The Professional Service Providers
"When the government looks at Basler Electric Co., it sees a maker of voltage regulators and transformers," Newsweek reported in its June 8, 1992, issue. "But when Basler Vice President Herb Roach looks around the main plant in Highland, Ill., he sees bins of components anyone can buy—and dozens of computer and electrical engineers who add unique value to resistors and semiconductors. The company 'is more and more moving into a software role,' Roach says."
While the share of GNP coming from manufacturing in the U.S. has been the same for decades, we've really quit being a manufacturing economy (so, too, all developed nations' economies). Although three-quarters of us work in the service economy directly, more than three-quarters who work in "manufacturing" perform service activities such as sales marketing, engineering, design and purchasing.
In Intelligent Enterprise, forthcoming from The Free Press, Dartmouth professor Brian Quinn examines companies' soft assets or "service competency value": In 1990, for example, Philip Morris bought candy maker Jacobs Suchard for $4.2 billion. Suchard's book value (tangible assets) was $813 million. The service competency value (its brand equity, marketing and distribution skills, etc.) is the difference, about $3.4 billion. When Bristol-Myers acquired Squibb for $12.7 billion in 1989, Quinn calculates that service competency value ran 752 percent of book value; and when McCaw Cellular acquired Lin Broadcasting (mostly for its cellular franchise rights), service competency value was a whopping 1,721 percent of book value.
As 3M strategic planner George Hegg says, "We are trying to sell more and more intellect, less and less material." Visiting 3M's Austin, Texas, electronics operation confirmed Hegg's pronouncement. Echoing Basler Electric's Roach, 3M executives told me, "We sell a process more than a product." To be sure, the company peddles 25,000 different electronics "products" (lumpy objects); but the basis for each sale is increasingly 3M's process for custom tailoring a solution to a customer's needs, fast.
An August 1991 New York Times Magazine cover featured Microsoft founder Bill Gates (whose company's total stock market value recently was greater than GM's). "Microsoft's only factory asset," author Fred Moody intoned, "is the human imagination." That's clear for a software company, but I suggest what's true for Microsoft is also true for 3M, Squibb, Jacobs Suchard and Basler Electric. Which leads to an important question: What do we know about managing the human imagination?
Darn little. Imagination is a very big word, far beyond participative management and empowerment. Even the boldest champions of participative techniques would admit they're rarely concerned with unleashing the raw power of imagination—e.g., mimicking a movie director who inspires a moderately controlled creative maelstrom among his actors, camera crews, and sound technicians.
However, there is a group that does trade in human imagination: professional service firms, such as consultancies, accountancies, law firms, movie production companies, ad agencies, and publishing houses. What can the rest of us learn from these outfits? Among other things: (1) work is done in groups of two, five, ten, or fifteen, not hundreds, let alone thousands; (2) all activities are organized as projects of limited duration; (3) project teams assemble and disassemble informally; (4) everyone is personally responsible for keeping her or his skills at state of the art (traditional functional staff groups are unheard of and would be a hindrance if they existed); and (5) top-down control mechanisms are minimal.
Some manufacturers are starting to get it. Titeflex—the high-tech hose maker whose transformation I've described before—created a Rapid Deployment Team. A customer caught in a crunch (at GE or Boeing, say) can come to the RDT and get a custom job designed, built and shipped in just a few hours (it used to take months).
When I visited Titeflex, Teamsters Tom Strange and Joe Tilli made up the RDT. The dynamic duo, I contend, are professional service providers—akin to a pair of Arthur Andersen consultants. True, Strange, and Tilli occasionally hoist hoses; but the value they add is "service competency" per Quinn, exercise of the "human imagination" per Microsoft.
Can the world of commerce be totally transformed into Strange and Tilli-like teams? Quite possibly. Recall my recent analysis of the Lakeland Regional Medical Center: In a 40-bed self-contained surgical unit within the 897-bed hospital, "care pairs" (a cross-trained registered nurse and a technician) perform upwards of 80 percent of their four to seven patients' pre-and postsurgical needs; they quarterback the rest, thanks to a networked computer system that is anchored by a terminal in every patient's room. Again: I claim that the care pair is a full-fledged professional service "firm."
The only limits to this scheme are our leaders' human imaginations! We need to leap far beyond the '80s models of participative management, employee involvement and self-managed teams—and aim the entire corporation toward exercising human imagination. The good news: Tom Strange, Joe Tilli, and the care pairs are ready and able to answer the call if we're brave enough to issue it.
(C) 1992 TPG Communications.
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