4.0 Lab: Inventing the Future of Food, Finance, Health, Ed, & Management

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Last week, Amazon acquired Whole Foods in a move that has many wondering what this means for the direction of the economy. In my view, Amazon’s acquisition of Whole Foods does to organics what Uber did to the sharing economy: it takes something that was born out of a different economic logic (a grocery store dedicated to healthy food) and then molds and morphs it to fit into an economic operating system that is firmly based in the old paradigm—i.e. in a paradigm that aims for world domination rather than serving a goal of shared prosperity and well-being for all.

In this post, inspired by a number of gatherings with change makers across sectors in China, Europe, and the Americas during the past few months, I outline a framework for understanding how the current limits of capitalism we are bumping up against in sectors such as food, finance, health, education and business are all related to the same outdated economic logic or “operating system” (OS). We need a new economic operating system, one that reinvents how we work together as neighbors, as businesses, as cities and as larger systems. Below I describe briefly the evolution of these five sectors from OS 1.0 to where we are today, which in most cases is OS 2.0 or 3.0.

The pressing challenges of our time, i.e. the challenge of losing our environment (ecological divide), our societal whole (social divide), and our humanity (spiritual divide) calls for reinventing our systems of food, health, education, finance and management towards 4.0. This essay lays out the rationale for OS 4.0 and a possible way to get us there through an Asian-American-European initiative called 4.0 Lab.

Five Sectors, One Problem

As the labels of the new economy have gone mainstream (green, organic, sharing economies) the underlying economic reality stays the same. That is to say, the immense buying power of giants like Amazon squeeze the supply chain, workers, farmers, and the planet through the same patterns of exploitation and structural violence that gave rise to the movement for a new economy in the first place.

On one level you could describe the problem by saying that companies like Amazon and Uber misperceive the new economy as just another app that runs on their old corporate operating system (i.e. world domination through economies of scale). In reality, though, the new economy is not just another app—it’s a radical upgrade of their entire operating system. The difference between the old and the new paradigms can be summarized in three words: ego vs. eco. Ego-system awareness means “me first”, while eco-system awareness means an awareness that focuses on the well-being of all.

There is a profound systemic barrier that exists in all major sectors today. It’s not only the mainstream players like Amazon and Uber that are stuck in their current economic operating systems; many of the innovators who once broke through that model are now also stuck. The global food system is still profoundly destructive. The health system is still sick. The educational system is unable to learn. The global financial system is heading full throttle into the next crash—as if 2008 never happened. Foundations and philanthropists still place their assets in the old economy, thereby harming people and planet, in order to use some of the profits to fund projects that alleviate symptoms but don’t deal with root causes. The innovators in all these spaces are stuck in the niches that first gave them space to develop something new. But now these niches are increasingly crowded, and mainstream players adopt the new labels and sound bites while often perpetuating the old models.

Two challenges

Table 1 summarizes how, over time, the institutional operating systems have evolved in five major sectors: health, food, finance, education, and management. As most societies have been evolving their institutional operating systems from 1.0 to 2.0 and from there, in many cases, to 3.0, we see two specific challenges arise:

  • Amazon and other mainstream players urgently need to learn that these moves of simply downloading another app (by acquiring Whole Foods) and building a system of last-mile distribution centers is not good enough. What they need is not just another app but an upgrade of the entire operating system—that is, of all their collaborative procedures or protocols—to an eco-system way of operating.
  • The second challenge concerns the innovators such as (at least until last week) Whole Foods. Many innovators are stuck—stuck in stakeholder-centric 3.0 ways of operating. They’re losing their distinctive edge as the mainstream begins to invade the same space. ‘What’s next?’ these 3.0 innovators are asking themselves. Do we stay in our own small niche until it disappears? Or do we reinvent ourselves once again in order to make ourselves relevant for the emerging future?

Health: From pathogenesis to salutogenesis

In health we saw a shift from traditional doctor-centric to managed care and evidence based medicine. Realizing that only 20% of health depends on health care services, while 60% depends on social, environmental and behavioral factors, major health system innovators like Kaiser Permanente have begun to refocus from pathogenesis (focusing on the 20%) to salutogenesis (to also focus on the 60%) by strengthening the sources of health and well-being in communities. As the mainstream health organizations have been moving into 2.0 (evidence-, standards-, and science-centric), we have seen the more innovative health care providers shift to organize around the actual patient journey (3.0). While that patient-centric way of delivering health care services is moving more mainstream, we see yet another frontier of health innovation at the horizon: a system that strengthens the sources of well-being both individually and collectively (4.0).

<p>Table 1: Four Stages of Systems Evolution: Four Operating Systems</p>

Table 1: Four Stages of Systems Evolution: Four Operating Systems

(c) 2017 Otto Scharmer

Education: From student-centric to co-shaping the future

In education and learning we see a very similar shift: the journey from a traditional, input-centric 1.0 operating system (revolving around teachers and teaching); to an output-centric OS 2.0, which revolves around standardized curricula and teaching for testing (which a friend of mine called “bulimia learning”: fast in, fast out); to OS 3.0, which puts the experience of the student at the center of reshaping learning environments. While school systems in most countries are still stuck in the 2.0 world of teaching for testing, the more innovative schools have moved into the space of 3.0. The most innovative schools (and in Finland the school system itself) are experimenting with OS 4.0: connecting learners with the sources of creativity and the deepest essence of our humanity, and teaching them to co-sense and co-create in the face of emerging future possibilities.

Food: From organics to cultivating the living presence of eco-social fields

In the agriculture and food sector, we’ve seen a similar evolution: a shift from traditional ways of farming (1.0) to science-based industrial agriculture, focusing on monocultures, maximized output, and profitability (2.0). Now we know that this model has been a disaster not only for the planet (soil erosion, water pollution) but also for people (farmers, workers, supply chains, consumers). The resulting rise of the 3.0 model of sustainable farming practices in part brought us businesses like Whole Foods. Though only a small fraction of their products are locally sourced and organic, many other related brands are an expression of a worldwide movement that has reshaped the ag and food industry over the past decade or two.

But if you talk to the innovators in the green and organic space, many of them are frustrated, despite their amazing successes. They built brands. They built responsible supply chains. They built customer communities. But below the surface, questions loom: Who is my successor? How do we expand? How do we survive massive digitization, big data (automation of ag practices), and ag science or Monsanto-like assaults that threaten the integrity of farms as living eco-systems? Among innovators, there is still too much competition and ego and too little true collaborative transformation aimed at transforming the entire food eco-system. Plus: what really is organic? Just a reduced negative footprint? Or is it something more? More of what? These questions point toward Ag 4.0, which should aim to close the feedback loops across the ecological divide (through circular agriculture), the social divide (through inclusive supply chains), and the spiritual divide (by cultivating the living presence of social-ecological farms).

Finance: From extractive to generative capital

The evolution of finance and money is deeply interconnected with systemic “stuckness” in 2.0 and 3.0. While the mainstream financial system is firmly grounded in 2.0 practices—extractive capital that is blind to externalities it creates (Wall Street)—there is a worldwide awakening to the fact that these financial practices are a path to self-destruction. The stage is set for OS 3.0: impact investing and more responsible uses of money—i.e., more awareness of the positive and negative externalities. Most foundations, impact investors, and venture philanthropists share these ideas and goals. Still, their projects and programs rarely address the root causes of our failing systems, let alone transform them. As a leading venture philanthropist in Silicon Valley explained to me recently: “Most high-net-worth people do not like to give away their money. So they don’t. And if they do it, they only do it under three conditions: (1) technology is the solution; (2) the problem can be measured and solved within ten years, and (3) the donor can call the shots.” These three points sum up everything that's wrong with philanthropy today.

Which brings us to OS 4.0. Generative capital has the highest transformative impact, not only individually, but also systemically. Generative capital is defined by the antithesis of the three conditions just mentioned: (1) the focus extends beyond technology to regenerating the creative, social, and ecological commons; (2) the impact is long term and systemic; and (3) the donor is letting-go of control in order to unleash the highest level of creativity and collective impact. How did it happen the Whole Foods got sold to Amazon? The same reason why Seventh Generation got sold to Unilever: because the investors wanted to see the money—in other words, because the intention of the capital owners focused on extraction, not on serving the whole. In short: the problem is that we have too much extractive and too little dedicated capital.

Management: From top-down to eco-system activation

In management and business leadership, the evolution has been from centralized-hierarchical (1.0) to more decentralized-divisionalized forms of organizing (2.0); and from there to more networked type of managing and organizing. In order to do their jobs well, today’s leaders need to connect with and change the dynamics among stakeholders who operate outside their hierarchical control (3.0). Yet the sober truth in management today is that there is a vast mismatch between the challenges that leaders face and the tools leaders use to address them. The challenge of moving to 4.0 means engaging the surrounding stakeholder constellation not as a bunch of separate interest groups but as a living eco-system of relationships. Through the use of generative dialogue and other social technologies, it’s possible to engage these stakeholder constellations in new ways.

Governance: From competition to ABC (awareness-based coordination)

The reason that many players, big and small, feel stuck and unable to change the systems they operate in has to do with governance: the lack of a fourth coordination mechanism that deals with acting from shared awareness, acting from seeing the whole.

All modern economies are based on the division of labor. But how are these worldwide collaborative relationships stitched back together as a whole? Historically, we have seen the evolution of three coordination mechanisms. The 1.0 solution was hierarchy and centralization in the form of, for example, mercantilism or socialism; the 2.0 solution came with the rise of the private sector—i.e., with the coordination mechanism of markets and competition, which led to enormous growth and wealth as well as to enormous negative externalities; 2.0 led to the subsequent rise of the social sector and the 3.0 solution in the form of organized networks and stakeholder groups as an additional coordination mechanism. Today these three mechanisms alone are unable to deal effectively with our global society’s new challenges.

The most important, least-told story of our time concerns the birth of a fourth coordination mechanism: awareness-based collective action (ABC)—i.e., acting from shared awareness, acting from seeing the whole. Where do we see the first examples of this coordination mechanism? We are seeing it first at the local level. In many cities and local communities, stakeholders are coming together and collaborating to rebuild the environmental, social, political and cultural commons. But what’s missing is an understanding of how this collaboration across boundaries can be extended to larger systems—regions, countries and continents. That is where new practices and innovation infrastructures are needed.

4.0 Lab: The future of food, finance, health, ed and management

To address the challenges outlined above, my colleagues and I at the Presencing Institute along with other partners are exploring how to launch a global initiative that would bring together pioneers and leading innovators to form cross-sector teams, with the goal of co-sensing and co-shaping 4.0 ways of operating in the five systems outlined above: food, finance, health, learning and business management.

In broad outline, the 4.0 Lab would begin in North America, Europe, and China, with other regions gradually self-organizing to join the platform and community. In agenda-setting workshops, innovators and institutions would connect across sectors and systems to dialogue, and co-initiate the agenda and regional focus of each lab. The Presencing Institute would support these labs with the social technologies we have developed, tested, and used successfully over the past two decades—methods and tools for co-facilitation, capacity building, and prototyping—as well as with our global online-to-offline u.lab platform, a tool for multi-local innovation and movement building (100,000 registered users to date).

The process would include regional and global learning journeys to places of most potential, deep-dive retreats and prototyping bootcamps for emerging initiatives. We would regularly connect as a global 4.0 Lab community through our live-broadcast communication platform. Each participating business, government, NGO, or academic institution would commit a core team to a two-year process to ensure the rapid replication of the best prototypes throughout the entire network. The finance innovators would co-create a 4.0 platform that functions as a mechanism to fund the enabling infrastructure and advance the most promising prototyping ideas.

We feel that we live in a critical moment on this planet in which the three divides—the ecological, the social, and the spiritual—either keep widening until they rip us apart or in which we succeed to activate a dormant potential for profound civilizational renewal. The intention of this lab is to activate this deeper potential by linking key innovators across sectors and regions. The goal is to cultivate a vibrant global eco-system of innovation and civilizational renewal. A new multi-media platform, co-developed with a major global news-organization, will be instrumental for sharing inspiring stories, living examples, and enabling tools for rapid replication by change makers in other regions, sectors or systems. Let us know in case this speaks to your core intention.

For more information:

on transforming capitalism: 7 acupuncture points

twitter @ottoscharmer1

email: scharmer@presencing.com

Thanks for the helpful comments from Adam Yukelson, Kelvy Bird, Tobias Bandl, Katrin Kaufer, Marian Goodman, Arawana Hayashi, Katie Stubley, Simoon Fransen, and Ursula Versteegen.