Managing Knowledge and Innovation

(comment: As originally posted on the OUBS Blog)

Nonaka and Takeuchi put it like this: knowledge creation -> continuous innovation -> competitive advantage.

Simple. You can also say that next to creation of knowledge you have application, transformation and integration and all those functions interact.

In the 17th century Francis Bacon saw economic power in scientific knowledge and the possibility to then control the world we live in. Peter Drucker stressed the importance of knowledge as a crucial economic resource in 1969 (The Age of Discontinuity). Many companies now see themselves as knowledge based.

While knowledge creation leads to innovation it can also be argued that innovation leads to new knowledge, making this a circular process. Sometimes this process is needed to survive. Schumpeter actually pointed out that a main driver of innovation is the threat of innovation in your sector that you are missing. You need to learn to unlearn to learn again. Schumpeter’s gales of creative construction or discruptive technologies can be mentioned here. You will need to create new knowledge internally and raise your awareness to external threats. On a macro economic level variety occurs higher than at the individual level, meaning you cannot do anything against it at this level.

Definition of innovation

This is about the new, both technological and organizational. Invention is only a building block and often does not have the economic benefit needed for sustained innovation. Drucker said systemic innovation is the “purposeful and organized search for changes.” You need to understand the technical and the organizational part of innovation to really manage it successfully. While innovation is often seen as a leap to something new, this includes a lot of small steps that led you there and will take you further, with the leap actually mostly being on impact. Radical innovation is a lot more risky, especially because once undertaken, there is probably not pool of knowledge to use to build it up.

Embodied and embedded knowledge

This is based on Blackler’s list of types of knowledge. You can also say that “innovation embodies knowledge, or that innovations have knowledge embedded in them.” This is important considering worker education, especially in relation to some kinds of knowledge types only available in people, context, verbal communication or interaction.

Scientific and other knowledge

While it is often believed that technological innovation is the application of scientific knowledge, there are other types too even though. Still, the commercial application of scientific knowledge is a big field not to be underestimated, especially as it’s creation relies on the application of human and financial resources, precluding some form of commercialism in science. In terms of commercial relevance you need to also include the education and training part of science, which will lead to new, potentially commercial, advances. In the end, a lot of different types of knowledge need to be integrated for innovation to be successful. Page 25 in the book does list some types of knowledge needed there and can be really helpful, also in terms of thinking about outsourcing.

Knowledge creation and innovation

Surprisingly little has been done to research knowledge management in relation to its agreed importance and research in other core functions.

Design, something that cannot be automated or routinized, can be closely related to Gibbons’ Mode 2 knowledge or Flick’s contingent knowledge or Schön’s reflective practitioner. Schön actually sees design as a “reflective conversation with the materials of the situation.” Each problem is unique and handled in context. Some see it as a rational solving process but Dorst and Dijkhuis actually found out that each approaches appropriateness depends on the context.

This leads in to two perspectives on knowledge creation frameworks. In Nonaka’s SECI model new knowledge comes from the interaction of implicit and explicit knowledge. Knowledge conversion is key and different types of knowledge are created at each step. (More on Nonaka here.)

Building a new product needs interaction from a lot of different people and both socialization and externalization, individuals from the ba of the team who form the ba of the organization. (Lots of ba in SECI ;))

Top management needs to build a vision that shows the direction this knowledge creation should take. Then you have two dimensions of knowledge creation:

\- epistomological dimensions: tacit/explicit conversion

\- ontological dimension: individual to group to organization

Cook and Brown emphasize the concept of knowing, which only really works in a master and apprentice system where you learn what knowing something really means.

Important here is that you need to have variety and a deep (beyond immediate need) knowledge pool and interaction and communication between different/diverse people.

Experimentation and prototyping is another way to innovate and its actually easy to do with today’s technology in some fields. Leonard-Barton talks about it in her book _Wellsprings of Knowledge_ in terms of “purposeful experimentation.” You need to support risk taking and allow experimentation with the option of failure. You need to put a system in place that allows all this to happen and foster learning from it. Unsuccessfully trying some things might lead to something successful in an unexpected field, something she calls “failing forward.” Rapid prototyping and an open mind is needed. Local experts, early adapter types and all the stuff from Malcolm Gladwell’s Tipping Point is needed.

Thomke has found 4 main areas of focus to exploit technology with prototyping and experimentation in mind.

1. Organize for rapid experimentation

2. Fail early and often, but avoid mistakes

3. Anticipate and exploit early information

4. Combine new and traditional technologies

Learning and Innovation

Learning and knowledge creation are un-separable. Ruggles (1997) argues knowledge management needs 4 independent activities:

\- knowledge identification

\- knowledge codification

\- knowledge interchange

\- knowledge creation

(all this seems very similar to SECI)

A lot of firms need to go to learning by doing as Arrow (1962) believed, citing as evidence increased output. Ludvall talked about learning as incremental additions and deletions from your pool of knowledge through experience and practice. Cultural, social and historical as well as your own pool of knowledge interact. Everything is context sensitive.

Knowledge Practices for Innovation

Either knowledge has its own dynamic or it is driven economically… technological push vs. market driven. Actually we are somewhere in the continuum between the two. We can actually build a matrix putting knowledge about means and about ends in categories of unknown, definable or understood.

At a firm level your knowledge will be cumulative and path dependent and you need to balance keep your core constant and keep an eye on the edges, which should be fluctuating. Creative abrasion is a term signifying that different specialists share knowledge, like designers and coders, building new knowledge based on their different knowledge and viewpoints in the process.

Strategic Context

You need to innovate to stay competitive and therefor build up the capability to do so strategically. But rational planning processes are rarely possible, so you need a way to manage and to cope with complexity. You need to continuously link opportunities to market possibilities, within and outside the organization.

Freeman (1992) identifies 6 strategies:

\- Offensive innovation strategy

\- Defensive innovation strategy

\- Imitative innovation strategy

\- dependent strategy (subcontractors and suppliers innovate)

\- traditional products

\- opportunist (identify niches)

Perceptions of innovation

The extremes, found in a OUBS research by Storey (200), are routinized innovation versus more individual creative events. Most are in the middle. Different dimensions play a larger or smaller role dependent on who you ask. There is a social — individual dimension and the external — internal dimension.

Some things are noticeable in relation to this:

\- innovation happens in stages, with potential reviews at each stage

\- the social part emphasizes the influencing process part, or even fight for resources

\- cross-functional teams are important

\- skunkworks (Tom Peters), aka individual experimentation

\- find and keep innovative individuals

\- importance of inter-firm collaboration

\- social relationships are critical (internal and external)

Internal and External Knowledge for Innovation

You need to build knowledge but also look for diversity which is sometimes found outside your organization. Make or buy is an important consideration here. Working internally has high costs and risks, while externalizing things means you need to work hard to select the right collaborators. Learning from consultants needs a real effort as they are often not there to part with their specialized knowledge. The capability you can build is choosing, communicating and taking advantage of external resources. Outsourcing can be related to more diversity and larger communities of practice, which actually makes it attractive if the right partners are chosen.

In terms of R&D it can be argued that the capability to orchestrate resources needs to be internal but the build does not need to be. Remember the transaction costs though.