Shared Knowledge Creates Advantage

One of the most exciting developments affecting our business over the past several years has been the emerging management discipline referred to as “knowledge management” or “intellectual capital management.” While there are many management fads that come and go, this trend has the look and feel of substance with staying power.

In the mid-1970s, Peter Drucker was the first to observe how the nature of work has changed for many of us—that more and more we were becoming a “society of knowledge workers.” More recently, Ikujiro Nonaka and Hirotaka Takeuchi (two Japanese business school professors) developed this same theme further in The Knowledge-Creating Company. They proposed that the driving source of competitive advantage and continuous innovation is a company’s ability to create knowledge. Most recently, in their book, Working Knowledge, Davenport and Prusak apply what we know about market behavior to the hows and whys of knowledge exchange, an essential dynamic in the process of creating knowledge.

A growing number of large, established companies such as Dow, Skandia and others are rediscovering knowledge creation as an engine of innovation, and increasingly attending to their intellectual capital and knowledge creating assets to increase shareholder value.

In attempting to better manage their knowledge, most companies appear to be concentrating on the codification and valuation of their intellectual assets. A few others seem to be more interested in the generation of new knowledge. All are keenly interested in converting their knowledge into value. And sharing or exchanging knowledge is increasingly recognized as the key factor.

How and why knowledge is (or is not) shared is an increasingly important dynamic for managers to understand. Comparing the way knowledge is shared within an organization to the way goods and services are exchanged in the marketplace, Davenport and Prusak point to one very important difference: “Knowledge markets are different in that the seller keeps his knowledge when he sells it or gives it away. More importantly, the transaction itself often generates new knowledge. Newly acquired knowledge interacts with existing knowledge to spark ideas that neither buyer nor seller has had before. One of the major sources of new knowledge is fusion—bringing together people with different ideas to work on the same problem.”

I have been privileged to witness this fusion happen time and time again for almost two decades. This year we participated, largely in a facilitating role, in dozens of these “fusion experiments,” resulting not only in patentable inventions, but also in the generation of new knowledge.

One of these fusion experiments itself was particularly innovative. The objective was not only to create new and proprietary knowledge about the consumer, but also to create the mechanism to do so continually. This one client has already taken Nonaka and Takeuchi’s advice to heart: “the more mature the market, the more knowledge becomes tacit. Thus in a mature market [product developers] have to interact much more intensively and frequently with the market, since the importance of the more qualitative type of information increases with maturity.”

By sharing knowledge both within and outside of our organizations, even with end-users and customers, there are many more innovations that work™.


This article was originally published in Innovating Perspectives in January 1998. For this and other back issues of our newsletter, please visit our website at innovationsthatwork.com or call (415) 387-1270.