Know How and Confidential Information

That’s because in a competitive landscape, players get advantages from their networks. Their connections and people that they can call upon become their advantage. When I joined a networking organization some years ago, they promised to turn my network into my net worth … they believed in the power of building relationships, for business purposes.

The idea of networking is, very simply, something like this. You are looking for your ideal client. Perhaps you sell pots and pans, and your ideal client would be the army, because they can buy a lot of pots and pans from you. You sit down and think… who do you know in the army? You keep scratching your head, and a few hairs fall out. Your bald patch grows bigger. And you conclude that you don’t know anybody in the army. Does that mean that you have no way of selling to the army? 

Au contraire, my friend. In adversity there is opportunity. And so, you ask around. Your neighbour. Your son’s schoolteacher. Your gardener. Your secretary. Your client. Do they know anybody in the army? Bit by bit, connections pop up. Somebody has an uncle who works in the nearby army base. Somebody else happens to be related to the director general of operations. And yet somebody else is an ex-classmate of an up-and-coming rising star in the army. Bit by bit, you ask for introductions, and then, when everything seems dull and uneventful, you land a deal. Congratulations on your networking skills.

In the 1990s, it was a slogan often bandied around: “Know who, not just know how!” That’s why grown men took to golf courses, chasing after balls and putting them into holes, and occasionally losing the game intentionally. It was a good reason to wash down with a beer and go for a round of karaoke after. My father’s friend was a star salesman who would spend the whole day wining and dining, golfing and karaoke-ing with directors of large companies. If he didn’t get the sale, he would be back the next day to say hi and invite them for another round. He was quite successful. But all that alcohol took a toll on his health. 

So they (whoever they were) were right to a certain extent. Know who is at times more important than know how. Know who would be relevant in certain contexts:

1. When the product or service that you are supplying is perceived to be commoditized, or homogeneous, without any perceived advantage over your competitors;
2. When there is a selection (screening) process for the product or service that you want to supply;
3. When the ultimate decision to purchase lies in the hand of selected individuals, who may be swayed to your favour;
4. When your product or service is perceived to be inferior to the competition (and you couldn’t stand a chance of making it otherwise); 
5. When you are in the business of getting business to pass it on to someone else to do;
6. When you are lobbying to an organization that is less than impartial;
7. When there are too many options in the market to the extent that making decisions becomes difficult, due to the bewildering array of choices;
8. When the client has very little knowledge of the industry leaders, and is still learning about the best products or services;
9. When the client prefers products or services that have been backed by recommendation from someone they trust (effectively extending that trust to you); and
10. When the decision maker is normally inaccessible, except through mutual friends that he respects.

How many food companies claim to make a canned or tinned product using a trusted, ages old recipe, handed down from generation to generation? In reality, the recipe could have been invented by the company founder himself, and embellished with the story of great lineage to enhance your perception towards the product. Take for example, products which claim to be based on the recipes of the royal palace of some ancient kingdom. Nobody alive then can confirm that it is the same recipe because, those people are dead today. Nobody alive today can confirm that it is the same recipe from ages ago, because, it was a secret recipe which was enjoyed only by kings! So, it’s easy for someone to set up shop and claim that they are descended from the royal chef of some ancient royal kitchen. You know the saying about the fool and his money…

But just in case, some of these products are based on real claims, then there, my friend, is a real life example of a product based on know how. The secret recipe is the know how. The method of preparation is the know how. Scientists in a lab can take a food product and break it down to its component ingredients, but it is not easy for them to replicate the recipe, step by step. 

“Know how” can be described as knowledge of processes. Sometimes the knowledge is secret, just like Coca-Cola’s drink concentrate or Famous Amos’s cookie batter dough. And sometimes it is open, such as spray painting a car or welding a gate together. In both cases, knowledge does not appear suddenly. The worker must be trained in the art of making the product or providing the service. It takes time. And the worst thing is, if the worker has become sufficiently skilled and walks away, he or she walks away with the know how. It would be disastrous if the know how is a family secret from ages past…. 

In today’s world, where online shopping is popular, buyers tend to go for something extraordinary. That’s when the long tail of exotic products, made according to centuries old recipes or ancient techniques, can command a high fee. Today’s online buyers buy not only mass produced cheap things from China, but also the high quality handmade items which embody culture and heritage. It is the classy artisan product that young people are looking for.

Important know how should be passed on, otherwise, it will perish. A recent article which reported that in a neighbouring country, some professors tried to study using the cow for traditional farming of rice fields. It was too difficult for the participants, and the cows were not properly trained. The impact of using modern machinery for years had resulted in the loss of know how.

In the old days, people would try to break down the skills they were trying to pass on into smaller steps. Then they would write books and illustrate with drawings. 

But nowadays, there are video recorders, which, truth be told, are better at capturing soon-to-disappear skills. But videos tend to be in one format or another, and at times, evolving technology makes it impossible to access the original videos. If videos are made of the important skills, they must be transferred from one media to another, as dominant media types change over the years.

With modern technology, even the voice of the trainer who wants to pass on the know how can be recorded for posterity. The only fear is, will the recordings and videos be accessible two or three generations down? Think about the time when we used 5.25 inch and 3.5 inch diskettes. If you had some information stored on those diskettes, they would be unreadable today, because it’s so difficult to find a drive for those diskettes. I also remember fungus growth on the magnetic surface of diskettes as a source of data loss. Surely, in the age of the cloud, these are worries of the past?

But that’s basically the point. With the rise of the cloud, and Internet as a repository for the digitization of everything, nobody has bothered to ask: What happens if World War 3 breaks out? The plug will be pulled, the Internet will be offline, and everything might disappear. For that reason, both online and offline media will become important, and should progress in tandem, but most people tend to overlook the offline nowadays, in favour of the online.

Family businesses are always a potential problem. Think about some of your favourite family businesses. You might not know the workings of the shareholders and their boards, but suffice to say, these are problems that they will face:

1. The founder possessing the specialized knowledge and not willing to pass it on;
2. The founder passing on the business to his children, but passing on his skill and know how to only one heir;
3. The children have all acquired the skills and know how of the founder, but due to disagreement, the children leave the family business to start their own; and
4. The children do not have interest in learning the traditional business and the founder passes away or becomes unable to teach it.

For the business founder, another question is, should he get outsiders to help him keep the business going? In the short run, it helps to ensure that the business is being manned and is able to cater to the clients’ demands. In the long run, however, the critical know how would have passed to outsiders. 

Some business owners try to adapt to this situation by teaching the outsider only a portion of the process. But then they would have already revealed part of the secret process to outsiders. The part not revealed can be guessed.

Know how can be a crucial edge for family businesses. Family businesses tend to remain small, and control is kept in the hands of the trusted few. Rarely, if ever, are outsiders given shares in the business. And yet, because of the way know how is passed and protected, family businesses find it hard to scale up.

Confidentiality agreements are meant to ensure that information revealed in the course of work remains secret. But how can Pak Kassim, who hired Aminah to prepare yummy fried chicken according to his secret recipe, be sure that Aminah won’t suddenly take the recipe and start producing fried chicken herself?

Some business gurus will tell you that confidentiality agreements are for amateurs. They say the same things about non-disclosure agreements and patents. “Amateurs!” they cry. But the fear that something can go wrong, and will, is a real one. 

And so sometimes, the business owner needs to have an uncomfortable conversation with their workers about confidential information. Information that includes know how, and trade secrets. Information that is the basis of their competitive advantage. It’s an uncomfortable conversation, but it usually doesn’t take long. A few minutes should be enough. If the employee understands, she or he will know what is needed to be done.

Trade secrets, specialized know how, and confidential information usually cannot be patented. But they contain important information for the organization. Like Willy Wonka in Roald Dahl’s Chocolate Factory, you should realize that sometimes, your best workers could be paid off by your competitors for competitive intelligence. And unlike Mr Wonka, you probably don’t have access to an undiscovered tribe of little singing people who can make a home in your chocolate factory. In case you meet them, though, they are called Oompa-Loompas. 

Confidentiality agreements aren’t failproof. Sometimes the damage is done, and then, you sue after the fact. Confidentiality agreements don’t prevent leakage of sensitive information. But then again, that’s just like laws for drugs and robbery and rape. They provide for punishment, and can only be enforced after the act has occurred. They cannot stop drugs, robbery and rape, but the gravity of the punishment can sometimes act as a deterrent. 

By the way, if you’re looking for someone to prepare a confidentiality agreement — you know who to contact.

Read some other articles from me:

1. Blackberry’s Future
2. If fans upload your music to YouTube
3. Three lessons from Project Ara
4. Dispute the patent, short the stock

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