And yes, a company, whatever it is, no longer produces the same thing in 2007 as it did in 1980. And they spend most of their resources producing something other than the product they are marketing. This is true in the world of services and intangibles, but it is also true in more traditional sectors such as industry.
Surprising? Perhaps. Just look at the facts.
At first glance, I admit, nothing has changed. Renault still sells cars, Danone still sells food, L’Oréal still sells cosmetics…. But if you look at the trend from 1960-1980-2007, you have to admit that this is not the bulk of their production. In fact, I’d like to stress the difference between product and production. To take the example of a car manufacturer, compare the number of vehicles produced in 1960, 1980 and today. Compare this with the number of employees assigned to their manufacture and compare this with the company’s total workforce. The bulk of the company’s human capital is no longer allocated to the production of the end product, but to the production of something else. And that something else is… information.
At every level, businesses have become gigantic machines for producing information, and this information is used to produce the end product. This is obvious in service companies (banks, insurance companies), and even more so in ‘grey matter’ companies (consultancies), but it is also true in industry. How many engineers are needed to design a Ford T or a Renault 5? How long does it take? How many market analyses? Time spent finding the concept? Time spent designing the marketing campaign? Monitoring competitors? Almost nothing compared to the volume of resources allocated to factory production. And what about today? Exactly the opposite.
The example of the car industry is all the more striking in that, with a few rare exceptions (and even then…) the manufacturer no longer builds. It invents a concept, tests it, designs a vehicle, has most of the parts manufactured by a sub-contractor, usually taking care of the body and engine itself, takes delivery of everything, handles the marketing campaign and supplies the distribution network. Renault, PSA, VW… no longer make cars, they watch over them, innovate, design, organise, assemble, promote and sell. Flows and stocks of information are replacing flows of parts, and this is reflected in the composition of the workforce. How many people produce information for one who produces a part? It’s a thought that can be extended to the economy as a whole.
The answer is that all this is obvious and that we know it. I admit that (although… I sometimes doubt it). But are we taking all the consequences into account?
Firstly, in purely managerial terms. We hire brain-workers and manage them in the post-Taylorian tradition. Of course, progress has been made, but I don’t get the impression that we’ve gone all the way in terms of reflection and change imposed by this renewal of populations.
Then there’s the notion of value. Value is no longer created by making/selling cars, yoghurts or shoes. Value is created well upstream, and the act of production is no more than a concrete expression of it. Value is created through innovation, through the ability of individuals to think together about increasingly complex issues and to find solutions. I say ‘together’ because the act of producing the finished product is usually an individual one: you can think about a product or a marketing campaign with several people (and indeed you should), but you don’t work on a nut with 5 or 6 people at the same time.
It seems to me that this reflection on value is essential and all too often forgotten: we want to create agile, intelligent, synergistic companies, and we continue to demand ROI based on indicators from another era. What is the ROI of monitoring, brainstorming, brainstorming, an idea box, an exchange and communication tool? It’s impossible to say for sure (unlike a machine with a higher production rate than the one it replaces). We have kept indicators based on time and output, even though most of the company’s production no longer has a logical link between time spent and volume produced. Add to this the fact that volume does not mean quality, and you can understand the dilemma faced by many managers when assessing the effectiveness of their payroll. Google has understood this very well and has simply done away with the famous ‘timesheets’: you have to justify what you have worked on during the week, but never quantify it in hours. ‘In our appraisal system, thinking is not working, even though the ability to innovate is a key recruitment criterion’, a team manager recently told me, before going on to say that ’setting up an organisation that enables me to perform better in the light of today’s challenges makes economic sense, but is untenable in terms of our performance indicators. I’ll be fired before it has had any effect’. All this reminds me a little of Goldratt’s story of returns.
A third effect relates to the tools used to do the work. Traditional production requires standardised business information systems. They exist, and whatever people may say about them, I find them rather efficient, and I don’t attribute to them all the ills that are generally attributed to them. But if we take into account the changes we’re talking about, we need to equip ourselves with tools that focus on the production of individual information and collective reflection. Unlike traditional information systems, which process information themselves, this new generation must enable information to be processed by the individual, who alone is capable of enriching and contextualising it. People have become their own machines, and the process of reflection and innovation is in no way ERP-able. An ERP or CRM system will tell me what to produce, in what quantity, at what cost, where I am in achieving my sales targets, how my teams are working, but it is incapable of suggesting a product modification that will increase sales, a promotional campaign, informing me of a project in progress with a potential customer or helping me to improve my sales pitch. And I could go on. Of course, the use of such tools presupposes the abolition of certain taboos: allowing the individual to send out a signal, allowing others to pick up on it and express opinions, taking the time to get organised and think things through together. Strangely enough, we also come back to the ‘revision’ of indicators based on time and output.
Acting on the shift in value creation, rethinking indicators, equipping ourselves with the right tools and breaking down managerial taboos… it was worth looking at what our company really produces, wasn’t it? Unfortunately, I have the impression that many people are limiting themselves to the tip of the iceberg without really subordinating everything to this new constraint.