NORTH- HOLLAND

Synthetic Technology-Analytic Governance: The 21st Century Challenge

D O N E. K A S H and R O B E R T W. R Y C R O F T

ABSTRACT

There has been a growing divergence between the reality of U.S. society and the nation's conceptual model of governance and this pattern will likely continue into the 21st century. The divergence is being driven by a rapidly changing reality which has at its core the continuous innovation of complex technologies through a process of synthesis. The nation's analytic model of governance is increasingly unresponsive to the synthetic reality with one result being increased social stress. This article investigates the reasons for the divergence and future governance needs. © 1997 Elsevier Science Inc.

Introduct ion The American distrust of government can be traced to the beginnings of the

Republic. For more than 200 years the only variation has been in the level of the distrust [1]. As we enter the 21st century, that level surely must be among the highest in our history [2]. If the present elevated level of suspicion of government were only an American phenomenon it would be plausible to attribute it to the periodic ebb and flow of the exceptionalist culture which Alexis de Tocqueville identified in the early days of the country [3]. The evidence suggests, however, that disenchantment with government and with governmental leaders has become a global fact of life. For instance, President Clinton's approval rating has compared favorably with that of political leaders in most advanced nations, countries that do not share American tradition [4].

What factors might be contributing to the spread of distrust in government and governmental leaders? One credible factor is a growing divergence between the concep- tual models we use to understand and guide governance and the reality within which we live. In the United States, we subscribe to a conceptual model o f governance that is analytic, while our reality & becoming ever more synthetic. It has long been believed that a growing divergence between the ideas societies use to govern themselves and their reality is a major source of social stress. In truth, the most elementary standard

DON E. KASH holds the Hazel Chair in the Institute of Public Policy at George Mason University in Fairfax, Virginia.

ROBERT W. RYCROFT is Associate Professor and Director of the Center for International Science and Technology Policy at the Elliott School of International Affairs at George Washington University in Washington, D.C.

Address reprint requests to Don E. Kash, Hazel Chair of Public Policy, The institute of Public Policy, George Mason University, 4400 University Drive, Fairfax, VA 22030.

Technological Forecasting and Social Change 54, 17-27 (1997) © 1997 Elsevier Science Inc. 0040-1625/97/$17.00 655 Avenue of the Americas, New York, NY 10010 PII S0040-1625(96)00063-7

18 D.E. KASH AND R. W. RYCROFT

c~ Z <

Reality

TIME

Fig. 1. The French Revolution.

1779

of a successful system of governance may be its ability to maintain reasonable consistency between the expectations of the governed and their day-to-day experiences.

Divergence between governance and reality can result from either of two develop- ments. Tocqueville's description of the period leading to the French Revolution illus- trates one. He observed that the French revolutionary cadre built up in men's minds an imagery of an ideal society in which all was simple, uniform, coherent, equitable and rational in the full sense of the terms. It was this perfect vision of a perfect state that fired the imagination of the masses and little by little estranged them from the here and now (i.e., reality) [5]. In the case of the French Revolution, the divergence resulted from the introduction and successful promulgation of a new conceptual model derived in part from the Enlightenment. Figure 1 illustrates Tocqueville's formulation of what happened. There was a fundamental change in the conceptual model of governance.

It seems likely that a major source of stress in contemporary American society, and probably in much of the rest of the developed world, is the emergence of conditions that are just the opposite of those outlined in Figure 1. Figure 2 suggests the massive and accelerating change in our current reality as a consequence of the development of a capacity for continuous and rapid technological innovation. In the present period, reality is moving away from the dominant conceptual model of governance as technology requires that we govern ourselves in new ways.

Unfortunately, at the same time technological change is triggering this pattern of divergence, U.S. politics is beset with reactions that call for the utilization of an ever purer and more fundamental application of our traditional governance model. A growing number of political and intellectual leaders and movements argue that the answer to contemporary social stresses is to be found in a simpler version of the established analytic model of governance. An obvious example of this yearning for simplicity is the appeal of the Republicans in the 1994 congressional elections. The impact of vast technological change will not be made to go away by calling for a reduction in the size

SYNTHETIC TECHNOLOGY-ANALYTIC GOVERNANCE 19

Conceptual Model

Z <

TIME

Fig. 2. Conditions in the 21st century.

I996

of the national government, throwing away social welfare programs, or cutting the capital gains tax [6].

This article investigates how American governance might move beyond its analyti- cal roots to better respond to the powerful synthetic challenge of modern technological innovation. As used here, synthesis is defined as the combination of separate elements into a complex whole, while analysis is the separation of a complex whole into its el- ements.

Synthetic Reality Two issues will likely be central to the struggle over governance in the 21st century.

The first will revolve around what has to be governed. This article assumes the focus will be on the governance of physical reality, defined as "things in the world." Here the trend suggests accelerating technological and organizational complexity. Central to the governance challenge, then, will be the complex organizational processes which deliver continuous innovation of complex technologies [7]. The second issue will be concerned with who governs. Here the struggle will likely revolve around how national governments, in combination with a range of other organizations (e.g., firms, universities) and institutions (e.g., industrial relations, education systems) develop highly integrated "national systems of innovation" [8].

Driven by the continuous innovation of complex technologies, the reality of the next century will doubtless be a much more complicated version of the world we know today. However, it is unlikely that we will be able to anticipate with any great detail the particulars of our future. This is because complexity, with rare exceptions, refers to systems that are at best difficult and often impossible to understand in the traditional analytical and reductionist sense.

This article makes use of the concept, complexity [9], and the work being done in the science of complexity [10]. The work in the science of complexity offers a different and useful view of what is happening in our society, but it does not offer understanding

20 D.E. KASH AND R. W. RYCROFT

Simple Process /S imple P roduc t S imple P rocess /Complex p roduc t

1970 = 5 4 % $75,995,919

1 9 8 0 = 28% $163,187,712

1993 = 15% $252,569,082

1970 = 13% $17,9t16,225

1980 = 28% $163,187,712

1993 = 27% $439,564,823

',omplex Process /S imple Product

1970 = 0%

1980 = 0%

1993 = 0%

1970 = 33% $46,021,270

1980 = 44% $254,970,123

1993 = 58% $939,147,538

Complex Proces s /Complex Produc t

Fig. 3. Thirty most valuable product tech- nology exports--minus crude oil: A 1970, 1980, 1993 comparison.

in the traditional sense of the word. For example, there is no agreement on how to measure or define complexity, even among those scholars and practitioners who find the concept useful [11]. The most commonly ased definitions refer to complex systems as having many parts, many interactions among the parts, and many interactions between the system and a surrounding environment [12]. And complex systems are often assumed to have cybernetic characteristics. That is, there is adaptation, communication, steering, and governing by way of positive and negative feedback loops [13]. As used in this article, complexity has another dimension, the capability to create knowledge. Dynamic, complex systems continuously synthesize new learning and understanding, some portion of which is tacit--the "implicit, wordless, pictureless knowledge essential to engineering judgment and workers' skills" [14]. Much tacit knowledge resides in organizational routines that develop over time [15]. Thus, at any point in time it is not possible for individuals to make all knowledge explicit and communicate it across time and space. Successful innovation of today's complex technologies is highly dependent on combina- tions of explicit and tacit knowledge held jointly by individuals and organizations [16].

This article posits that the best indicator of the trend toward a more complex reality in the 21st century is emerging technology. Consider, for example, the pattern of global trade in commercial technological products (also commonly known as manufactured goods). Because complex technologies are so intertwined with each other and because they are increasingly inseparable from their surrounding physical and social environ- ment, product technologies seem a logical indicator of contemporary complex reality.

Patterns o f C o m p l e x Real i ty Three things repeatedly appear when one looks over time at product technologies

traded in the international marketplace. The first is that complex technologies represent a rapidly growing portion of the total value of products traded. The second is that a rapidly growing share of the technologies traded are the product of, that is they are innovated by, socio-technical systems (i.e., combinations of organizational, hardware, and software capabilities). The third is that decision making, management, and the process of synthesis whereby complex technologies are innovated by socio-technical systems is characterized by continuous self-organization [17]. That is, synthesis depends on: 1) linking and disconnecting diverse information and capabilities, and 2) developing adaptable structures, procedures, and routines [18].

The general picture of what has been transpiring with products is presented in Figure 3. The figure includes twenty-nine of the thirty most valuable product exports worldwide. The one product that has been taken out of the data is crude oil, because

SYNTHETIC TECHNOLOGY-ANALYTIC GOVERNANCE 21

TABLE 1 Top 25 World Product Technolog~ Exports, 1993 (Billions $U.S.)

SITC Category (REV2) Industrial sector code World

781 Passenger motor vehicles C/C 186.5 776 Transistors/Valves C/C 92.7 784 Motor vehicle parts, Acc. NES C/C 89.8 752 ADP equipment C/C 86.1 764 Telecom. equip. Parts, Acc. NES C/C 77.2 792 Aircraft C/C 69.3 759 Office/ADP parts, Acc. C/C 58.2 541 Medicinal/Pharm. products C/S 51.5 778 Electrical machinery nES C/C 50.0 583 Polymerization products C/S 48.4 641 Paper and paper board C/S 47.8 772 Switchgear Etc., Parts NES C/C 42.0 749 Non-dec. machine parts, Acc. NES C/S 40.7 728 Other mach., Spec. industries C/C 40.3 713 Internatl comb. piston C/C 40.1 874 Meas./control instruments C/C 40.1 782 Special motor vehicle NES C/C 37.5 674 Iron/steel plate, Sheet S/C 36.7 843 Women's outerwear (not knit) C/S 35.0 893 Articles of plastic C/S 34.4 821 Furniture S/S 33.5

Source: International Trade Statistics Yearbook, Vol. II, Trade by Commodity: Matrix Tables, United Nations, New York; 1955, pp. 3-239.

its price per barrel fluctuated so markedly over the period covered by the figure. To

illustrate, the value of crude oil exports was about $15 billion in 1970, skyrocketed to

$275 billion in 1980, and plummeted to $177 billion in 1993.

The twenty-nine product categories included in Figure 3 are classified by whether

the products and their production processes are simple or complex. A product or process

is simple if it can be understood in detail by an expert. It is complex if it cannot be so

understood. For example, a chemical compound is simple while an aircraft is complex. 1

Figure 3 shows that the most valuable products are becoming complex. The most

striking change is the growing value of complex products produced by complex processes.

A more detailed examination of the data shows that the complex/complex cell is predomi-

nantly composed of electronic, electro-mechanical, and electro-optical-mechanical tech-

nologies. In Table 1, column three indicates the category code in which the top twenty-

five world technological exports are located. For example the abbreviation "C/C" repre-

sents Complex/Complex technologies.

In an effort to gain insight into the ways in which these complex technologies

are innovated, the authors have carried out six case studies (Table 2). Each of these

technologies has experienced continuous incremental innovat ion over periods ranging

from ten to fifty years [19]. The case studies indicate substantial variability in complexity

1 Understanding exists at different levels of generality. For example, an aircraft designer may understand how to carry out the integration of the subsystems that make up the aircraft but not understand the subsystems. As used here a technology is complex if an individual cannot understand every component as well as their integration into the completed technological system.

22 D . E . KASH AND R. W. RYCROFT

TABLE 2 Case Studies

Intel Microprocessor GE turbine blade HP Cardio-imaging technology Varian linear accelerator for cancer treatment Sony compact disc Sony 3.5" floppy disk

at any point in time. Sometimes they become more complex, sometimes they get simpler. But the most general trend is toward greater complexity.

One pattern that is found in all the studies is that, with the combination of increasing complexity and an ever faster rate of innovation, the boundaries among the organizations that constitute the socio-technical systems and the boundaries between these systems and their surrounding environment become more difficult to define and maintain. Simi- larly, this pattern of seamlessness is evident within the product technologies themselves. This pattern represents a fusing of previously separate technologies, something that was identified several years ago by Fumio Kodama as being one of the significant sources of innovative advantage held by the Japanese [20]. Therefore, the six case studies indicate not only that technologies are becoming more complex, but that it is increasingly difficult to isolate individual components of either the technologies or the socio-technical systems that produced them.

From the point of view of governance, one of the factors that pervades the case studies is the increasing difficulty in separating the public sector from the private sector. The cases provide repeated examples of the blurring of lines between government, firms, universities, and other actors. The blurring is interwined with such factors as the inability to clearly identify the sources of the ideas and methods which result in innova- tion. Quite clearly, however, in the case of complex technologies, the factory floor, the marketplace, service organizations, or customers are as likely to be the source of innova- tive concepts and approaches as research and development. For instance, in the case studies and the broader literature regarding complex technologies, innovation often results from what economists call interindustry transfers or spillovers. That is, technolo- gies "leak" or are moved from one industry into another [21]. A classic illustration would be the integration of the microprocessor into automobiles.

It has also become more difficult to separate the roles, for example, of suppliers of components and the organizations which assemble or synthesize the ultimate product technology. Moreover, most of today's complex technologies are the result of the synthesis of materials, components, and subsystems from many different countries. Look at what has happened in the case of the Semiconductor Manufacturing Technology (Sematech) consortium. Its creation was partially funded by the U.S. federal government in its initial years, and the federal government was essential in facilitating the exchange of information and expertise among a diverse set of suppliers, producers, and users of technologies in the semiconductor industry [22]. Now Sematech is moving away from government funding, but is inviting companies from other countries to participate.

The message seems clear. Our reality, at least as reflected in a growing portion of the economically most valuable technology sectors, is one that defies dividing activities and components into clearly bounded units. Today's complex reality, likely to continue well into the 21st century, does not and will not conform to the analytic model that structures American debates about governance.

SYNTHETIC TECHNOLOGY-ANALYTIC GOVERNANCE 23

The U.S. Model of Governance: Theory and Practice The American system of governance, established in its general outlines by the

Constitution, is one which depends heavily on separation. Specifically, the Constitution has at its core the location of the various functions of governance (i.e., executive, legislative, judicial) in separate organizations which then control each other by competi- tion. To provide an additional check, the Constitution constructs a federal system which pits states against the national government. Thus, the pattern of governance by separation has been central to the conceptual model of Americans from the beginning.

Perhaps the best metaphor for the analytic model of governance in the United States is that first used by Thomas Jefferson in an 1802 speech to the Danbury Baptist Association, where he emphasized the importance of building a "wall of separation" between church and state [23]. The wall of separation image entered the modern rhetoric of governance in 1947, when it became a central part of the Supreme Court's decision in the case of Everson vs Board o f Education [24].

The centrality of analysis--separating activities into ever smaller components and building walls of separation between them--has been a continuing theme in political debate throughout American history. What began as an idea central to the arena of governance was vigorously reinforced in the latter part of the 19th century and the first half of this century by the industrial revolution and the introduction of mass production. Walls of separation were essential to the success of the Fordist production model and Frederick Taylor's scientific management [25]. Max Weber's concept of bureaucracy was another powerful idea that reinforced the emphasis on separation, segmentation, and differentiation [26]. Faced with any problem, the American conceptual model has said: divide responsibilities, draw clear, precise boundaries between functions or activities, and achieve performance by competition.

Tocqueville's characterization of the French revolutionary cadre's conceptual model of a "simple, uniform, coherent, equitable and rational" society fits well with the ap- proach to governance articulated by those representing the new Republican majority in Congress, with one exception. The idea of equity has to be dropped. As stresses in American society are perceived to increase and as our reality becomes more complex and more difficult to understand and manage, a conceptual model which is simple, uniform, coherent, and rational becomes ever more attractive.

In a recent study, Richard Adams examined four major components of the American conceptual model (the view of the universe, learning, knowledge, and trust) in search of their influence on the innovation of complex technologies. Adams' findings were that the universe is seen as a machine which can best be understood using causality mechanisms. Reason and analysis are the best way to learn, and the whole is best understood as the sum of its parts. Knowledge is about rational, explicit (not tacit) understanding, and all things are ultimately understandable in explicit terms. Individuals are the building blocks of society, the source of most creativity, and they contribute most in a context of generally unrestrained competition, not trust [27].

Although most Americans would find Adams' summary quite congenial, it has always been substantially at odds with how American society has worked. Students of American government have long emphasized that the other side of the separation of powers and federalism was that governance was impossible in the absence of national legislative-executive-judicial collaboration and federal-state cooperation. Similarly, other fundamental walls of separation, such as the public-private sector divide, have been routinely breached. That all these divisions are more a matter of rhetoric than reality has been amply documented by Sidney Fine. His findings are: "Whatever the

24 D.E. KASH AND R. W. RYCROFT

TABLE 3 Conceptual Model-Reality Characteristics

Characteristics Conceptual model Reality

Views of reality Mechanistic Organic Learning Reductionism Synthesis Knowledge Explicit Tacit/explicit Creativity/productivity I ndividual/competition Group/cooperation

theory, in practice the federal government and the state governments of the era before the Civil War did not confine their activities within the limits recommended by the advocates of laissez faire. The federal government became the promoter of a variety of enterprises." Fine goes on to provide a long list of cases of federal promotional activities in the private sector [28]. Otis Graham documents the continuing involvement in "industrial policy" into the present period [29].

Similarly, our reality has always been to some extent governed by the use of organic as well as mechanical models of learning, tacit as well as explicit knowledge, and the importance of groups as well as individuals. Even while holding passionately to our conceptual models in national debates, we Americans have always been proud of the fact that our lives were governed by "common sense." When our theories and models have not worked, we have paid only rhetorical attention to them. Our conceptual model and our behavior have always diverged.

Why does the divergence of model and behavior pose special problems for gover- nance in the 21st century? There appear to be three interrelated answers. First, the level of complexity, however defined and measured, seems to be escalating as more sectors of technology interact with each other. Innovation increasingly involves the integration of knowledge, capabilities, and technologies from a broad range of sectors. Second, innovation is evolving so fast that there is no longer the luxury of gaining complete understanding of what works. In the words of a senior manager in one of our case studies, "by the time we understood why it worked, it would be obsolete." Third, more people, at lower levels of organizations, appreciate the failings of the traditional model as the popularity of such reforms as "quality management," "re-engineering" and "flattening" has grown [30]. Larger numbers of Americans are coming to understand that the world is not simple, uniform, coherent, and rational.

Dissonance exists where there is an inconsistency between the beliefs one holds and one's actions. This is a pattern frequently identified in surveys of the American public's perceptions of their world [31]. It has also been identified in many companies involved in the rapid innovation of complex technologies [32].

The growing dissonance in America may become clearer by examining Table 3. If events in our world are increasingly driven by the ability to successfully innovate complex technologies, the characteristics in the "reality" column in the table are diverging dramat- ically from those in the "conceptual" column. Both complex technologies and the socio- technical systems which innovate them are seen as organic by most people involved in our case studies. The cases also reveal that there is widespread recognition that search, discovery, and learning takes place through group trial-and-error processes. A senior manager at Intel, for example, indicated that 80% of learning in that firm occurs in the context of group problem solving. And we found in our cases that group-based tacit knowledge is at least as important for the innovation process as explicit knowledge.

Perhaps the most striking indicator of the changes that are being driven by the continuous, synthetic innovation of complex technologies is that much of the creative

SYNTHETIC T E C H N O L O G Y - A N A L Y T I C G O V E R N A N C E 25

thinking about how American society is evolving is coming from the private sector. This doubtless is happening because private organizations have felt the most immediate need to modify their conceptual models to conform to the new reality they face every day.

Implications for Governance Faced with a seamless reality characterized by continuous, incremental change, the

social stresses that will result from using the old U.S. model of governance seems likely to increase in severity. And returning to a simpler and more primitive world is not a viable option. The most obvious alternative would be to address the challenge to our world view directly, and hold a Constitutional Convention. Joseph Coates states the case for this option concisely [33]:

The U.S. Constitution fundamentally reflects eighteenth-century political issues, the arbitrary division of a new continent by the crown to satisfy short-term interests, and the traditional and now obsolete view of the mountains and rivers as boundaries and for defense. As we have grown into a continental economy, the 50-state model and the associated Constitution are increasingly inept, cumbersome, counter- productive, and inappropriate. Consider our most cherished constitutional instrument, the Bill of Rights. At least half of it reflects 18th century technological issues. We surely need to consider rewriting the Constitution to fit the socio-economy and technology of the emerging 21st century.

Though a constitutional rewrite might help, there are two reasons it must be disregarded. First, the idea is politically unacceptable. For most Americans, rewriting the constitution has about the same appeal as rewriting the Bible has for Christians. More significantly, given the new complex reality, approaching any effort at a comprehensive restructuring of any big system--and our society is a huge one--has little to recom- mend it.

If we cannot approach a major redesign of our conceptual model, what can be done? First, it seems likely that we will live in a reality of continuous disequilibrium in the next century. Thus, only those who are intimately involved in the process of innovation will be aware of (but never entirely understand) what the state of the art is in technology and in the organizations that innovate them. Therefore, if policy is to be informed by up-to-date expertise, policy making must involve these people. That is, the policy process will only work if those who have a conflict of interest are allowed to participate. Because useful policy will have to be continuously adapted to conform to a rapidly evolving complex reality, we will need to have innovation expertise close at hand.

In a frequently cited formulation, Brian Arthur has provided the perfect metaphor for 21st century policy making [9]:

So we are a part of this thing that is never changing and always changing. If you think you are on a steamboat and can go up the river, you're kidding yourself. Actually, you're just the captain of a paper boat drifting down the river. If you try to resist, you're not going anywhere. On the other hand, if you quietly observed the flow, realizing that you're a part of it, realizing that the flow is ever changing and always leading to new complexities, then every so often you stick your oar in the river and punt yourself from one eddy to another.... [I]n a policy context [this] means that you observe, and observe, and observe, and occasionally stick your oar in and improve something for the better. It means that you try to see reality for what it is, and realize that the game you are in keeps changing, so it's up to you to figure out the current rules of the game as it's being played. It means you observe the Japanese like hawks, you stop being naive, you stop appealing for them to play fair, you stop adhering to standard theories [i.e., mental models] that are built on outmoded assumptions (pages 330-331).

Given this metaphor, two points are central for policy in the 21st century. General- ized policy made for the long term (i.e., macro-policy) will not be enough. If policy is not made for the specific needs of different complex systems at different times, it will

26 D . E . KASH AND R. W. RYCROFT

not be successful. One can only use the paper boat metaphor if it is understood that the only useful observers are those who are directly involved in the particular innovation activities. You cannot know when to insert the policy "oar" by using abstract theories.

In the next century it seems likely that policy will increasingly need to be focused on distinctive technologies and the socio-technical systems that will coevolve with them. With each incremental innovation these socio-technical systems may change. Not only will the organizations involved experience ongoing learning and thus alter their struc- tures and processes, but different organizations will participate in innovation as it proceeds. Thus, it will no longer make any sense to focus policy on specific organizations or sectors because a never-ending metamorphosis will be unfolding. Similarly, policies will have to reflect the fact that these socio-technical systems will probably include an ever-wider variety of participants (e.g., industrial, governmental, academic) from around the world.

In conclusion, our evolving complex reality demands that the traditional tendency to focus policy on broad sets of issues (e.g., intellectual property protection, antitrust regulation) must change. Policy will need to focus at the level of the industrial sectors as they are defined in Table 1 (e.g., motor vehicles, telecommunications equipment). And then sectoral policy will have to be able to adjust rapidly as the sectors evolve, fuse, or disappear. The challenge is to develop synthetic policy.

Development of this article benefitted from support provided by the Center for Innovation Management Studies at Lehigh University. The authors express their apprecia- tion for this support.

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Received March 19, 1996; accepted 2 April 1996