More than 80% of today’s workforce is engaged predominantly in knowledge and service work, thereby rendering obsolete the conventional understanding of operations management. Knowledge workers, the creators of knowledge, and service workers, the appliers of knowledge, have become critical resources because they are now the means by which value is created—they are today’s principal means of production.

For production workers, the makers of products, and logistics workers, the movers of products, employers provide the means of value creation in the form of machinery, processes, and materials. No longer is knowledge work limited to the design of machinery and processes and procurement of correct materials.

A Different Kind of Operations

Production and logistics work is predominantly concerned with having workers follow a predetermined standard technical process, with minimal variation. Entire processes incorporating both machine functions and human work are reasoned out and designed to operate with as much precision and control as possible. The goal is low unit costs, which are best achieved with high-volume efficiency. Workers contribute to value creation by doing exactly as they are told. Worker behavior that varies from this standard often creates additional costs, thus reducing value.

Knowledge and service work is much different. The principal distinguishing feature of knowledge and service work is worker discretion. Knowledge and service workers are expected to have and apply the appropriate knowledge to a situation by sensing and responding to the situation adaptively, thereby creating value by meeting the specific needs of each situation or customer. Workers often decide what work to do and determine the appropriate methods for completing it, often with only a minimum of direction.

For knowledge and service work, the goal is to get workers to use their discretion in order to provide customers with the most satisfaction possible. These workers create the greatest value for the customer (and their company) when they utilize their discretion to do their best with every problem or opportunity, using whatever knowledge and expertise they have or can access. Furthermore, knowledge and service workers do their best when they perform with high levels of knowledge and service differentiation—when the knowledge created or service rendered most closely fit what the customer really values.

Management of Knowledge and Service Workers

These new work roles require new work designs and managerial methods. Management can no longer afford to think of all workers as simply labor with which to operate a machine, staff a process, or perform simple tasks. To be effective, management must recognize the importance, discretionary nature, and greater potential for performance of the knowledge and service workers who generate and apply knowledge to create value.