The Superpower of the Knowledge Era: Process

Process is not new to business. In fact, process in the form of production lines was a critical driver of the growth of the industrial economy. In a factory, you could see the physical movement of raw material as it moved from the warehouse into a series of production lines with finished goods coming out the other end. The movement of goods, and the productivity of the machines and the output of the entire factory could be tracked. Accounting and operational systems made it possible to measure everything from the purchase of the land to build the factory down to the last widget being put onto a truck. It also, by the way, made it easier for bosses to identify the best way to do a task and mandate the work patterns of their workers.

Much of what is today views as “best practices” in management comes from the factories of the industrial era.

But today, a lot of process occurs inside of people’s heads, their computers and networks of computers spread across a building or across the globe. This kind of process can be harder to see and measure. The information gap begins from the initial investment, which is generally not tracked, all the way through to the end result. This lack of information keeps process off the radar of many critical stakeholders from Boards of Directors to investors and even, sometimes, a management team. Many knowledge processes, therefore, are done on an ad hoc basis with people reinventing the wheel every day, day after day, year after year.

We have experienced this gap in companies of all sizes. In one middle market commercial specialty contracting company, we found that every one of their staff members had to be an expert with extensive industry experience because there was no process supporting them. This kind of contractor knows a certain piece of the building trade such as electrical, plumbing or flooring. Success in this business requires excellence in estimating the job, buying the materials and supervising the labor. This company had grown to be one of the largest in the U.S. by hiring very experienced people. But so many of the details of the business were in the heads of their people. The bigger they got, the harder it got for individuals to remember everything. Each developed their rules of thumb for calculations and their own tracking systems. But each person’s rules of thumb were different. Further, no one had access to good information. This led to all kinds of mistakes and misunderstandings—and a volatile work environment. The company only brought us in as consultants when key people started to leave in frustration. It was slow and painful to get people to use common systems and institutionalize their collective knowledge. Key new processes were implemented. As with any company there are plenty more horizons for continuous improvement but they are now past the chaos that forced them to begin to institutionalize their processes.

We have also seen this problem in larger companies. While these may have many of their processes well-defined and institutionalized, there are often dramatic pockets where people do much of their work in their own way. One recent client had 70 people spread all across the country with only limited structural capital at their disposal—a CRM system and some marketing materials. In conversations with these people, it was clear they were looking for more “support” in the form of content and processes. Interestingly, their managers were hesitant to standardize work processes—they didn’t want to force everyone into a cookie-cutter approach. This is another good illustration of the top down/bottom up challenge facing managers of all kinds in the knowledge era. In this case, both management and employees came to see the value of creating shared content such as training materials and information systems that helped the field staff do their work more efficiently—while still leaving plenty of room for individual creativity and initiative.

It is important to note that knowledge processes and physical production processes are intersecting with greater frequency. This is because many of the marginal gains from manufacturing are now coming through automation of information or through adjustments to a process designed by employees who work on it. We have seen this in plant tours over the years. When we walk around a manufacturing plant today, most of the conversation is about how the workers organize their work teams and the flow of information. It is about the processes much more than it’s about the machines.

Another factor coming into play is the increasing rate of outsourcing. The more critical an outsourced process is to the operation of a company, the greater the need for deep understanding of the underlying process. The best kind of outsourcing is where the process and knowledge of the outsourcing company is combined with special knowledge of the company to which the process is outsourced. In the HP – UPS example cited in the last chapter, HP’s understanding of printer repair was supplemented by UPS’s logistical expertise.

Why do we call process a “superpower?” Because it is the most scalable forms of knowledge capital. Anytime that you capture the “best practices” of your organization in an automated process, you are making every employee smarter when they come to work in the morning. They do not have to think about how to solve the simple problems—because the solution is already built into the system. For example, in the specialty contracting business, standardized systems for pricing, product yields and pre-set assemblies of materials automate the estimating process. This frees the staff to think about the aspects of a project that are not standard—and how to protect the company in the structure of the bid. Then, the real opportunity comes when the information from the estimating system can be compared in real time to the actual results so there is a continuing loop of learning and improvement. Continuous use and adaptation of systems like this capture the wisdom and knowledge of each knowledgeable employee—and institutionalizes it in systems makes everyone smarter and more effective. Good systems also made it possible for people to back each other up.

Are your processes superpowers or are they ready for a tune up? It’s a question worth asking because the marginal cost of most fixes to process is very low compared with the potential return. Sounds like a good solution for any economy, especially today’s challenging one.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak.