Outsourcing, Knowledge and Competitive Advantage

Outsourcing figures vary widely as you review conflicting media reports. And in the last few months the number of stories of companies now…ok, wait for it…in-shoring, is growing. What does that mean? They have taken the work done via off-shore outsourcing back to the U.S.

Yes, this seems confusing but was it that hard to spot the trend upcoming? Companies under tough economic pressures decided it was more profitable to use resources outside of the U.S. to build products, service customers, even to create new ideas. And they created strategies to move work from the U.S. to locations with lower costs, like India or China. That trend has not stopped, but it is shifting. Now the work is less profitable off-shore as wages rise in step with the increased labor demand, and companies are feeling the effects of less-than-satisfied customers.

One of the difficulties in moving work was that to retain excellence, they also had to move deeply-held organizational knowledge. Even those companies not good at identifying and transferring knowledge in one country now needed to transfer very critical knowledge (for example, how to speak with and service their customers) to another country with a different culture, language and traditions.

Were the outsourcing companies always successful at training and sharing knowledge with their new international colleagues? No. We all have examples of miscommunications and understanding when asking how to fix a technical issue or work out a charge on a credit card. Nonetheless, as the new colleagues gained experience, they began also to gain their own critical knowledge, to hear what the customers thought or wanted, and to therefore gather business
- critical learning.

We lacked in creating effective processes for sharing the deep nuances of the products, the customers or the culture with the new outsourcing partners. But we also lacked in creating processes to collect their learning and bring it back to the heart of the organization.  Companies were increasingly out of touch with the front line of what was happening with customers and products.  That front line often creates competitive advantage by allowing companies to hear their customers wants, needs, concerns and quickly address them, beating out slower moving competitors.

In short, all of the out-sourcing, off shoring, in-sourcing, on-shoring, in-shoring has simply taxed our already less than stellar skills at transferring knowledge. Few companies do this very well, and the additional burden of needing to quickly move the knowledge already not flowing in the organizational caused less than adequate processes to break down.

What is the learning? That the knowledge held by the companies about its products, processes, customers, supply chain, distribution channels—all of that knowledge is key to profitability and sustained success. Treat knowledge like the asset it is. Tend to it, share it wisely but share it well. And never underestimate the power of a well-informed, experienced employee.

What Knowledge Is Critical to Your Organization?

There are a number of reasons why it is both urgent and critical to understand where the critical tacit knowledge in your organization lives. Is it held in the heads of your senior people, in the heads of bench scientists, or in the heads of those who deal with your customers on a daily basis?

You want to ensure you retain the knowledge, share it more broadly through the organization, and build the internal bench strength and competencies around that knowledge.

But the first question I ask is, “Are you certain you know what knowledge, expertise, and experience is critical for your organization’s success?

You need to ask “What is the knowledge and experience that, in losing, would cost productivity, increase risk, decrease profits?”
In other words, what is the knowledge, experience, expertise critical for your organization to not only survive but thrive?

If you can’t answer this, you are not alone. Many organizations cannot answer that question. Honestly. Large and small organizations, public and private, for- and not-for-profit organizations… few can answer the question. And, if they do, their information might be outdated or based on assumption.

What knowledge is critical to the survival and sustained success of your organization? Is it the knowledge your employees hold around new product development? Is it how they use internal processes to develop products quickly; knowledge about the materials needed, the new designs or technology available? That knowledge may well be based on knowledge about what products are critical to your customers.  And, what is critical to customers will change over time, so there must be an ability to forecast, to predict and to prepare for the future.

Perhaps your critical knowledge is around the ability to effectively leverage your supply chain, to get products or services to those who need them quickly, accurately, cheaply and with little error.  Or perhaps it is in how you service and work with your clients, more than it is how you develop new products. It might be that your organization builds loyalty like no other but do you know why and are you certain, absolutely certain, you can retain that for your future customers? Do you know who your future customers are and what they will want or need, much less what they will pay?

Knowledge about your core competency must be retained, enhanced, reused….but first it must be identified.  And not necessarily by YOU. It must be identified by the clients, the customers, those who purchase whatever it is you have to sell—be it a service, a product or somewhere in between.  It must be identified without emotion or assumption, but as an honest assessment as to what sets you apart from your competitors now and in the future.

There is no substitute, no golden bullet, and no way to ensure your organization’s continued success unless you are certain you know what that success is built on.  There are few more important questions then “What is the knowledge/experience/expertise that you must have for continued, sustained success.”

Vulnerability, Shame, Courage and Knowledge Sharing

Profound, life changing information and wisdom can come from unlikely sources. When that happens, the impact is often much greater then when such information comes from a talking head on TV, or an expert from on high.

Researcher Dr Brene Brown is such an unlikely source. Yes, you expect her research to be excellent, as her credentials would suggest that. You might expect her data be to provocative given the subject matter of her work is shame and vulnerability. However when you listen to her talk, as she does in the TED series, she is quiet, humble and incredibly powerful. It is like the girl next door takes on the mythological beast and in front of our eyes, slays it...all the while saying "oh my goodness, I can't believe I'm doing this and in public".

If you want to increase innovation, creativity and productivity in your organization or increase the quality of your life, this is a must see video. Does that sound like hyperbole? Not in my opinion. No one likes to talk about shame or vulnerability, most especially in business. And yet, as Dr Brown states, "vulnerability is the great measure of courage", and do we not all need and want courage in business? And, think about those people you find the most deeply inspiring. Is it not true that part of why they are so inspiring is their vulnerability and perseverance?

Dr Brown talks about failure, the need for it, the perceived  shame of it, and the fact that without it, there is little success. Just trust me. See the video, let me know what you think. The link is below.

The first time I talked to Brene Brown was after she did a video with my colleague Jen Loudon a year or two ago. I was so impressed that I wrote Brene and she responded immediately, in her personable, down to earth manner. I so enjoyed the conversation and we both acknowledge that vulnerability and shame are interesting components of knowledge sharing. What rich opportunities exist for those of us with the courage to name it, discuss it, harness the outcomes..... 

See the video. Let's talk. Here's the link and her earlier talks can also be found via YouTube. Brene Brown TED Talk March 2012

The Leader As Role Model for KM

I've been working in the field of Knowledge Management for a long time. I started doing this work back when PCs were not on every desk and hand held devices were mobile telephones as big as a good sized brick.

There are a few things about managing knowledge, or work in general, that do not change. Let me give you a few:

• Knowledge Management takes discipline
• Knowledge Management is ever evolving as the organization evolves and is never completely done
• Leadership must role model the behaviors they wish others to follow

One of the truths about this work is that no matter what you say to your employees or how often you say it, they will do as they see you, the leadership, do.

If you tell them how critical it is to manage knowledge, to share, to document and do not, as a leader or leadership team, share and document your own knowledge, the behavior for them will not stick. If you do not actively participate in endeavors you tell others are critical, the message is not only confusing, but also demotivating for the employees and will have an opposite effect.

It is common sense, really. You look to your leaders to lead, to show the way, to be what is aspired to, and to be the walking role model of what the organization stands for.

When employees can witness leaders not sharing knowledge with their peers, missing meetings, showing up late, or as I saw in a meeting today --falling asleep, the message is clear. Leaders might tell you to do something, to participate,but if they do not believe it, everyone loses.

Leaders who are not authentic are giving very loud messages to their employees, peers and vendors. Trust becomes a major issue. They hurt the organization and themselves.

Now instead, consider the leader who is openly curious, interested and actively participates in the very things they say are critical. They give honest, respectful feedback with the visible intent to improve the work or the endeavor. Their messages are always clear and they stand up for what they believe to be important. They show that knowledge is an asset to be built, respected, re-applied and the people who hold or share that knowledge are to be respected as well.

When leadership work the knowledge management practices they espouse, dialogue openly about the opportunities and the challenges they experience in managing knowledge, participate in the projects, meetings, and the activities required to get the KM ball rolling, the impact is astounding. Leadership role modeling can create a step change in the culture, the behaviors and the abilities to manage knowledge. There is no greater jumpstart to any change initiative then a proactive, involved, authentic leader. That truth will never change.

That type of leadership is what is needed to have knowledge management stick. It is the type of leadership that a great organization requires for all they do. They are not defensive about any one group or tool or project but role model openness, active listening, and learning from those around them. They think their job is about continually improving because they think the company is about continual learning.

There is no consultant who can replace the value and the impact of an authentic, engaged leader willing to role model KM and the behaviors needed to do that.

Now be honest, are you really working globally?

Many, actually nearly all, of the clients that I work with have locations in more than one country. Notice that I did not say that nearly all of my clients are global. To me, there is a huge difference.

Companies locate in various countries for many reasons: merger, economics of manufacturing, tax laws, customer reach, new market expansion, the list goes on.

Working across locations does not necessarily mean they are skilled at working globally.

Companies working effectively on a global basis are dealing head-on with the challenges of cross-cultural communications, time zone issues, language barriers, and the need to collaborate across all types of boundaries. There is much more to working globally then simply having multiple international locations.

I remember these same topics discussed in boardrooms in the mid 90’s, when expansion was the name of the game and money flowed freely. We may have missed some valuable opportunities to create the processes, cultural understanding and infrastructure that would have facilitated global success. Perhaps we were running too fast after the short-term opportunities and forgetting the long-term needs and benefits. Sounds familiar, doesn’t it?

The need to work effectively globally will not go away, but will instead be enhanced as US-based companies put even greater emphasis on emerging markets. It may suddenly become apparent to those working in the US that they are the minority in their organizations and most of their colleagues are located across an ocean or at least across a border. I believe that preparation now will be the key to competitive advantage in the future. How will you communicate and share critical learning in lightning speed across geographic and cultural gaps? How will you ensure that everyone in the organization, no matter the location, is as fast, bright, well prepared, and knowledgeable as your best people? There is no time like the present to begin that journey. Or, do we want to continue to work in multiple international locations? Working globally makes a great deal more business sense.

Sustainable Knowledge: A Story

Let me tell you a story. A cautionary tale, actually. Once upon a time there was a Knowledge Management Consulting group doing some client work in a terrific, intelligent, innovative organization. The objectives were clear-- help the organization learn how to identify, transfer, reuse and develop new knowledge, innovation, ideas and learning. However, no one had set the objective for sustainability. (And there, my friends, lies the caution).

Along the journey, many roadblocks were met and most, through the hard work and dedication of the team, were handled. Pilot projects were identified, processes put in place, employees and sponsors alike understood what was involved, the business benefits and the need to transfer experiences, insights and expertise. People were willing and certainly the organization and those who worked there held a great deal of critical knowledge.

As the work continued, it became more clear that though the innovation and the experiential part of knowledge transfer was interesting, even intriguing to the organization, what was not so interesting was the work it takes to sustain and continue to keep the knowledge alive and refreshed. The creation and  implementation of a sustainability plan-- creating and editing the documentation or other vehicles to capture knowledge, keeping the Wiki's up to date, ensuring videos were edited and, most difficult, creating the architecture plan for where the various pieces and types of knowledge would live-- was not the fun part for these intelligent, fast paced learners. Remembering to communicate that new content, in whatever form, was available seemed to be a bother rather than a show of pride. They had done the work to identify and transfer, but capture and compilation, along with labeling and meta data creation, was not where they wanted to spend time.

And so, eventually the good work the team had done was lost in and amongst the other data stored in various document management systems, in SharePoint sites and shared drives. Sometimes it even languished on hard drives.

The Knowledge Management consultant moved on to a new role elsewhere. But the organization's knowledge transfer was not sustained. There had been a great deal of work, even some culture change, but the next generation of employees were still left to spend their valuable time searching, sometimes in vain, to find the internal knowledge around their projects. Most simply stopped trying and used the external web to find information rather than reuse the hard won, expensive, time consuming and critical internal intellectual capital.

The moral of the story: Do not start what you can not sustain. Discipline is a GOOD thing. If an organization is not disciplined about their documentation, they will not be disciplined in the long run about their tacit knowledge. Start with the end in mind. And make sure everyone is willing and able to stick through the long term work of sustainable knowledge transfer. It might not look as sexy as the knowledge gathering, but the end game is much, much more valuable.