In an apocryphal statement, the Hewlett-Packard chief executive officer, Mr Lew Platt asserted: "If Hewlett-Packard knew what HP knows, we would be three times as profitable." He was articulating the basic problems facing those who want to create value from the fragmented knowledge that exists in their organisations.
In short, this requires a "learning organisation", which captures, transfers and applies knowledge.
So, what prevents HP and other companies from knowing what they know? How can this be rectified?
There are three main inter-related obstacles to be overcome on the way to effective knowledge management (KM):
1. Knowledge is inherently hard to capture and apply.
2. Often, there is no incentive for the knower to share her/his knowledge - in fact there may well be an incentive to keep valuable knowledge to oneself.
3. Most traditional organisational cultures and infrastructures make knowledge capture and transfer difficult to effect.
On the capture and application of knowledge, Mr Ikujiro Nonaka, a Japanese professor and guru on KM, has talked about the ideal of a "spiral of knowledge", consisting of the interplay between tacit and explicit knowledge. In companies that create and use knowledge well, there is a recognition that knowledge starts with the individual, often in the form of tacit knowledge.
Tacit knowledge is highly personal and difficult to articulate, therefore unique and valuable. Thus, the core of success is to make this tacit knowledge explicit - available to the organisation as a whole.
Mr Nonaka cites the case of Matsushita's attempt to develop a new home bread-making machine. Despite exhaustive analyses and data collection, the machine consistently produced inferior bread, burnt on the outside and undercooked on the inside.
A solution began to emerge only after a member of the product development team spent a year as a baker's apprentice. By actually kneading dough, she was able to feel in her hands the sort of kneading/twisting movements that were necessary to make quality bread. Her experience enabled the transfer of tacit knowledge from master to apprentice, and was grounded in action.
On rejoining the product development team, she made the tacit knowledge about the kneading actions explicit and helped to encode it in the product specifications for the bread machine. The challenge of making tacit knowledge explicit is underlined by the fact that it took Matsushita a further year to mimic the kneading movement and embody it in a machine.
Once made explicit, knowledge is relatively easy to transfer. Here, information technology plays a part, as a pipeline for rapid transmission and storage medium for explicit knowledge But the contribution of IT is limited because explicit knowledge requires a "knower" - a person to make the explicit knowledge really useful and valuable.
The ability to evaluate and leverage value out of incoming knowledge must be based on action and experience. A dramatic example is seen in an article in the Wall Street Journal on Korean Air, an airline noted for its abysmal accident record and scores of "near misses" in the last ten years. Eighty per cent of these were blamed on human error. In part, the errors were due to "cookbook flying" - rigidly standardised pilot training, with techniques learned by rote. In simulation exercises, even "emergencies" were standardised, always presented in the same sequence. Thus, in a real emergency situation, pilots lacked the wellspring of experience to assess the situation quickly and act appropriately.
Different tasks require different levels of tacit knowledge added to the explicit to make the explicit useful, and there may be some ambiguity about the appropriate mix. This ambiguity is exemplified by the controversy in RTE about whether meteorologists or professional television announcers should present the weather on-screen.
The RTE controversy highlights the second issue in KM. How do you encourage people to share their knowledge?
Mr Thomas Davenport and Mr Laurence Prusak, two KM consultants, talk about a "market" in knowledge. When knowledge is procured from outside the company, the medium of payment is usually money. However, within organisations, they considered three types of "payment" that will entice the "seller" to reveal knowledge. One of these is reciprocity - expecting something in return, whether in the way of knowledge, or mutuality of interests, e.g. the knowledge sharer is also a profit sharer or owns shares in the company. A second incentive is reputation enhancement. Respect is desirable in its own right, but also leads to secondary rewards because knowledge buyers are more likely to seek out the person with a reputation for knowledge and reward her/him accordingly.
The third incentive is altruism - the expert is keen to share knowledge, because he/she is enthusiastic about disseminating the word.
The third obstacle to KM is eliminated when companies build a learning organisation infrastructure. This enables the creation of knowledge through action and experience, the transfer of tacit and explicit knowledge to create a "spiral of knowledge" and the application of knowledge to areas of leverage, where it will add the most value and competitive advantage.
A learning organisation empowers everyone to be responsible for learning and sharing knowledge. If knowledge is hoarded by a very few people, it is less likely to be developed and enriched. As in any oligopoly, or even monopoly, those with the knowledge wield inordinate power.
It is in their interests to sell their knowledge only at exorbitant prices, or not to sell it at all, but to contract themselves out at a high price to complete a specific job.
Maximum participation in knowledge sharing is facilitated by an understanding and implementation of the knowledge market pricing system. This means using reciprocity and reputation when appropriate. However, all too often the knowledge resource available through altruism is undervalued. It is ironic that when companies downsize, experienced staff, who could be mentors and willing to share their tacit knowledge, are those targeted for redundancy. For example, in the early 1990s, some Irish banks made a cohort of branch managers redundant. It was only after the managers were gone that the banks realised that they had taken irreplaceable tacit knowledge and customer relationship with them.
The learning organisation is one where knowledge travels easily. In this respect, IT systems help, but the key input is the human one, the interaction among people. Knowledge transactions have to take place in an environment of trust and mutual respect. The buyers and sellers of knowledge must know that their "trading partners" can be trusted. Everyone must be willing to engage in a continuing series of transactions for the mutual benefit of all.
Another feature of a learning organisation is the freedom to voice ideas, and the openness to hear the thoughts of others. Hierarchy and entrenched mental models are the enemies of learning. Returning to Korean Air, virtually all pilots promoted to captain were former air force pilots. This established a hierarchy in the cockpit with a rigid code of obedience to the captain.
The crew was too intimidated to correct a captain, even making a life threatening mistake. For a civilian co-pilot to challenge a military trained captain would mean a loss of face for the captain. For both men, it was more honourable to die, and sometimes they did.
The situation was compounded by the fact that strong informal ties among the former military "old boys" prevented challenges to the conventional wisdom through the introduction of discordant knowledge, creating resistance to change. Can we see any parallels in Irish corporate life?
Eleanor O'Higgins is a lecturer in strategic management and business ethics at the Graduate Business School, UCD.
