The Knowledge Advantage

Citation

Paswan, A. (2002), "The Knowledge Advantage", Journal of Consumer Marketing, Vol. 19 No. 5, pp. 441-445. https://doi.org/10.1108/jcm.2002.19.5.441.2

This book is all about knowledge – what is it, why we need it, how do we get it, how we use it, etc. In short, the book is about management of knowledge to gain market leverage? It is a compilation of words of wisdom, experiences, and anecdotal stories by the likes of Ikujiro Nonaka, Peter Drucker, Lester Thurow, and several other equally illustrious visionaries. Barring a few raised eyebrows, from expressions like “it makes sense,” and “so what?,” I finished the book thoroughly impressed. In addition to business managers, I wish that the administrators and professors within academic institutions would also read this book. We often forget that we are in the knowledge business, not the administration business.

With that as a preamble, let me now present a peek into the contents of the book to pique the reader’s interest. The book starts with a brief overview of knowledge management (KM) history and trends. Strongly rooted in the works of Nonaka, Takeuchi, and Leonard‐Barton, knowledge management seems to appear very high on CEOs’ key trend lists. In terms of operational details, seven strata or levels are identified – infrastructure, content, process, organization, relationship, products and services, and strategy (p. 13). The rest of the book is divided into four sections – individual, organization, strategy, and economy, which corresponds to the notion that knowledge and its associated advantages reside at these four levels.

The first section deals with the notion of knowledge in the context of an individual. It revolves around the belief that knowledge fundamentally is personal and is at its richest peak at this level. However, knowledge at this individual level tends to be very fragmented and compartmentalized. It is generally agreed that there are three key branches of knowledge – natural science, social science, and humanities. Each one is surrounded in its own paradigm, language, and jargon, with little attention given to investigation of issues from a reconciliatory or cross‐disciplinary perspective. This attempt at maintaining purity or isolation of knowledge turf runs counter to the notion of evolution and actually hampers advance or progress. Herein, lies one of the sources of discord in KM. A possible way out of this rut is to build knowledge bridges and borderlands, e.g. the cognitive neurosciences, human genetics, evolutionary biology, environmental science, etc. Weber uses the term “knowledge revolution” and proposes that impetus behind this revolution is moral perspective and not just profit or growth. The notion of reengineering is dismissed with terms such as “cynicism,” “nihilism,” and “hypocrisy.” It ignores the heart of a company, i.e. its people, relationship and values. Using the examples of Telco and Buckman Labs, Weber proposes that a knowledge leader manages by dispersing rather than concentrating power, creating a shared understanding, creating meaning and not products, recognizing patterns and helping others see these quickly and clearly, encouraging meaningful conversation including disagreements, and focusing on values rather than technology.

Drucker questions the age‐old scientific management philosophy à la Frederick Taylor and argues that knowledge workers do not try to find the one best way of doing any task. Instead they ask whether a task is necessary, identify information needs, and teach others. Because knowledge by definition makes itself obsolete, knowledge workers are managed by deliberately introducing abandonment of past. It is suggested that knowledge workers must be treated as volunteers and not as employees by using three critical mechanisms – results, manners (freedom does not mean bad manners), and responsibility (a key to motivation). Interestingly, Drucker defends structure and hierarchy to ensure continuity and succession, although he cautions against dysfunctional and onerous hierarchies.

Part two of the book examines KM in the context of organization. Nonaka suggests two knowledge categories – tacit (personal, contextual, hard to formalize and communicate) and explicit (transmittable in a formal systematic language). However, “Excessive focus on explicit knowledge leads to paralysis by analysis. Over‐evaluation of tacit knowledge tends to lead to reliance on past successes” (p. 66). The socialization, externalization, combination, and internalization (SECI) model of knowledge creation is next introduced, along with the notion of five enablers, i.e. knowledge vision, knowledge strategy, systems and organization, organization structure, and finally the people.

After berating reengineering as a destroyer of tacit knowledge, Nonaka introduces the concept of Ba – a common place (physical, intellectual and emotional) shared by knowledge workers. Using the dimensions of type of interaction (individual or collective) and the type of media (physical face‐to‐face versus virtual media such as books, electronic media, etc.), four types of Ba are identified – originating Ba (individual face‐to‐face interaction), dialoging Ba (collective face‐to‐face interaction), systemizing Ba (collective virtual interaction), exercising Ba (individual virtual interaction). Nonaka clearly differentiates between knowledge and information by suggesting that information is a commodity. It is a start, and it becomes knowledge only after internalization. Information is passive, whereas, knowledge is active. Information is transient and is determined by efficiency concerns, whereas knowledge is more universal and is determined by aesthetic values. By the end of this chapter, one starts to get a feeling of being immersed into a Jen‐Buddhist philosophy discourse, but the beauty of it is that things actually make sense.

Bauer adds that the management of information typically tends to be technology focused – tools of practice, enterprise libraries, and conversational tools. However, given that “knowledge comes from putting information into productive use” (p. 90) and it is embedded in organization structure (designed and/or emergent), people, and the social network they form, there must be a harmony between these three, i.e. technology, structure and the social network. Knowledge organizations then could be seen as community of practice that are multi‐functional, have a sense of mission, require time to develop, and share a unique intellectual property.

After a quick review of organization structure, Bartlett suggests that contemporary knowledge organizations must be seen as complex patterns of interrelated teams and task forces, consisting of skeleton (organization structure), physiology (flow of information and knowledge as life blood), and psychology (people’s values and culture). Organizations are social as well as pure economic institutions. The paradigm of strategy, structure and systems is replaced with purpose, process, and people. There is a strong emphasis on people as assets and empowerment. Quinn argues that the drivers of economic growth are no longer the land, labor and capital. It is now, intellect (defined as knowing, diffusion, and innovation) and conversion of intellect into service, and the greatest value is created not by possession of knowledge, but by using knowledge. Using the services industry as a context, Quinn argues that through the network externalities in a network‐based economy, a “negative entropy system self‐actuates and creates new energy” (p. 128). What prevents systems from getting out of control and becoming chaotic, is one of the underlying principles of chaos theory, i.e. chaotic systems will become self‐organizing. Three strategies are proposed to harness this energy – one has to be best at something, continual innovation, and the speed of innovation. In terms of structure, network, starburst, or independent collaboration type of organization structure is proposed with a caveat that network organizations are extremely good at creating options, but lousy at making decisions. Interestingly, like others, Quinn sees technology as merely an enabler and not the answer.

The next section deals with knowledge and its relationship with strategy. Using the humongous and seemingly sluggish World Bank as an example, Steve Denning (of the World Bank) illustrates how organizations transform themselves by using the principles of KM. He suggests that KM can be used to make the organization perform its functions better or to redefine the business. World Bank transformed itself from a financial institution to a knowledge organization and reoriented itself into looking at knowledge rather than money as its product offering. Davis focuses on technology as a means of converting knowledge into products. Acknowledging the product, market, resources, and competition as four basic elements of a business, Davis argues that one must have a knowledge business before thinking about the knowledge organization or management. The examples of some smart products such as smart vending machines, smart cars, and smart TV illustrate that advances in IC chips technology will help convert knowledge into future products. Davis also supports the increasing returns model as a characteristic of knowledge business. The key is the change in focus from cost cutting to enhancing revenue by examining the contributions made by intangibles and by changing one’s orientation to “ubiquity before profitability.” Sveiby revisits the notion of tacit and explicit knowledge, and links it to the market value. The difference in tangible and market value is being attributed to individual competence, external structure, and internal structure. Another perspective attributes these differences to customer, structural and human capitals. Finally, it is suggested that it is the knowledge within the organization that contributes to this intangible asset, and unlike capital, knowledge does not depreciates with use. In fact, it deteriorates with lack of use.

Sveiby elaborates how organization culture – collaborative versus competitive, is likely to result in different knowledge sets being exchanged. An interesting example of using a coffee machine as a knowledge Ba illustrates that one does not need technology as an enabler. A word of caution is introduced here – “To be a knowledge organization with an information focus is outright dangerous. If you do that, you will substitute your valuable knowledge workers for IT” (p. 189). Replacing people with IT, as is the practice in re‐engineering and downsizing mindset, merely reduces cost and results in a very static organization. It is people that are dynamic and create revenue.

This brings us to the final section – knowledge management and the economy. Brian Arthur starts by focusing on the high‐tech economy since a prime driver of high‐tech economy is knowledge. He suggests that characteristics of old economy – “stable markets, established competition, increased costs at the margins, and decreased demands at the margins” constrain growth (p. 197). In comparison, high‐tech economy operates on the basis of increasing returns. The high‐tech products tend to be complicated, are strongly rooted in knowledge rather than raw material, and generate network synergies. Lester Thurow explains this relationship between KM and economy by elaborating various stages of industrial revolution. The first stage was propelled by steam technology (introduced in around 1800) and the second (starting around the end of nineteenth century) by systematic industrial research and electrification. The third industrial revolution (suggested to have started around the beginning of the twenty‐first century) is anchored in six technologies – microelectronics, biotechnology, designer‐made materials, telecommunications, machine tools and robotics, and computers (both hard/software), coupled with fact that our thinking has moved to distributed, as against centralized, processing. However, despite this strong stress on technology, Thurow has tremendous faith in human beings – “Technically, we could buy everything electronically but sociology is going to dominate” (p. 220). Two things – the intrinsic nature of human beings and demographics – will dictate the level and type of technology infusion. Defending the good old market capitalist systems, it is suggested to be the only system that has been able to generate consistent economic growth and the best for catering to peculiar needs of humans. However, it has two inherent negative characteristics – “it has recession and depression cycles, ups and downs; and it has financial meltdowns” (p. 224). As regards the driving force behind capitalism, “Greed, the desire for more, makes capitalism work. And greed, the desire for more, creates financial meltdowns” (p. 225). So why and how do we keep at it? The answer is optimism, and our ability to clean up the mess. This is where the third revolution comes in and knowledge becomes the key to success. In order to facilitate this new revolution, governments need to provide an educated workforce, state of the art infrastructure, and ensure leadership in research and development. Davis and Meyer close this section by stressing on connectivity as a key to success in this knowledge revolution. The other two related factors identified are speed and intangibles. In fact, they suggest that, “The real point is about this shift in the economy in which value is created through knowledge and through intangible means rather than tangibles ones” (p. 246). The marketing and product managers bring in the customers to create the offer they want, and not offer them their version of what customers want. The way to do this is through KM, both on the part of managers and market entities.

So where do we go from here? Rather than paraphrase it in my words, I am going to quote Gregory Sieg (Temple‐Island’s Director of Information Systems): “When you couple the complexity of the business environment with the speed of change, knowledge management has, and will continue to have, a positive role” (p. 269). What the firms need to decide is where they are on the Gartner curve and then go from there. This book is a must for anyone who claims to be in the business of, with, and for knowledge.