Leverage the knowledge in your company by first transforming it into a "service" based organisation

[I recently realised that when I wrote this short post 11yrs ago, by "process" I actually really meant "service" based organisation.  I now replaced 'process' with 'service'] 

I am increasingly a supporter of the principle that it is more efficient and increases the chances of success to leverage organisational knowledge with a stealth approach, meaning not in a direct open way, but indirectly and without advertising it as THE objective. The less a company’s culture is conducive to knowledge sharing (see my list of corporate culture traits not conducive to knowledge sharing) the more this principle should apply.

In the majority of organisations today, performance is measured and rewarded functionally usually at department levels. This generates departmental silos where knowledge is at best hoarded for internal consumption.

But when performance is measured only through formally defined intra-departmental services, managers and staff will naturally focus on supporting the services as efficiently and effectively as possible. For each cross-company service, this will mean sharing all the relevant knowledge between all the individuals/teams/departments directly involved in the service and therefore responsible for part(s) of it. A service-based organisation naturally breaks down departmental silos: if a service fails, all participants fail.

So, in other words, re-ingeneering an Organisation’s operations and structure around clearly defined cross-company business services is an effective indirect way to foster value adding knowledge sharing.

The History of Maths and Knowledge Sharing

Yesterday, I watched a TV program produced by the Open University on the history of Maths. It started in China where Mathematics as a discipline really started. A book was written in about 200BC explaining among other things how to resolve equations. Then it moved on to India a few centuries AD where truly important advances were made such as the 9 Indoo numbers (ancestors to the Arabic numbers we use today), the creation of the number 'zero' and the first method for resolving complex equations to the power of 3 as well as the first method for an approximation of the value of Pi. Then came the Middle East and the Arabic countries where further discoveries were made in the Middle Ages. The point in common with most of these advances in Mathematics are that they were all made in the East well before they were either "rediscovered" or applied in the West from only about the 15th Century. And this is when it struck me! The lack of communication between these Eastern civilizations and the Western World prevented a valuable knowledge sharing that would have enabled a much faster worldwide scientific progress. What has enabled an exponential scientific and technological progress in the last 3 or 4 centuries is the increasing ease to share knowledge around the World. The Internet being the last of these inventions to contribute immensely to this. But then, if it is so obvious that sharing knowledge between distant civilizations, cultures or communities generates creativity, discoveries and innovation; why is it so difficult for most modern companies to recognize the value of fostering internal (and external) knowledge sharing between all employees and stakeholders?

Is sharing knowledge really desirable (question asked on Linkedin)

I recently asked on Linkedin my question comparing two extreme organisations in terms of knowledge sharing processes posted here on 26/04/09 (see all the 14 responses here). More respondents chose company B model (with knowledge sharing). A significant number went for the “it depends” option and a still significant number chose company A model (no knowledge sharing). I do not of course consider this as a quantitative survey but I would like to think that the respondents are a meaningful qualitative representation of managers thanks to the very nature of the medium used: the Linkedin professional networking site. In any case, I was not attempting to obtain a “true” representation of manager’s opinion but more an idea of the proportion choosing model A and what their arguments would be. For all intent and purposes, I view the company A and “it depends” answers in the same larger group of managers that do not consider company B as the best choice all the time. Arguments given for company A by the ones who chose this model are:

1. It is more organized for achieving the company’s goals by having people more focused on their department’s/team’s objectives. 2. Sharing of information between teams/departments strictly limited to what is needed for the operational work flow/supply chain, or in other words, “share [the information] needed to do the job – no more no less”. 3. It prevents information overload.

Arguments given for company A by the ones who opted for a split decision are:

4. Does well in a “best cost approach” (as opposed to “best product/solution approach”). 5. Suppose their offering is functional—it satisfies basic, unchanging needs and has a long life cycle, low margins, and stable demand. (Think paper towels or light bulbs.) In this case, you need an efficient supply chain—which minimizes production, transportation, and storage costs. So model A is better suited for “labour (Production and Manufacturing)” Industries, where employees are not expected to rely much on their thinking abilities. 6. It is a question of size and this model does well in large companies.

Let me now analyse each of these arguments: 1. Why would a model B company be necessarily better organised for achieving the company’s goals? Why is it that the vision of letting people freely share knowledge is often assumed to generate mess?With adapted formal processes in place, you can very effectively and efficiently enable knowledge sharing flows in an organised way, all in line with the strategic goals. Google is a perfect example of this as it has a second to none knowledge sharing culture and is definitely not a “chaotic organisation”. 2. This argument is from another age I believe. It describes the organisational models of the industrial age. We have moved on to a knowledge economy when intangible assets must increasingly be considered to accurately value a company. Managers can no longer dictate over time what information – and even less knowledge – is strictly needed for each operational role to be competitively efficient and effective. In a model A company, by the time managers adjust the information flows in reaction to the market, it is often too late and damage is done with the competition already ahead. To be ahead of the competition, you need to be proactive and therefore enable – at the level of the individual - fluid and adaptive knowledge flows internally as well as with with external stakeholders. 3. When I speak of knowledge in model B, I mean "knowledge", not information. Therefore, the argument of information overload does not hold water. Employees will only seek/share the knowledge they ask for/consider valuable. This is not about having full access to an encyclopedia of (mostly irrelevant) information. Even employees in a model A company can have access to it via the internet for instance! 4. A company with a “best cost” strategy such as Easyjet, the successful low-cost airline, does not imply a top-down structure with isolated teams and departments asked to only do their predefined job. Easyjet incidentally promotes a knowledge-sharing and learning culture where it is assumed that every tasks can always be improved by each individual for the benefit of all his/her colleagues (and ultimately the benefit of the company) therefore improving efficiency and reducing costs further. See below what Easyjet expects of its employees (from Easyjet recruitment website ):

• Pushing yourself to constantly develop and learn from every opportunity
• Sharing knowledge and ideas with colleagues
• Seeking feedback
• Displaying a positive attitude that contributes to an enjoyable working environment
• Communicating your intentions clearly and positively

5. I can agree in principle that in a labour intensive industry (as opposed to a knowledge-based industry) employees are less expected to think and hold valuable knowledge for the company. But this does not mean they never do! If a factory worker works out a better way to use a machine for his/her repetitive tasks, wouldn’t it be valuable to the company that this knowledge be shared with all the employees using the same machine, even if their factory is on the other side of the World? 6. My example of Google earlier already negates the argument that a large company operates better in model A. And there are many more successful large companies with a knowledge sharing culture such as Toyota, BHP Billiton and 3M. In fact, I would argue that the bigger the company (in number of employees) the more valuable knowledge it potentially holds so the more benefits it can obtain by leveraging it. Having said all that, we are still left with the disconcerting fact that the majority of companies today still gravitate closer to model A than model B. If leveraging organisational knowledge makes so much business sense, then why isn’t it already widespread and becoming the norm? I think the answer to this question lies more with organisational culture stagnation than with operational or strategic considerations. For most companies senior management, enabling knowledge sharing or not is not about success but more about losing management control and power. In my 2 blog posts on “organizational cultures not conducive to effective leveraging of knowledge” (first here then here ) I listed 20 common cultural traits inhibiting knowledge sharing. You should find a lot of these traits fitting well with any companies closer to model A you are familiar with. Conversely, anyone familiar with companies more in line with model B should not recognise these traits as typical of their culture. So now, are these “model A” organisational cultures to last? For a while yes but some factors will (hopefully) slowly do away with them such as:

• Generation Y taking over the board room. This is about the necessary top-down leadership to instigate a knowledge-sharing culture, probably lead by the generation of managers who grew up with the Internet.
• Information Systems increasingly integrated and pervasive that facilitate (and reduce transaction costs of) information access and expertise localization.
• An increasingly mainstream acknowledgement of the direct relationships between success and knowledge-focused organisational cultures.
• Social media spreading inside the company. This is the bottom-up pressure for enabling a similar level of knowledge sharing at the workplace that people have at home.
• Or more simply, going out of business as a result of being out of touch with the Knowledge Economy.

Social Media: overhyped fad or essential tool?

Attended an MBA Association event last night: Social networking for business – overhyped fad or essential tool? Speakers: Mireia Fontbernat, Paul O’Nolan & Paul TannerLocation: Strand Palace Hotel In a few words, the speakers confirmed what I already knew or suspected: No one has a clue where online social media is really taking us (and these 3 speakers were no exception). It is not about having a crystal ball but about having a clear understanding of the effects that these social tools have on our societies, and what their generic objectives are. When the telephone was starting to spread around the world many years ago, one could understand the effect on the society (connect everyone synchronously and speed-up information flows between individuals) and foresee an end-game (everyone being able to call directly anyone else from anywhere). You can't do that for social media today.Maybe it's because it is too soon after the first of these tools were created. But that is my point actually, we need more time to make real sense of it all. In the meantime, if it is important to embrace this online social world, it is no less important to be wary of potential pitfalls. For instance, the more you interact with this world, the more it knows about you. So, for a start, what you need to really keep private, don't put it online (but these pitfalls were not really addressed at the event yesterday either, it was more about what you can effectively do today for your business or for yourself). I think that what can be said today of the effect (benefit!) of social media is that it transfers power of influence to the individuals, and by extension to communities of individuals.Each of us has potentially the power to influence comparable to politicians or journalists. Recently, Ashton Kutcher (Demi Moore's husband) managed to reach 1 million twitter followers before the News network CNN. I am certainly influencing many more people with this blog than through my physical networking. What does this mean to businesses? Well, it can be summarized like this: Your company can choose not to know about its customers through social media, but your customers will certainly learn a lot about you online and it won't always be nice stuff! And that, they did illustrate it well at the event last night. So embrace online social media yes, but not in haste and choose the right tools for the intended audience and purpose.

The Cultural challenge (for outsourcing companies)

After their successes with outsourcing services, Indian IT Services firms are growing their consulting business. In Europe, and in particular mainland western countries like Germany and France, one of their key challenges is to convince European executives that they have acquired internally enough “local” culture to provide adapted services. 

 This is only a matter of time and the first Indian firms to achieve this will build a strong competitive advantage. Andreas Floth from PA Consulting Group, the international management, systems and technology consultancy, said back in 2004: “The growth of ‘nearshoring’ in Central and Eastern Europe offers exciting opportunities in Western Europe for provision of IT development and business process outsourcing. Their standard of IT literacy and expertise is very high, and both supply and demand of IT knowledge in the acceding countries will increase steadily. ‘Near-shore’ outsourcing also appeals to cautious CIOs who want to maintain control over IT assets. However, service providers must improve significantly to meet expectations.” 

Three years later, we can say that the Indian consulting firms have taken on board this competition threat. In fact, some of them have started recruiting and opening up support and technical sites in Eastern Europe, bringing with them their technical skills and experience. However, success is not just about technologies and how to implement them. It is also about a deep understanding of the customers and their business, social and political environment. 

According to Gartner Indian offshore service providers face three big challenges if they hope to be seen as equals with traditional European providers (all consulting firms with a long history in Europe): 

 1. “European Providers Enjoy Entrenched Mind Share Traditional European local or multinational providers enjoy greater mind share among European buyers. Their long-term presence and investments have demonstrated a commitment to each of the European countries and have underlined a European strategy. Until recently, with the exception of the U.K., many European companies believed the Indian providers had an opportunistic approach to Europe. By increasing local hires, the Indian companies will take the first step on a long, slow path toward gaining European buyers' trust and confidence. A growing number of providers are starting to demonstrate capabilities that will help organizations look beyond cost savings to achieve other benefits, including access to scarce skills, resource agility, productivity gains, process improvements or innovation.

 2. European Companies Are Reluctant to Publicly Acknowledge Offshoring Continental European buyers' reluctance to acknowledge their use of offshore services does not help providers that want to leverage their success to win more deals, particularly when they are trying to gain traction in certain industries or countries. This silence about the use of offshore services also disguises the extent to which companies use offshore resources. Some continental European companies have signed deals with traditional service providers for offshore services, so that it is not obvious to the market that they are moving work overseas. Many traditional service providers have decreased their European operations in favor of increased offshore delivery capability. Some offshore providers, therefore, are justified in claiming that they are the local employers of the future as they scale up their local network of skills. 

 3. A Large Labor Pool Can Become Unwieldy Indian and traditional providers are building scale offshore, in India and elsewhere. For the Indian providers to continue their strong growth, they must move away from labor-intensive methods of responding to strong demand. Effective operations in the future must also be able to offer process automation, including repeatable solutions and utility delivery models, or these providers risk building up an unsustainable and unwieldy resource pool.” 

The second and third challenges are more concerning the outsourcing activities (not the topic of this article but nevertheless important). The first challenge about mind share however is also valid for the consulting business, in fact even more so I would say. 

In the same article, “Gartner advises Indian offshore service providers to establish local (onshore and/or nearshore) delivery capabilities, not just sales offices. This is because buyers will seek consulting and delivery capabilities that understand their local markets and business environments, in addition to being able to address language and cultural issues. 

Indian offshore service providers must plan early to adapt their delivery model, taking into account nuances like automation of processes, more repeatable services and solutions, utility delivery approaches and true innovation.” Unless you don’t mind taking 10+ years to get there, this local delivery capability means local recruitment among consultants and professionals with a significant European professional and cultural experience. These “locals” will help for: Winning contracts. 

European executives need be comforted by the client-facing sales team that their consulting firm has the competences to deeply understand the given business. Having around the table a team of Indians looking and sounding like they’ve just landed from Mumbai might not do the trick. Delivering successful projects with greater chances to exceed customer expectations. With top class knowledge of best practices and technical skills, a team of Indian consultants would probably manage to meet most project objectives (and usually with very competitive prices). However, in order to go beyond these objectives, the team would benefit having at least one member with local and specific knowledge of the customer’s business, social and cultural context. 

It is important to realize that it is not only about the culture of given countries, it is ideally also about a specific market and/or organizational culture in line with the consulting firm’s strategy. 

If for example a consulting firm intends to provide services to the large food retailers (like Carrefour, Tesco and Asda) it needs to recruit professionals and consultants with relevant retail experience (i.e. worked for one of these retailers). Managing a chain of supermarkets in Europe carries specific cultural traits that would not be immediately assimilated by an Indian consultant with an Asiatic food retailing experience. I will illustrate the importance of cultural differences with the reverse example of one of these European retailers (Carrefour) that had to adapt to the Chinese market for a rather odd but nonetheless important cultural habit: the Chinese grocery shopper likes to touch and smell fresh food before buying, and not only fruits and vegetables as in most European countries, but also rice, fish and meat! It is extremely unhygienic but Carrefour had to adapt their shop design and packaging practices or not sell these products. This is of course an extreme and easily identifiable market specificity but more insidious differences could have no less significant impact on a consulting project.