Q U A N T U M L E A D E R S I N C .

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7 S h a s t a , I r v i n e , C A 9 2 6 1 2 • t e l e p h o n e : 8 7 7 . 5 0 2 . 7 7 4 7 • w w w. q u a n t u m l e a d e r s . c o m
 ”A Journey Begins…”
1969 I began my journey into the world of business. Starting as a system analyst/programmer in the days
when computers were still programmed in assembly language and then moving into the world of man-
agement and leadership within 5 years.

My first year as a manger was fraught with many struggles and near failure. I was tempted to abandon
the world of management and return to the safe, certain environment of working with computers where I
had been previously successful. After all, with computers you can design the logic, write the code, test it
and you knew what results you were going to get. Not so with people.

At the encouragement of my mentors, I chose to stay on the management path to see if I could, in fact,
achieve the same level of success there as I did in my technical career. I guess my mentors saw some-
thing in me I didn’t quite see yet, and to this day I am forever grateful.

I set out to learn about managing organizations and the people who occupy them. Like every manager,
whether first level supervisor, or CEO, I hungered for one thing, to achieve the goals I set for the organi-
zation; to ultimately achieve success. I spent the last 35 years looking for the formulae, the equation that
would guarantee my success, and the success of the organizations I have led (after all I am a scientist at
heart).

This has been an exciting journey, and one that has led me closer to my goal, and provided great surprises
along the way. Surprises, because the path of seeking the key to organizational success has taken me to
places I could not have imagined in my early days.

Of course I traveled through the teachings of all the traditional management gurus and followed many of
the current leadership experts. I learned the important roles of profit, teams and motivation. I ran organi-
zations that I transformed from failure to success. I learned that “Quality is Free”, implemented continu-
ous improvement programs and re-engineered key business processes. I followed the merger and acquisi-
tion trail, and the path of the entrepreneurial start-up through the venture capital jungles.

While I learned a lot about running successful organizations, there always seemed to be something more
to learn. Like the peeling of an onion, every time I thought I had the magic formulae, something would
arise that revealed there was yet another layer to peel, another set of forces at play that had to be consid-
ered.

Where did this lead me? Did I ever develop the ultimate formulae, the “Grand Unified Theorem for
Business Success”? While I understand this is truly a never ending quest I will let you, the reader, be the
judge of how close I have come.

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 The Need for a New Map
All journeys require an accurate map to help us effectively navigate the terrain we intend to travel. It is
no different in business. When you finish reading this, I want you to walk away with a map that will al-
low you to navigate through the various hills and valleys along your personal journey of organizational
leadership.

Like any map, the one we use to navigate our business lives - or for that matter - all aspects of our lives, is
based on the core beliefs we have about how the world works. After all, our goal is to achieve certain
desired goals; that is our destination. If my desired goal is to grow the company by 15% I need a frame-
work that allows me to make choices among the myriad of options available to me.

These frameworks or maps are based on the beliefs that are formed from our personal experiences. When
we have learned that Path “A” yields certain results, then whenever I want that particular result, I will
choose to travel Path “A”. It is really that simple. Sometimes we don’t have to travel Path “A” ourselves,
but can learn about if from the journeys others have taken. This prevents us from having to recreate the
wheel continuously. And so - over time - we create a series of beliefs, which are turned into rules and
these evolve into the frameworks, the map, we use to navigate through our options.

Over time we come to rely on these maps to be complete and accurate navigational tools. They serve to
simplify our lives, and when faced with difficult choices we draw upon them for guidance. But these
maps can also act as filters - filters we become so reliant on that we fail to see anything that is not in-
cluded in the framework the map defines.

For example, one of the core beliefs held within the popular framework of business is that businesses are
a machine of production. Within this framework we view all things from the perspective of enhancing the
machine, and use metrics as if we were simply fine-tuning the machine.

Another core belief is that we can control and predict both the demand and output of the machine. But
many of us today now realize this is not as simple as we might think (or desire).

Since maps always emanate from our experiences and those of others we choose to accept, it is useful to
look back at the state of the world when our current maps were first developed. Most of our current core
beliefs emanated from the Industrial Revolution of the early 1900s where the modern day corporation was
given birth.

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The following chart compares the world of 1908 with that of 2008:

Geographic Reach
Rate of change
Product Life Cycles
Degree of causality
Level of workforce education and Labor force mostly unskilled
skills
Employment relationship
Predictability
Competitive landscape
Speed of Communication
Level of complexity
1908 2008
Local community (national at best) Global community
Change relatively slow (sometimes be- Change occurring with increasing pace
yond the span of a life)
Product life cycles measured in years, Product life cycles often measured in
maybe decades months
Direct cause-effect relationships ex- Events seem to come out of nowhere –
plained much (Scientific Management sense of random occurrence
ruled)
Labor force mostly educated, even for
blue collar jobs
Social contract Meaning and Purpose
Management can plan and predict with Plans are difficult to predict with any
high degree of certainty certainty
Competition within industry (well defined Industry boundaries are fluid – competi-
boundaries) tion coming from anywhere
Slow Almost Instantaneous
Low- Moderate Extreme

With such changes in the environment of 2008 over that of 1908, why would we expect the map we used
to navigate the terrain of business of the 20th century to work well within the context of the 21st century
environment? And yet that is the situation we currently find ourselves in.

But first let’s be clear. The maps we have been using are still valid in many regards. I believe that much
of the guidance we get from them is still very valid and applicable to today’s business environment. If
this was not the case, we would have thrown them out a long time ago and replaced them with something
more effective.

It is not that the maps are wrong; it is just that they are not sufficiently detailed to help us navigate a more
rigorous landscape.

If we look at the two maps below we see an early version of the map of the United States on the left. It
shows an accurate layout of the land mass and some detail of the terrain, mostly of the east coast. It would
have been a useful tool for the occupants of the United States in the 18th and early 19th Centuries. How-
ever, it usefulness in the the United States of 2008 is questionable.

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And this is the nature of the map we are using when we try to navigate in a world of complex roadways of
the 21st century as we see in the map on the right, with a map that only has the details of the 20th century.

Building a New Map:

The Physics of The Living Organization™ Model
Einstein taught us that a problem cannot be solved at the same level of consciousness that created it. We
must therefore shift to a new dimensional view in order to build a new map.

In my efforts to ensure the new map is built on a foundation that can bear the test of time and one that we
can rely on with great surety, I looked to the world of physics for my guidance.

The one thing we know about the universe that is uniformly agreed to by all disciplines is that everything
in the universe is energy - and that energy can neither be created nor destroyed. Therefore everything
that happens in the world is the transformation of one form of energy into another.

We know energy can take many different forms, from the observable - such as the flow of a river or hu-
man activity, to the unobservable - such as magnetic flux or human thought. We also know that energy is
almost always flowing and transforming; this seems to be one of the basic laws of nature.

Let’s continue by further exploring energy and see if it will help us build the map we can more effectively
use for business navigation.

We know three things about energy.

• It flows
• It forms patterns which show up in the different forms

• And different forms of energy interact with each other, forming patterns that impact and that are
impacted by other patterns

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Let’s look at some of the forms of energy we are commonly familiar with:
• Color

• Light

• Electricity

• Magnetic fields

• Objects
• People

• Thoughts

The fact is everything is energy…

Another characteristic of these flows of energy is that some patterns are more easily discernible to hu-
mans than others. For example we can easily discern, using just our human senses:
• River flowing

• Table

• People

• Human behavior patterns(if you train yourself to observe them as a sociologist or psychologist
and even good leaders do)

But other forms we know exist but cannot easily observe:

• Electricity

• Magnetic fields

• Radiation

• Human motivation(the underlying energies that flow through us and drive or define our behav-
iors)

We also know that there are flows of energy within flows of energy (like currents in the ocean). For ex-
ample a person can be considered a single flow of energy. Bring a group of people together to work on a
common objective and you have a team of people. The team can be thought of as a single form of energy
that is, in turn, comprised of multiple forms, or flows of energy.

Starting with the energy form called a person and looking in one direction we know that a human is made
up of multiple flows of energy, (our cells, blood circulation, thoughts, etc.) Similarly, looking in the other
direction we can observe that people form teams and teams come together to form an entity called a busi-
ness. Multiple businesses come together to form markets. Multiple markets come together to form socie-
ties. And societies come together to form the world and worlds come together to form…

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 In fact you can represent this chain as follows

What we see are energy patterns or flows, within flows; energy patterns impacting and being impacted by
each other.

What we do know is that there are a series of energy flows, some that take on a physical form, coming
together to transform energy from one form into another. This is the role of a living organism and so we
can thus look at business as a living entity.

This is the true nature of the organizations we are tasked with the responsibility of leading.

The Living Organization™

Companies, our organizations, are organic living flows of energy coming together to form ever more
complex patterns; interacting with other energy patterns in a dance we call commerce or business.

We can therefore define business as

A Living System that Directs the Flows of Energy Transforming it into a Desired Result

And, as with all living things, these entities come into being for very important reasons. I don’t believe it
is simply pure randomness that brings these various energy patterns into existence. I believe that energies
flow into patterns to serve life in their unique way. Every living thing has a purpose, a unique reason for
existing. And since organizations are living entities, I also believe they come into existence to serve - that
they have a unique contribution to make, a unique purpose for existing. This is what I call their “SOUL-
FUL PURPOSE”.

So now we have the foundation on which to build a model - a map if you will - of the flow of energy we
call the business organization.

Since all living organisms have a Soulful Purpose and business is a living organization, then its Soulful
Purpose is a useful place to start.

Since all living entities exist to serve and our Soulful Purpose defines our unique way of being of service,
then it follows that Soulful Purpose also defines the nature of the contribution we will make and how we
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will make it. In the human form of energy, our Soulful Purpose helps define whether we are an engineer
or an artist and if the latter, whether we will pursue the path of a dancer or a painter. Similarly, in busi-
ness, the unique contribution the organization makes is expressed in the form of the goods and services
provided the markets it serves.

In business the common definition of “success” is providing a good or service to a market place that is
highly valued and adopted.

As stated earlier, an organization is a living system that transforms one form of energy into a desired re-
sult. This desired result is the goods and services delivered to the market.

In business organizations, the primary source of energy is the people and their unique contributions. It is
from the active release of energy through their efforts that we derive the major source of energy for the
transformation process.

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Energy, however, cannot be allowed to flow totally free and still be expected to transform into a desired
output. What would happen if you put people in a room and told them to simply “be active”? … Would
you get your desired result, the transformation of effort into goods or services? Not likely. What we
would have in this scenario is totally diffused energy, or we might call it unfocused effort.

Energy, in order to create a desired result, must be directed like waveguides guide energy in physics. In
business, these energy waveguides are the work flow and other business processes we use to help define
how work is to be done. These energy waveguides are also the means for integrating and mixing the en-
ergies of the various elements of the organization; integrating energy from Marketing with Sales energy,
Sales with Operations, Operations with R&D, and so on, and so on. It is these business processes that
guide the flow of energy, directing and transforming it along the way into the desired output.

The desired output is the goods and services provided to markets and customers. In business, a common
definition of “success” is providing a highly valued good or service to a market place that adopts it. The
specific and unique way a company serves the market is defined by its Soulful Purpose.

Since the source of energy comes from the people, it is helpful to understand the dynamics that allow for
increasing the flow of energy. Certainly one can increase energy by simply linearly increasing the num-
ber of people. However, this would run counter to the desire to most efficiently use resources.

It is here where we come to a fascinating aspect of the model - the primary source of energy (labor) deliv-
ers a varying amount of energy that can be increased on a per unit basis. When done correctly, the appli-
cation of effort towards a desired result also increases the capacity, the amount of energy that can be con-
tributed. This process we call Learning.

This is the basic system flow of every business; the organization’s Soulful Purpose defines it’s purpose
and the derivative goods and services it will provide as its unique contribution, its service to the market.
The Living Organization™ transforms the energy of its’ people into those goods and services with its’
business processes serving as the waveguides for the transformation process. It creates the opportunity
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for learning, thus increasing capacity and also defining the experiences of those interacting with the or-
ganization, thereby impacting the perceived value.

The feedback loop

As with all systems, this system requires a feedback mechanism to ensure that the process is in equilib-
rium and achieving the desired results. The gauge we use to measure the various aspects of organiza-
tional performance is the financial system. It provides the basic metrics we can use to determine whether
a system is in balance or not. Without such financial systems we would not be able to make the necessary
adjustments to the overall system when it is determined to be out of balance.

Profit - the good, the bad, and the ugly

The foundation of all feedback metrics is Profit, and its two major components: Revenue and Expense.
While Profit is considered by many as being the root of all evil, it is anything but. In fact, the bottom line
is a critically important aspect of any successful enterprise.

Revenue is the measure of value perceived by the market. The higher the value the market perceives in
the goods and services the organization provides, and the larger the market that perceives such value, the
more revenue the firm will generate. Revenue received is a function of value perceived.

Expenses are the measure of energy consumed by the organization, energy classically defined as labor and
materials. Expenses should thus be viewed as the efficiency rating of the organization in transforming
energy into its goods and services

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Profit is the feedback that lets the organization know how much the market perceives the value of the
goods and services in relationship to the consumption of energy required to produce it.

Without a proper gauge to provide the necessary feedback to the system, the system can easily become
out of balance which would cause it to oscillate out of control and eventually fail.

Profit is thus critical to the success of an organization. However the focus on profit as the primary, if not
sole reason for the organizations’ existence is misguided. In fact it is the “pure profit motive” i.e., the
desire to achieve profit for its own sake, that continues to be the root cause for most of the failings we
have experienced in business and society.

If profit is the gauge used in the feedback loop and I don’t’ like the reading I am getting, I have two
choices. The natural one is to identify what aspects of the system may be out of balance and make the
necessary adjustments. An alternative approach is to adjust the gauge to give me the reading I want.

This might sound a bit farfetched and extremely silly, even dangerous; but farfetched? - unfortunately
not. All too often, this is what many “managers” have chosen to do over the past decade or so. Off-
Balance Sheet financing is one such adjustment. Another is the clever creation of default swaps and other
financial instruments that obfuscate the ability to gain an accurate reading of the gauge. Yes - much of the
“creative financial engineering” we have recently experienced is nothing more than adjusting the feed-
back loop rather than paying attention to the underlying system performance.

This is what happens when the focus shifts primarily (or exclusively) to pursuing the profit motive instead
of the core, or Soulful Purpose for why the organization exists.

Increasing the flow of energy

Since the source of energy comes from the people, it is helpful to understand the dynamics which allow
for increasing the flow of energy. Certainly one can increase energy by simply linearly increasing the
number of people. However, this would run counter to the desire to most efficiently use resources. There-
fore, it would be useful to examine how we can improve efficiency by increasing the energy flow per unit
of labor employed.

And it is here we come to a fascinating part of the model - the fact that the primary source of energy (la-
bor) can in fact deliver a varying amount of energy and that this level can be increased on a per unit basis.

One thing we know about people is that the more skilled they become at what they do, the more they can
do. In essence, they can transform energy into goods and services more efficiently. So Learning thus be-
comes a key component of the model as shown below.

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 Experience drives perceived value
As we noted earlier, the revenue a company receives is a function of the marketplace’s perceived value of
its goods and services. One energy flow that has a large impact on such perceived value is the experience
that the marketplace has with the organization. This simple example, serves to underscore this point:

When you choose to purchase a cup of coffee you have two distinct choices among a variety of options.
You can go to a Starbucks, or one of the similar coffeehouses. Or alternatively, you can go to a conven-
ience store such as 7-11 or an AM/PM Mart. At Starbucks, you will spend up to $5.25 for a large cup of
Mocha Coffee. At the 7-11 you will pay $1.39 for the same cup of coffee, and you can blend it exactly
the way you like it.

The coffee at both venues is basically the same (some argue that the convenience store coffee actually
tastes better), however - the higher revenue received by Starbucks is related to the premium the market
places on the overall experience of purchasing coffee there.

The Starbucks experience is generated from the energy of the people within the organization interacting
with the market and plays a very significant role in achieving Starbuck’s desired results: successfully pro-
viding the goods and services it is meant to provide.

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 The Living Organization™ Model – The Spirit
The key to success is to maximize energy contribution while minimizing the loss of energy as it flows
through the system, transforming into valued goods and services. However, the model is incomplete if we
think of the flow of energy as being at just one frequency.

Similar to light passing through a prism, the energy flowing through The Living Organization ™ has mul-
tiple wavelengths. Looking at the model three dimensionally, we perceive three distinct energy frequen-
cies: Activity, Relationship and Context.

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Activity is the energy of doing. It entails both the “what” and the “how” of the work to be done. This
energy has the characteristics of linear, direct cause and effect relationships. The information it provides
is processed analytically, and resides in the domain of the left brain , using physical intelligence (IQ).

Relationship is of the energy of interactions. It covers the “who” involved in the activity. Its manifest
predominantly in the form of communications, and mainly experienced in terms of empathy and patterns.
The information is processed by the right brain, calling upon emotional intelligence (EQ).

Context is the energy of meaning and purpose. It is the “why” behind all what we do. Its dominant char-
acteristics are culture and values, and is experienced as holistic knowing or intuition. It is an integrative
energy, connecting information from other entities through their context energy field. It is processed by
the heart-brain and calls on the spiritual intelligence of individuals (SQ).

Activity is what we can observe and measure. It is the field of energy that is most easily processed via the
human senses. It is in the Activity field where potential energy converts into kinetic energy and trans-
forms into goods and services.

Since Activity is the field that is easiest to measure, we tend to think of it as being the most significant
energy field. Certainly, most traditional theories of business have focused on this. However,while it is
certainly a critical part of the overall flow of energy, it is by no means the only nor the most significant
one.

Relationship is the energy that emanates from the interaction of two energy sources. When we work with
someone we are in conflict with, we tend to guard and withhold some portion of our energy. Conversely,
when we are in a positive relationship with our co-workers, we tend to feel more energized and desire to
contribute more.

There are also the synergistic interactions between flows of energy that further adds to the total energy
flowing within the system. When two energy waves are in synch, their energy levels become additive,
and are amplified. When they are out of synch, (out of phase in physics terms), their energy is attenuated,
or diminished.

When we speak of teamwork we are, in essence, describing ways to maximize the synergistic amplifica-
tion of energy, the whole becoming greater than the sum of the parts.

Context is the field of energy I suspect will be the most difficult for people to understand, especially in
the arena of business. I believe everyone has, within their life experiences awareness and an understand-
ing of this field of energy. It is the place within us that carries our deeper values, meaning and purpose. It
is the source of our passions and our loves.

Lately, we read more and more of the business importance of vision, values, mission, and culture. We
know that intuition plays an important role in decision making. We strive to stimulate creativity within
our organizations. This all resides within the domain of the Context layer. As does such elements of the
TLO model as Experience and Soulful Purpose.

Over the last few decades we have come to realize the importance of issues like culture, creativity and
intuition, but we really do not yet fully understand their nature. At best, it is set aside as being that
“squishy stuff” and we return to what we know best: the realm of what we do and how we do it (Activity).

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When we do attempt to address these issues, we often do so by defining them within the context of activi-
ties, e.g. visioning exercises or creativity sessions. Unfortunately, this relegates them to an only intellec-
tual understanding, thus losing much of the energy that emanates from the Context field.

While there is a great deal of available information about what to do and how to do it (Activity), and an
equal amount on teamwork, the psychology of interactions etc. (Relationship), there is little information
within the traditional business environment about the Context energy field.

There is however, a rich body of knowledge about this field of energy that we can draw on as leaders of
our organizations. It lies within the psychology of Carl Jung. Abraham Maslow, Carl Rogers and others.
We can also find it in the writings of some of our greatest poets and philosophers, and in the literature of
the great religions of the world. And yes, even in movies such as Star Wars. The Context field is the field
of the Collective Unconscious, the domain of The Force, and the world of The Divine (however you per-
sonally have chosen to define it).

And while this energy field is the one least understood by business leaders, it is also the one that will have
the greatest impact on the long term performance of your company. It is the layer that forms the context
for everything that is - and is not - done within your organization. This context drives all behaviors,
which in turn are reflected in the relationships we have and which, in the end, impacts what is and is not
accomplished.

When we speak about “the spirit” of the organization it is the energy that flows from the context field, the
energy that cannot be seen but is always experienced.

”A Journey Continues…”
There it is The Living Organization™ Model, a new map for understanding the forces underlying busi-
ness success and failure. It is our sincerest hope that you have received something very beneficial in re-
turn for you time reading this paper. We believe the model can serve as a guide for improving not only
the performance of your organization but your performance as the leader of that organization. Like the
multi-colored glasses in the movie The National Treasure allowed Nicholas Cage to see different clues
through the different frequencies of each color, we know you can learn to gather information from each of
the frequencies – Activity, Relationship, Context – flowing through your organization allowing you to
apply the right solution to the right problem.

This model has been the embodiment of many years of learning on how to create success in the business
world. And while it may be a rich and new way to view our challenges I believe it is only a beginning,
with new questions coming up for each one that is answered. I hope that others will come to understand
and embrace this framework, and begin to work with and add to it, making it even more robust and de-
tailed, and thus allowing for greater success for everyone.

Thanks you for sharing this telling of my journey and perhaps we shall journey into the future together.

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