Most people would suggest that the ‘machine economy’ started with Henry Ford and his production line Model-Ts. The purpose of the production line is to process more raw materials through the factory, quicker, for lower cost and higher margin at a predicable quality. Simple really. The machine economy is rule driven and if you’re in the ‘machine’ business then straight through processing and minimum exception handling is what you care about.
Lots of services based companies have machine elements in their operations. Financial transaction processing is a classic example of machine behaviour, a cash withdrawal from a bank ATM is absolutely machine work, strict rules, no exceptions, speed is king. Potential for improvement in that area tends to be measured in eliminating seconds (if not milliseconds) out of the end-to-end transaction cycle. The corporate procure-to-pay cycle is another common example. With delegated approvals and functions like catalogue punch-out and electronic ordering/receipting & invoicing there are not many surprises or exceptions that cannot be codified and handled accordingly.
Most modern services businesses have automated their ‘machine’ activities to a greater or lesser extent with the usual business applications like ERP and CRM, etc. Of course in the manufacturing, assembly and other ‘manual’ industries, specialised automated production lines and robotics are very prevalent.
The great thing about the machine is that virtually everything can be predicted and allowed for. The rules by which the machine can operate are clearly defined and can be mapped out to ensure the best results. But for a large proportion of activities in your business you quite probably rely on people rather than systems. For example, onboarding a new private wealth client in financial services, or the sales process in a complex services business. This is the ‘knowledge economy’. The difference with the knowledge economy is that you are relying on the intuition and experience, the whim and wherewithal, the care and caution of individual people. Indeed highly paid people who stand somewhat apart from the machine.
The knowledge economy is goal driven and there are really only 3 meaningful metrics: cash (costs or margin), customer service and competitive advantage. And of course they all come with a wrapper of compliance. Getting your KPIs to move in the right direction in a knowledge world is not always easy and probably, at the moment, your results are unpredictable.
The knowledge economy is the new frontier for competitive advantage. How do you enable your people to do more of what we humans do best, think and make wise contextual decisions, without rigidly enforcing rules and compliance mechanisms that either make the people irrelevant or ineffectual? And at the same time capture the knowledge you are paying for and get predictability and visibility into the equation?
PA can help you get the most out of your knowledge economy.
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