McKinsey Quarterly

Competitive advantage from better interactions

Companies are looking for ways to improve the effectiveness of their top talent: workers who interact with others and draw on experience and judgement to solve the deepest business problems.

Tacit interactions are becoming central to economic activity. Making those who undertake them more effective isn't like tweaking a production line.

For many employees today, collaborative, complex problem solving is the essence of their work. These "tacit" activities—involving the exchange of information, the making of judgments, and a need to draw on multifaceted forms of knowledge in exchanges with coworkers, customers, and suppliers—are increasingly a part of the standard model for companies in the developed world. Many employees engage in activities of this kind to some extent; production workers at Toyota Motor, for instance, collaborate continually with engineers and managers to find new ways of reducing costs and solving quality problems. But employees such as managers and salespeople, whose jobs consist primarily of such activities, now make up 25 to 50 percent of the workforce. They are typically a company's most highly paid workers and make huge contributions to its competitive prospects in a fast-changing global business landscape. During the next decade, companies that make these activities—and the employees most involved in them—more productive will not only raise the top and bottom lines but also build talent-based competitive advantages that rivals will find hard to match.

But building these advantages won't be easy: companies must alter the way they craft strategies, design organizations, manage talent, and leverage technology. The best way for executives to begin is to understand the nature of what economists call tacit interactions—the searching, coordinating, and monitoring activities required to exchange goods, services, and information. During the past half century, the faster pace of specialization, globalization, and technical change has profoundly altered companies, their customers, the supply chains around them, and, consequently, the nature of work within them and at their borders. The result is a dramatic increase in the volume and value of interactions. In most developed economies today, four out of five nonagricultural jobs involve them; only one in five involves extracting raw materials or working on a production line. A century ago, the proportions were reversed. The number of jobs chiefly involving the most complex interactions—tacit ones—is growing faster than any other type of job in developed nations. Examples include running supply chains, managing the way customers buy and experience products and services, reviving brands, and negotiating acquisitions.

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