The People Are the Company

How to build your company around your people.

Revolutions start in the most unexpected places and with the most unlikely heroes. Who would imagine that the conventional wisdom of the Industrial Age would be challenged by copier repair technicians — "tech reps" — at Xerox? Or that field research by anthropologists would support a new set of management principles for competing in the Knowledge Era?

The story begins in the 1980s. We were looking for ways to boost the productivity of the Xerox field service staff. Before deciding how to proceed, we launched a study. An anthropologist from the Xerox Palo Alto Research Center (PARC), a member of the work-practices team, traveled with a group of tech reps to observe how they actually did their jobs — not how they described what they did, or what their managers assumed they did. That research challenged the way Xerox thought about the nature of work, the role of the individual, and the relationship between the individual and the company. It was the first shot in a revolution.

Here's what the anthropologist saw: Tech reps often made it a point to spend time not with customers but with each other. They'd gather in common areas, like the local parts warehouse, hang around the coffee pot, and swap stories from the field.

Think how a garden-variety reengineer would interpret this finding: Here's "low-hanging fruit" — easy pickings for immediate productivity gains. Simply reroute the tech reps, cut out the conversation, eliminate the dead time — and pocket the savings.

The anthropologist saw the exact opposite. The time at the warehouse was anything but dead. The tech reps weren't slacking off; they were doing some of their most valuable work. Field service, it turns out, is no job for lone wolves. It's a social activity. Like most work, it involves a community of professionals. The tech reps weren't just repairing machines; they were also coproducing insights about how to repair machines better.

These technicians were knowledge workers in the truest sense. And it was through conversations at the warehouse — conversations that weren't a step in any formal "business process" or a box in any official "org chart" — that knowledge transfer happened.

So Xerox turned conventional wisdom on its head. Rather than eliminate the informal conversations in pursuit of corporate efficiency, we decided to expand them in the name of learning and innovation. Using the Denver area as a pilot project, PARC distributed two-way radio headsets to the tech reps. The radio frequency over which the tech reps communicated became a "knowledge channel" through which they asked each other questions, identified problems, and shared new solutions as they devised them.

But the headsets had limitations. For one thing, no one captured the knowledge the tech reps created. The field staff might communicate in real time to diagnose an unfamiliar problem and generate a solution, but the insights often evaporated once they finished the job.

So we took the tech rep experiment to the next level. In France, working with Rank Xerox, PARC recently unveiled Eureka, an electronic "knowledge refinery" that organizes and categorizes a database of tips generated by the field staff. Technically, Eureka is a relational database of hypertext documents. In practice, it's an electronic version of war stories told around the coffee pot — with the added benefits of an institutional memory, expert validation, and a search engine.

Eureka operates as a free-flowing knowledge democracy, much like the natural, informal collaborations among tech reps. It relies on voluntary information exchanges. Any tech rep, regardless of rank, can submit a tip, but they are neither required to nor are they explicitly rewarded. In Eureka, the coin of the realm is social capital: the incentive to be a good colleague, to contribute and receive knowledge as a member of the community.

Across the Knowledge Divide

The tech rep experiments offer important clues about working and managing in the Knowledge Era. Companies today face a landscape littered with ambiguity. Old structures, familiar routines, reliable channels — all are apt to yield puzzling, often disappointing results. At the same time, hungry competitors, unfamiliar strategic models, and new business techniques seem to emerge from thin air, threatening to overthrow decades of business-as-usual.

The ranks are dividing: companies who get it, companies who are gotten by it. The difference, increasingly, pivots not on information but on interpretation — the ability to make meaning out of still-emerging patterns.

Three principles bring this perplexing environment into focus:

Processes don't do work, people do. Look closely at the inner workings of any company and you'll discover gaps between official work processes — the "ideal" flows of tasks and procedures — and the real-world practices behind how things actually get done. These gaps are not problems that need fixing; they're opportunities that deserve leveraging. The real genius of organizations is the informal, impromptu, often inspired ways that real people solve real problems in ways that formal processes can't anticipate. When you're competing on knowledge, the name of the game is improvisation, not standardization.

We're not arguing against business processes per se. The challenge is to keep them elegantly minimal — to underprescribe formal procedures and create "elbow room" for local interpretations and innovations. It's a point that off-the-shelf reengineering misses: you can't build processes without the practices to implement them — and the most effective practices grow from the grassroots.

Once again, tech reps help illustrate the point. In developing Eureka, PARC sent a researcher to travel with field technicians. When problems with copiers arose, the researcher asked to see the manuals the tech reps consulted. Early on, before they got comfortable with the PARC representative, the tech reps would pull out the "official" company manual — clean, pristine, neatly organized. Over time, though, they started showing the researcher their "real" manual. It was the standard book — but highlighted, dog-eared, filled with scribbles in the margins and annotated with notes and reminders.

Each tech rep was keeping two sets of books: the formal and the informal, the official and the improvised. But isn't that true for work in general? Each of us, in our own way, keeps two sets of books. And too often, what is unofficial remains invisible — except perhaps to members of our own trusted community. In the Knowledge Era, what's invisible is often what's most valuable.

Learning is about work, work is about learning, and both are social. Two ideas shape how most companies approach learning and knowledge: (1) learning means individual mastery, and (2) everything that is knowable can be made explicit. The more you explore real work, the more you appreciate the power of a different kind of knowledge: tacit knowledge. With individuals, tacit knowledge means intuition, judgment, common sense — the capacity to do something without necessarily being able to explain it. With groups, tacit knowledge exists in the distinct practices and relationships that emerge from working together over time — the social fabric that connects communities of knowledge workers.

Recognizing the tacit and collective dimensions of work has big implications for learning. From this perspective, learning is less about absorbing information than it is about becoming part of a community. It is a social process built around informed participation: people need information to do their work, but it is only through working that they get the information they need.

Think about product designers. At National Semiconductor, a community of engineers who specialize in phase lock loops (PLLs), a critical technology in some of National's most important products, has begun to conduct joint reviews of new chip designs. Over the last 18 months, product groups from across the company have brought their PLL designs to this group (on a strictly "off-the-org-chart basis") to solicit its advice. The more reviews this group has done, the more effective it's become — so much so that the PLL community has earned a companywide reputation for excellence.

But these engineers can't simply publish their "rules" and teach the rest of National how to do design reviews. They can't create a library of PLL designs and urge the rest of National to use them. The practice and knowledge is embedded in the community that created it. The only way to learn the practice is to become a member. The best way to access the knowledge is to interact with the community.

Organizations are webs of participation. Change the patterns of participation, and you change the organization. At the core of the 21st century company is the question of participation. At the heart of participation is the mind and spirit of the knowledge worker. Put simply, you cannot compel enthusiasm and commitment from knowledge workers. Only workers who choose to opt in — who voluntarily make a commitment to their colleagues — can create a winning company. When a company acknowledges the power of community, and adopts elegantly minimal processes that allow communities to emerge, it is taking a giant step toward the 21st century.

At Xerox, for example, the goal of developing reusable software code seemed unattainable — until a group of young engineers, working outside official channels, organized themselves under the banner of the Toolkit Working Group. These engineers weren't an official task force. They were an informal band of colleagues held together by friendships and loyalties forged during their intense collaboration on writing software for the company's 5090 copier line.

When the 5090 hit the market, it was time for this group to disband and work on new products, which meant reinventing much of the code they had already written. But they had a different agenda — and decided to act on it. Beginning with virtually no official sanction, and while still meeting new product obligations, the group pursued its reusable software vision — and managed to do in three years what official task forces and project teams hadn't done in five.

Communities of Practice Emerge

Like the organizations we are all part of, these principles aren't clean and neat. They lack the allure of off-the-shelf implementation promised with each new consulting nostrum. To some extent they are counterintuitive: to win in the new world of business, managers shouldn't try to gain control, they should surrender it. In other words, these ideas are real. And they match what we're discovering about the nature of working in the Knowledge Era.

How can we begin to convert these principles into action? With communities of practice (CoPs) — the critical building block of a knowledge-based company.

What are CoPs? Think back to National and the PLL engineers. At the simplest level, they are a small group of people (in this case, about 20) who've worked together over a period of time. Not a team, not a task force, not necessarily an authorized or identified group. People in CoPs can perform the same job (tech reps) or collaborate on a shared task (software developers) or work together on a product (engineers, marketers, and manufacturing specialists). They are peers in the execution of "real work." What holds them together is a common sense of purpose and a real need to know what each other knows. There are many communities of practice within a single company, and most people belong to more than one of them.

Companies do much of their most important work through CoPs — especially in the overlaps and alliances that bring disparate communities together. Indeed, it is precisely in these overlaps that core competencies live. Most companies make the mistake of defining competencies as discrete technologies: patents, trade secrets, proprietary designs. But a real-world competence — a sustained capacity to outperform the competition — is built as much on implicit know-how and relationships as on tangible products and tools. You can't divorce competencies from the social fabric that supports them.

National Semiconductor has gone further than any other company in promoting and catalyzing CoPs. And it's done so for hardheaded business reasons. Over the past five years, National has experienced a dramatic — and at times wrenching - transformation. In the late 1980s, the company built an array of high-volume, low-margin, commodity chips — "jelly beans" in industry jargon. When its competitive environment changed, its business model collapsed.

A new CEO, Gil Amelia, arrived in 1991 and began a process of restructuring and rationalization. Now the agenda has changed from cutting costs to growing — and from commodity manufacturing to product leadership. Part of National's strategy involves building its core competence in mixed-signal technology — computer chips that function as the electronic interface between the "real world" of voice and video and the "digital world" of computing and communications.

Communities of practice are playing a central role in this redefinition. At one level, they energize and mobilize the company's engineers — the critical people for a company in transition from slashing headcount to pioneering markets. They also shape and enact strategy. A cop focused on communication signal processing (an application of mixed-signal technology) includes engineers from a variety of product lines. This community, built slowly over an 18-month period, has gained a powerful voice in the company's strategy.

The PLL community focuses on execution. For more than 20 years, PLL designers at National swapped ideas, shared insights, helped each other solve problems — even though they worked in stand-alone business units that seldom cooperated. They were a "loose" community of practice with tremendous potential.

In May 1994, after a first-ever gathering of key technologists across National's product lines, this loose group became a recognized community of practice. Its charter: to make its know-how about circuit design accessible; to spread the word about notable product successes and failures; to continue building National's PLL competence.

The PLL community does not "report" to any business unit or product line; it is of, by, and for its members. But it is not a debating society or an affinity group. It exists to perform real work and to provide a vehicle for collaboration and interaction among technical people. It conducts formal design reviews. It won special funding to develop two advanced PLL prototypes outside the control of any specific product group. It has even created a "PLL place" — a lab, borrowed from one of the product groups that benefits from its work — that houses special equipment the CoP buys.

National wants to extend the success of the PLL community across the company. (There are now four recognized CoPs at National, with several more on the horizon.) It has created a CoP Council to provide advice on communities of practice, offer technology support, and lobby for funding for community projects. It has distributed a CoP Toolkit to help rank-and-file technologists build their own communities of practice. It encourages CoPs to create home pages on the World Wide Web to help members communicate with each other — and to share their work with the rest of the company.

Virtual Social Reality

The challenge for National is the same challenge facing any company that wants to tap the latent power of its emergent communities: How do you achieve scale? CoPs seldom grow beyond 50 members — that's about as big as they can get before they lose the intense collaborations needed to build shared commitment. But National has sales of nearly $2.5 billion and more than 20,000 people around the world. How can CoPs leverage themselves to affect the fortunes of such a giant organization?

Part of the answer comes from technology — a fourth principle of competing in the Knowledge Era. New approaches to work require new kinds of computing. The age of desktop computing is giving way to the era of social computing.

Reengineering would not have been possible without new information technologies. Almost without exception, companies applied these technologies to explicit work in the authorized organization; they flattened the formal. New digital technologies will enable companies to engage their employees and energize the emergent.

Consider Project Jupiter, now in operation inside Xerox. Jupiter is "virtual social reality" — a collection of audio, video, and communications technologies to help communities form and flourish. Jupiter's real value is that it supports interactions that are richer and more focused than free-form electronic discussion groups, bulletin boards — even the Web. It allows for flexible participation; users can be more or less engaged as they see fit. It provides context as well as content: different programmable "rooms" and "objects" evoke different behaviors. In short, is a network place, rather than an electronic space, where people interact as a community.

We are in the formative stages of this revolution of community. But this much we know: success in the Knowledge Era is as much about the spirit of the enterprise as the economics of the business; as much about the positive energy it unleashes as the positive cash flow it creates. We also know that the most valuable knowledge often resides where we are least able to see or control it: on the front lines, at the periphery, with the renegades. Companies that embrace the emergent can tap the logic of knowledge work and the spirit of community. Those that don't will be left behind.

John Seely Brown ( is vice president and chief scientist of Xerox Corporation. He is director of the Xerox Palo Alto Research Center ("PARC").

Estee Solomon Gray ( is the founding partner of Congruity, a consulting firm in Palo Alto, California, and an affiliate of the Institute for Research on Learning.

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