The Knowledge-Era Plant Tour
When we were bankers, one of the required parts of our jobs was a “plant tour.” Managers would walk a banker (or sometimes a gaggle of us) from the raw materials warehouse along the production lines to the finished goods stocking and shipping departments. Of course, bankers are not manufacturing experts.
We couldn’t really critique the details of the operation. But we could get a sense of the strengths and weaknesses of the operation from seeing the condition of the facility and the knowledge that the manager demonstrated as he or she walked us from point to point. We also got a sense of the workforce and the level of teamwork. Most of all, however, we got an orientation that we could match to the financials we had sitting back on our desks. The tour made the numbers for inventory and property, plant and equipment come alive for us.
Today, when we visit a factory, there are many more computers on the floor than there were when we started our careers in the early 1980s. Of course, many companies that we visit today don’t have even have manufacturing plants—they make their money selling their knowledge directly or through services. No matter what kind of company we visit today, there is always a point in the tour when we walk through a series of offices and the best the manager can do is point out what the people do in one or another group of cubicles. Most of the time, a very big part of the story is out of view, inside the computers on the shop floor or in the sea of cubicles.
The computers are the hub, of course, of the knowledge side of the business. And they are (often literally) like a black box. We cannot easily see what is inside them. So our old technique of a plant tour isn’t as helpful as it used to be. We still do it because it is a way of engaging management in telling their story, seeing how they interact with their people as they walk around, and getting a sense of how the operations work.
Frankly, the financial statements aren’t much help either. As we’ll show you in this and coming chapters, the knowledge side of the business is also invisible in the financial statements. This means that it’s not just the computers that are “black boxes”; the companies that use them are equally mysterious. Managers and stakeholders can usually describe the essentials of how the company makes money and what some of their key strengths are, but most cannot draw you a model of how they do it. This is a critical gap that holds back both internal and external conversations. That’s why the starting point for most IC work is to just get a basic list and model of the key components of human, relationship and structural capital.
Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak.
