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Savvy executives recognize that a company’s core organizational and operational processes are crucial to realizing its competitive potential. These organizational processes integrate the goals of the business into its employees’ day-to-day activities via routines. Executives also know that a primary route to the development of such processes and practices is the study of best practice. The enterprise’s capacity to flourish depends in part on their ability to capture and embed best practices from their own and other companies. Without mechanisms that facilitate the sharing of best-practice knowledge — such as visits to exemplar companies, communities of practice and the use of experts — companies would be consigned to reliving the same mistakes day after day. Searching for and then articulating, refining and embedding best-practice ideas brings companies in a sector to a level playing field. Those companies that fail to adopt best-practice processes rapidly become complacent laggards.1
But our research into high-performing companies shows that while the search for and adoption of best-practice processes is indeed necessary, it is not sufficient. (See “About the Research.”) Other types of processes, which we call “signature processes,” also can be crucial. We find that a unique bundle of signature processes combined with industry best practice ultimately enables a company to prosper and compete.
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1. Many scholars have considered the development of best-practice processes. See, for example, J. Lowe, R. Delbridge and N. Oliver, “High Performance Manufacturing: Evidence From the Automotive Components Industry,” Organizational Studies 18, no. 5 (1997): 783–798. For an overview of the development of best-practice processes such as lean manufacturing, see K. Clark and T. Fujimoto, “Product Development Performance: Strategy, Organization and Management in the World Auto Industry” (Boston: Harvard Business School Press, 1991).
2. Our initial thinking was framed within the concept of dynamic capabilities. For glimpses at the characteristics of dynamic capabilities, see K.M. Eisenhardt and J.A. Martin, “Dynamic Capabilities: What Are They?” Strategic Management Journal 21 (October–November 2000): 1105–1121; and D.J. Teece, G. Pisano and A. Shuen, “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18 (August 1997): 509–533.
3. The idea that culture and values can be a source of competitive advantage has been debated for some time. This is a central thesis of T.E. Deal and A.A. Kennedy, “Corporate Cultures: The Rites and Rituals of Corporate Life” (Reading, Massachusetts: Addison-Wesley, 1982); it was elaborated in E. Schein, “Organizational Culture and Leadership” (San Francisco: Jossey-Bass, 1985). The potential link with performance was argued in the resource-based theory of the firm; see J.B. Barney, “Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?” Academy of Management Review 11, no. 3 (1986): 656–665.
4. We have described peer assist as an integrating mechanism in S. Ghoshal and L. Gratton, “Integrating the Enterprise,” MIT Sloan Management Review 44, no.1 (fall 2002): 31–38. The process also has been described from a learning perspective in M.T. Hansen and B.V. Oetinger, “Introducing T-Shaped Managers: Knowledge Management’s Next Generation,” Harvard Business Review 79 (March 2001): 107–116.
5. A more detailed description of John Browne’s philosophy of learning can be found in S.E. Prokesch, “Unleashing the Power of Learning: An Interview With British Petroleum’s John Browne,” Harvard Business Review 75 (September–October 1997): 5–19.
6. Finnish values are described in G. Hofstede, “Culture’s Consequences: International Differences in Work-Related Values” (Newbury Park, California: Sage, 1980); and A. Laurent, “National and Corporate Cultures: A Study of Six European Countries,” INSEAD working paper, Fontainebleau, France, 1982.
7. The idea of “flow” has been described in M. Csikszentmihalyi, “Finding Flow: The Psychology of Engagement With Everyday Life” (New York: Basic Books, 1997).