentralize in order to move decision making closer to the markets, customers, or citizens. The resulting 2.0 structures are defined by both hierarchy and competition.

Decentralized

In a 2.0 organizational structure, decentralization enables the source of power to move closer to the periphery. The result is a functionally, divisionally, or geographically differentiated structure in which decisions are made closer to the markets, consumers, communities, or citizens. The good thing about 2.0 structures is the entrepreneurial independence of all of its divisions or units, its accountability, and its focus on meritocracy. The bad thing is that no one is managing the interdependence, the white space between the units. Which brings us to 3.0 structures.

Networked

In 3.0 organizational structures the source of power moves even farther from the center. It originates from beyond the traditional 501-71384_ch01_5P.indd 48 1/17/18 1:59 AM The Matrix of Social Evolution 49 boundaries of the organization. The result is a flattening of structures and the rise of networked relationships. Power emerges from the relationships to multiple stakeholders across boundaries. How many people report to me matters less than the quality of my stakeholder relationships inside and outside the organizations, or how many people follow me on Facebook and Twitter. A good thing about 3.0 structures is empowerment and networked stakeholder connections. A bad thing is the increased vulnerability in the face of disruption or being sidetracked by vested interests, because small groups can organize their lobbying activities much more easily than large groups.

Eco-system

Finally, 4.0 structures, or eco-system structures, operate by connecting and cultivating the entire living eco-system that is organized around a shared purpose. “Swarm” organizations and Agile or Tealbased organizations are all based on self-organizing circle structures in the context of shared purpose and institutional interdependency. As the decision making is being pushed even further to the frontline of organizations (empowering), these flattened and fluid structures of decision making only work well to the degree that the mindset of the participants has shifted from ego-system to eco-system awareness. This means that the decision-making circles develop the capacity to act from local knowledge while being aware of the cross organizational interdependency and aligned by a shared purpose.

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More about Otto Scharmer
Otto Scharmer is a Senior Lecturer at MIT and co-founder of the Presencing Institute. He chairs the MIT IDEAS program for cross-sector innovation that helps leaders from business, government, and civil society to innovate at the level of the whole system. He is the author of Theory U (translated into 20 languages) and co-author of Leading from the Emerging Future, which outlines eight acupuncture points of transforming capitalism. His latest book, The Essentials of Theory U: Core Principles and Applicationsilluminates the blind spot in leadership today and offers hands-on methods to help change makers overcome it through the process, principles, and practices of Theory U.

In 2015, he co-founded the MITx u.lab, a massive open online course for leading profound change that has since activated a global eco-system of societal and personal renewal involving more than 100,000 users from 185 countries. With his colleagues, he has delivered award-winning leadership development programs for corporate clients and co-facilitated innovation labs on reinventing education, health, business, government, and well-being.

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