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Prof. Dr Willem Mastenbroek
Prof. Dr E. van de Bunt
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Negotiating as emotion management
Prof. dr. W.F.G. Mastenbroek
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The Knowledge Organization
Knowledge management = asset management
Burt Rost van Tonningen


The definition of knowledge

Davenport and Prusak in their book, Working Knowledge , have formulated a very clear and bright definition of knowledge. They state that, "Knowledge is neither data nor information, though it is related to both and the differences are often a matter of degree. Unlike data, information has a meaning. We transform data into information by adding value in different ways. Most people have a sense that knowledge is broader, deeper and richer than data and information."

In addition, they argue that, "Knowledge is a fluid mix of framed experience, values, contextual information and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms."

That makes things clearer, but why then, we ask ourselves, is the meaning of knowledge management in daily business life, besides the obvious complexity, still so ambiguous for many professionals?


The influence of fashion on "new approaches"

In the past, Total Quality Management (TQM) and Business Process Reengineering (BPR) might have been the last gasp of the old economy, barely delivering on their promises. The problem started with the names themselves, names that fostered a simple mechanical view of what is really a complex human system. More important, the focus was on existing processes and not on fundamental innovation. What has been ignored, according to Allan Webber, the founder of the magazine, "Fast Company " , are issues like people, relationships and values (Ruggles cs, page 43). Mechanical thinking doesnt work mostly because people should be more flexible in using know-how.

Case: How a TQM study killed a company
A Company in building materials launched a TQM program with experienced external consultants. The CEO was a former McKinsey strategic adviser and he really liked the approach of going for "excellence". He defined the corporate goals, installed a steering committee and launched in each company taskforces who analyzed existing processes. After that, they figured out "improvement ideas" and actions to implement them. There were about 20 strategic business units in ten European countries. The whole process lasted two years; the analysis was probably perfect but, in the meantime, the company missed so many opportunities in their innovative markets that they had to return to the old-fashioned core business of one strong product. The company never recovered from this process.

Long processes of restructuring often cripple an organization. It is very dangerous to be occupied for such a long time with study or streamlining and pay little attention to the environment, certainly when new wishes of customers are ignored. Nevertheless, it became "fashion" to be involved with TQM etc., because striving for better quality sounded good. Of course it is not only negative, sometimes TQM did really benefit an organization.

Other business "breakthroughs" like Peters and Watermans, "Excellent Companies", or Hamel and Pralahads, "Core Competencies", though mostly brilliantly analyzed, also obtained a high degree of fashion. All these new approaches did sound exciting during the last decades for PR reasons, but remained "gimmicks" in the hands of mediocre management as long as they didnt understand the real meaning. Now it seems to be knowledge managements turn to be fashionable.


The false knowledge organization

Knowledge is evidently related to science, superior experience, intelligent people, learning capabilities and high qualitative, interactive information. With such characteristics it seems to be very chic and attractive to stimulate managers to proclaim that they lead a knowledge organization. This is the ultimate reason that the phrase "knowledge management", with so many interesting elements, might have been even more abused and misused than all the other examples previously mentioned.

We can observe a paradox: leaders who are loudly claiming that they are adapting the newest insights about knowledge often do the opposite; they remain old-fashioned machine bureaucrats with greedy PR instincts and a tiny flavor of innovation. Being part of such an organization is especially frustrating for employees in these days of the digital age. They know that the claim for knowledge management is false; that the rituals echo egos more then content. Knowledge management is not a simple commodity, and can only be obtained, as we will prove, after hard work.

Case: "Not invented here" syndrome
A University has a unique chance to develop a management development program for a prestigious global company. The Dean and his staff are very enthusiastic and stimulate the companys HR staff and their consultant to work with them in order to prepare an outstanding and very innovative learning program. It is clear that E-business will be the central issue because it is the new way of life. The corporate staff and the university mutually agree to launch a management-training program with a strong relationship between strategic projects and change management.

All of the officers involved were excited by the idea. Shortly after the beginning of the management-training program, the power structure within the university and the company changed simultaneously. It happened partly by accident (succession) and partly for budgetary reasons. The new officers responsible from both sides had to start again from scratch with no clue about - and worse, no interest in - the ongoing process. The result: they killed the project shortly after take-off, because they preferred their own invention, a "down to earth, no nonsense approach". Many talented knowledge workers left the company as a result and the company now faces the backfire effect of being part of a "not invented here" syndrome from mediocre management. This is the opposite of a knowledge organization.

Turning into the information and the service economy

"Knowledge has become the key economic resource and the dominant - and perhaps even the only - source of competitive advantage", is the oft-repeated statement of Peter Drucker (Ruggles cs, page 1). Drucker is undoubtedly the most important guru of modern management practices in the second part of the twentieth century, but he belongs more to the old economy than to the new. Nevertheless, in his book, "The Post Capitalist Society", he made unmistakably clear what the real reasons are for the importance of knowledge.

Drucker pointed out that information became central around 1960 with the introduction of the computer. For the first time, we had people who did much more knowledge work and services than ever before; manual labor clearly became in the minority (Ruggles cs, page 52).In his book, "Knowledge, The Appreciating Commodity", Thomas Stewart added to this development. "The new economy is about making the most important ingredient of what people buy and sell" (Pfeffer, page 18). Knowing became about everything: shopping, running a business and even entertaining. From the very moment the computer was introduced, information technology facilitated this development.

The conclusion should be: the real and perhaps sole source of the development of knowledge management is the importance of information driven by technology . Such a process is not simple to master, learning is essential and thus to communicate between each other is very important. Knowledge is more then a product, it is intangible, and access is not easy. Knowledge management seems to work best, according to Pfeffer & Sutton in their great book, "The Knowing Doing Gap", when people who generate the knowledge are also those who store it, explain it to others and coach them as they try to implement it. When division of thinkers and doers does not work, then what are the implications for organizing a company?

Knowledge is balancing between chaos and structure

Maira and Scott-Morgan state that, "The word management has acquired connotations of certainty and control. However the rigidity of these structures can result in inflexibility in the organization that cannot step with the dance of change. To be most innovative, it must operate on the edge of chaos. At the other extreme if there would be no organizational control at all then an organization wouldnt exist. The key question here is: How can a manager set the right conditions to encourage a balance between organic chaos and mechanistic stagnation?" (Mairacs, page 230)

To get midway between innovation/chaos and goal-oriented/mechanical rules, there are, again according to Maira and Scott-Morgan in their interesting study, "The Accelerating Organization" (Mairacs, page 235) , the following conditions that need to be satisfied:

  • 1. Creative tension between shared vision and acknowledged reality
  • 2. Permeable organizational boundaries
  • 3. Flexible resource architecture
  • 4. Minimal rules

The strategic task is how much experimentation and innovation a company needs for success in business and how much tension is acceptable (see 1). The operational task is to ensure that at least three dimensions (see 2, 3 and 4) are aligned with respect to each other. Knowledge has to be developed as part of these tasks.

The knowing doing gap

Case: No control over network
The staff of a very large global company prepared for the Executive Board a business mission in Silicon Valley. They defined together with a consultant a good and balanced program. The Board was interested in commerce solutions, the use of front and back office technology, human resource practices and E-finance solutions. Many players have been contacted through the consultants network. It turns out the global company had already established long time relationships with about the half of the companies approached, but the Board was not aware of this. Everybody was confused! The organization of the company clearly had no insight into their own networks, consequently was not an efficient knowledge organization and, because of this, will miss many opportunities.

The Maira and Scott-Morgan study gives a preliminary managerial direction to knowledge management, but only partly explains how to act when knowledge of what needs to be done frequently fails to result in action or behavior consistent with that knowledge. Jeffrey Pfeffer and Robert Sutton call this phenomenon the "knowing doing gap" . They argue that, "Great companies get remarkable performance from ordinary people." Not so great companies take talented people and manage to lose the benefits of their talent, insight and motivation. Thats why Pfeffer and Sutton focus on management practices that either create or reduce the knowing doing gap.

Pfeffer and Sutton have formulated eight guidelines for action:

  • Why before how: philosophy is important.
  • Knowing comes from doing and teaching others how.
  • Action counts more than elegant plans and concepts.
  • There is no doing without mistakes. What is the companys response?
  • Fear fosters knowing doing gaps, so drive out fear.
  • Beware of false analogies: fight competition, not each other.
  • Measure what matters and what can help. Turn knowledge into action.
  • What leaders do, how they spend their time and allocate resources matters.

The logic of these guidelines is evident and at the same time simple, but practicing them is another story. We should add efficient storage of knowledge as very important.


Knowledge and learning

Mastering the knowledge management process during action means that learning becomes the key issue, because only when workers are able to learn can management build a vital organization . "An organizations ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage" , urges Jack Welch, CEO of General Electric. Peter Senge in his book, "The Fifth Discipline", makes the same comment. To become a leader in the industry is primarily a matter of mentality because you can only learn if you want to learn and want to win. Managements responsibility is to invest whatever time and effort are desirable to understand the required change, and how the company must change.

"To succeed at digital or E-business strategy, the organization must be a learning organization, more focused on ideas and experiments than detailed plans and forecasts" , argue Dowles and Mui in their book, "Unleashing the Killer App". A mental model of how change and learning occur has to be shared throughout the organization, to avoid disintegration. The language that the organization speaks is about ideas, scenarios, options, and what-ifs. People, according to Senge, should think more about shifting away from the old mental models, be open for other opinions, understand how an organization works, share visions, and be committed to reaching goals together. Learning is all about common and shared practice, and constantly improving it. Four modes and five enabling conditions of knowledge conversion:

Knowledge is dynamic and living; knowledge creation is supported by several preconditions. Nonaka (Ruggles, page 66) teaches us that we can determine four models of conversion: socialization, externalization, combination and internationalization based on tacit and explicit knowledge. His model makes clear how we have to share visions creating the right mentality and commitment . Tacit knowledge is personal, context specific, and therefore hard to formalize and communicate. Explicit or codified knowledge refers to knowledge that is transmittable in a formal systematic language.

Socialization is a process of sharing mental models and technical skills through shared experiences. Externalization is the process of articulating tacit knowledge into explicit concepts of languages. Combination and systemization of concepts through symbols such as language or figures is achieved through media. Finally, internalization is the conversion process from explicit into tacit knowledge. Knowledge conversion (Nonaka)

Knowledge conversion (Nonaka)

Of course, for effective conversion we need to design the vision, strategy, structure, system, and leadership to promote the process continuously. We call this "enabling conditions" (Nonaka,page 71)

Conclusion: the real importance of knowledge

We are now aware of the reasons that knowledge became important, we know that it is hard to manage and that organizations without learning capacity will become obsolete, but we still want to know what kind of knowhow makes a company competitive.

Case: Cisco
Cisco might be one of the best examples of a knowledge organization, not because the management is extremely creative, it probably is not. But Cisco management is a champion in identifying and implementing smart solutions. They let clients collect, through web-based chat boxes, the main ideas for innovation. They realized substantial cost cutting in a few years: 70% of support calls are resolved by a visit to the companys website, 80% of orders are placed on line, 70% cut in order cycle (from 6-8 weeks to 1-3 weeks), 40% inventory reduction, and 55% of the sold goods never touch a production place from the company, etc.

Ciscos acquisition and partner policy is a great success. More than 90% of the CEOs from the acquired companies are still in the company after a few years, benefiting from the great culture and option plan. Ciscos website states: "Our strategic alliances are designed to help deliver a customer-centric, total solutions approach to solving problems, exploiting business opportunity, and creating sustainable competitive advantage for our customers. This shared commitment to deliver solutions and services encompassing products, applications, systems integration, and best practices, will help make our customers successful as globally networked organizations in the new economy."

Knowledge management = asset management

Knowledge management means for Cisco, in conformity with Davenport and Prusaks definitions mentioned at the beginning of this article: being connected with the customers, the partners and the employees. Second, it means being busy with sharing data and giving direction to information; third, building a common context with all the participants within a framework for evaluation; and fourth, being embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms." And finally, they are going fast, fast, fast.

The conclusion becomes clear. Knowledge management is asset management , because in this information age we no longer have other important assets. Unique knowledge with a competitive edge is based on the ultimate best quality, shared with the stakeholders and the fastest accessible information. Literature:

Chawla, Sarita and John Renesch, Learning Organizations , Productivity Press, Portland Oregon 1995.
Davenport, Thomas H and Laurence Prusak, Working Knowledge , Harvard Business Press, Boston 1998.
Downes, L and C. Mui, Unleashing the Killer App , Harvard Business Press, Boston 1998.
Drucker, Peter F., The Post Capitalist Society , Harper Business, New York 1993.
Maira and Scott-Morgan, Accelerating Organization, McGraw-Hill, New York 1997.
Pfeffer, Jeffrey and Robert I. Sutton, The Knowing doing Gap , Harvard Business Press, Boston 2000.
Ruggles, Rudy and Dan Holtshouse, The Knowledge Advantage , Capstone Dover NH 1999.


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