# Process Power ## The Idea in Brief A company develops embedded processes—ways of working refined over years—that competitors can't replicate without the same extended commitment. The advantage isn't a secret; it's visible. But visibility doesn't mean imitability. Process Power requires path dependence: you can't skip the learning, and the learning takes time. --- ## Key Concepts ### The Danaher Business System The canonical example. Danaher hired consultants from Shingijutsu—direct disciples of Taiichi Ohno, who created the Toyota Production System—and spent decades codifying their learnings into a transferable system. **What DBS actually is:** Not philosophy. Not culture. A specific set of tools, training programmes, metrics, and rituals. Visual management boards. Daily standups. Kaizen events. Policy deployment. Eight core metrics tracked uniformly: organic growth, operating margins, cash flow, ROIC, on-time delivery, quality, internal job fill rate, retention. **Why it works:** Every acquisition goes through the same integration: one week of DBS training, one week running a kaizen event, a 100-day improvement plan, three years of metric tracking. The system is the same whether the target is a dental equipment manufacturer or a water quality sensor company. **Why competitors can't copy it:** They can read about DBS. They can hire Danaher alumni. But the accumulated refinements—forty years of learning what works in which contexts—can't be transferred. You have to build your own path. ### The Swedish Alternative: One Metric Bergman & Beving took a different route. Instead of a comprehensive operating system, they built Process Power around a single focusing metric: EBITA / Working Capital, with a 45% minimum target. **Why 45%?** At that level, the business generates enough cash to pay taxes (one third), pay dividends (one third), and fund growth (one third). Self-sustaining without external capital. **The Focus Model:** Above 45% = invest in growth. 25-45% = improve margins or reduce working capital. Below 25% = fix or exit. This simple metric spawned six listed companies (Addtech, Lagercrantz, AddLife, Momentum Group, Alligo, and Bergman & Beving itself), all still using the same framework. Different path, same outcome: a process refined over decades that competitors can observe but can't replicate quickly. ### Process Power vs Operational Excellence Process Power requires hysteresis—path dependence. The current state depends on the history of how you got there. Operational excellence without hysteresis is just best practice, which competitors can copy. **The test:** If a well-funded competitor could replicate your advantage in 2-3 years by hiring the right people and following visible practices, you don't have Process Power. You have operational excellence—valuable, but not durable. **Toyota vs imitators.** Companies have studied Toyota for decades. Books, consultants, factory tours. Yet few achieve Toyota-level performance. The accumulated tacit knowledge—millions of small refinements, cultural norms around problem-solving, supplier relationships built over generations—can't be transferred by reading about it. --- ## Implications **In M&A:** Acquirers with Process Power can pay more for targets because they extract more value. Danaher targets high gross margin businesses with wide spreads between gross and operating margins—room for DBS to work. The process is the value creation engine. **In due diligence:** Ask whether the target's operational advantages come from Process Power or operational excellence. If Process Power, it might be defensible. If just good practice, competitors will catch up. **In building Process Power:** Start with a focused domain. Codify learnings explicitly. Train relentlessly. Measure obsessively. Iterate for years. There are no shortcuts—that's the point. --- ## Sources - [[7 Powers]] — Process Power is one of Helmer's seven; the barrier is the extended commitment required to match - [[Lessons From the Titans]] — Deep dive into Danaher's DBS, Roper's cash return focus, and operational systems that compound - [[Competing Against Time]] — Time-based competition creates Process Power when speed advantages accumulate through learning --- ## See in Notes - [The Danaher System](https://www.anishpatel.co/the-danaher-system/) — The canonical example: codified kaizen applied across hundreds of acquisitions - [The Bergman & Beving Legacy](https://www.anishpatel.co/the-bergman-beving-legacy/) — One metric (EBITA/WC) spawned six listed companies - [The Halma Discipline](https://www.anishpatel.co/the-halma-discipline/) — Incremental reshaping through consistent financial model - [The Roper Model](https://www.anishpatel.co/the-roper-model/) — Cash Return on Investment as the single governing metric - [Standards, Tempo, Focus](https://www.anishpatel.co/standards-tempo-focus/) — The three levers of operational excellence