Economic Recovery? Don’t Count On It.

You can’t open a newspaper these days without reading some headline about the economic recovery.  Hopes are rising that we may actually be turning the corner – consumer demand is growing, factory orders are increasing and the unemployment rate seems to have stabilized if not significantly dropped. Each day brings a new index number that we eagerly cluster around and struggle to interpret, much like tea leaves that are open to multiple interpretations.

While understandable, these efforts to read near-term indices also present very significant risks.  We continue to be seduced by near-term news, while losing any perspective on longer-term trends. These longer terms trends tell a very different story and suggest that we may be lulled into complacency by the short-term news of recovery.

Long-term performance deterioration

In our new book, The Power of Pull, we summarize the metrics that we developed for the Shift Index – the first attempt to quantify the longer-term trends that have been re-shaping the business landscape over the past four decades.  Of the 25 metrics in the Shift Index, one metric in particular stands out: return on assets for all public companies in the US.  Since 1965, return on assets has collapsed by 75% – it has been a sustained and substantial erosion in performance.  There is no evidence of any flattening of this trend, much less turning it around.

What does this mean?  It provides strong evidence that any “recovery” is merely a short-term relaxation of pressure and that there will be no “back to normal”. We often hear executives talk about the Red Queen effect where they feel they are running faster and faster to stay in the same place.  The actual situation is far worse: we are running faster and faster and falling farther and farther behind. There is absolutely no reason to believe that the long-term performance erosion will not continue.

The key question is what to do about it?  Market economies are generally successful in spawning innovative new approaches to overcome existing performance pressures.  That has not yet happened here. The fact that this trend has continued over such a long period suggests that the causes of the performance erosion are deeply embedded in our current management practices and institutions.

Shifts in the source of value creation 

The Power of Pull suggests that we are going through a fundamental shift in the source of economic value creation.  In the past, economic value creation depended on proprietary knowledge stocks.  The challenge for any company was to acquire some proprietary knowledge, rigorously protect it to make sure no one else had access to it, and then as efficiently as possible extract the economic value from this proprietary knowledge stock for as long as possible.  As change accelerates and uncertainty grows, though, knowledge stocks depreciate at a more rapid rate.  In this kind of environment, the key to economic value creation shifts to the ability to participate in a growing number of diverse knowledge flows to more rapidly refresh our knowledge stocks.

This shift calls into question our most basic assumptions about where and how economic value gets created.  Perhaps that is why firms have had such a difficult time responding to the deteriorating performance trends. Even more challenging, responding to this shift requires developing a whole new set of management practices and institutional arrangements.

Mastering the techniques of pull

We discuss these management practices under the broad rubric of pull.  Rather than trying to forecast demand and design push programs to ensure that the right people and resources are in the right place at the right time, a new approach is emerging.  This pull approach seeks to develop scalable pull platforms that amplify our ability to draw out the people and resources when we need them and where we need them. The pull techniques developed in lean manufacturing approaches are a promising first step, but they have only worked when there are a very limited number of participants. The leaders of a new generation of pull techniques are demonstrating the feasibility of aggregating thousands and even millions of independent and very diverse participants on global pull platforms.

As we begin to better understand these pull techniques and how they work, something interesting begins to happen.  For the first time, we have the potential to shift from our current pattern of diminishing returns performance improvement (as documented in the well-known experience curve) to a business environment where we can begin to unleash increasing returns performance improvement. We are already beginning to see some of the early indications of this potential on the edges of our economy, in such diverse areas as extreme sports, online gaming and software development networks.

The good news is that there is a pragmatic migration path that can move us from where we are today to where we need to be in a world of pull.  Small moves, smartly made, can in fact set big things in motion. To pursue this path, though, we will need a sense of direction, harness different forms of leverage and deploy platforms that can accelerate the pace of change.

Bottom line

Economic recovery?  Don’t count on it. We are just beginning to understand the challenges ahead. True recovery – in other words, sustainable, long-term recovery – will only come when we pull back from the near-term events that today consume our attention and re-focus on the less visible, longer term trends playing out around us. Those who refuse to be blinded by  short-term trends and focus on the longer term shift playing out in our global economy will begin to understand that the game is changing in fundamental ways. By harnessing the power of pull, they will create enormous wealth and leave those still struggling to read the tea leaves of short-term indices in the dust.

The Power of Pull Has Finally Arrived

When you write a book, there comes a point when you begin to believe it will never see the light of day. Well, today my new book, co-authored with John Seely Brown and Lang Davison is officially released by Basic Books—The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. We began writing it more than a year ago, and the direct research started even further back. In some ways, however, the three of us have been working on this book in various permutations since 1996.

Power shift

That’s when Net Gain (Hagel and Davison) was written around a foundational insight:  that digital technology was setting in motion a shift in market power from the makers of goods and services to the people that buy them, and to talented employees from the institutions that employ them.  We developed that theme even further in a subsequent book, Net Worth (Hagel and Davison).

While we may have had this insight fourteen years ago, what we didn’t yet have in clear focus was the mechanism by which this shift in power from institutions to individuals would take place. That mechanism is pull.

Pull allows each of us to find and access people and resources when we need them, while attracting to us the people and resources that are relevant and valuable, even if we were not even aware before that they existed. Finally, in a world of mounting pressure and unforeseen opportunities, pull gives us the ability to draw from within ourselves the insight and performance required to more effectively achieve our potential.

The power of pull puts each of us, individually and together, in a position to collaborate in a complete re-imagination of our biggest private-and public-sector institutions, one that may eventually remake society as a whole. As customers, we have more choices, and more information with which to make those choices, than ever before. As talented employees we have greater power too than before, since we create the lion’s share of today’s corporate profitability.  As each of us votes with our feet and allies ourselves with new generations of institutions, we’ll abandon the old ones, leaving them to drift into obsolescence and setting in motion a reshaping of broad arenas of economic and civic life.

The relationship economy

While this broad shift in power to individuals is one thread woven through our work, another has to do with how technology is amplifying and transforming relationships. That theme came into even sharper focus in the book Out of the Box (Hagel and JSB), which described the emergence of a new generation of technology architecture – service oriented architectures -  and placed it explicitly in the context of new relationships that this more flexible architecture enabled.

It’s a peculiar thing about technology: Many people seem to regard it as an end in itself. (Consider the companies that throw money at technology without thinking through commensurate changes in management practices or social relations necessary to create value from that investment.) Yet technology is revolutionary in its implications due to the changes it enables in how people find each other, interact, and collaborate to create and share knowledge.

That’s why the mantra in Net Gain was “community before commerce”: If you don’t handle the community aspect right you’re unlikely to get the commercial aspect right, either. Companies that put their own interests ahead of those of their customers would find their customers defecting to companies that treat them better.

Talent development as the only sustainable edge

In The Power of Pull we broaden the point to include employers that fail to provide sufficient professional development opportunities for their employees. These companies will lose their most talented workers to more magnetic organizations that provide better chances for learning and growth.

We began to explore the role of talent development as a competitive advantage in The Only Sustainable Edge (Hagel and JSB).  That book ventured out to the geographic edges of China and India to explore the ways in which entrepreneurial companies were developing new approaches to talent development that harnessed loosely coupled  business networks that provide scale without inertia.  We made the case in that book that the only sustainable edge in the future would come from accelerated capability building – creating the conditions to enable people to learn faster by working together.

Performance improvement and learning

Prior to The Only Sustainable Edge, JSB had been separately pursuing some of the same themes – in fact, our mutual passion for these themes led the three of us to meet and to develop a deeper collaboration over time.

In writings during the 1990’s, JSB explored new approaches to learning that broke the traditional educational model and depended deeply on situating learning within the context of relationships, as illustrated by his piece on “Stolen Knowledge” and “The University in the Digital Age.”  In his work as head of Xerox’s Palo Alto Research Center, JSB had become deeply engaged in the role of communities of practice in driving learning and performance improvement.  Once again, deep personal relationships were a key to driving capability building.  It was in fact through a shared interest in communities that I first met JSB.

In his introduction to the book, Seeing Differently, published in 1997, JSB highlighted the importance of people from diverse backgrounds coming together and, through the creative tension that often arises from confronting different points of view, increasing the potential for innovation. The Only Sustainable Edge developed this further by exploring the conditions necessary to generate productive friction.

Prior to that, JSB co-wrote  (with Paul Duguid) The Social Life of Information, a book that powerfully explored the role social networks play in providing necessary context for information.  In that book, he offered an extended analysis of how learning occurs in practice.  He also developed an important contrast between practice and process in the context of organizational activity. JSB particularly highlighted the vital role of practice, again rooted in the social context of communities of practice, in driving innovation and learning.

In many respects, The Power of Pull can be read as an attempt to reinstate the central role of socially embedded practice in driving knowledge creation and performance improvement relative to the recent emphasis in the management literature of process reengineering. The Power of Pull at one level seeks to refocus technology innovation on providing tools to amplify the efforts of communities of practice to drive performance improvement.

It was also in The Social Life of Information that JSB underscored the importance of tacit knowledge in the creation of new knowledge, a theme that became central to The Power of Pull. In an even more recent book, Storytelling in Organizations, JSB discussed the role of storytelling in helping to communicate tacit knowledge.  Once again, the need to engage in knowledge sharing and knowledge creation through social relationships remains a continuing theme.

Bringing it all together

So, there you have it.  In many respects, this book is simply a continuation of themes under development for a couple of decades.  We explore power shifts, evolving social contexts, scalable networks, and new modes of learning and performance improvement, as well as the development of technology infrastructures that continue to change the game in profound and pervasive ways – all themes that have focused our previous writing as well.  This time, though, we have brought it together into an integrated framework that bridges description and prescription, destination and migration path, and individual and institution.  We try also to mix it up with some stories of people who are making the most of the new world around us by turning challenge into opportunity. We hope you will find the book reflective of your own interests and passions.

Next steps

We had our first launch events last night in New York, and they were a huge success (thanks to everyone who showed up). There will be other launch events, including Silicon Valley on May 4 (hosted by The Churchill Club and Tim O’Reilly), San Francisco, Boston, Washington DC and Seattle.  For more details, visit our joint website and sign up for e-mail updates on the event plans and other developments regarding the book as they unfold.

The Power of Pull represents not an end point but one more step on a broader journey. Where will we go from here? In part that’s up to you. Let me know what you think we’ve gotten right—and what you think we’ve missed or where there might be the greatest potential to focus as we seek to build upon the perspectives in this book. Rather than identifying a single element and elevating it to represent the whole, we’ve tried to capture the whole itself. You’ll be the best judge of how well we’ve succeeded.

(This is an extended version of a more abbreviated blog posting that appeared a few days ago at the Harvard Business Review blog site)

Passion and Reason

As a child, I early on embraced reason as a safe haven from the deep and dangerous emotions that swirled around me and scarred me with memories that were impossible to forget.  Like many of us, I believed that reason and passion stand in opposition to each other. One had to choose one or the other or risk being pulled apart by the competing demands of each. Throughout history, we have seen many champion the need for choice – rationalists side with reason while the romantics and assorted others (often not quite so appealing) side with passion.

As I have grown older, I have come to challenge this basic assumption.  In fact, reason and passion need to be tightly integrated if we wish to achieve our full potential and make a difference in the world around us.  Far from undermining each other, they build on each other and powerfully reinforce each other. I would even go so far as to say they are essential for each other. In fact, in isolation, reason is a very shallow pool to swim in. From my perspective, that pool needs to be deepened with passion in order for the journey to be fruitful and satisfying.

Over my life, I have become deeply skeptical of efforts to force choices between apparent opposites – stability vs. change, freedom vs. discipline, stocks vs. flows, nature vs. nurture, risk vs. safety. Most of what makes life interesting are the tensions created by these contradictions.  Seeking to resolve these contradictions by picking one or the other side only creates the appearance of simplicity, while blinding us to the richness that makes life so damn interesting

Defining terms

So it is with reason and passion.  Both terms have a broad range of meanings, so a good place to start might be to explain what I mean by them. Reason is a process of observing the world around us, systematically applying rules of logic and experimentation and generating conclusions that others can follow. It often seek s to abstract from the particular so that general conclusions can be derived and defended. 

Passion is commonly used to refer to strong emotions of any type. When I use passion, I use it in a much more specific way to describe a particular blend of emotions – excitement, anticipation, curiosity, desire, love, joy and wonder and empathy – that motivate us to venture deeper and deeper into particular domains defined by the passion. These emotions motivate us to move beyond our comfort zone, provide us with the dedication and commitment to build capabilities in these fields over extended periods of time and help us ultimately to achieve the potential that resides within each of us. In particular, I focus on the passion of the explorer who is motivated by a desire to gain new insight into a particular domain by working with others to drive performance to new levels.

So, how do passion and reason reinforce each other?  Think of agency versus structure. Passion provides the first by generating energy and creating a sense of freedom.  Reason provides the latter by imposing constraint and discipline.  Without structure, agency becomes an aimless whirlwind of activity, constantly distracted by the bright lights, but unable to maintain forward movement. And, of course, without agency, structure remains an inert mass, sinking deeper and deeper into the ground below it, seeing but unable to explore the world around it.

Kahlil Gibran in his classic book, "The Prophet", put it eloquently:

Your reason and your passion are the rudder and the sails of your seafaring soul.
If either your sails or your rudder be broken, you can but toss and drift, or else be held at a standstill in mid-seas.
For reason, ruling alone, is a force confining; and passion, unattended, is a flame that burns to its own destruction.
Therefore let your soul exalt your reason to the height of passion, that it may sing;
And let it direct your passion with reason, that your passion may live through its own daily resurrection, and like the phoenix rise above its own ashes.

Closer to home, Ben Franklin, expressed similar views much more succinctly: “If passion drives you, let reason hold the reins.”

We can gain more insight into the tight relationship between passion and reason by looking at four attributes that need to come together for us to achieve our full potential: focus, action, relationships and friction

Focus

We need to be able to carve out specific domains that we can focus on to achieve world-class performance.   Spreading ourselves too thin risks that we remain superficially engaged in lots of areas without ever achieving world-class performance anywhere.  But, how to pick the domains that offer us the greatest opportunity to excel?

Passion provides the key.  If we are not passionately engaged in a particular domain, it is unlikely that we will invest the effort and energy required to achieve mastery and distinctiveness.  Malcolm Gladwell in his book, "Outliers", emphasizes that successful people generally invest considerable effort over time in mastering their domains – he estimates that 10,000 hours is the minimum investment made by these people to achieve mastery. In fact, in a world of constant change, one could make the case that 10,000 hours is just table stakes – sustained excellence demands continued investment.  It is very hard to sustain that kind of investment over a period of years without passion to provide the motivation.  If we rely solely on reason to select an appropriate domain, we may have a compelling logic but that alone is unlikely to sustain us as we begin to encounter obstacles and distractions along the way.

On the other hand, having chosen a domain to focus on, reason provides a valuable way to frame questions and test the experiences that we accumulate as we explore the domain. It helps us to choose the most productive directions to pursue as we venture into the domain and helps us to solve the difficult puzzles that we encounter.

Action

It is not enough to choose the domain – we must engage with it and explore its farthest reaches (dare I say edges?).  It is not enough to sit in an easy chair and contemplate; we must roll up our sleeves and dive in to really experience the textures and particulars that help us to gain insight into what is really going on.

Leaving that easy chair and venturing forth into unknown territory presents real risks and can be very scary.  Reason alone rarely helps us to overcome those fears.  In fact, it can deceive us into believing that we can process information about the domain at a distance, keeping our attention focused on the forest, without the distraction of all those trees.

Passion will have none of that – it demands our engagement and will settle for nothing less.  It propels us forward, giving us both the energy and courage to welcome any challenge as an opportunity to test ourselves, regardless of the risk.

Once again, though, reason provides a welcome companion on the journey.  It helps us to reflect on our experiences and to begin to discern patterns emerging from seemingly unique encounters. We start to see the themes that make the particulars less particular and part of a more coherent whole. It provides us with powerful tools to make sense of rapidly evolving landscapes and to begin to zero in on the underlying forces driving and shaping this evolution.

On a related note, Antonio Damasio in his book, “Descartes’ Error”, provides an intriguing perspective, arguing that “emotions are not a luxury, they are essential to rational thinking” and that “the absence of emotion and feeling can break down rationality and make wise decision making almost impossible.”

Relationships

Experiencing a domain requires engaging with people in ways that go beneath the surface of a casual conversation and help us to see the domain through different lenses.  We will need to form relationships that transcend short encounters and begin to build shared understanding of the domain. Relationships involve connecting on a personal level and passion helps to form a common bond.  As I discussed in an earlier post, passion inherently drives us to connect with others who share our passion and who can help us to improve our performance.  The passion of an explorer provides a capacity for empathy that can be very powerful in forging deep and lasting bonds.  Passion also draws out the stories from all participants that are the first and often the most powerful way to express the new knowledge emerging on the fertile edges of any domain.

Our Shift Index research showed a clear relationship between level of passion and degree of connection with others through a variety of avenues, including conferences and social media. Those who are motivated purely by reason are likely to find themselves less connected and therefore at a disadvantage relative to those who are connected through shared passion.

At the same time, reason helps to forge a common bond in relationships with others. A shared commitment to reason can help people to overcome deep differences in experiences, assumptions and perspectives.  It can help build a shared understanding that will make it easier to access tacit knowledge that each participant brings to the table.  It also provides a powerful framework to reflect on experiences and to begin to sift through the idle distractions and zero in on the elements that are most distinctively shaping these experiences.

Productive friction

I have written about productive friction elsewhere.  It is an essential ingredient in any sustained effort to engage with diverse participants in order to deliver significant improvements in performance. 

Passion provides a firm foundation for productive friction to emerge and flourish.  Shared passion creates a deep emotional bond that encourages people with different backgrounds and experiences to continue to engage with each other even though some of their most cherished assumptions are being challenged. They are all on a shared quest to find the most creative ways to drive performance to new levels and they are constantly on a search for new approaches that offer the potential to deliver performance breakthroughs.

Reason, on the other hand, also provides a useful toolkit for addressing and resolving potentially deeply held differences.  It offers some common ground for debating and resolving alternative approaches to a shared problem.

Framing questions and framing answers

Passion frames the most powerful questions and reason frames the most convincing answers – this is another way to express the reinforcing effect of integrating passion and reason.

As Claude Helvetius, a French philosphe during the Enlightenment,  observed: “. . . it is the strong passions alone that prompt men to the execution of  . . . heroic actions, and give birth to those grand ideas, which are the astonishment and admiration of all ages.”  It was Helvetius who  entitled one of the chapters in his book, “The superiority of the mind in men of strong passions above the men of sense.”  He asserted that “it is , in effect, only a strong passion, which, being more perspicuous (sic) than good sense, can teach us to distinguish the extraordinary from the impossible, which men of sense are ever confounding; because, not being animated by strong passions, these sensible persons never rise above mediocrity . . .” Perhaps it is not surprising that this book, "De l’Esprit", was publicly condemned as heretical and burned by the Catholic Church.

In short, passion prompts us to ask the really difficult and creative questions that “sensible” people would never think of asking.  The more I learn, the more I see the insight in John Seely Brown’s observation that framing the right question is the most powerful aspect of learning.  With the right question, reason can help us to generate powerful answers but it is the question which focuses the tool of reason and ultimately provides its power.

Bottom line

I held on to the rationalist position for a very long time.  It provided me a welcome refuge from the messy world of emotions. But something changed – I moved to Silicon Valley, drawn in part by the rationality of technology.  What I had not fully realized until I moved here was the central role that passion played in the evolution of this amazing place. It has quite literally changed my life and taught me that reason becomes even more powerful when amplified by passion.

Silicon Valley is a living example of the power of passion and reason woven together into a fabric that adorns every achievement emerging from this fertile valley.  People are drawn here from all over the world by the passion to make a difference, to quite literally change the world, by exploring new frontiers of technology.  On the other hand, many of the people driving the most awe-inspiring innovations are engineers, deeply trained in the disciplined rationality that brings forth amazing power from more and more circuits painstakingly arranged on small silicon chips and lines of software code carefully designed to deliver the most functionality in the fewest instructions.

Every day, I see the power of passion and reason coming together. It literally has changed the world, and it has changed me.

Passion Versus Obsession

When I was a little boy, I was obsessed with chemistry.  I had a chemistry lab in my home and I could not wait to retreat to my little lab and conduct the most amazing experiments, exploring all kinds of permutations of chemical mixtures. When I was not in my lab, I was devouring chemistry textbooks.  People said I was passionate about chemistry, but they were wrong – I was obsessed.  I was using chemistry as an escape from a very difficult childhood. It was a survival mechanism, not a means to achieve my full potential.

We are all familiar with cautionary tales of people so consumed by their passions that they lose their social standing, meaningful relationships, and—ultimately—their mind. Their professional and social lives fall apart as obsession grips their every waking hour, crowding everything else out. It’s no wonder people fear passion.

In a previous blog post, I asked the open question, “When does passion become obsession?” [link], touching upon the possibility of destructive passion – when passion leads to fixation and dysfunction. Having thought about this more, I think I was asking the wrong question.

To say passion becomes obsession is to make a distinction of degree. It implies that obsession is a more passionate form of passion—too much of a good thing. However, I’m now convinced that passion and obsession do not vary in degree, but in kind. In fact, in many ways they are opposite. 

What makes this distinction confusing is that passion and obsession exhibit very similar behaviors.

Both passion and obsession are generated within and manifest in outward action or pursuit, which can provide purpose and direction. Passions and obsessions are powerful motivators to take risks, to make sacrifices and step outside of conventional norms to achieve what we desire. Most importantly, passion and obsession burn within us irrespective of extrinsic encouragement or rewards. This can lead to what traditional institutions perceive to be subversive or rebellious behavior, driving passionate and obsessive people to the edges of organizations and society.

It is on the edge that the crucial distinctions between passion and obsession become clear.

Pulled to the edge versus pushed to the edge

The first significant difference between passion and obsession is the role free will plays in each disposition: passionate people fight their way willingly to the edge to find places where they can pursue their passions more freely, while obsessive people (at best) passively drift there or (at worst) are exiled there.

The degree to which free will plays a role in determining who winds up on the edge,will greatly determine their capacity to succeed in this challenging environment.

Sense of self: Achieving potential versus compensating for inadequacy

Passionate people find edges exciting because they have a rooted sense of self. As I discussed in a previous post, passion inspires creation.

Creators have a strong and meaningful sense of identity—defined not by what they consume (which has little or false expressive potential) but by what they make (total self-expression).

When I say that they have a “rooted sense of self,” however, I don’t mean to imply that their identity is fixed. On the contrary, as creators, passionate people are invested in constant personal, professional and creative growth. They want to develop and diversify their talents in order to keep their creations innovative and their passion dynamic, sustainable and alive.

Through the challenge of creation, and the innovative disposition demanded by the ever-shifting edge, passionate people expand their personal boundaries, helping them to more effectively achieve their potential. In other words: passion gives us the energy and motivation to work hard—and joyfully.

When I consider the drive of passionate creatives, I’m reminded of this observation by Ortega y Gasset:

The most radical division that is possible to make of humanity is that which splits it into two classes of creatures: those who make great demands of themselves, piling up difficulties and duties; and those who demand nothing special of themselves, but for whom to live is to be every moment what they already are; without imposing on themselves any effort toward perfection; mere buoys that float on the waves….The few individuals we have come across who are capable of a spontaneous and joyous effort stand out isolated….These are the select men, the noble ones, the only ones who are active and not merely reactive, for whom life is a perpetual striving.

It requires a passionate person to generate the strength and enthusiasm to apply the effort needed to achieve and create, which requires they “make great demands of themselves.” Whatever the subject of passion and creation, it is the capacity to direct that energy into actions that reinforce personal growth, which makes the passionate people thrive on the edge. 

An obsessive person is what Gasset would call a “buoy on the water.” Obsessives have a very weak sense of identity because they displace their sense of self into the very object of their obsession (this becomes a strange form of self-obsession, which is why obsessive tendencies are frequently associated with narcissism). Obsession, far from the joyful effort and striving inspired by passion, is a strategy of escape. In conflating their identity with an object of fascination, obsessives are not only able to forget their inner-self, they are able to insulate from the challenging world around them.

The obsessive person’s focus is narrow because they are less interested in complex growth than singular direction. Obsessive personalities may be driven to create, but the inner growth needed to be a sustained creator is undermined by their lack of determination to grow as people. As a result, rather than realizing their potential, they are concerned with finding a way to stay focused and compensate for inadequacy.

Breadth of focus: Narrow objects versus broad subjects

It’s not an accident that we speak of an “object of obsession,” but the “subject of passion.” That’s because obsession tends towards highly specific focal points or goals, whereas passion is oriented toward networked, diversified spaces. Objects of obsession are often quite narrow, for example using a specific photo editing tool, developing enhancements to a specific product or developing new art around a specific pop culture character or icon. 

Subjects of passion, on the other hand, are broad, for example involving digital photography, innovating within a broader category of technology or experimenting with a certain genre of pop culture. Given this broader focus, passionate people thrive on knowledge flows to stimulate innovation, achievement and growth. The subjects of passion invite and even demand connections with others who share the passion.

Relationships: Expanding versus contracting 

Because passionate people are driven to create as a way to grow and achieve their potential, they are constantly seeking out others who share their passion in a quest for collaboration, friction and inspiration.  Because they have a strong sense of self, passionate people are well-equipped to form relationships.  They present themselves in ways that invite trust – they have little time for pretense and they are willing to express vulnerability and need in order to receive the help they need in achieving their own potential.  Because they are passionate, they are willing to share their own knowledge and experience when they encounter someone sharing their passion. They are also intensely curious, seeking to understand the other passionate people they encounter in order to better see where and how they can collaborate to get better faster.

In contrast, obsessive people hide behind their objects of obsession.  The objects are what are important, not others or even themselves. As a result, obsessive people are hard to get to know and trust – they share little of themselves and they exhibit minimal interest or curiosity regarding the needs or feelings of others. One of the hallmarks of obsessive people is that they tend to talk endlessly and often repetitively about the same thing, rarely inviting commentary or reaction from others, and ultimately pushing others away with their obsessive rants.

The key difference between passion and obsession is fundamentally social: passion helps build relationships and obsession inhibits them. This becomes a key marker to differentiate between passion and obsession: is the person developing richer and broader relationships or is the person undermining existing relationships and finding it difficult to form new relationships?

A final note: Passion and neurosis

Passion creates options while obsession closes options.  Passion reaches outward while obsession pulls inward. Passion positions us to pursue the opportunities created by the Big Shift while obsession makes us oblivious to the expanding opportunities around us.

I was inspired to expand upon this passion vs. obsession distinction because many people object  to my advocacy of passion by citing examples of great scientists, artists and thinkers who, while certainly passionate, appear to have been reclusive, neurotic and unhappy.

Lionel Trilling does an admirable job of addressing this issue in his essay, “Art and Neurosis.” Crudely put, Trilling argues that all of us have “issues,” and it is only because great men and women are visible to the public that theirs are on display, creating the illusion that they have more than most of us (this, of course, rests on the second myth that there is such a thing as “normal people” without problems).

But far from being inundated with neurosis or “issues,” what sets these great men and women apart is their ability to transform shortcomings into strengths, or compensate for them by excelling in other areas.

Trilling cites a short essay by Charles Lamb, called “The Sanity of True Genius.” Lamb points out that what we call genius or excellence, “manifests itself in the admirable balance of all the faculties,” while unhealthy psychological behavior (in Lamb’s words, “madness”) is characterized by the “disproportionate straining or excess of any one of them.”
 
Lamb goes on to point out that those who can’t master their inner demons,

do not create, which implies shaping and consistency. Their imaginations are not active — for to be active is to call something into act and form — but passive, as men in sick dreams.

Agreeing with this, Trilling concludes,

Of the artist we must say that whatever elements of neurosis he has in common with his fellow mortals, the one part of him that is healthy, by any conceivable definition of health, is that which gives him the power to conceive, to plan, to work, and to bring his work to a conclusion (“Art and Neurosis, ”The Moral Obligation to Be Intelligent, p. 103).

Over the years, as I moved into more supportive environments, my obsession with chemistry dissipated.  I began to discover a passion for technology and business. That passion in turn led me to reach out to others, at first through writing and then through weaving an ever richer network of personal relationships.  It has been a long journey and it is far from over, but it has taught me that obsession confines while passion liberates.

To cultivate passion, to channel its energy into self-determination, inter-personal connections and regenerative curiosity, and finally to find the balance needed to sustain creativity on the edge, is much more than health—it is happiness.   

Reinventing the Sacred

When I was a young boy, I grew up with parents who were disillusioned with organized religion. As the first people to go to college, not to mention graduate school, in either of their families, they chose reason over religion.  In spite of this, I early on developed a fascination with spirituality, but the concept of the sacred eluded me until recently.  As I became more deeply immersed in studying and understanding the Big Shift that is playing out around us, I began to see elements of a very different kind of sacred. Until recently, though, I had a hard time verbalizing what I was encountering. With the help of the writings of two men that I deeply respect, this post seeks to put into words something quite remarkable that I see emerging from the Big Shift.

The Big Shift will play out in many domains, in ways that we may not be able to imagine today.  For example, the concept of the sacred has been criticized by rationalists for centuries, but it may be slated for rehabilitation from a very unlikely direction.

Certainly, fundamentalists of all stripes have engaged in a crusade to revive the sacred over the century.  At the risk of over-simplification, their notion of the sacred is a defensive, static one.  The sacred has already been revealed and our job is to protect it from attack.

A different form of the sacred is taking shape, one resulting in the unlikely collaboration of an experimental and theoretical biologist and a professor of divinity, both with the surname of Kauffman (albeit spelled slightly differently).  These two individuals – Stuart Kauffman and Gordon Kaufman – have been pursuing a mission to reinvent the sacred by focusing on the theme of creativity.

In my previous post, I discussed the shift our identity from consumer to networked creator. As this shift plays out, we will likely find this rehabilitation of the sacred very appealing. It will help not just to connect us with each other in richer and deeper ways, but will begin to reveal that our connection with the universe may have creative or sacred foundations that have been part of the human story for millions of years.

Stuart Kauffman

Stuart Kauffman’s book “Reinventing the Sacred” really got me thinking about creativity and the sacred. The book is an impressive stroll by a deeply thoughtful scientist through many domains from the microscopic to the cosmic, with a particular focus on the common patterns emerging in the universe, the biosphere and human culture. Kauffman observes:

“We live in a universe, biosphere, and human culture that are not only emergent but radically creative. We live in a world whose unfolding we often cannot prevision, prestate, or predict – a world of explosive creativity on all sides.  This is a central part of the new scientific worldview.”

Throughout the book he offers a sustained critique of reductionism. Instead, he stresses the importance of emergence as a way to begin to understand the dynamics that we shape – and that in turn shape us. He is also deeply skeptical of universal laws, focusing instead on understanding the situatedness of the objects under discussion.  I found it refreshing that, in discussing situatedness, he puts equal emphasis on context, the surroundings at any point in time, and history, the trajectories that have been traveled by the object.

Kauffman also highlights the central role of agency in emergence, observing that  “  . . .we are co-creators of a universe, biosphere, and culture of endlessly novel creativity.” He argues that agency helps to define meaning and in turn gives rise to values. His book is an ambitious attempt to overcome four “injuries” splitting humanity apart at the seams – the divisions between science and the humanities, facts and values, secularism and spirituality and divisions across diverse value systems.

Kauffman follows the admonition of Scott Momaday, a Kiowa poet, to “reinvent the sacred.” Kauffman seeks to demonstrate that “in this ceaseless creativity in the universe, biosphere, and human culture and history we can reinvent the sacred, and find a new view of God as the fully natural, awesome, creativity that surrounds us.”

Kauffman later clarifies what he means by sacred:  “The word sacred is, for many, tied inextricably with the concept of the divine, but in many instances it is used to express an immense respect or reverence. . . . .  if we are the authors of what is to be held sacred then we will engage in mature reasoning about what is sacred.  Might it be the case, then that at this stage in human cultural evolution we are, at last, ready to assume responsibility for our own choices of what is to be sacred?”

Kauffman goes further and asks: “Do we use the word God meaning that God is the natural creativity in the universe? . . . How dare we use the word God to stand for the natural creativity in the universe? Yet I say yes, we can and should choose to do so, knowing full well that we make this choice. . . .This sense of God enlarges Western humanism for those who do not believe in a Creator God. It invites those who hold to a supernatural Creator God to sustain that faith, but to allow the creativity in the universe to be a further source of meaning and membership.  I hope this sense of God and the sacred can be a safe, spiritual space we can all share.”

Gordon Kaufman

In this effort to reinvent the sacred, Kauffman treads a similar path that Gordon Kaufman has been following for at least the past fifteen years.  Gordon Kaufman announces early in his book “In the beginning . . . Creativity” that “for a good many years I have been speaking and writing of God as creativity rather than creator . . .” A great interview with Gordon can be found here.

Kaufman, a professor of divinity emeritus at Harvard University, offers a similar perspective to Stuart Kauffman: “The metaphor of creativity, as I have been suggesting, is appropriate for naming God because (1) it preserves and indeed emphasizes the ultimacy of the mystery that God is, even while (2) it connects God directly with the coming into being – in time – of the new and the novel.”

Kaufman amplifies this theme: “. . . God should be thought of as creativity; creativity is the only proper object for worship, devotion and faith today . . . . Everything other than the ultimate mystery of creativity is a finite created reality that may indeed be valued and appreciated within certain limits, but which is itself always subject to distortion, corruption, and disintegration and thus must be relativized by the creativity manifest in the coming into being and the ultimate dissolution of all finite realities – that which alone may be characterized as ‘ultimate.’”

I especially like Kaufman’s emphasis on serendipitous creativity: “This whole vast cosmic process, I suggest, displays (in varying degrees) serendipitous creativity: the coming into being through time of new modes of reality. It is a process that has frequently produced much more than would have been expected or seemed possible, given previously prevailing circumstances . . .” He further clarifies:  “But mere change is not what we mean by the word ‘creativity,’ for changes can generally be understood and often explained, and they do not involve the coming into being of something truly novel.”

Stuart Kauffman and Gordon Kaufman co-taught a course at Harvard Divinity School this past Spring – something I would have loved to attend.

The bottom line

So, why am I writing about this? Why should a hard-headed business strategist and management consultant be spending time on God and the sacred? What does this have to do with the daily quest for profits?

Well, it all has to do with the Big Shift.  The Big Shift is not just about disruption and profits.  It is also about identity, meaning and values that are changing in profound ways. More than ever before, if we just focus narrowly on commercial quests, we will find ourselves blindsided by much broader changes playing out on the global stage.

As we shift our identity from consumers to networked creators, we will find that creativity plays a more and more central role in our lives, especially as our personal and professional identities knit together again. More and more of us will come to realize that creativity is indeed sacred, worthy of respect and reverence. By cultivating a view of creativity as sacred, we reinforce a sense of wonder, curiosity and, most of all, humility that will help us to become even more creative.  By honoring creativity and giving it a more central place in our worldview, we will find that it strengthens our perception of possibility, motivating us to create in ways that we previously never thought would be feasible. The focus on agency highlights the potential opportunity we all have to co-create the universe we live in – this is not (just) about watching others, it is us about us working together.

Even more importantly, this reinvention of the sacred represents a move from a static to a dynamic worldview.  Rather than the sacred representing perfection already achieved, the sacred emerges as a process of becoming without end.  This reinvention of the sacred is profoundly consistent with the broader movement of the Big Shift from a static world of knowledge stocks to a dynamic world continually re-shaped by ever evolving knowledge flows.

Embracing this new notion of the sacred will strengthen us in our quest to harness the forces of the Big Shift to create things never before imagined. Just as the Big Shift is changing our beliefs about ourselves, most certainly it will change our beliefs about the cosmos. Perhaps these new beliefs will provide a common ground where we can all come together – believers in a divine being and believers in a divine becoming – to heal the injuries that have separated us and helping all of us to more effectively achieve our potential.

Shifting Identities – From Consumer to Networked Creator

Who are you?  Your answer to that question will shape what you do and feel on a daily basis. We each have a unique personal identity, but underneath that are layers of identities that help us to connect with others based on communities, values and interests. These layers are undergoing profound and long-term shifts that will have profound impact in our personal and professional lives.

A few months ago, I wrote a manifesto for passionate creatives. In a later post, I explored what I meant by passion.  I chose “creative” because I believe that this identity will become increasingly widespread. In fact, I believe we are in the early stages of a significant shift in identity from “consumer” to “networked creator.”

20th century identities

In the 20th century we witnessed a deep split in our professional and personal identities.  The quest for scalable efficiency in all of our institutions required us to conform to highly standardized organizational routines.  To do this, we had to sacrifice much of our individuality, which was compartmentalized into “after hours” time.  While passions in this domain were certainly acceptable, we were increasingly encouraged to seek status and expression through consumption.  Scalable efficiency required mass markets. Mass marketing programs were all geared to reinforcing the message that our identity depended on a large home, a big car, lots of state of the art appliances and stylish clothing that changed with each new fashion season.

As a result, identity in the 20th century increasingly took two different forms – we were company men (and as the century progressed, company women) and consumers.  Since the professional identity offered little room for individual expression, we poured much of our energy into expressing individuality through our consumption – perhaps a sportier car or a fancier dress. Our status hinged on our ability to consume.

The big shift in identities

That is all changing now – our identities are shifting in ways that we are only beginning to understand. All around us, we see people engaging in creation of various forms, sharing these creations and deriving satisfaction, meaning and status from these activities.  Whether we look at the resurgence of crafts and hot rod cars, the rise of the “maker” movement, body hacking, social media or open source software, we find people who are investing more and more time and energy in the creation of things they are passionate about. 

What is behind this shift? Well, it is all part of the Big Shift. It is emerging because we face unprecedented opportunity and unparalleled pressure.

Pursuing opportunities. Let’s look at the opportunity side first. The tools of creation are being democratized.  Rather than remaining the province of the very wealthy, these tools are increasingly within the reach of far more people around the world.  Much of this is driven by the rise and dissemination of the digital technology infrastructure on a global basis. This certainly has been central to the proliferation of user generated media, whether it is video, music, photography or text. But there are other design and production tools emerging – more affordable 3D printers for example, that give us the ability to “print” all kinds of physical objects, ranging from ceramic art objects to architectural models. On another front, more sophisticated scientific tools ranging from powerful telescopes to advanced electron microscopes are becoming accessible on a shared basis to anyone with a passion for discovery.

As important as the tools of creation are, the tools of sharing may be even more central.  Digital infrastructures give us the opportunity to connect with others who share our interests, no matter how obscure or marginal they might be.  This capacity for connection matters on many levels.  First, we can derive encouragement for our efforts.  We can learn from others who may be more skillful than we are, both watching what they produce and having their feedback on what we produce.  In growing arenas, we can watch how others use our creations and gain insight into what works and what doesn’t work. We can create things that others build on and enhance, so that we collaboratively create new works that can then be shared with others.

But these are just tools and platforms.  They help us to give voice to what is inside of us.  We were born with passion but, over time, this passion was gradually suppressed as we learned that the institutions we spent most of our time in, starting with schools, viewed passion as somewhat suspect at best and deeply dangerous at worst. Sure, we were offered an outlet for our passion outside the institutions we studied and worked in, but even there we were encouraged to channel our passion into purchases.  Passion for food meant going to the finest restaurants, passion for clothing meant buying the latest and most expensive styles, passion for automobiles meant buying the most powerful and exclusive sports car models.

The problem was that this outlet for passion rarely satisfied.  The more we bought, the less satisfied we became. Many of us felt a deep seated need to achieve our potential, not by buying even more, but by discovering and developing our unique talents. We could apply these talents to creative activity that could then be shared with others. For some of us, the creations will be physical objects like crafts, robots or new ways to harness renewable energy. For others, it will be practices like the extreme sports enthusiasts who work together to push performance envelopes.  And for many, it will be ideas that generate debates and coalesce communities of interest.

This creative activity would help us to express our unique individuality rather than simply showcasing the mass produced designs of others.  The new tools and platforms provided us with ways to re-connect with the passion many of us lost from our youth and gave it new forms of expression as we sharpened the talent that many of us never even knew we had.

As our passions drive us to connect with others sharing our passion, we discover a powerful reinforcing loop that begins to play out.  The relationships that we build pull us into creating and sharing even more. Relationships thrive on reciprocity.  As we become the recipients of the creations of others, we feel a desire to create for them as well. The more we create and share, the more we draw out creations from others and the cycle begins to repeat.  Our identity becomes increasingly associated with what we have created but also what has been adopted and used by others that we care about.

As we slowly began to re-connect with our passion and connect more broadly with others who shared our passion for creation, many of us began to take the next step.  Rather than simply pursuing our passion as a hobby, we felt a growing need to make our passion our profession.  We simply could not compartmentalize our lives any more – our passion would not tolerate it. While institutions had a hard time accommodating this passion, we found that we could strike out on our own and once again leverage digital infrastructures to build revenue generating businesses based on the creations driven by our passion.  This began during prosperous times, but became even more pronounced in the current economic downturn. Many found themselves without a job and decided that this was a good time to make their passion their profession.

These trends have not played out evenly across the world.  Perhaps the group most immediately experiencing this passion to create is the younger generation just coming out of college or, in a growing number of cases, bypassing college entirely. They are the ones most comfortable with the digital infrastructures that can enable and amplify this passion. Gaming and other online habitats nurtured a questing disposition that gave them the confidence to explore their passion and talent outside the confines of traditional institutional boundaries. This questing disposition among the younger generation becomes particularly strong in developing economies like China and India where youth have a strong desire to seize upon the opportunities for talent development and growth that digital infrastructures offer.

At the other  end of the spectrum, many of the developed economies confront a rapidly aging population that is likely to live far longer than any previous generations.  This older generation in many cases has achieved a degree of affluence where the continued accumulation of consumer goods has diminishing appeal.  They are seeking more meaning in their lives and are hungry for an opportunity to discover, or re-connect with, passions that can define the next phase of their lives.  Unexpectedly, this older generation is the most rapidly growing segment of users embracing the digital infrastructure.

Responding to pressure. These are the opportunities drawing more and more of us into networked creation activity that increasingly shapes our identity.  But there’s another set of forces shaping this new identity as well. We are all under increasing pressure as a result of the Big Shift.  No matter how talented we are, we now find that we face competition from talent across the world.  And much of that talent is developing rapidly, driven by the opportunities described earlier.  The result for all of us is increasing stress as we wrestle with growing demands on our time and attention. 

This pressure and stress calls into question our choice to split our professional identity and our personal identity as consumers. We have long since learned that our employers are only as loyal to us as the latest quarterly financial results.  We run the risk of being let go as soon as financial pressures begin to mount.  Anyone who cultivates a professional identity as a company man or company woman runs a growing risk of having that identity shredded in very short order.

At the same time, we find it harder and harder to deal with the mounting pressure in our work.  Our recent Shift Index revealed that very few employees are passionate about their work.  We were conditioned from a very early age not to seek passion in our profession, but rather to view it as a paycheck that allowed us to pursue our passions in our spare time.  The problem is that, without passion, we have a hard time coping with growing pressure.  We have a much higher risk of burning out or becoming marginalized as we find it harder and harder to keep up. Our traditional identities of company man (woman) and consumer become more challenging to maintain.

The only way we will be able to cope with the mounting pressure is by making our passion our profession.  As this happens, we will find ourselves driven to create and to connect with others who share our passion for creation.  As discussed earlier, this will drive the definition of a new identity – the networked creator – which integrates at last our professional and personal identities into one primary source of meaning and fulfillment. This new identity will help us to drive the development of our talent as we begin to recognize that participation in diverse knowledge flows will help us enrich our creativity and that sharing our creations with others will accelerate our learning. It will provide us with a solid foundation to turn stress into stimulus as we begin to see and embrace new challenges as an opportunity to pursue our passion and more effectively achieve our potential.

Reshaping Relationships through Passion

I have always been shy. As a child, I learned to turn inward as a way to protect myself against an environment that I perceived to be very threatening.  I saw relationships as temporary at best and full of turmoil at worst, and would frequently retreat into a personal world with a good book rather than interact with new people. I had such a severe reaction to my first day at kindergarten, for example, that my parents decided to give me a reprieve until first grade. Shyness is a survival mechanism and it helped me to navigate through some very challenging times.

For shy people like me, the Big Shift can be deeply challenging. The Big Shift suggests we are moving away from a world where stocks of knowledge and short-lived transactions are the key to success. In its place, we find a world where participation in many, diverse flows of knowledge and long-term, trust-based relationships determine success. In this new world, shy people can be at a significant disadvantage. We run the risk of becoming increasingly stressed and marginalized by the extroverts who welcome the opportunity to broaden and deepen relationships. They thrive in crowded rooms while we are deeply uncomfortable with exposing and sharing.

The need to reshape relationships

For everyone, whether shy or not, the Big Shift poses other challenges.  We generally treat relationships as sources of stability in a confusing, complicated and rapidly changing world.  We seek out people who share our backgrounds and experiences, those who can make us comfortable and reassure us that our ways of viewing the world are valid and enduring. Once we find these people and connect with them, we develop relationships that comfort us rather than challenge us to achieve our full potential.

The strength of these relationships also becomes a vulnerability. Lulling us into complacency, they insulate us from new perspectives and practices far more appropriate to the changing world around us. 

In sharp contrast, passion holds the key to creating and shaping relationships that will help us thrive in a rapidly changing world. It motivates even the shyest of us to reach out and connect with others in ways that become catalysts for creativity and growth. Passion fosters a uniquely strong and productive bond that provides both the stability and stimulus needed to continue to grow and succeed in a constantly changing world.

1. Overcoming inhibitions

Though passionate people may be socially awkward or shy, their passion compels them to step outside of their social comfort zones to find others who share their passion and who may be able to help them reach new levels of performance.

Passion is a powerful driving force. The internal momentum it fosters gives passionate people the will and enthusiasm needed to overcome social inhibitions that otherwise discourage them from connecting with new people.

If there is any doubt about this, consider the area where the force of passion is best understood: love. The archetypal “laying it on the line” in pursuit of romantic connection is understood by even the shyest or most conservative of people. An uncomfortable or risky overture of some sort is necessary to the formation of virtually every new relationship. Each one of us has experienced the drive of passion in this way, which makes the analogy—while limited—a powerful illustration of how passion enables connection irrespective of social ability.

However, the key difference is a very important one: the relationship sought by a passionate creative (as opposed to a passionate romantic) is a means to a common end, and not an end in itself. When creatives form a productive connection based on shared passion, they feed each other’s energy and build momentum toward greater achievements than would have been possible independently—something that all talented individuals intuitively understand.

Passion plays another role here as well.  In addition to motivating us to seek out others who share our passion, it becomes a beacon attracting others to us.  Passionate people speak and write about their passion.  They share their passion with others. They can’t help it – it is their passion after all.  This makes others aware of our passion.  We soon find others approaching us because of something that we wrote or said.  Before we know it, even more connections are established and relationships built around these shared passions.

I found intriguing evidence of the role of passions in expanding our relationships in the Shift Index (pdf) that the Deloitte Center for the Edge published last year.  This research discovered a striking correlation between the degree of passion that employees have in their work and their participation in knowledge flows of various types – measured by such proxies as participation in conferences, professional associations or social media.  Passionate people are much more connected than those who indicate little passion in their work

Shy people can experience a virtuous cycle.  In overcoming their inhibitions to forge these energetic connections, they find that they are indeed able to pursue their passions more effectively than if they remain isolated in their own shells.  As they experience this success, they are motivated to reach out even more broadly to build expanding networks in search of new relationships with people who share their passion. Though their instincts may still encourage isolation, they yield instead to the much more powerful force of passion.

2. Come together, right now: The diversity of passionate communities

Through passion, the kind of people we connect with changes as well. Whether shy or not, we all have a tendency form bonds with people who look, believe and act as we do. Rather than helping us to overcome conventional geographic, demographic, ethnic and professional boundaries, our relationships often serve to harden and strengthen these boundaries.  Romeo and Juliet’s love was so taboo because it compelled them to transcend conventional social boundaries (note that, even here, it was romantic passion that gave rise to this inspiring exception).

In times of rapid change, this tendency becomes even more pronounced.  In a previous posting, I discussed the research of Bill Bishop, in his recent book, The Big Sort.  He documented a sustained and significant population shift in the United States as people increasingly congregate in neighborhoods with others who share their demographic attributes, lifestyles and values. Many have worried about the polarization of society occurring in the virtual world of the Internet, while remaining relatively oblivious to the much deeper polarization occurring in the physical world.

Passion, however, is blind to social background, political beliefs (unless the passion is related to politics), experiences or lifestyles.  As long as someone shares our passion and is actively engaged in pursuing it, we seek them out and welcome them into our fold. Passion brings together unlikely groupings and these communities have a tendency to create dynamic and innovative “creative spaces” not in spite of their member’s diversity, but because of it.

In Susan Sontag’s 1965 essay “On Culture and the New Sensibility,” she associates genius with the “personalities and music of the Beatles” (emphasis mine). Sontag is right in placing the cultural significance of John, Paul, George and Ringo’s personalities beside the music they made together. The individual characteristics and inter-group relations of these four passionate creatives are seared into cultural memory because of the dynamism of their distinction.

Relationships built on passion are extremely strong and often defy the incentives of traditional bond formation.  When they traveled to Hamburg Germany for one of their first big gigs, The Beatles’ line-up was John, Paul, George, Stewart and Pete. With a grueling performance schedule to maintain, only the most passionate—not necessarily the most popular—would remain. Stewart quit to follow new passions, Pete was replaced by the more talented and enthusiastic Ringo, and The Beatles, as we know them, were formed.

As an exemplary passionate community, The Beatles continued to seek edges. They constantly reinvented themselves through the influence and collaboration with other passionate creatives on the edge, people as diverse as Bob Dylan, Brian Wilson, Ravi Shankar and Yoko Ono. Though these influences had discernable impact on The Beatles as an artistic team, the most significant key to their success was the unlikely partnership between John Lennon and Paul McCartney—whose personalities, talents and sensibilities are extremely divergent and even at-odds. Yet together, they became one of the most important artistic teams of the twentieth century.

3. Growing through sustained relationships

Shared passion helps the relationships we build to strengthen and grow. While reaching out to others in expanding networks can be fruitful, one of the most important fixtures of a passion-based relationship is its want to become a rooted, stabilizing force, while at the same time challenging each of its members to “keep their end of the bargain” as an innovative contributor to the creative momentum of the bond.
In this way, passion-based relationships are not just resistant to the status quo—they are incompatible with it.

The Lennon-McCartney partnership held strong at the height of innovation throughout the tumultuous Sixties in large part because of the continuous challenge John and Paul posed to one another to grow as artists. This quasi-competitive dynamic is a fixture of most cultural, social, artistic, political and intellectual movements throughout history—where talented individuals continually set the bar higher for one another, making these relationships a source of forward-moving momentum for their passions and creativity.

But “movements” have another important characteristic: they are highly community oriented. Passionate creatives gather physically in neighborhoods, cities or districts (what Richard Florida calls “spikes” ), or maintain connection through correspondence in some form, to fortify connections with one another as community members. Think of the Harlem Renaissance, the High-Modernist Ex-Pats, the Berkeley New Left, Greenwich Village Beats and today, Silicon Valley’s digerati.

It had been the case up to very recently that this rootedness was typically imposed from without (as is the experience of many people “pushed” into the religious communities of their parents), which can be a stifling and repressive force. Conversely, passion provides a pull-based foundation for community building that liberates, for those who may feel alienated or different in traditional community settings.

In a constantly changing world of shift and flows, finding (or founding) a passion-based community may be one of the most significant factors to staying oriented, rooted, and poised to grow. 

The dynamics of passionate relationships are powerful elements of success in an era of continuous instability. Passion trumps inhibition in the service of new connections; shared passion provides a foundation for diverse relationships; and these relationships provide both stability and inspire growth for its members.

Lessons learned 

This is not just theory. This perspective is deeply informed by my own personal experience.  Connecting with my passion has helped me to overcome my shyness and to build a rapidly expanding network of deeply rewarding personal relationships, especially with people on a variety of edges, who have helped me to learn and grow continuously.

Over the years, I have learned that my shyness was a coping mechanism. It is not who I really am.  I have come to believe that we are all passionate and social beings, but we learn to become otherwise as a result of childhood experiences. Connecting with our passion can help us to recover our natural sociability, inspire us to connect with others and grow as individuals within the dynamic and nurturing bonds of passion-based relationships.

From Research Monographs to Story-Telling: New Forms of Communication in the Big Shift

The Big Shift cascades through all dimensions of our life.  The Big Shift will also transform how we communicate with each other. We are moving from a world of deep analysis communicating explicit knowledge to a world of rich, personal narratives communicating tacit knowledge. Narratives powerfully help to shift perception from static objects to dynamic relationships (the focus of my previous posting).

20th century communication – research monographs rule

The 20th century was an era of research monographs, slicing into the complex reality we all confronted, seeking to simplify it and focus us on the elements that really mattered.  We pursued research and explored many new frontiers but we did not rest until we had the knowledge stocks appropriately codified and reduced to writing in iron clad patents and copyrights. We knew that the real work and wealth creation did not start until we had protected stocks of explicit knowledge and reduced the knowledge to routine tasks that could be efficiently scaled.

Serious research required large data sets that could yield statistically significant results.  It would be even better if the results could be reduced to a simple yet universal formula that could be reliably applied to yield predictable results across as many situations as possible.  The more universal the results, the more scalable the activity could become. 

Stories, on the other hand, were for kids.  As early as possible in school, children were brought into the world of abstract concepts and scientific analysis. Stories at best were ghettoized into literature classes. Literature and arts were nice to have, budget permitting and as long as these programs did not conflict too much with the real work of bringing children to a level of “maturity” that would allow them to enter the workforce and become productive employees, able to handle the basics of explicit knowledge, literacy and numeracy.

This message was reinforced in a variety of subtle and not so subtle ways.  Virtually everyone in their academic careers has encountered the ultimate put-down: “The plural of anecdote is not data.” Get serious. Forget the stories, even if there are many of them, and focus on hard, raw data that can be massaged into real knowledge.

When we entered the workforce, this message was reinforced time and time again.  “Don’t tell me stories, bring me data” could be emblazoned above the door of every conference room in the large corporations that drive our economy. Spreadsheets and PowerPoint charts ruled while memos summarized the findings and made the case for action. Stories could be read for entertainment and relaxation in our leisure time, but they had no respectable role in the workplace. Workers furtively gathered at the water cooler to tell stories, but quickly disbanded when their bosses showed up to check in on them.

The impact of the Big Shift

But here’s the thing. Knowledge stocks in general diminish in value as the changing world renders more and more of this knowledge obsolete.  This increases the need to generate new knowledge. New knowledge inevitably has a higher proportion of tacit knowledge in its early development. Tacit knowledge is the knowledge that is the most difficult to express, either because it is so new and so unfamiliar or because it is so deeply embedded in our practices that we are not even aware of it.

As tacit knowledge grows in value, we need different ways of communicating it. When we first encounter new and unexpected events or results, we often have a hard time even expressing what happened, much less reducing it to the abstract, conceptual language that explicit knowledge pulls us toward. We need different ways of communicating what we encountered.  What do we tend to fall back on?  Stories.

Pick any area that is just emerging.  It could be some new technology frontier like cloud computing or a new set of practices like open source courseware.  One key indicator of these emerging areas is a rapid growth in the number of conferences. What are people doing at these conferences? They are telling stories to each other, sharing experiences, seeking advice and input regarding those experiences and learning from each other.

The unique value of stories

Stories emerge as an increasingly central form of communication in times of rapid change because they so richly reflect the needs of the time. In particular, they help us to shift our perception from static objects to dynamic relationships.

Stories by their very nature are dynamic rather than static.  Stories are ultimately about movement and development.  They engage because they immerse listeners in changing circumstances and the challenges and opportunities created by change.  Stories focus on sequences of events and highlighting the causal forces shaping these events. They are far more “true” than snapshots.

Stories are about relationships at multiple levels. Stories situate their protagonists in context – they help the listener to understand a complex set of relationships that shape the choices and movement of the protagonist. In a story everything is related. Stories integrate apparently disparate elements and make their relationships visible. They take people and things and focus on relationships rather than objects.
There’s another set of relationships developed by stories – the relationship between listeners and the protagonists as well as between the story-teller and listeners.  Even more generally, as PJ Manney reminds us, stories help to cultivate empathy, encouraging listeners to understand the perceptions and motivations of others.  This empathy extends far beyond the story at hand and helps listeners to be empathetic in all aspects of their lives. Thus, in many ways, stories help to build new relationships, rather than just describe existing relationships.

Stories powerfully illuminate tacit knowledge.  By focusing attention on the motivations and practices of the protagonists they help us to gain insight into tacit knowledge that cannot be reduced to explicit knowledge.  We indirectly access the tacit knowledge through a deeper understanding of context, choices and practices of specific individuals.

Stories inspire the imagination, rather than simply communicating existing knowledge.  By pulling us into a new and often unfamiliar context and helping us to see this context through the eyes of someone else, stories help us to break out of our existing frames of reference and inspire us to see things in very different ways.  As a result, stories can generate sparks of new insight that, properly nurtured, can lead to fundamentally new knowledge about complex and rapidly evolving situations. In the end, stories are not just powerful ways to communicate existing tacit knowledge; they help to catalyze the creation of new knowledge.

Stories are catalysts. One story often pulls out other stories from other people. Stories can begin to build upon each other and draw other people in.  They spark broader conversations and begin to establish a common ground for shared understanding, helping to build trust based relationships.

Stories provide powerful filters that help us to orient ourselves in complex and rapidly changing worlds.  On a daily basis, we are bombarded by an ever expanding array of stimuli that spread our attention ever more thinly and risk disorienting us in terms of a sense of what matters and what is simply noise.  Stories help to focus our attention.  The task of the story teller is to reduce a complex situation to its essence, making difficult decisions about what matters and what is simply extraneous while still preserving the relationships and textures that drive forward movement.  The result can be very helpful to listeners in terms of communicating what is really important in a world that distracts and diminishes our ability to focus. At the same time, stories also encourage listeners to use their own imagination to enrich the context of the story – they pull listeners in and invite them to co-create the world at hand.

Stories focus on agency.  Stories highlight the role of individuals and groups in acting upon challenges and opportunities.  They give listeners a sense of the possibility and importance of action, rather than simply passively absorbing what is going on around them.  They motivate listeners to make choices and act.  They also show the potential to reflect on and to learn from action, as the listeners are encouraged to do when they hear stories about others.

Stories help develop a questing disposition and passion. Stories are often about protagonists who are curious and seeking something that is difficult to attain.  By helping us to put ourselves in the situations of these protagonists and experiencing the questing disposition in a very personal way, they inspire us to pursue similar quests. Passion is about pursuit and stories can similarly ignite passion as we experience in a deeply personal way the satisfaction and rewards of pursuits. The potential for passion is enhanced by the passion that successful story-tellers bring to their craft.  The stories that engage the most are the ones where the story-tellers communicate their own passion as well as the passion of their protagonists.

For all of these reasons, stories will become an increasingly central form of communication in the Big Shift.  Stories help us to make sense and to make progress in complex and rapidly changing times in ways that more conventional forms of communication simply cannot.

Bottom line

So, what does this mean for corporate executives? Executives have generally viewed stories as somewhat suspect distractions from the focus and data required to run the business.  As we move from a world where scalable efficiency is the source of wealth creation and capture to a world where scalable peer learning becomes a much more powerful source, stories assume a much more central role in the communication arsenal of executives.

The ultimate task of leaders is to help the people around them make sense and to make progress.  In a world where performance pressures are mounting and the old assumptions no longer have as much validity, stories can be a powerful means for leaders to accomplish their mission. Stories become critical to build shared understanding among employees, but they also become increasingly powerful in helping to orient and engage third parties and customers.

Leadership is about pulling people out of their current situation and helping them to see the potential and opportunities that exist around them.  Leadership is ultimately about helping people to pull out of themselves their potential, helping them to see and achieve the potential that lies latent within all of us. By pulling people into a different context and building connections with other people, stories can help leaders to be more effective.

For those who are intrigued by the increasing importance of stories, Steve Denning represents one of the most thoughtful proponents of narrative as a way to strengthen leadership.  In particular, his book, “Squirrel, Inc.” explores a broad array of story-telling genres and analyzes their importance for leaders.

On a personal level, stories help to integrate our own experiences into an overall personal narrative. Personal narratives help to provide us with context and orientation in our own lives.  Daniel Siegel in his important new book Mindsight makes the case that integrated personal narratives are an important marker of psychological health.

Stories matter.  Analysis and explicit knowledge still have a major role to play.  But stories and the tacit knowledge they convey are essential if we want to venture out to the edge, build a deep understanding of what is happing out there and help to communicate that understanding back to our colleagues in the core. 

We have a choice. We can stay closeted in the core, hiding behind patents, research monographs and charts of compelling data, and staying well in the comfort zone of the forms of communication that have contributed to our success to date.  But the complacency that breeds can be very dangerous in the Big Shift.  Far better to venture beyond our comfort zone and master new forms of communication that will help us to make sense and to make progress in an increasingly complex and challenging world.

And, yes, I am aware of the profound irony that I wrote this entire blog posting without telling a single story. I am a prisoner of my 20th century education and still struggling to master the art of story telling. 

Relationships and Dynamics – Seeing Through New Lenses

Do we all look at the world in the same way? Hardly. We can each look at the same scene and focus our attention on something completely different.  Individual idiosyncrasies definitely play a role, but broader patterns of perception are at work as well. Are certain patterns of perception more or less helpful in these rapidly changing times?  Most definitely – in fact, they may determine who succeeds and who fails.

About five years ago, Richard Nisbett, a professor of psychology, wrote "The Geography of Thought." This fascinating book drew on extensive research pointing to fundamental cultural differences in how we see the world. Specifically, he contrasted an East Asian way of seeing the world with a more traditional Western way of seeing.

While it would be difficult to summarize Nisbett’s rich analysis, I want to focus on a key distinction that he develops in his analysis of two cultural ways of perceiving our world.  He suggests that East Asians focus on relationships as the key dimension of the world around us while Westerners tend to focus more on isolated objects.  In other words, East Asians tend to adopt more holistic views of the world while Westerners are more oriented to reductionist views. This basic difference plays out in fascinating ways, including the greater attention by East Asian children to verbs while Western children tend to learn nouns faster.

One very tangible illustration of this is a simple test reported by Nisbett. A developmental psychologist showed three pictures to children – a cow, a chicken and some grass. He asked children from America which two of the pictures belonged together.  Most of them grouped the cow and chicken together because they were both objects in the same category of animals.  Chinese children on the other hand tended to group the cow and grass together because “cows eat grass” – they focused on the relationship between two objects rather than the objects themselves.

I found this intriguing in the context of our continuing work at the Center for the Edge on the Big Shift.  As I indicated in a previous posting, the Big Shift is a movement from a world where value creation depends on knowledge stocks to one where value resides in knowledge flows – in other words, objects versus relationships. Our Western way of perceiving has been very consistent with a world of knowledge stocks and short-term transactions.  As we move into a world of knowledge flows, though, I suspect the East Asian focus on relationships may be a lot more helpful to orient us (no pun intended).

Of course, this is not an either/or proposition.  Nisbett holds out hope that these perspectives might ultimately converge, citing some promising research evidence:

“So, I believe the twain shall meet by virtue of each moving in the direction of the other.  East and West may contribute to a blended world where social and cognitive aspects of both regions are represented but transformed – like the individual ingredients in a stew that are recognizable but are altered as they alter the whole. It may not be too much to hope that this stew will contain the best of each culture.”

But wait, there is more.  The distinction between perception of objects and relationships is just one dimension of difference.  In fact, the East Asian and Western modes of seeing share one common element: they view the world as largely static. As Nisbett points out, the Greek philosophers gave us the notion that “the world is fundamentally static and unchanging.” East Asians tend to focus on oscillations and cycles which acknowledge change but contain it in relatively narrow fields – the world is in flux but it does not head in fundamentally different directions over long periods of time.

So, there is another dimension that differentiates perception – and this is a point that Nisbett sadly does not explore or develop.  Some of us tend to view the world in static terms while others focus on the deep dynamics that lead to fundamental transformations over time.  Many executives, especially in large firms, tend to adopt a static view of the world.  They want detailed snapshots of their environments to drive their decision-making.  When they go to distant countries and markets, they carefully  observe the state of play as it is today, but they rarely ask for “videos” – detailed analyses of the trajectories of change that have been playing out over years and are likely to shape future markets.  Even in the more contemporary world of social network analysis, this analysis often remains highly static – elegant maps show the rich structures of these social networks as they exist today, but they rarely reveal the dynamics that evolve these networks over time.

Why is this the case? Many factors contribute to this static view of the world.  Modern enterprise is built on the notion of scalable efficiency and scalable efficiency requires predictability.  Predictions are much easier in stable or static worlds, so executives are predisposed to see the world in these terms.  Change can be highly unpredictable and can rapidly call into question the ability to predict demand for products or services.  Whether one sees in terms of objects or relationships, these are much easier to understand and analyze if they remain stable.  Contemporary economics is largely built around equilibrium models that are essential if the detailed econometric analytics are to work. Social networks are complex and messy as it is, without having to factor in even more complex dynamics that continually reshape these networks over time. We don’t even have a very robust set of categories to describe various trajectories that can play out over time. Let’s face it, life would be a lot simpler if everything just came to a halt and stayed the way it is right now.

But, of course, it does not stand still.  Our world is constantly evolving in complex and unexpected ways. And there is evidence that it is evolving ever more rapidly, generating disruptions that send people and things careening in new and unanticipated directions. Product life cycles are compressing across many, if not most, industries.  The movement from products to services as key drivers of growth reinforces this trend, since services can often be updated far more frequently than products. With the growth of outsourcing, new competitors can enter and scale positions in global markets in ways that simply were not feasible in the past when capital intensive physical facilities needed to be built before products could be launched.  Edges of new innovation rise quickly and gather force to challenge entrenched positions in the core of our global economy. Black swans pop up with increasing frequency, seemingly out of nowhere and challenging some of our most basic assumptions about the world around us.

Yet, we do not have very good lenses or analytic tools to bring these dynamics to the forefront.  They tend to operate behind the scenes, rarely seen until it is too late and the latest disruption is enveloping us.  Survival in this more rapidly changing world requires developing new modes of perception, ones that put structure in the background and focus attention on the deep dynamics that are re-shaping the structures around us.

This is the other key message of the Big Shift work.  We are going through a profound long-term shift in the way our global business landscapes are evolving.  We get so caught up in short-term events that we lose sight of these long-term changes, much less understanding what is driving them or thinking about their implications for how we work and live.  As we have emphasized, we must learn to make sense of the changes unfolding around us before we can make progress.  Even more fundamentally, we must learn to see these changes, searching them out where they remain hidden or obscured and penetrating through the surface currents of change to focus on the deeper dynamics shaping these currents.

What is required to do this?  Well, first we need to embrace change rather than dampen or suppress it.  Virginia Postrel wrote "The Future and Its Enemies" over a decade ago, a fascinating book that described a persistent and intensifying conflict between stasists, those who fear and resist change, and dynamists, those who welcome change as an opportunity to create even more value for more people.  Those who fear and resist change spend relatively little time understanding change – all of their energy is focused on blocking it.

By embracing change, we begin to see the opportunities it creates.  We are motivated to explore the contours of change in ways that moves us from focusing on what is to what could be. As we begin this migration, we will need new analytic tools to help us on our way.  Promising early toolkits can be found in diverse arenas. For example, the Santa Fe Institute is studying the evolution of  complex adaptive systems and increasing returns dynamics.  On another front, the revival of Austrian economics challenges equilibrium analysis and instead focuses on processes of change unleashed by distributed tacit knowledge, inspired by the early work of Friedrich Hayek. In yet another arena, work in the technology world seeks to understand the implications of continuing exponential improvement in the price/performance of digital technology as it breeches the boundaries of computing and invades such diverse arenas as biology, materials science and robotics.

Stepping back from all of this, the challenge is great, especially for those of us in the West.  We must learn to shift attention from objects to relationships while at the same time moving from structure to dynamics as the key lens for perception.  We were not trained this way.  We generally have not operated in this way. All of our assumptions tell us that this is the wrong way. Yet, there are enormous opportunities for those who do make this shift.  Perhaps most importantly, those of us who remain wedded to the old way of seeing things will find ourselves increasingly stressed, blindsided and marginalized in a world that will continue to move on without us.

Challenging Mindsets: From Reverse Innovation to Innovation Blowback

Views on innovation in developing economies are evolving rapidly, yet they still do not capture the full significance of what is going on. Executives in the West are still prisoners of a mindset that equates innovation with technology and product innovation. This blinds them to significant alternative forms of innovation that can profoundly disrupt their businesses in the years ahead.

Early view of innovation

A decade ago, few Western executives were willing to recognize any potential for innovation in developing economies. From their perspective, the growth of developing economies could be fully explained by the availability of cheap "sweatshop" labor displacing unionized Western labor and the ability of agile Asian companies, freed from intellectual property constraints, to copy superior Western technology.

Fortune at the Bottom of the Pyramid

Six years ago, noted business analyst C. K. Prahalad wrote a book, The Fortune at the Bottom of the Pyramid, which began to change this view. In this book, Prahalad made a compelling case that companies were creating significant economic value by innovating the design of products and services to more effectively serve the unmet needs of the lowest income segments of the population in developing economies. He cited examples in fields as diverse as health care and agricultural products to drive home his point that there were significant economic opportunities associated with this new innovation focus.

While perceived as radical at the time, this perspective was still comforting to Western executives. Perhaps there were real product and service innovation opportunities in developing countries, but they were safely confined to those countries. After all, what might work for a peasant in rural India certainly would have little interest for a sophisticated urban consumer in the West.
Western companies could choose to participate in these opportunities. In fact, these opportunities provided new platforms for growth to compensate for the lower growth offered by more developed markets. Yes, these Western companies would face growing competition from local entrepreneurs in these developing economies, but their core markets in developed economies were not really affected. This was much more of an opportunity than a challenge to existing business.

Reverse innovation

Even more recently, an important refinement to this perspective has emerged. Last October, two business school professors at Dartmouth, Vijay Govindarajan and Chris Trimble, teamed up with Jeffrey Immelt, chairman and chief executive officer of General Electric, to publish an article in Harvard Business Review that has attracted significant media attention. Entitled "How GE is Disrupting Itself", this article introduced the concept of "reverse innovation". Using the examples of portable ultrasound machines and small turboprop jet engines, it discussed how General Electric is using developing markets as seedbeds for product innovation to create much more efficient products and services.

In a new twist, the products discussed in this article were not simply designed to serve local developing economies. These products had the potential to become innovations that could be driven into world markets. They could challenge incumbents in these world markets and drive growth on a much large scale than ever imagined before. This perspective challenges the more conventional view of "glocalization" (a particularly horrible neologism) which argues that Western multinationals should develop products in their home markets and then tailor them to meet the more specific needs of local markets around the world. Instead, this new perspective "reverses" the innovation process, using developing economies as the platform for product innovation and then takes these innovations back into developed markets.

This is a significant advance over Prahalad’s earlier perspective that viewed innovation in developing economies largely as distinct and separate from innovation in developed economies. It now explicitly links product innovation across both domains and explores the potential for innovations in developing economies to drive "attacker" strategies against incumbents in developed economies.

And yet, this more refined perspective still under-estimates the full disruptive potential of innovation in developing economies. Reflecting Western biases, it still equates innovation with product innovation. It focuses on how products and services can be re-designed to offer more value at lower cost, making this form of innovation much more accessible to Western companies. They simply need to shift their innovation focus from developed economies to developing economies and significant growth opportunities will be available.

Immelt, Govindarajan and Trimble acknowledge that there are organizational challenges associated with this shift in innovation focus. As they caution, "zero-based innovation doesn’t happen without zero-based organizational design. GE’s organizational ‘software’ – its hiring practices, reporting structures, titles, job descriptions, norms for working relationships, and power balances between functions – all evolved to support glocalization. [Local growth teams] need to rewrite the software."

But note that the organizational changes described by these authors are all within the company. While these are still challenging to pull off, they do not call into question the basic mindset that Western executives have about the role of their companies. They do not call for a need to re-think at the most fundamental levels the institutional arrangements that define roles and relationships across companies.

These perspectives help to change our view of where innovation will occur – shifting our focus from the core developed economies to the geographic edges represented by developing economies like China and India. But they do little to alter our view of innovation itself. As a result, Western executives remain vulnerable to being blindsided in a much more fundamental way.

What if the most significant form of innovation is not product innovation or even technology innovation? What if a different form of innovation is emerging in developing economies that could prove far more disruptive, providing a platform for successful attacker strategies that would challenge Western companies on a global scale?

Innovation blowback

Five years ago, John Seely Brown and I wrote an article for the McKinsey Quarterly entitled "Innovation Blowback: Disruptive Management Practices from Asia." In that article, we described a series of innovations emerging in Asia that were much more fundamental than isolated product or service innovations. We drew attention to a different form of innovation – institutional innovation. In arenas as diverse as motorcycles, apparel, turbine engines and consumer electronics, we detected a much more disruptive form of innovation.

In these very diverse industries, we saw entrepreneurs re-thinking institutional arrangements across very large numbers of enterprises, offering all participants an opportunity to learn faster and innovate more effectively by working together. While Western companies were lured into various forms of financial leverage, these entrepreneurs were developing sophisticated approaches to capability leverage in scalable business networks that could generate not just one product innovation, but an accelerating stream of product and service innovations.

This is not a question of business model innovation or the management innovation that Gary Hamel talks about. Those forms of innovation are still contained within a single enterprise. Institutional innovation is different – it defines new ways of working together, ways that can scale much more effectively across large numbers of very diverse enterprises. It provides ways to flexibly reconfigure capability while at the same time building long-term trust based relationships that help participants to learn faster. That’s a key breakthrough – arrangements that support scalable trust building, flexibility and learning at the same time. Yet this breakthrough is occurring largely under the radar of most Western executives, prisoners of mindsets that prevent them from seeing these radical changes.

We highlighted the need for Western executives to question the most basic assumptions that they held regarding the institutions they managed. Without a profound shift in mindset, they would be increasingly vulnerable to innovation blowback – the prospect of institutional innovations in developing economies that would provide a platform for a growing stream of disruptive products and services to drive attacker strategies in developed economy.

In an earlier blog posting, I also contrasted different forms of institutional innovation emerging in India and China. Both forms of institutional innovation had significant potential to drive strategies to disrupt and gain share in global markets.

These institutional innovations will be far more difficult for Western companies to appropriate precisely because they challenge basic assumptions about roles and relationships across companies, not just the way individual companies are organized or managed. In our book The Only Sustainable Edge we argued that these institutional innovations would become the basis for a new form of strategic advantage – getting better faster by more effectively working together in larger and larger ecosystems of participants.

Institutional innovation has enormous power to disrupt and drive major new forms of economic value creation and capture. Much of its power stems from its ability to blindside incumbents who hold onto traditional mindsets. As I argued in the Shift Index, new digital infrastructures and related public policy shifts are increasingly rendering obsolete the assumptions that Western executives hold about what is required to create and capture economic value.

Until and unless Western executives begin to aggressively challenge these assumptions and awaken to the potential of institutional innovation, they will remain vulnerable to attack. They must begin to recognize that the most promising forms of innovation emerging in developing economies are not at the level of individual products or services but rather at a much deeper level – novel approaches to scalable peer learning shaped by institutional innovation.