Sunday, March 19, 2006
Business innovation: Knowledge strategy and organizational values
A big topic, one that won't be blogged. After more than 5 years since letting this subject go, its starting to seem relevant again. We have to start these discussions within the organizations we work with. Who else will?
To admit just a bit of context, I've had a proposal accepted to contribute a chapter to a new academic book (collection of articles) on knowledge issues in business strategy. Before realizing there were few, perhaps no, serious academic conferences dealing with this area, I over-wrote and presented a paper at KM World 2000 on Knowledge Strategy: Aligning Knowledge Programs to Business Strategy. Soon afterward, the KM field imploded, not so much due to dearth of ideas, but to the inflection-points of dot coms and consulting firms all going under at once in early 2001 (I was a KM consulting lead for Atos Origin at the time). Oh, and the fact that none of the so-called KM technologies worked back then, and the notion of KM as managing information assets as-if knowledge remains elusive.
What's changed since then? Offshore outsourcing, for one, which has turned KM on its head. I still believe businesses that outsource their core competencies are going to lose their core business over time. My chapter, and my take in 2000 on knowledge and strategy, builds upon the resource-based view of strategy, which has claims to being the best strategic foundation for understanding human knowledge in real organizations. For two big reasons (but there are others):
1. You can only control what you own. We cannot know what the external environment will do, and it misleading to study competitors too closely. Scenario research has shown few teams able to generate strategic scenarios that really help prepare for the strategic anomaly. In lieu of external control, we control what we have: Internal resources, especially the fragile, intangible competitive value of internal, organizational knowledge.
2. Knowledge resources are the basis of "non-appropriable capabilities" that lead to sustained competitive advantages. LexisNexis was thought at one time to be extremely vulnerable to the rise of Internet information services, which would start from scratch, cheaply, make content deals, and undercut the Big Daddy of research data services. It did not happen, for the most part, because of (world-class) infrastructures and dynamic capabilities. They were able to leverage deep, internal knowledge about product development, online services, their paying customers, and to some extent, brand. Which is yet another knowledge-based resource.
But, the rise of Internet-enabled cost-reduction strategies has positioned US companies toward a race to the bottom. Managers have forgotten that the company outlives their bonus packages. Outsourcing may be a good way to make your numbers, but in doing so, firms are only raising profit by reducing costs, never a strong competitive strategy. Unless you have the infrastructure and serial-killer values of Wal-Mart.
I am simplifying here to make a point, of course, but I believe the destruction of internal capabilities will cost many firms the ability to innovate. A capability they may be handing over to India and China, in order to cut costs (in a supposedly growing economy which should do OK without such radical reengineering). These firms are also creating organizations with poor morale, low motivation, cynicism and lack of vision, and labor-arbitraged burnout. These values will persist, and when its time to gear up and build something unique again, the people who remembered that originality and innovation were fragile, important values will have left, for good. And the reputation left behind will not well-serve the rats who failed to jump the slowly-sinking ship.
To admit just a bit of context, I've had a proposal accepted to contribute a chapter to a new academic book (collection of articles) on knowledge issues in business strategy. Before realizing there were few, perhaps no, serious academic conferences dealing with this area, I over-wrote and presented a paper at KM World 2000 on Knowledge Strategy: Aligning Knowledge Programs to Business Strategy. Soon afterward, the KM field imploded, not so much due to dearth of ideas, but to the inflection-points of dot coms and consulting firms all going under at once in early 2001 (I was a KM consulting lead for Atos Origin at the time). Oh, and the fact that none of the so-called KM technologies worked back then, and the notion of KM as managing information assets as-if knowledge remains elusive.
What's changed since then? Offshore outsourcing, for one, which has turned KM on its head. I still believe businesses that outsource their core competencies are going to lose their core business over time. My chapter, and my take in 2000 on knowledge and strategy, builds upon the resource-based view of strategy, which has claims to being the best strategic foundation for understanding human knowledge in real organizations. For two big reasons (but there are others):
1. You can only control what you own. We cannot know what the external environment will do, and it misleading to study competitors too closely. Scenario research has shown few teams able to generate strategic scenarios that really help prepare for the strategic anomaly. In lieu of external control, we control what we have: Internal resources, especially the fragile, intangible competitive value of internal, organizational knowledge.
2. Knowledge resources are the basis of "non-appropriable capabilities" that lead to sustained competitive advantages. LexisNexis was thought at one time to be extremely vulnerable to the rise of Internet information services, which would start from scratch, cheaply, make content deals, and undercut the Big Daddy of research data services. It did not happen, for the most part, because of (world-class) infrastructures and dynamic capabilities. They were able to leverage deep, internal knowledge about product development, online services, their paying customers, and to some extent, brand. Which is yet another knowledge-based resource.
But, the rise of Internet-enabled cost-reduction strategies has positioned US companies toward a race to the bottom. Managers have forgotten that the company outlives their bonus packages. Outsourcing may be a good way to make your numbers, but in doing so, firms are only raising profit by reducing costs, never a strong competitive strategy. Unless you have the infrastructure and serial-killer values of Wal-Mart.
I am simplifying here to make a point, of course, but I believe the destruction of internal capabilities will cost many firms the ability to innovate. A capability they may be handing over to India and China, in order to cut costs (in a supposedly growing economy which should do OK without such radical reengineering). These firms are also creating organizations with poor morale, low motivation, cynicism and lack of vision, and labor-arbitraged burnout. These values will persist, and when its time to gear up and build something unique again, the people who remembered that originality and innovation were fragile, important values will have left, for good. And the reputation left behind will not well-serve the rats who failed to jump the slowly-sinking ship.
