The Quantum Management Revolution

by Danah Zohar

The traditional management thinking rooted in Taylorism was designed for companies operating in the local, linear, largely stable and predictable environment of the Industrial Age, an age of machines. But today, companies must cope with the uncertainty, complexity, rapid change, and global interconnectivity that characterize a new digital, or Quantum Age. This is a time for creativity and reinvention, requiring both the leader and his/her organization to be creative. The “thinking as usual” management model offered by Taylorism is failing business leaders confronting these challenges and opportunities of 21^st century reality, and many are searching for a new management model to guide them. I believe that Quantum Management Theory meets this need. Its whole purpose is to describe the leadership thinking and organizational transformation required to maximize creativity and the adaptability it requires.

Quantum Management, importantly, is not just yet another management theory. Rather, it is an all-inclusive new management paradigm that replaces Taylorism’s traditional Scientific Management paradigm. The new Quantum Management paradigm redefines the essential principles for all 21^st century management thinking, and embraces such current movements as “the flexible organization”, “agile organizations”, “adaptive organizations”, “dynamic capabilities”, etc. All would find their home within the more comprehensive, meta-theory of Quantum Management.

Origins of Quantum Management

Like Taylorism, Quantum Management is grounded in science and the best, current understanding of organizational systems dynamics. But where Taylor took his inspiration from Newton’s 17^th century mechanistic physics and adapted its principles to an age of machine technology, Quantum Management derives its principles from 20^th century quantum physics and complexity science and applies these to the challenges and opportunities of 21^st century digital technologies, all of which emerged from the discoveries of quantum science. Just as Newtonian science underpinned the first Scientific Revolution and the management thinking needed for the Industrial Age, quantum science has given birth to a Second Scientific Revolution, calling for a management revolution that offers “quantum thinking” about the leadership, structure, and systems dynamics of companies operating in the Quantum Age.

Quantum physics itself began with discoveries about the inner structure of atoms, and initially its new understanding of the “weird”, unpredictable and non-local nature of material reality was believed to apply only to micro phenomena within the atom. But slowly, scientists discovered that the new laws of quantum physics also governed the behavior and properties of much larger physical systems, like lasers and semi-conductors. Then, in the later 20^th century, complexity science discovered that all biological systems, including those of the human body, are themselves living quantum systems, whose nature and systems dynamics reflect those of non-living quantum systems. They called these new, living quantum systems “complex adaptive systems” (CAD’s), and soon complexity theorists began describing human social systems, like companies, as large-scale CAD’s. Companies, cities, and economies could now be seen to have the same nature and systems dynamics as the physical and biological systems governed by quantum principles.

Quantum Management Theory has its origins, and draws its management principles from, the nature and behavior of CAD’s, and describes companies as complex, adaptive, living quantum systems.   So, where the machine was just a scientific metaphor used by Taylor for thinking about the management of companies, the quantum company is more than a metaphor. Quantum Management draws its authority from an actual description of companies, and suggests an actual, scientific way of managing them.

Defining Principles

Quantum Management recognizes that human systems like companies function best when led, managed, and structured to function like natural systems. Its defining principles for achieving this are the same defining principles that make CAD’s adaptive, sustainable, and creative.

• Sense of purpose and direction: The quantum universe is directed towards creating ever greater complexity and information. CAD’s function to sustain life, and to evolve. Because quantum companies are human systems, the purposes, values, aspirations, and motivations of employees, and a coherent company culture, are part of its system dynamics. Quantum companies have a clear vision of their purpose, the values that define them as a company, what they want to achieve, and set targets or goals that give a unifying sense of direction to all work activities. All employees know and share this purpose, vision, and values. Each knows his own role and purpose, and how his work is contributing to the larger whole.
   
• Spontaneous/Adaptable: CAD’s are poised at the edge of chaos, radically open to change. Every element of the system is “attuned” to every other, and to the system as a whole, spontaneously adapting both its behavior and identity to changing internal and external requirements. Making themselves responsive to the uncertainties and rapid change that distinguish today’s business environment, quantum companies do not lock themselves into rigid strategies or structures. They rid themselves of mechanistic patterns like fixed functional or individual roles and rigidly organized structures for management and control. Their flexible infrastructures adapt with new challenges. They develop close, co-creative relationships with customers and have systems in place that can respond rapidly to their changing needs.
   
• Self-Organizing: CAD’s are self-organizing systems, functioning and evolving according to their inner, system logic. Any outside or top-down control destroys sustainability and evolution. Quantum companies operate as self-organizing systems, free from top-down control and bureaucratic directives. They ensure maximum autonomy for all employees to make decisions, take creative initiatives, interact with customers, and achieve their own best potential, guided by, and thus furthering, clearly understood company purposes and goals. Knowing they own and are responsible for their work, employees are more highly motivated, committed, and productive. Quantum leaders lead, not with power, but with the moral authority of their character and personal example. They inspire and facilitate rather than control, acting as servant leaders.
   
• Holistic: CAD’s are holistic – everything is connected to everything, and the behavior and identity of every element is defined by its relation to the others and to the system as a whole. There is no separation. There are no boundaries. Quantum companies remove divisional boundaries and rigid power structures. They rid themselves of hierarchy, bureaucracy, and siloed functions. Employees work in self-organizing, multi-functional teams and establish close, co-creative, relationships with other teams and with customers. The quantum company also knows there is zero distance between it and the outside world – the local and global environment, the community, and wider society, and realizes its own success is entangled with the well-being of these. Quantum companies are good, and caring, citizens.
   
• Celebrate Diversity: Quantum systems are superpositions of multiple potentialities, and as evolve, they send out multiple “feelers into the future”, simultaneously exploring many ways forward. A quantum company will thrive on diversity. It is in the very nature of “quantum” that no quantum organization would be defined by a set blueprint or formula. Each will adapt Quantum Management to suit the needs and demands of the field of activity or industry in which it operates. Each will evolve its own organizational culture. But any quantum company will accommodate the multiplicities and diversities of markets, customers, and employee potential by exploring many ways forward, constantly researching product innovation, considering many points of view, and taking advantage of many talents and thinking styles.  There will be infrastructures that mix levels of responsibility, teams that represent assorted educational, functional, and professional skills and backgrounds, all designed “to let a thousand flowers bloom.”
   
• Experiment! Ask Questions: In quantum physics, questions (and experiments) create answers. Each question is like dropping an empty bucket into the quantum “sea” of infinite potentiality and then bringing up a bucketful of new reality – innovative ideas, new products, new strategies, new relationships. A quantum company encourages questions and rewards experiments. It listens and responds to suggestions and valid criticism, appreciates the value of “creative mistakes”, and increases its resilience for absorbing risk.
   
• Build Relationships: The quantum universe is literally made of relationships. New relationships create new realities, and all things and events exist within, and are affected and defined by, the web of relationships of which they are a part. A quantum company knows that it is its relationships. Its success depends on the number and quality of its relationships, both internal and external. It will strive to function as an ecosystem, establishing co-creative relationships between all employees and teams, close, mutually beneficial relationships with customers, and, where possible, win/win cooperative relationships with competitors.

Haier’s Rendanheyi Model

Haier was the first large, global company to pioneer the implementation of Quantum Management, and its revolutionary RenDanHeyi business model was the first to present this theory in the form of a practical business model. RenDanHeyi gives us an opportunity to see Quantum Management in practice.

As a young man, Haier CEO Zhang Ruimin* was employed in a rural factory. He and his young fellow workers tried to suggest ways the factory operation could improve, but their boss responded, “You are not being paid to think. Just get to work and do what you are told.” Zhang vowed that one day he would found a company where people could think. Giving all employees maximum autonomy to develop their own, best potential is one pillar of Haier’s vision and purpose. The other is guaranteeing its customers high quality, personal service, and maximum freedom of choice with minimum difficulty. The company motto is, “At Haier, everyone is a CEO, and the customer is the boss.”

In 2005, Zhang began to implement his RenDanHeyi transformation, and its driving principle of Zero Distance. All traces of bureaucracy were removed by ridding the company of middle managers and the whole torturous process of chain-of-command decision making. Zhang himself surrendered all power, seeing his CEO role as providing inspiration, and facilitation of employee needs.  Employees were divided into small, independent, multi-functional, self-organizing micro-enterprises (ME’s) of three to twenty people, and those middle managers who wished to stay with the company became CEO’s of these. Employees, and even people from outside Haier, were empowered to present bids to form additional ME’s, and today there are 4000 customer-facing ME’s in the Haier ecosystem.  Each designs its own products, finds and interacts closely with its own customers in co-creative relationships, determines its own hiring and remuneration policy, and earns its profits directly from customers. Each is an enterprise in its own right.

The customer-facing ME’s have the flexibility and independence of small start-ups, but are provided the supply and service advantages of being part of a large company through service platforms that themselves function as independent, self-organizing ME’s. All ME’s are free to trade with each other in an internal market, or to source their requirements from outside suppliers. In recent years, Haier introduced “scenarios”, groups of products that are sold as a unit to meet multiple customer needs in one transaction, and in 2019 the company introduced its “ecosystem scenarios” policy in which multiple Haier ME’s form temporary contracts with each other and/or with outside companies to provide ever more inclusive scenario solutions to customers. The entire company is now a vast industrial ecosystem, a company-of-companies comprising an interactive internal ecosystem that is itself part of an extensive, interactive, external ecosystem of partner companies. Everything is connected to everything. This Zero Distance model has enabled Haier, once a domestic appliances company, to expand into health care, medical supplies, clothing, agriculture, real estate, food, and finance – simultaneously turning potentialities into new realities in every direction, sustaining itself, reinventing itself, and growing, like an evolving, living system, a CAD.

Quantum Management is Chinese Management

It is not a surprise that the first company in the world to implement the principles of Quantum Management in a practical business model was a Chinese company. Western scientists discovered quantum physics, but they have never understood it. China’s traditional philosophers have been embedding quantum thinking and action in the national culture since the days of Lao Tzu. Modern China is a quantum society, the natural home of Quantum Management, and destined to become world leader in new quantum technologies upon which new, world-leading quantum companies will be built.

Danah Zohar is a guest professor at Tsinghua University and the China Art Academy, and a Haier entrepreneurial mentor. She is the author of The Quantum Leader and The Quantum Self. Her new book is Zero Distance: The Tao of Quantum Management.

*Editor’s Note: Zhang Ruimin is now Chairman emeritus of Haier.