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Featured Guest Speaker

Michael D. McMaster, Author and
Managing Director, Knowledge Based Development, Ltd.
Posted: December 12, 1998

Organizational Intelligence
(Adapted from a talk given to The Industrial Society, London, April 1998)

I assume that you all want your organizations to be adaptive, innovative, creative, growing, robust and long-lived. Many of you have a more or less unacknowledged wish that they also be predictable, orderly and under control. The second may be incompatible with the first - at least in the way that you think about it now.

In America there are a number of facilities that do research and manufacturing for nuclear weapons. For a variety of reasons, a large one being that they work with extremely life threatening materials, these facilities are located on huge acreage far from civilization. People who have worked in these facilities are beginning to get sick and die. For fourteen unsuccessful years they have been working toward new practices and new regulations to eliminate this problem.

In Wales there is a similar facility right in a city. Across the street on one side is a school. Across the street on another side is a shopping centre. All around are houses. There are zero incidents of health problems. The Americans, in efforts to clean up their own sites, visited the Wales facility a number of times over these fourteen years - but still no progress was made.

Since I’ve had the opportunity to help change this situation I have some insight into where the differences are. I account for it by saying that there is intelligence operating at the facility in Wales; but not so at the American facilities. The intelligence I'm referring to isn't individual - it is an organizational intelligence.

By intelligence I mean the capacity to sense, make sense and take action, combined with knowledge that is available and ready to use. As human beings we have access to our own intelligence through language, and through this means the ability to increase both knowledge and the capacities of intelligence, and thus an unlimited capacity to expand.

With the term organizational intelligence we name what we want to access at the organizational level - the capacity to sense, make sense, and act in flexible, creative, adaptive ways. Organizational intelligence is the source of our future - and to get it, we need to think differently, manage differently, and organize differently.

Organizational intelligence opens possibilities for:

  • Non-linear results.
  • Futures that are not predictable given current understandings.
  • Results beyond our current capacities, which organizationally are largely linear.

To get our minds and hands around this, we need to understand intelligence as it resides in the organization and not merely in individuals. It is at the level of organization that we have access to the "architecture of intelligence" and "processes of intelligence" and not just its content. We can design for intelligence just as easily as we can seriously inhibit the natural occurrence of intelligence.

Dee Hock, founder of Visa, provides an insightful perspective:

"The organization must be adaptable and responsive to changing conditions, while preserving overall cohesion and unity of purpose. This is the fundamental paradox facing businesses - not to mention living cells, immune systems, ant colonies and the rest of the natural world."

That is, an organization must be intelligent.

Intelligence is a distributed phenomenon. In ant colonies, in society, in individual human beings - and in organizations.

Let's consider an ant colony as an intelligent entity for a moment. It is extremely adaptive and extremely flexible. It senses, makes sense and takes action. It continues to find food and keep the colony and species surviving. Some build incredibly complex housing systems. Where is the knowledge, the intelligence, the capacity to do this? It isn't in some queen, in some ruler, in some central source. If it were, we'd expect to find a few really smart ants!

The intelligence or know-how is built into the structures of relationship and communication of the colony.

This country appears to be intelligent - able to make sense of its world and adapt in ways that keep it prospering. But we can't find any single individual responsible for that nor any truly central source.

London manages to provide food, shelter, services, entertainment, and transportation, without central control. We can't find the intelligence of London and yet it exists and functions very well.

Let's consider human beings. In what sense is intelligence a "distributed phenomenon" here? We tend to think intelligence is in the brain. But it's actually much more distributed than that. We find it in the whole nervous system, the immune system, a whole raft of systems that are integrated and inform the brain as much as the brain informs them. There is no centre here, and there is no linear mechanism that explains what happens.

Even when we look at the brain in detail we find that there isn't a centre there. There isn't even a clear location for each bit of information nor for each function. We find that "information" coming into the system through our senses is scattered throughout the brain. When we see or think something that triggers a memory we think that this memory was stored somewhere as a unit - but we now know it isn’t.

Think of your own organization for a moment. I spoke to an executive of the Royal Mail who was lamenting about the difficulty of making important changes. He was suggesting that people in the organization were not very intelligent. He certainly didn't consider "the organization" to be very intelligent. So I asked him,

"Do you know how to make an organization deliver mail to 20 million people reliably every day? Do you know how to make an organization adapt to changing technology, changing transportation, changing population, and generate phenomenal growth over centuries? Is there anybody - or small group - in the organization that really knows how to make the mail get delivered and to adapt to the constantly changing environment?"

It became apparent as we talked that there isn't anybody that knows how to deliver the mail. But there is an organization that knows how. That's a pretty good display of intelligence in my book.

Your organization is the same. Check your experience:

  • Do you know, personally, how to do what your organization does. Can you directly make happen what you want to have happen?
  • How easy are your change initiatives?

What is so difficult about changing an organization?

Consider that the fundamental model of the organization that we are using - the one inherited from generations of executives and the history of the organizations - is flawed. The model of the organization that inherited culture gives us, not only for being a manager but also for being an employee - in fact for most of our life - is based on what we might call an engineering model.

The characteristics of the traditional organizational model are:

  • Linearity - an understanding of how things work that allows a visual and cognitive grasp based on simple lines of causality.
  • Reductionism - a way of understanding things which breaks them into separate parts that are easily understandable, so that we can improve them and put them back together for improved performance
  • Hierarchy - an approach which uses linearity and reductionism to gain understanding and control of larger systems.
  • Objectivity - an approach to the world that separates our experience from what is so, and generates the belief in "one right way" and some ultimate truth.
  • Predictability and control - the result of the above applied to machinery (effectively) and human affairs (not so effectively).

These are not the characteristics of intelligence. Intelligence works by different means. The accepted model for intelligence is a "complex adaptive system".

The characteristics of intelligence are:

  • Non-linearity - state changes, transformations, invention, breakthroughs, and other results which appear like quantum leaps.
  • Distributed phenomena - where the elements cannot be located specifically yet something emerges - like intelligence, teamwork and rapid response abilities.
  • Independent agents - individual elements which make their own sense or meaning, and then make their own choices based on their own interests as they understand them.
  • Emergence - those results which occur without direct, linear action and are unpredictable in detail yet, at least after the fact can be seen as a result of earlier forces combining in new ways
  • Attractors - those elements or principles around which forces move so that detail cannot be predicted but patterns can be seen.
  • Patterns - seeing the connections between things and identifying the "attractors" around which these form, giving access to influence without control.
  • Holistic - taking a view that includes whole systems rather than the parts or even merely the particular focus that is of interest to you.
  • Socially constructed reality - the realization that through language and practices we create the social world that we live in - and we live almost exclusively in a social world that we have emerged from and co-emerge with.

This strange language, by the way, is being used by CEOs and board members of Koch Industries, VISA, Unilever, Coca-Cola, ROLM, Xerox, Citibank, Levi's and other large organizations, including the US military, as well as by many executives and founders of the younger and faster growing hi-tech companies.

This later model give us better prediction and control for those systems which are dynamic and interactive, particularly those which use language - like human intentions, productive processes, resolution of complex problems, delivering the mail.

The model gives us a tool to engage the total knowledge and intelligence of a community - a community which has an interest in resolving a complex issue - and creates a new, richer shared understanding from which emerges new, more innovative solutions to challenges.

It gave resolution to the American DOE challenge (see below for link) of how to transform inherently dangerous workplaces into safe ones. Application of this model connected the distributed intelligence related to the problem, created a collective intelligence, and generated effective regulation and practices being put into action now. (Hyperlink to DOE story)

Let us look again at what we want - adaptability, innovation, creativity, initiative.

These are emergent phenomena. They arise from a system that may be intentionally created but for which there is no linear or reductionist understanding. These systems are neither mechanistic nor predictable, nor are they random or capricious. They can be designed. To do that you need to give up control as you understand it and employ control appropriate to an intelligent system.

Let's take a non-intelligent instance for understanding this better. Consider a river. If you ever paddle a raft down the Grand Canyon you will notice that you have nothing to say about the way it is going. And very little influence over what it will do to you, where it will take you, or at what speed you will travel. Yet you do have enough influence, enough prediction ability, and enough control. If you try and exercise inappropriate control, it will throw you into a rock or overturn you. If you exercise appropriate control - a small steer here, go with the flow there, paddle a bit another time - you find that it is quite safe, quite predictable, and you are quite in control of all that you need to be in control of on order to realize your intentions.

Or consider the flow of water in a small stream or canal. You can influence what goes into it by a dam. You can influence its broad speed and direction by digging, placing obstacles, or changing the banks. You can predict a great deal about the behavior of the stream and control some major effects. But you can't predict or control even a tiny fraction of the small details of the stream, of the water, of the flow.

With an understanding of the phenomena of a river you focus your energy, attention, and intention at the right level.

Business is a cognitive activity. If we understand the model of distributed intelligence that is a corporation, then we can design both structure and practices to call forth the maximum emergence consistent with sufficiently controllable productive results. Key elements:

  • Social-language and agents which create a natural tendency for relationship and communication as the basis for alignment and shared commitment (the naturally converging and binding force)
  • Independent, intelligent agents as a basis for continual development of possibility and responsiveness (the naturally diverging and innovating force).
  • Attractors and patterns as the basis for making sense and meaning.
  • Connections as the source of innovation and adaptiveness.

The vehicle for this is dialogue, relationship, and engagement - not formal systems, one way communication, and publication. The outstanding executives that I have met are generally excellent thinkers; but more importantly, they are obsessed with relationship.

Michael D. McMaster
Manageing Director, Knowledge Based Development, Ltd.,
Author: The Intelligence Advantage - Organizing for Complexity, Butterworth-Heinemann, 1996.
Author: The Praxis Equation - Design Principles for Intelligent Organization, 1997.
Link: The USA DOE Story

Would you like to offer some thoughts or add to the dialog? Responses of general interest may be posted below. Send your comment to . IMPORTANT: Make sure the subject line of your message contains: Comment on Guest Speaker 12/98.
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From: USDCC2FC@IBMMAIL.COM (John Oleson), Date: Tue, 15 Dec 1998
Rick, As usual you have brought forth some keen "intelligence" with the OtherWise article by Michael McMasters. Combined with the DOE Beryllium experience it makes a strong point about the change in a corporate culture through managing the development of corporate intelligence. Here at At Dow Corning it applies to the program to shift the organization to supply chain management with the appropriate level of agility. It seems to be an approach that allows the organization to determine the changes needed and sets them free to do it. Existing culture is the top down guided change with the troops saluting and saying yes sir. One important factor in the DOE experience is the relationship between the people and their functions (bosses). They need to be sure that what ever happens at the sessions their entity will support. The atmosphere must be to get the best total organization solution. Thanks for the intellectual stimulation.

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From: "Michael McMaster" Date: Wed, 16 Dec 1998
Thanks for the feedback. The DOE will be put into play because we involved all of the decision makers AND representatives of all of those who are to act - all the way down to the shop floor and including the union.

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From:  (Timothy Cousins) Date: Wed, 30 Jan 2002
Michael. My experience (12 yrs in Australia) is with organisations in crisis after a disaster. (fire. flood etc...)
I have devleoped a managemnet style completly independantly of any theory of "complex adaptive systems" and have recently discovered amazing parallels between my learnt disaster recovery management style and current theories of complex adaptive systems. I have always maintained that Disaster Recovery Plans have NO intelligence - people do, and clearly organisations o as well. Thank you for your insporation in this article. I was stuck on the issue of "how to train for a good adaptive response prior to a disaster. I know that information and the meaning of information is critical - and that is how I apply my levers to alter the course of the recovery process. I now have to take a risk and let the intelligence of the orgnisation develop. my thoughts are still embryonic. Thank you for your thoughts. Cheers

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