Chapter 4 / Strategic management perspectives 109
●
● appraisal;
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● persuasion;
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● adoption decision;
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● implementation;
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● confirmation;
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● routinisation;
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● infusion.
These processual innovations have had a profound effect on many organisations and have occurred in forms such as business process re-engineering, lean production and customer requirements management. They are affected considerably by cognitive, social and organisational factors. The political dynamics, interests and power bases can also considerably influence the innovation. By their nature, innovations can be irrational, unpredictable and uncertain and fail to follow rationalised management processes. These can lead to frustrations among managers about how to effectively manage innovation.
An alternative conceptualisation to the stages of innovation shown above is the notion of innovation as four ‘episodes’, as shown in Figure 4.7. The four episodes emphasise that the different stages are overlapping and may not occur in a linear manner.
The agenda formation episode is principally about knowledge creation and acqui- sition. Firms can acquire knowledge internally through congenital or experiential learning or externally through vicarious learning, grafting, searching and notic- ing (Huber 1991). Given that many new ideas come from external sources, the firm’s ability to acquire new ideas from external sources becomes critical. This is normally achieved through individuals engaging in external networks, acquiring new ideas and sharing them across the firm (knowledge diffusion). It is argued that weak ties in these networks provide the most productive source of ideas as they are more likely to
COGNITIVE FACTORS
POLITICAL FACTORS
SOCIAL FACTORS DISCONTINUITY
Selection (knowledge diffusion)
Agenda formation (knowledge creation)
Implementation (knowledge implementation)
Routinisation (knowledge utilisation)
Figure 4.7 Episodes in the innovation process (Clark and Fujimoto 1992; Newell et al. 2002)
challenge conventional thinking rather than conform to it (Hansen 1999; Newell et al.
2002). The strength of networking is measured as a form of social capital (Adler and Kwon 2002) and determines the level and quality of new ideas coming into the organ- isation from external sources.
New ideas on their own do not create innovation. They need to be developed and merged into local conditions through organisational processes, practices and politi- cal environments. The culture of the organisation can significantly influence whether these ideas are accepted or rejected. Strong ties between organisational members are important as they allow greater facility to engage in discussion and dialogue leading to a greater opportunity for the idea to be implemented in a practice or process as an innovation (Hansen 1999). These phases are part of the implementation and selec- tion episodes. The last episode in the innovation cycle is the routinisation episode concerned with the utilisation of knowledge and its efficient reuse. This episode has parallels with the codification strategy where knowledge codification, storage and retrieval mechanisms are developed. To be successful, an innovation starts as an irra- tional idea but turns into a codified, constrained and routinised form of knowledge.
Exploration leads back to exploitation. It needs a discontinuity to kick-start the inno- vation process again.
Exploitation strategies require ‘discipline’ in collecting knowledge for any given situ- ation, developing alternatives and evaluating the one most likely to increase the value of the firm. A form of convergent thinking towards a problem. In contrast, exploration strategies require ‘imagination’ to go beyond the conventional methods of thinking and promote divergent thinking towards a problem. The primacy of imagination in the long term is illustrated by Einstein (Szulanski and Amin 2001):
‘Imagination is more important than knowledge. For knowledge is limited, whereas imagi- nation embraces the entire world, stimulating progress, giving birth to evolution.’
Social networks are essential for the success of innovations as they rely heavily on social interactions between different interests. These networks may exist within (intra) or between (inter) organisations, through educational and professional networks and increasingly through virtual networks such as Facebook. They may be formal or infor- mal (see communities of practice in Chapter 9) but need to encompass different aspects of knowledge processes: creation, diffusion, integration and implementation. Material artefacts such as mobile technologies can play an important role as ‘boundary objects’
in linking together different groups and interests.
Chapter 4 / Strategic management perspectives 111
CASE STUDY
Two weeks after Paul Polman had been appointed as Chief Executive, he asked for a review meeting with Cathy Bautista, Head of Unilever’s Knowledge Management Group. At the meeting they dis- cussed Unilever’s achievements in establishing communities of practice and various knowledge repositories. However, he was concerned about the extent to which Unilever’s knowledge crea- tion and transfer processes were aligned to corpo- rate objectives and strategies. His fear was while there may be a lot of learning and knowledge within Unilever, it might be insufficiently focused towards delivering better products and services.
He asked Cathy to re-evaluate current knowledge management activities from a strategic perspec- tive and to put forward recommendations that would move Unilever towards a more purposeful approach to its learning and knowledge.
Unilever is one of the largest consumer goods companies in the world with an annual turnover of over €40bn. The company employs around 250,000 people based in over 100 countries. It has a large and varied portfolio of foods, home and personal care products including such well- known brands as Flora, Omo, Ragu, Calvin Klein and Dove. Uniliver invests around 2.5 per cent of its annual turnover in research and develop- ment leading to continuous product innovations and filing of patents each year. It takes learning and knowledge seriously and believes that trans- ferring this knowledge into its products and ser- vices is a key source of competitive advantage.
The organisation has ambitions to be ‘multi-local’
through understanding and anticipating local needs around the world and producing products and services that fulfil these needs. Internally Unilever aspires to be a networked learning organ- isation with its diverse and dispersed workforce and often questions whether it has become more of a top-down ‘teaching organisation’.
Unilever’s Knowledge Management Group has aimed at delivering the learning organ- isation vision through a number of targeted interventions. They have developed a frame- work of organisational knowledge processes and
focused their efforts on locating, capturing, shar- ing, transferring and creating knowledge. Cathy Bautista sees two clear reasons for this approach:
‘Firstly, as a group it is helpful to have a struc- tured way of organising the what and the how of knowledge acquisition. Secondly, the team knows that to be able to give better advice and support to their customers, they must excel at what they do’. She recognises the benefits of learning from mistakes and ‘error harvesting’
but appreciates that it is more of an aspiration in some parts of the organisation. ‘Learning from success is relatively easy as we can actively promote and help embed lessons derived from successful experiences. Learning from failure is more sensitive but just as important. We are pro- moting a culture of being willing to learn as you go and to embrace and apply learning both from successes and failures. This is what I would call a
“wholesome way of learning”.’
Unilever started its knowledge management activities in 1996. A key strand of its activities has been the development of several dozen com- munities of practice (CoP). To initiate these informal networks, they organised ‘Knowledge Workshops’ to bring together key experts and practitioners from around the world. The pur- pose of the workshops was to focus efforts in a functional domain and to ascertain what people did and didn’t know about the area. The domain had to be core to Unilever’s strategy. This allowed a shared vocabulary and terminology to develop as well as identifying any knowledge gaps. Each workshop generated a ‘Knowledge Domain’ for each community of practice. This comprised handbooks, manuals, presentations and any information deemed valuable to that domain. There was also a list of key people and groups within Unilever who had long-term expe- rience in that domain such as meal sauces.1 Each CoP had a champion to help coordinate and mobilise the network. The champion held a relatively senior position to encourage com- mitment and focus to the CoP. The aim of the CoP was to encourage collaboration between
Unilever (UK/Netherlands)
➨
2 geographically dispersed plants and to cross
functional boundaries. The CoPs were built around four key principles: deliverables, people, operations and leverage. The deliverables could be business deliverables such increasing efficien- cies in organisational processes or they could be knowledge deliverables such as new insights or producing best-practice guidelines. The people aspect ensured that there was a right mix of experts from diverse geographical and functional backgrounds. An ‘activist’ role was articulated in each CoP. The activist position rotated around the group and was introduced to ensure that there was strategic alignment with community activities. The operations element of each CoP was around creating a safe and trusting environ- ment where people felt comfortable to contrib- ute and co-create new knowledge. The leverage dimension was to create linkages between the different communities rather than having lots of isolated communities within such a large organ- isation. Each community developed their own identity and brand and engaged in two-way dia- logue with other communities.2
External feedback was provided to each CoP after it had been in operation for some time. This took the form of a health-check questionnaire and identified strengths and gaps in the persist- ence of the community. Each CoP also tried to classify the value of their activities in a variety of ways. This included a list of success stories, quotes from satisfied community ‘customers’ and use of the balanced-scorecard framework.
Another major strand in Unilever’s knowledge management endeavours was the development of an intranet portal. The aim of the portal was to aid knowledge sharing and increase collabor- ation across the organisation. The portal held a knowledge repository with a search engine cov- ering different CoP projects, a CRM database as well as key procedures and practices. The knowl- edge repositories were supported by ‘chat groups’
who provided hints, tips and guidance on how best to use the material. Community interactions were maintained using community software such as e-groups and Geocrawler. A ‘yellow pages’
database was created to help identify experts.
The main challenge was getting experts to main- tain and update their profiles regularly.3
Unilever has tried to capture the knowledge and learning of retiring employees through nar- rative accounts called ‘learning histories’. They used two game-show formats, ‘Blind Date’ to match people with the necessary expertise and
‘Mastermind’ to help people question a departing expert. The learning histories served as a form of organisational memory to help employees think through what they might do in similar situations.4 Learning from projects was captured in
‘Knowledge Debriefs’ to help prevent recur- rent mistakes ‘re-inventing the wheel’ on each project. The debriefing focused on process and technical learning. Interviews were conducted with project participants to capture the five best and worst aspects of the project. These were dis- cussed with all participants and documented as a form of process learning. Technical learning came from comparing key product attributes and consumer attributes set at the beginning of the project. Two delegates from new related projects attended the project debriefs to ensure that mis- takes weren’t repeated and any learning was transferred to the new project.5
Cathy reflected on her earlier meeting with Paul Polman and smiled at his perceptive remarks around knowledge management. She recalled her own affirmation in this area through organisational circulars:
‘Knowledge management needs to be aligned with CEO’s strategy. It will be essential to define how KM can support the business strategy, as well as build and/or strengthen KM competencies across the business. Professional competencies need to focus not only on what people do, but also on what they need to know in order to deliver. In that sense the discussion shouldn’t be as to whose responsibility it is, either the CKO, CIO or HR function, but rather of how to ensure that those needs are deliberately identified and addressed’.
It was time to move some of this rhetoric into reality. Cathy called her knowledge management team together to discuss the way forward.
Chapter 4 / Strategic management perspectives 113
Summary
This chapter has elaborated five areas that need to be considered when developing a knowledge management strategy:
1 Realised strategies may emerge from the way a firm develops through experience rather than as an outcome of a deliberate plan or strategy. Many deliberate strategies may be unrealised.
2 A clear understanding of strategy needs awareness of the different schools of thought and their underlying assumptions. The dominant schools of thought in the knowl- edge management literature are the industrial organisation tradition, the excellence and turnaround literature, and the institutionalist perspective.
3 The resource-based and knowledge-based view of the firm place greater emphasis on the firm’s resources (tangible and intangible assets) to achieve competitive advantage.
4 Information systems and information technology strategies have developed from operational data-processing approaches to management information systems and strategic information systems. More recently, IS/IT strategies have adopted a resource-based view of the firm and suggest that IS capabilities are the primary source of competitive advantage.
5 Knowledge management strategies occur as a dialectic between codification (exploi- tation) strategies and personalisation (exploration) strategies. Firms that follow both strategies simultaneously are likely to fail. The dialectic or change between strategies is likely to occur following a crisis or discontinuity.
References
1 von Krogh, G., I. Nonaka et al. (2001) ‘Making the most of your company’s knowledge: a strategic framework’, Long Range Planning 34: 421–39.
2 Poss, A., K. Linse et al. (2005) ‘Unilever: Leveraging community value’, Inside Knowledge 8(4).
3 Iske, P. L. (2002) ‘Building a corporate KM commu- nity’, Ibid, 6.
4 Higgison, S. (2007) ‘The Knowledge: Sam Marshall’, Ibid, 27 June.
5 von Krogh, G. (2002) ‘The communal resource and information systems’, Journal of Strategic Information Systems, 11(2): 85–107.
Questions
1 What advice would you give Cathy Bautista on improving the strategic focus of Unilever’s knowledge management activities?
2 What changes, if any, would you make to Unilever’s communities of practice?
3 How could ‘learning histories’ be further developed to capture organisational memory?
Further reading
1 Mintzberg et al. (1998) is an excellent exploration of the different strategy schools and their underlying assumptions. The authors distinguish ten schools of strategic thought rather than the three described in this chapter.
2 Johnson and Scholes (2002) is a classic strategy text for MBA students. The main caution is that it comes from a predominantly industrial organisation background and needs to be read in this context.
Questions for further thought
1 At the extremes of KM strategy, is a codification strategy purely an IS/IT strategy and a personalisation strategy a human resource (HR) strategy? What is the importance of the IS/IT department and HR departments talking to one another for the development of a KM strategy?
2 Given the institutionalist perspective’s preoccupation with learning, how do we know that the organisation is learning about the right things and responding to market changes in the appropriate manner?
3 If only 10 per cent of formulated strategies ever get implemented, why do firms bother with elaborate planning processes?
4 Why do people knock books and publications from the excellence and turnaround literature when they have probably had more impact and influence on managers than literature from the industrial organisation and institutionalist perspective put together?
5 Core competences are described using the analogy of the roots of a tree. How effective are these core competences in times of discontinuity when the environment changes the soil nourishing the roots of competence into sand?
6 Is there potential in development of strategic thinking by a synthesis of the best ideas from the industrial organisation and institutionalist perspective?
7 What lessons can managers take from the innovation literature when the results of several studies are inconsistent? Could literature hinder the very creative and innovative processes it is trying to describe?
8 If we cannot predict the future, what is the point of codifying strategic knowledge into ‘what we don’t know we know’ and ‘what we don’t know we don’t know’ (Drew 1999)? Is this the same as the use of scenario planning in the industrial organisation tradition?
9 Is KM strategy development the domain of the finance director, the IS/IT director or the HR director? If you propose a joint body, how do you overcome the
communication
difficulties between the different areas, their interests and different languages?
10 What is the likelihood of codification strategies developing superficial learning and personalisation strategies developing a deeper insight on any subject.
Chapter 4 / Strategic management perspectives 115
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