This paper introduces the idea of, and necessity for, a 'third-order cybernetics'. It does this through the critique and problematisation of the ontology of the observer as elaborated within a second-order cybernetics. The necessity for this third-order is directly generated from our work as strategy consultants and our needs to evolve an effective, coherent and ethical consultancy practice. The paper draws primarily on the writings of Lacan and Maturana to provide the epistemological presumptions upon which we generate a new characterisation of, and approach to, the business organisation. This new approach for the understanding of the business organisation is presented as an 'Economy of Discourses'. This Economy is a description of the effects of a third-order in the second-order observer's invention of himself as subject. We have formulated this approach as an aid for diagnosis, intervention and prognosis in our work with business organisations. We include two case studies, one of a chemicals-based manufacturer, the other of a large accountancy practice. In these two cases we seek to unpack and illustrate the way in which it is possible to use the new approach, and to highlight the principles which allow the consultant maximal movement and effectiveness in relation to his client system. We end by outlining the implications of our approach for an ethics of consultancy.

A newly emerging organizational mode shifts our thinking from the traditional vertical hierarchy of command to horizontal patterns of market-oriented networks of autonomous agents. This organizational mode is characterized by self-management, autonomy and self-sustainability, the trio of prerequisites for a successful and self-sustainable enterprise. Self-sustainable systems must be autopoietic, i.e., self-producing. They must be capable of producing themselves, not only of producing something else. Employees, managers and community stakeholders are striving to create a self-sustaining organizational milieu by pursuing decisional autonomy, self-management and shared participatory ownership. Like biological “amoebas,” they should adapt to the ever changing circumstances in terms of size, shape, function and interaction. Relevance: This paper builds on the theory of autopoietic systems based on the work of Maturana, Varela and Uribe.

The free-market economy is being continually challenged – by governments, monopolies, “too big to fail” enterprises, global banks and social experimentation. Crisis is still considered to be a failure of the capitalistic system rather than a failure of the politicized state and governmental institutions unable to abstain from interfering with free-market fundamentals. Crisis represents a necessary catharsis which periodically renews and regenerates prevailing business ecology. At the same time, especially with the current crisis, the system is undergoing fundamental transformation, change of paradigm and change of dominant business models. Transformations get naturally confounded with crises. Man’s failure and challenge is that we repeatedly fail to do the catharsis of crisis – without the crisis. Disentangling the phenomena of crisis from those of transformation is the main aim of this paper. We address the issues of unemployment in the post-crisis environment, especially in the U.S. We trace the difficulties to treating the economy as a deterministic machine while it behaves as an adaptive organism. Relevance: It is claimed that the theory of autopoiesis is applicable to social, business and management systems because they are mostly natural, spontaneous, self-organizing and self-equilibrating organisms, not mechanistic contrivances.

Advanced and mature societies are undergoing a fundamental transformation of their economic, political, technological and social lives. Developing countries are rapidly catching on and accelerating their participation in the transformation, which is equally rapidly becoming global. Yet, at the same time, the process of globalization itself is exhibiting signs of a reversal towards relocalization, i.e., rebounding after the strong global outbound of the past fifty years. The change of paradigms and change of dominant business models accompany such transformations. Yet transformations get naturally confounded with ongoing recessions and crises. Disentangling the phenomena of crisis from those of transformation remains a challenge, especially for politicians. In this paper we primarily address the issues of unemployment and the changing nature of employment in mature economies. Relevance: It is claimed that the autopoietic cycle of self-production or self-renewal forms the organization of all living and self-sustaining systems.