Knowledge Gaps and the Corporate Instinct
Opinions vary regarding the best ways to manage during hard times. Some say a downturn is a great time to consider outsourcing, while others say it’s the worst. Some argue for immediate cuts across the board; others suggest it’s better to examine processes and projects in order to trim fat, not internal organs. Interestingly enough, hard times are always characterized by the presence of many gaps in the organization, the market, the economy, management and so on. The harder the times, more the number of gaps and their impact:
•Gap in the excess of inventory, compared with demand
•Gap in profitability, compared with levels of investment
•Gap in creativity, compared with fierce competition
•Gap in skilled personnel and management, compared with eminent need for downsizing, layoffs and employee loyalty; and the list goes on….
Corporate gaps, no matter their nature, are always a challenge for management and the organization as a whole. However, for learning organizations, gaps can and should be opportunities to transcend, to renew and reinvent themselves. As discussed throughout this book, although organizations must learn to deal with the constant “move of the cheese,” they will be better-off learning to constantly reinvent, re-create their own cheese. By doing so, learning organizations will be actually moving the market’s cheese; for sure, it’s the competitor’s cheese. Call it disruptive technology, or strategy, today, organizations must be ready to view the everyday business challenges coming their way as a necessary gap. After all, such gaps are for sure inevitable.
This chapter introduces the notion of learning organizations feeding on gaps such as the ones listed above, and many others, as a necessary competitive advantage, as a way to transcend them and disrupt the status quo of their competitors and the business landscape. In the process, due to their very disruptive and unprecedented nature, the only way organizations can deal with gaps is by trusting their very own corporate instinct. If they were to rely on any other form of information other than that, they would only be repeating the so-called reengineering cycle. As a result, instead of transcending their corporate culture and know-how, they would be simply readapting to whatever model is known as “best practices” at the time, losing their edge, becoming conformant.
Outsourcing: Are You Creating Another Gap?
Outsourcing can bring tangible benefits to any organization. It is typically the quickest response to any nonanticipated new gap in the organization, as well as the most efficient in quickly addressing and (hopefully!) ending a gap. But opting for outsourcing too quickly has a lot in common with taking a painkiller when something hurts, without bothering to identify the real source of the problem. Unfortunately, if not carefully considered, outsourcing promotes a lack of trust in the organization’s instinct.
Any organization, as any human being, has its own instinct, something we Christians call Spirit. To ignore such corporate instinct, is the same as Christians ignoring the Spirit. It means you are definitely in danger and heading for trouble. Outsourcing has too many issues around it for any manager to do it quickly and right. If management does not stop and listen to the corporate instinct, the odds are that if they go through with it, they will not be able to outsource in a time frame that is meaningful. Once they do the due diligence and think it through, they will be about one year down the road, by which time the economy, and gaps, will have changed. They may find themselves ready to outsource at just the wrong time, just as those Christians that do not rely on the Spirit find themselves on the wrong path only because it was easier to enter the broad road than walk the narrow one. In business, just like in Christian life, the danger of outsourcing is that it often becomes a “quick fix,” a “quick hit solution,” that often produces adverse consequences. The odds are high that if a manager tries to rush through this kind of major decision, she/he will end up paying for it in the long run. Even if they do it right, they might not get the savings, or results, they want in the time frame they need.
Using Corporate Instinct: Strengthening Your Processes
During an economic downturn such as the one the world is experiencing now, management tends to cut costs, in an attempt to reduce, or eliminate, the budget gap. Delays in project development or layoffs are very common, and are a result of conditional behavior, not corporate instinct. But isn’t that what any competitor will typically do? However, if you were to use your corporate instinct, your gut feelings if you may, you should instead begin preparing your transition to economic recovery and boom. The challenge in tapping into corporate instinct is not intuitive and requires some level of paradoxical thinking. The challenge in “listening” to corporate instinct is that it invariably requires improving processes and automation. By improving process you are making an investment during a downturn to prepare for an upswing. Otherwise, when it comes, you may find your company very inefficient.
Trusting corporate instinct, as Koulopoulos, Tom, and Spinello1 point out, enables companies to be successful time and time again. It is a result of deliberate action and can be developed. Actually, it must be! If you begin to rely on your organization’s instinct you will find your organization acting beyond the confines of rational control, beyond memory, and systematic analysis. In this case, strategies are created out of a collective reflex. It is important to always improve efficiency and plan ahead, as traditional IT gurus will tell you, but more important, you should help your organization to tap into and intensify its corporate instinct, by enabling everyone to access this collective corporate wisdom.
Building on Koulopoulos, Tom, and Spinello’s concept, corporate interviews and my own Knowledge Tornado concept, I confirmed that such collective corporate wisdom is an entity of the organization that can be negatively distinguished from an organization’s memory by the fact that is does not, like the latter, owe its existence to corporate professional experience and consequently is not a corporate acquisition. That is why many companies do not react to fatal market shifts and sadly crash and burn: management tends to reject the collective corporate wisdom and opposes anyone that promotes or points it out, instead, wasting time on committees and PowerPoint presentations.
While the corporate memory is made up essentially of professional knowledge, best practices and other contents that have at one time been conscious to the organization and its staff, but which have disappeared from corporate consciousness by having been forgotten or repressed, the contents of the collective corporate wisdom have never been in any database or KM system, and therefore have never been individually acquired by anyone in the organization; they owe their existence exclusively to what I call corporate heredity. Whereas the corporate memory consists for the most part of complexes, the content of the collective corporate wisdom is made up essentially of knowledge. Koulopoulos, Toms, and Spinello confirm this, as they point out the importance of understanding that the knowledge on which corporate instinct is based is essentially mistaken by corporate memory. They go on to say that in a corporate setting, memory is most often associated with informal means of information capture and retrieval, a far less reliable basis of decision making than knowledge. Memory is selective and subjective. Knowledge, or more specifically a knowledge base, provides specific mechanisms by which to objectify, capture, and make available the collective experience of an organization.2
The concept of the knowledge, which is an indispensable correlation to the idea of the collective corporate wisdom, indicates the existence of definite forms in the corporate culture, which seem to be present always and everywhere in the organization. Thus, in addition to corporate memory, which is of a thoroughly knowledge-base-gathering nature and which it is only empirical knowledge (even if we tack on the corporate memory as an appendix), every organization also has a second knowledge system, an instinctive one, of a collective, universal (every other corporation has it too!) and impersonal nature: a collective corporate wisdom. This collective corporate wisdom does not develop individually, by every professional in the organization, but is inherited. It is created by everyone in the organization but is not owned by anyone. It consists of pre-existent data, the capital knowledge, which can only be turned into action secondarily and which provides definite data to certain knowledge contents.
Disruptive Knowledge: Creating the Gap
Corporate instincts, as any human instincts, are highly conservative and have extreme antiquity with regard to both their dynamism and their collective reflex. Such reflex, when represented to the organization, appears as an idea or strategy, which expresses the nature of the instinctive impulse visually and concretely, like a picture. Now you know why after a new concept or idea is presented, the presenter typically asks, “if you got the picture.”
In order to take advantage of corporate instinct you must understand that instinct is anything but a blind and indefinite impulse, since it proves to be attuned and adapted to a definite external situation, beyond the corporate walls. This latter circumstance gives it its specific and irreducible structure. Just as instinct is original and hereditary, so too does its structure transcend current management, market conditions or knowledge base.
These considerations naturally apply also to the corporation as a whole, which still remains within the framework of general business practices, despite the possession of knowledge, decision-making, and rationale. The fact that corporate business should be rooted in instinct and derive from it its dynamism, as well as the basic features of its innovation strategy, has the same significance for corporate business practices as for all other competitors in the marketplace. The dynamic nature of instinctive organizations allows for the free flow of new ideas. These organizations focus on their core competencies and not their core products, thus constantly competing not against their competitors, but against themselves. They do not allow the market or the competition to create a gap in their business goals, product/technology road map or revenues. The paradox is, these companies compete against themselves, creating the gaps before them and striving to overcome them before the competition does so. A great example of such a company is Microsoft, which drives the competition insane with the many products, versions, and renewed feature sets it releases over and over again, several times a year.
Disruptive knowledge, a powerful strategic tool, consists essentially in the constant adaptation of the primordial knowledge (or technology) pattern that was instituted in the organization. Disruptive knowledge creates gaps, challenges in the organization, as it introduces certain modifications to or insights into the original organization’s knowledge. If the flow of instinctive dynamism into the organization is to be maintained, as is absolutely necessary for its existence in this new knowledge economy, then it is imperative that learning organizations remold their knowledge base into new and disruptive ideas, which are adequate to the challenge of the ever-present market. Organizations that are confronting gaps—changes—must first determine that they have the resources required to succeed. They then need to ask a separate question: does the organization have the processes and values to succeed? Asking such a question is not as instinctive because the processes by which work is done and the values by which employees make their decisions have served them well—corporate memory. Thus, disruptive knowledge can turn the very capabilities of an organization into its own disabilities as well. Relying on corporate instinct in such a situation can pay off handsomely. Collective corporate wisdom should be able to know if the process by which work habitually gets done in the organization is appropriate for the new problem.
Understanding the gaps created by a disruptive knowledge is a very important step in solving them. Not relying on the collective wisdom of the corporation can set teams charged with developing and implementing an innovation on a course fraught with roadblocks, second-guessing and frustration. The reasons why innovation often seems to be so difficult for established firms is that they refuse corporate instinct—or do not tap into it—employ highly capable people and then set them to work within processes and values that weren’t designed to facilitate success with the task at hand. Tapping into corporate instinct, especially in light of dealing with disruptive knowledge, is not an easy task. Nothing estranges a corporation more from the ground plan of its instincts than its learning capacity, which turns out to be a genuine drive toward progressive transformations of corporate culture modes. The creation and re-creation of such disruptive knowledge, more than anything else, is responsible for the altered conditions of successful organizations and the need for new adaptations, which the marketplace brings. It is also the source of numerous organizational disturbances and difficulties occasioned by corporate progressive alienation from its instinctual foundation, that is, by its affinity and identification with its corporate memory, by its concern with corporate memory at the expense of the collective wisdom. The result is that most of today’s corporations can know themselves only insofar as they can become aware of themselves.
Corporate Instinct Is Old
Has corporate instinct always existed? Yes! Although some believe that corporate instinct is new, and that only individual instincts driven by their vision existed before, corporate instinct has more influence on an individual’s instinct than the other way around. It’s true that corporate instinct can only be leveraged fully when the tools and technologies for its development are readily available. But every corporation always had at its disposal tools and technologies, as those define the very nature of a corporation.
What does happen today that didn’t happen before is that businesses are conducted at the speed of light. The advent of e-mail, Skype, YouTube, Tweeter, enterprise workflow, and other collaboration tools enables changes that used to take a full year, such as in manufacturing procurement, to happen now in less than a few minutes—as in e-procurement exchanges, such as eSteel, eChem, and ANX—through the use of collaboration tools, partnerships, and alliances.
But collaboration always existed, even if through primitive means such as interoffice memo or telex. The issue is that organizations never had the need to tap into corporate instinct, because there was time for fully rational decisions. But as the wheels of progress, in particular technological progress, increase speed and availability, corporations are being forced to tap into their corporate instinct in order to compete in time, to innovate and to adapt to new market demands. One way to keep up with it is through the development of community of practices.
Communities of Practice: Coping With Disruptive Knowledge
The concept of community of practice is relatively new and has been used to describe loosely structured groups of people that share knowledge in areas of common interest. Innovative organizations have adopted this model to position themselves for leadership in the knowledge economy and to expand the benefits of corporate collective wisdom. Often, communities of practice do not operate on an explicit agenda. Instead, communities of practice members tend to share their experiences and knowledge in free-flowing, creative ways that foster new approaches to problems and promote collective wisdom.3 I often try to organize communities of practice around the needs of the industry at organizations I am working for. I usually call them advisory group (AG). Despite the diversity of the group, we all shared a few common traits that besides dealing with disruptive knowledge included:
•Common interest or goal—AG was organized around topics that were important and meaningful to our membership.
•Common means to stay connected—AG stayed in frequent contact using e-mail listservs, Google Docs, Skype, webcasting or conference calls, and through more traditional approaches such as face-to-face meetings.
•Facilitated, not dominated—The role of the facilitator was important as it focused on recruiting and engaging members, not dictating content, which would completely block any instinctive activity.
•Management support, not control—Management provided tools and a supportive environment that includes providing members the time to participate and recognizing those that demonstrate an exemplary attitude toward community and sharing. The TAG set its own agendas based on the needs of members as they perform their jobs.
•Voluntary participation—Members choose to participate due to the “value added” in performing their jobs. Communities complement existing functions and organizational structures; they do not create additional ones.
•Willingness to share knowledge—Members are willing to share what they know, respond to requests, and collectively solve problems. They built trusting relationships.
Sustainable Innovation Through Gap Generation
Successful use of corporate instinct enables sustainable innovation in the sense that what gets produced or created by the organization is sustainable. For instance, in the late 1980s, I used to be the CEO of an information system and technology (IS&T) consulting firm in New Hampshire, TechnoLogic. After the crash of the stock market in 1987, the United States experienced an economic downturn, so business was not easy and gaps were being generated almost daily. We decided to devote our human resources to innovating new products and services with office automation and internetworking in mind.
Despite the merits of collective wisdom—the term actually didn’t exist back then, since the Delphi Group had not yet coined it—with everyone engaged in product and service development, the more we exercised corporate instinct, the less we had people to take care of the day-to-day needs of the corporation, such as making products, filling orders, or dealing with customers. In other words, we were all willing to think out-of-the-box, but no one knew what to do with the ideas and projects that resulted from such brainstorming, as they were all new to everyone, not present in the corporate memory or part of the skills set of the staff, which made the insights even more amazing as no one had any idea of how we got to them.
Clearly, there is a difference between the notions of sustainable innovation in the organization, versus innovation, one that is sustainable in the work process. Thus, the challenge to any organization tapping into its corporate instinct is that as a gap is filled—need for innovation—another one emerges, how should such innovation be implemented. As you rely again on corporate instinct and tap into corporate memory to resolve the challenge of implementing an innovative product/service, a new gap is created, as innovation then begins its institutionalization, and is thus no longer as innovative. The cycle restarts. The first stage deals with innovations and the corporate instinct in which they are produced, while the latter deals with the innovation process itself, as a component of the value chain, tapping into corporate memory, and which is independent of products produced or the sustainability of a firm.
Therefore, sustainable innovation must promote the sustainability of business; otherwise, innovation becomes only a great idea. The concept not only applies to outcomes in the product or organization sense of the term, but also to the process through which innovations are created. Thus, in my view, sustainable practices in business are utterly dependent upon whether or not sustainable innovation processes are in place, where the former cannot exist without the latter. Nonetheless, not always sustainable innovation programs lead to sustainable businesses, and not every organization, which practice sustainable innovation, will always be sustainable in their business affairs. The bottom line is that sustainable business is very unlikely in the absence of sustainable innovation.
Nurturing Collective Wisdom: Attempting to Fill the Gap
Collective wisdom, as discussed earlier, can be an effective tool for solving the problem of knowledge deficit, or the underutilization of organizational knowledge. Hence, strategy meetings and other forms of brainstorm meetings where employees across the organization are encouraged to freely share their own ideas are powerful tools in nurturing collective wisdom that transcends the corporate memory. These meetings should cover areas that are largely determined by the specific needs (gaps) of the organization and may range from developing a corporate quality mission statement in establishing practical methods for empowering employees, creating a new concept for a product or service, and so on.
The main idea is to tap into the collective knowledge of the organization as a whole (memory) and its members, who then include their inherent tacit knowledge. Unfortunately, most of the knowledge contained in an organization goes unused, and many times gets lost, through employee layoffs and resignations, even before it is acknowledge and captured, generating knowledge deficits (another form of gap!).
According to TMP Worldwide,4 it takes 1.5 times an employee’s annual salary to replace that employee. This is due to several factors, one of which is the loss of unrecorded information and data. Lost information may include internal business processes, external contacts/relationships, and proprietary data. Knowledge deficit refers not only to know-how, but to codified data as well. Knowledge deficit is caused when employees cannot access:
•Databases
•Documents
•E-mail communications
•Expertise of other employees/outside sources
•Internet content.
Therefore, as gaps are created and the organization attempts to fill them, employees should have available at their disposal searching capabilities that enable them to search for codified data, as well as unrecorded, tacit knowledge ones. Such a process fosters collective wisdom, which in turn fosters innovation, one of the prime goals in tapping into corporate instinct. Expertise management, as information market accurately contends, enables the creation of knowledge superconductivity. For instance, strategy meetings can enable employees with business problems to tap into the minds of those experts who can at a minimum add to their knowledge, and may even be able to solve the business problem at hand. However, these meetings should be moderated and include a variety of themes and dynamics that encourage freethinking, commitment, loyalty, and wiliness to create. Hence, these meetings play an important role in ensuring that any effort in developing new concepts, in innovation, are supported by the entire organization, top to bottom. These meetings can include topics such as:
•Achieving unanimous agreement and commitment to a new concept by executives and senior management.
•Creating a comprehensive plan by which a new product or service concept can be implemented and become sustainable (remember, without sustainability, the new concept is only a great idea).
•Crisis/contingency systems (dealing with major gaps in times of chaos).
•Developing specific tactics by which new concepts and respective plans are to be realized.
•Establishing appropriate goals and benchmarks.
As well as these strategic and planning meetings, there are also some less apparent but equally important communication issues which can be addressed during the quest for collective wisdom, including:
•Developing high-profile actions that communicate management’s commitment to change (creation of gaps) and innovation (bridging the gaps).
•Developing ongoing means for communicating progress of the strategy meetings and development of a collective wisdom process to both internal and external customers.
•Effectively communicating the collective wisdom to managers, staff and the entire organization as a whole.
Few Focus Areas Where Corporate Instinct Pays Off
Corporate instinct is key in crossing new gaps and bridging them. It enables companies to unlearn as quickly as they re-learn, thereby pushing aside their own best ideas for new ones that meet the rapidly changing markets they inhabit. There are few areas, however, where corporate instincts can really pay off, including the ability to:
•recover from mistakes, both quickly and creatively;
•take considered risks and facilitate organizational change;
•communicate conviction;
•balance conflict tensions;
•promote intellectual prowess.
Recovering From Mistakes, Both Quickly and Creatively
If well cultivated, corporate instinct enables an organization the ability to handle ambiguity, enabling the organization to recover from mistakes both quickly and creatively. Taking Wal-Mart as an example, going global isn’t always a smooth process. In fact, some blunders are inevitable and Wal-Mart had to pull out from Germany and South Korea, not to mention the punitive moralism of Wal-Mart’s Mexico mess. The Wal-Mart story is most importantly a reminder of the pervasive, even understandable, impulse within companies to ignore whistleblowers because they’re so often time-wasters. And it’s a reminder of why you can’t turn your back on them. The real measure of success then becomes how, and how quickly, mistakes are detected and then fixed. Wal-Mart excels in this area—although not so in Mexico—and the result has been a reawakening of the kind of entrepreneurism and experimentation Wal-Mart has been known for in the early days under Sam Walton. In an instinctive corporation, the moment you let avoiding failure become your motivator, you lose.
Communicating Conviction
Tapping into corporate instinct without communicating conviction predicts how likely the organization is to succeed, as well as how prone it is to derailing. Thus, as flag holders of corporate instinct, senior management must consider whether their organization fosters this competence, communicating conviction, or discourages it. To the degree that organizational climate nourishes this competence, the organization will be more effective and productive, as group intelligence5 is maximized, that is, the synergistic interaction of every individual’s best talents in the organization.
Take the example of GE’s leadership development center, GE Crotonville, embodied by Jack Welch’s vision for GE. Welch, then CEO of GE, effectively communicated conviction about his vision for GE, and the results are unquestionable to this date as we look at GE’s performance year after year, and the caliber of its management staff. But looking at Welch’s example, how can one break down his communicating conviction? Through a number of qualities that together inspire others to take risks, to trust their core competencies, and so on. It means a number of things, chief among them are confidence, clarity and charisma.
Today, more than ever before, executives in learning organizations must ride the knowledge tornado ever present in a knowledge-based economy. As a requirement, they must possess the confidence to make a difference. And they must be able to make critical decisions on the spot, sometimes in far-flung corporate outposts. They must trust the corporate memory and the collective wisdom of the organization, in particular of the senior staff. The ability to articulate a powerful vision for the company’s future, to motivate others to put it into action and to act decisively is absolutely vital to any organization’s success. But in a global organization, it is no less than a requirement.
Looking at how Welch reshaped GE during his tenure as CEO is a good example. He did it through more than 600 acquisitions and a powerful push into the world’s emerging markets. But he did it also through the sheer force of his personality—and his conviction. No corporate memory could have provided data and enough conviction to achieve such a goal. It was, in most part, fruit of innovation, and corporate instinct at its best.
The mastering and leveraging of technology for business success is essential when competing in global markets and in knowledge-based economy, in particular knowledge technologies. But it is not enough. Despite the wonders of today’s electronic communications, technology is no substitute for face-to-face interaction, emotional intelligence, and corporate instinct. That was why Jack spoke to every class at GE Crotonville and gathered his top executives there every quarter to review company strategy. It is also why he was known to fax off handwritten notes to his executives throughout the world. Beyond his unwavering conviction, Jack was also a master at balancing technology and technique.
Balancing Conflict Tensions
The ability to balance conflicting tensions is a balancing act. Senior staff is increasingly being pressured to find new ways of organizing and managing the tensions between:
•Achieving growth organically and through acquisitions
•Centralized and decentralized structures
•Competing alone and in tandem with partners
•Global and local interests
•Product or market-oriented organizations and geographical organizations
•Short-term and long-term perspectives
•The rights of parent corporations and those of subsidiaries.
Clearly, these are thorny issues with no simple solutions, and a challenge in turning such organization into a knowing organization for the 21st century. In fact, some of these issues may defy solution. The challenge for the knowing organization, one that relies on corporate instinct, then, is not to solve these conflicts, but to acknowledge them and operate from within them. This means making a shift from either/or thinking to a broader, bolder both/and perspective. Again quoting Welch, from a Business Week article many years ago, “Anybody can manage short. Anybody can manage long. Balancing those two things is what management is really all about.”
The management of a business structure that addresses the challenges listed above will always be prone to failure. In order to be able to adapt to the ever-shifting challenges (gaps!) so present in a knowledge economy, executives must organize without structure. When executives become aware of the corporate instinct, they morph their organization into a knowing organization, thus shifting the organizational structure paradigm into a fluid organizational structure. They would have developed and honed its instinctive power of adaptability and versatility through a heightened internal awareness, which is not locked into rigid organizational structures.
Chapter Summary
This chapter discussed the knowledge gaps that are created at learning organizations and the presence of a corporate instinct at every organization. The chapter encourages the use of corporate Instinct to strengthen business processes and to deal with disruptive knowledge. Communities of practice and the need for nurturing collective wisdom is also discussed.