Book excerpt: Revolutionizing Business Operations | 'Achieving Transparency in Business Processes'

A Patagonia store in the US. "The company now operates 100% renewable electricity across its US-based facilities and 76% globally." (Photo by Sam Beebe via Wikimedia Commons 2.0)

As business processes become increasingly mature in efficiency and effectiveness, the question becomes this: Is there a model to codify the organizational behaviors related to effectiveness?

There is. It involves creating a Dynamic Operating Engine based on transparency. Strategically using transparency in business processes is a big idea. It acts as an accelerant for alignment and collaboration. Interestingly, transparency as a strategy is not new. It has proved itself as a business model in several product organizations. The most noteworthy of these is the American apparel company, Patagonia. Let’s dig into their story to sift for lessons for business process effectiveness.

The Story: Transparency as a Business Model at Patagonia

Would you put out a full-page advertisement in the New York Times, on the most important retail sales day of the year, telling your audience not to buy your product? Fashion brand Patagonia did just that on Black Friday in 2011, in a campaign labeled “Don’t Buy This Jacket.” It took this unusual step after an internal sustainability audit uncovered that some of its suppliers were subjecting workers to deplorable conditions, including making them pay thousands of dollars just to work. It wasn’t an advertising gimmick; it is very much at the core of the company’s culture and business model. As its founder Yvon Chouinard has said, “I know it sounds crazy, but every time I’ve made a decision that’s best for the planet, I’ve made money.”

Patagonia is the gold standard for brands living out their values and purpose. In 2022, Chouinard announced that he would give away his company to fight climate change. In founding Patagonia, Chouinard always wanted to deliver more than just climbing equipment. He was seeking to alleviate problems within the climbing world and to do good for the environment at the same time. Decades of pioneering work in environmental activism and in the responsible use of materials in production have done exactly that. The company now operates 100% renewable electricity across its US-based facilities and 76% globally. It’s on the way to reaching net-zero, which includes zero waste to landfill by 2025. That’s a tough goal in the apparel industry, where old clothing ends up in landfill; then add to that the issue of carbon-intensive supply chains. Patagonia has committed to recycle every product and byproduct of its business.

However, in addition to Patagonia’s purpose-driven work on sustainability, it is its culture of transparency that’s worth noting. That includes its unprecedented openness to acknowledging problems within the company. That’s remarkable in the current world, where widespread greenwashing, spin, and outright lying aren’t uncommon. On the heels of the UN climate summit in Glasgow (COP26), Patagonia published an article in Fortune mentioning that it doesn’t use the word “sustainable” because it recognizes that it is part of the problem. That’s a remarkable start. Furthermore, it has used transparency as a rallying cry for the entire industry. It has used its goal of net-zero by 2025 as a call for help from other industry partners. Patagonia reported in the same Fortune article that “the biggest problem here is that 95% of our emissions come from our supply chain, and we are a minor player on this stage. We are developing an ‘insetting’ approach in our supply chain by setting up a joint funding mechanism where other smaller brands can partner with us to invest in ‘greening’ the factories. As is the case for many of our progressive ideas, we currently have only a hunch that it will work, but we know we have to try.”

Patagonia has proved that purpose and transparency can be profitable. The company has inspired outstanding brand loyalty, delivered remarkable financial performance, and gained global sustainability recognition, including the prestigious UN Champion of the Earth award. Beyond its purpose-driven work, it has proved that embracing a culture of openness, humility, and systemic change is a force multiplier. In our work to keep growing business process maturity, there are lessons to be learned from transparency as a strategy. It is a lever that can align business process customers and suppliers, foster an open environment of collaboration, and create a virtuous circle of a culture of ongoing improvement. Creating such a transparency-based Dynamic Operating Engine is the focus of the rest of this chapter.

Lessons from Patagonia on Using Transparency in Operations

Transparency builds trust, collaboration, and performance. It all starts with a foundation of credible messaging—something that product and process managers would love to strengthen. Patagonia’s legions of loyal customers trust the company implicitly. The “Don’t Buy This Jacket” ad strengthened the public’s conviction that this was a highly ethical company. On collaboration, Patagonia’s transparency regarding the challenges of “greening” the apparel industry supply chain, and its invitation to other companies to work with it, is another excellent example. And in terms of performance, Patagonia’s strong financial results underlie other important findings—for example, that customers are willing to try out more premium products. Beyond the anecdotal experience of companies, there is study data that organizations and employees perform better in transparent conditions. Studies in neuroscience have underscored that our brains work best when we no longer feel the need to hide, cover up our mistakes, or dwell on errors.

Clearly, transparency is a powerful strategy. It can strengthen trust, collaboration, and performance systemically as part of the Dynamic Operating Engine, and in our own experience it works extremely well. Having studied this issue at length, we believe that transparency works so well for business processes because it tears down the veil to the backroom processes mystique. Let’s face it, most employees in the organization have no need to understand the gory details of IT, finance, or supply chain processes. Certainly, we must not force this upon them, but we need to address the faulty assumption that these operations are not relevant to them—that being passive customers of the process is sufficient. The ball is in the court of the process organization to think through what information is relevant and, more importantly, what common goals are important to its customers.

We also know that process organizations continue to be on the defensive with trust, collaboration, and effectiveness. So the issue isn’t whether to employ transparency as part of our Dynamic Operating Engine, but how. What exactly do we need to be more transparent about? And how do we avoid oversharing information with users and business partners? The good news is that we have strong data on how transparency can be employed. It needs to be used in cost, value, and KPI performance. We elaborate on these three items in the Stage 2 model for Dynamic Operating Engine.

Excerpted from Revolutionizing Business Operations: How to Build Dynamic Processes for Enduring Competitive Advantage by Tony Saldanha and Filippo Passerini, with permission.