While
communities of practice have been the darling of the knowledge
management movement, the promise of radically improving the productivity of
knowledge is even more exciting. There are two elements to this promise;
improving the productivity of knowledge workers and improving the productivity
of the knowledge assets that reside in the firm.
Most of the literature on knowledge assets has focused on
calculating the value of the firm’s knowledge. But what really matters is not
the measure of knowledge. It is how to most effectively put knowledge to use. A
knowledge strategy is the specific way a company optimizes the transformation
of knowledge into a distinct competitive advantage. It is tied directly to the
company’s business and competitive strategy. Knowledge, particularly technical
knowledge, plays an important role in most companies and many companies, such
as research and professional service firms, have always had knowledge at their
core. But companies frequently don’t think through the specific logic – and
subsequent organizational structures – of how to optimize that knowledge for
competitive advantage. There are numerous knowledge strategies a company could
follow. A few are listed here.
Exploit economies of knowledge
Economies of knowledge occur when a company can amass a large
enough body of knowledge about a topic that it can do things with that
knowledge that other companies simply cannot do. A large pharmaceutical
company, for example, has created networks that compile and compare datasets
from many different drug development programs. Using those datasets, the
networks can see weak patterns of compound effects, too weak to see in smaller
datasets. As a result, they can identify subtle potential development
opportunities and safety problems. This gives them an economy of scale in
knowledge. Smaller companies can only do this by joining consortia of
competitors to collaboratively share those datasets. While those consortia
improve the quality of scientific analysis, they do not give any one company a
competitive advantage. To exploit economies of knowledge, a company needs
specific organizational structures, including a strong set of cross-business
unit networks to collect data from different operating units. These networks
need enough legitimacy to influence organization. It also needs some processes
for creating common data formats, common analytic methods, and sharing data
among operating units.
Concentrate rare expertise
Companies concentrate expertise when they link experts
tightly enough to deepens the company’s overall understanding of their area of
expertise. Generally this involves collocating experts so they can have
extensive, spontaneous and rich face-to-face discussions, collaborate on
projects, and use each other as sounding boards for their own thinking. An oil
company, for example, created a center of expertise on a certain kind of legal
agreements. By allowing the lawyers and contracts specialists the freedom to
informally share their experience from around the globe and collaborate on
developing these agreements, they were able to draw on a wide range of lessons
learned, giving the company a competitive advantage with this type of
agreement. Of course, concentrating expertise is only a competitive advantage
if the expertise is genuinely rare. In today’s world of hyper-connectivity,
average expertise can easily be accessed by any knowledgeable professional.
Concentrating expertise on common knowledge may save some staff costs, but it
is not likely to contribute to a true competitive distinction. As with creating
economies of knowledge, concentrating expertise requires organizational
structures and processes. Experts need to do more than share data and learning.
Concentrating expertise generally involves forming an operating group that
provides knowledge, analysis or services to the rest of the organization or
directly to customers. While the concept of a “virtual center of expertise” is
appealing, it is difficult to have the level of spontaneous and constant
interaction virtually that is needed to truly deepen complex, cutting-edge
knowledge. True competitively distinct centers of expertise are collocated.
Designing centers of expertise includes developing the processes for
determining what work is done at the center and what is done locally, how the
center interacts with local business units, the relationship between center
experts and local experts, allocation of staff time, and the governance
structure of the center.
Commodify knowledge
Companies commodity knowledge when they take a body of
knowledge they use as a resource and turn it into a product. An engineering
firm had a set of software, skill and tools it used to manage large engineering
/construction programs. As the market developed and their customers became more
sophisticated, they simplified and packaged their program management software
and know-how into a product they could sell independently of their engineering
consulting service. Of course, this was a painful decision. Their program
management product cannibalized their own engineering program management
consulting services. But international cost pressures had already considerably
eroded the profitability of engineering program management and commodifying
that knowledge was one of the few options available to them. Commodifying
knowledge is fundamentally “game changing” in the niche in which it is
introduced. Once knowledge is embedded in a product, it becomes much more
easily replicable and changes to basis of competition from exclusivity to
price. Commodifying knowledge also involves organizational change since it
shifts the role of knowledge providers from customer-facing to back-room idea
and material producers, a fundamental shift of identity and job. So commodified
knowledge requires an organizational structure organized for production, much
like a white-collar information processing center.
Create a knowledge monopoly /set the industry standard
Companies create knowledge monopolies when they organize,
commodify, and distribute knowledge in a way that they become the primary or
sole source of knowledge on the topic. An oilfield consulting company, for
example, developed a website that gives easy, uniform access to geological data
from datasets around the world. Similarly, telecommunications companies race to
establish their infrastructure as the industry standard upon which others write
applications. To sustain a knowledge monopoly requires constant innovation on
the original platform that cannibalizes former versions and resets the standard
for the industry. Like companies that commodify existing knowledge, companies
that aim to sustain knowledge monopolies need knowledge production units,
focused on routine knowledge generation and customer satisfaction. But they
also need groups closely tied to production units that focus on innovation.
Combining routine work and innovation requires organizational structures that
simultaneously provide rigorous process precision and sufficient looseness to
encourage creating thinking.
Knowledge and Organization
Since knowledge is the residue of thinking and resides in
people and collaborative relationships, organization structure is the primary
ways a knowledge strategy is executed. See Articles.
How Information Technology Inspired but Cannot Deliver Knowledge Management.
Structures are relationships
Organizational structures are explicitly acknowledged
intentional relationships, traditionally authority relationships. But in
knowledge companies, organizational structure typically includes influence
relationships as well as authority relationships. For example, a strategy
consulting company competes on two dimensions: strong client relationships and
a reputation for cutting edge knowledge. So the company has two, sometimes
competing, elements of core structure: local offices and practice centers.
While the tide of influence shifts over time, the offices traditionally have
primary authority and the practice centers have strong influence over them.
Rising consultants find projects not just by doing good client work, but by
building a reputation for expertise within the firm, typically by contributing
to a practice center. While the offices coordinate the selection of consultants
and delivery of advice to clients, the practice centers build the firm’s
reputation in the market and are the vehicle through which consultants build
their reputation in the firm. Without the reputation-building and promotion
focus of the practice centers, it is unlikely that the practice centers would
be strong enough to wield influence over the client-focused local offices.
Organizational structure is much more than a set of reporting relationships. It
is a combination of roles, relationships, processes, authority and influence.
When well designed, it is an expression of the organizations strategy and core
values.
Network structures
Many companies are evolving to more highly networked and
connected structures. Networks are natural parts of any organization. They are
simply the way people connect to get help, find others, get information, learn
and share their thinking. Even though networks arise spontaneously in any
organization – and between them - networks can be intentionally designed. Of
course any network, however intentional, will continue to evolve in its own
way. However, intentional networks can be focused and build momentum toward
achieving a purpose. Networks, even intentional ones, are different from other
organizational structures. Networks are essentially groups of peers, rather
than superior and subordinates, who have influence, but no authority over each
other, and typically over the other organizational units with which they
interact. As influence structures, networks complement other structures, rather
than compete with them. See Articles. Learning
across teams. There are several different types of networks. Some are
devoted to helping members with everyday work problems. Others develop best
practices; steward large bodies of knowledge; or even coordinate work between
sites, sharing workload. Others still focus on innovation. The organizational
structure and processes of each are different, so it is helpful for a network
to know its intent early in its life. As they evolve networks, like other
organizational forums, need support and governance to assure their health and
alignment with the organization as a whole. See Articles.
Community support structures. In fact, as networks mature, they
frequently want more influence over operating units and more integration with
the organization. They typically evolve from the margin to the mainstream of
the organization. See. Articles. How to avoid a
mid life crisis in your communities.
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Richard McDermott
712 Allen Drive, Longmont, Colorado 80503 USA
phone/fax 303-545-6030
e-mail Richard@McDermottConsulting.com
