Chapter 4
Making the Connection:
Knowledge Management and
Organizational Learning

In our exploration of the three main forms of knowledge in Chapter 2, we took a look at the specific tactics that can capture each form of knowledge for your organization. Then, in Chapter 3, we showed you, in more detail, how organizations can create, distribute, and apply knowledge. Along the way, we mentioned the need to keep knowledge management efforts linked to strategy and adapted to your organization’s culture and core needs.

In this chapter, we introduce a model that helps you focus your knowledge management efforts on building the core competencies that make your company the best in the world at what it does. This focus puts knowledge management at the service of your strategy. And it explicitly links knowledge management with organizational learning.

Let’s look at this another way. Today, almost every company’s strategic plans involve moving forward into new areas— businesses, markets, regions, technologies—where new skills will be needed. In addition, sources of information, and the information itself, keep changing. The faster a company’s people can gain the skills and competencies they need to keep up with the information deluge while taking the company forward, the better the chance that the company will meet its strategic goals. Therefore, the company’s collective ability to absorb and sort information and learn—its capacity for organizational learning—is a major factor in its chances of success. Knowledge management is the systematic use of processes that enhance organizational learning. The main purpose of knowledge management is to help companies learn and expand the core competencies—the know-how—they need to carry out their strategies and be the best at what they do.

The RICE Model: Responsiveness, Innovation, Competency, Efficiency

Know-how in your organization is built around four areas of action: responsiveness, innovation, competency, and efficiency. These four areas, which we call the RICE model, cover all of the different ways in which you can use knowledge to help your company succeed. Responsiveness concerns how your company takes in vital information from its surroundings: its customers, competitors, suppliers, and others who affect—and are affected by—your company’s performance. Innovation concerns how your company uses ideas and information to change what it does and how it does it. Competency concerns the skills your people and teams need to deliver products and services. Efficiency concerns how well your processes for product and service delivery work.¹

Part of developing a good knowledge strategy is concentrating on the areas that suit your company’s business proposition and objectives. For example, if your company is in a business in which being able to consistently deliver the same high-quality products and services at a competitive price is the path to success, then you are likely to focus on applying knowledge to improve the competency of your people and the efficiency of your processes. You will be making the most of your current resources and knowledge assets. Total Quality Management systems are an example of a way to efficiently reuse knowledge to improve processes.

On the other hand, if your company is in a business in which developing and delivering new products and services that reshape markets or create entirely new ones lead to success, then you are likely to focus on generating knowledge by hearing what the marketplace is saying—and enabling your employees to communicate with each other—and using that knowledge to innovate.

Most companies, of course, must do both kinds of knowledge management to thrive. They have current products and services to maintain in the marketplace, and they are developing the next generation of offerings to build a position in tomorrow’s marketplace. The purpose of the RICE model is not to assign a particular approach, but to help you define the key pieces of a knowledge strategy, assess where you have strengths or weaknesses, and focus on what will help your company the most.

Competency and Efficiency

From Individual Competency to Organizational Efficiency. Organizational learning builds organizational knowledge. But all learning, all knowledge, all know-how, starts in and resides with individuals. People in organizations often act collectively, but they learn based on their own interests, aptitudes, and motivators—and based on what they believe will protect or improve their standing in the organization. Ideally, they are also motivated to learn the competencies that help the organization most. But we can’t always count on that to happen automatically.

Starting with Competency. The first stage in building the knowledge of the organization is to hire people who already have the needed skills. The hiring process begins with identifying the needed knowledge and skills and then builds a recruiting, marketing, and retention program that identifies and attracts the right people with the right skills (see Manager’s Pocket Guide to Employee Selection and Retention).

The second stage in building individual competency is managing “time to talent.” How quickly can an organization take novices or new employees and turn their talent into activity that adds value to the firm? There are two approaches to improving time to talent:

•   Formal training programs

•   Communities of practice

Formal training programs focus on giving people the tools they need to learn what they need just then (just-in-time learning) or what they might need sometime (just-in-case learning). School-like training—in a group, with a leader, at a specific time and place—still plays a large role in training. More and more, however, companies are using on-line, on-demand forms of training that can be tailored much more precisely to individual needs. Beyond that, through distance learning or e-learning capabilities, faculty members and other experts become available as on-line consultants to help practitioners solve real problems. The problems and their solutions can then be integrated into the company’s knowledge base to share the learning more broadly and help employees bring the best approaches to bear on real issues.

Communities of practice are a powerful way to build organizational learning. Research shows that people learn as much as 70 percent of what they need to know to do their jobs from interactions with colleagues. As communities of practice help increase individual competency, they also serve as a place to cultivate and expand the codified knowledge of the organization.

Moving to Efficiency. Knowledge circulates in a company in a very dynamic way—moving, often erratically and unpredictably, to individuals, to teams, to communities, and to knowledge bases—and changing along the way. Codifying knowledge is a key way of circulating it more broadly and making it usable throughout the organization.

Codification, where possible, becomes very important in the cycle. By codifying individual, team, and community know-how and making it reusable, companies can improve the overall efficiency of the organization. Efficiency, in other words, reflects a company’s ability to turn individual learning, knowledge, and ability about getting things done into repeatable processes many people can follow with good results.

The process of building organizational efficiency and competency is also the process of building organizational memory. Memory allows us to “know what we know” and supports the efficient use of processes and practices that have already been used successfully. Taking new learning and codifying it into organizational memory is an ongoing process. As we discussed in Chapter 2, the rapid pace of change requires that new processes and practices be invented to respond to market and environmental demands. By intentionally linking the learning that takes place as work gets done into a codified process, organizations can increase the chances that everyone in an organization will learn from a particular experience and that organizational processes are being redefined to meet current needs.

Xerox’s Project Eureka is an example of systematically building on the knowledge shared and developed within communities of practice. Anthropologist Julian Orr studied the behavior of Xerox repair representatives. He noted that the reps frequently met together to have coffee or lunch. At these social meetings, they asked questions about work, discussed changes in work processes or in the machines they repaired, and shared problem-solving approaches that worked. These social encounters, and the sharing of what worked and what did not, clearly nurtured and developed the skills of individual repair representatives. Some reps emerged as “master problem-solvers,” well known throughout Xerox for their competency.

To leverage the learning that was taking place within these local communities of repair representatives, Xerox launched Project Eureka. Eureka is a shared database of tips and best practices, reviewed by experienced repair technicians and product specialists. As John Seely Brown and Paul Duguid report in Harvard Business Review, technicians’ use of these tips and best practices have saved the corporation an estimated $100 million. For example, an engineer in Brazil was about to replace a problematic high-end color machine for a disgruntled customer (at a cost of $40,000). Experimenting with a prototype of Eureka, he found a tip from a Montreal technician that led him to replace a defective 50-cent fuse instead.²

Innovation and Responsiveness

From Enhanced Responsiveness to Sustainable Innovation. Innovations are responses to challenging problems or even desperate situations. Creativity emerges when the existing solutions no longer serve their purpose and new responses are called for. For example, the digital revolution that is turning the business world inside out traces some of its technological roots to the struggle to prevail in World War II and the Cold War. As scientists and mathematicians on both sides searched for ways to automate the massive calculations required to break enemy ciphers and determine ballistic missile trajectories, they developed new technologies that became the seedbed for today’s advances. In a period of crisis, a century’s worth of abstruse theoretical work in mathematics was integrated into the foundations of a technological revolution that just keeps getting bigger.

In the business world, responsiveness is about listening to customers and reading signals from the marketplace. It’s an area in which many companies tend to be caught in permanent “adhocracy”—partly because they haven’t used knowledge management to systematically scan for market signals and then make systematic sense of the signals or compare notes from responses in different parts of the company. Faced with a particular customer need or change in the market, staff try to move quickly to develop a customized solution. But often the learning doesn’t become institutionalized. Each crisis gets a customized solution, when it might be possible to apply previous solutions.

How can knowledge management enhance responsiveness and make it more efficient? Through effective responsiveness systems, customer needs or problems are brought to the attention of the business—not just to individuals who deal with customers. When these needs become visible, they can be solved. Moreover, the results can be shared and the solution can become part of the service or product. In some instances, it can become a new product or service.

Just as knowledge management can better align responsiveness with your customer interests and your business strategy and objectives, it can also support and strengthen the innovation process. In many companies, a lack of ideas is not what’s hindering innovation. It’s implementing the ones that have the most promise. This, too, requires a knowledge management process—a systematic way to evolve and implement innovation. To bring ideas to fruition, a company needs an organized way to identify them, develop them (in part through collaborative discussion), sort through and pick the best ones, and then bring the best people together to pilot and implement them.

Take a Moment

Designing a Knowledge Management Strategy

The following questions can help in developing an integrated strategy for knowledge management:

1.   Where is the business heading?

2.   What kinds of information do we need to move forward?

3.   Where does that information reside and how is it renewed?

4.   What competencies do we need in our workforce to be able to apply that information?

5.   What collaborative structures, processes, roles, and incentives do we need to support the renewal and application of knowledge?

6.   What measures would help us track progress?

7.   What are our current basic cultural assumptions and are they the ones we need to support ongoing learning?

Building a Knowledge Culture

For knowledge management to have its intended impact, the role of culture must be understood and managed. Culture is both obvious and subtle. It is easy to identify and describe the overall cultural flavor of a company like IBM or Microsoft. It is evident in regulations, institutional processes, technology, work ethic, and personnel practices. However, there are more subtle cultural undercurrents that exist within each division and within each work group that can influence the successful absorption of new ideas and new ways of working. The beliefs, values, behaviors, norms, and roles of a group are critical to the way they integrate and use new knowledge. And what makes this level of culture even more tricky is that often there is a disparity between how people say they behave and the way they actually do. A group may claim that they share information freely while in reality the information is shared only within an inner clique. Or a group may appear eager to adapt a new decision system, but the leader, wanting to retain control over decision making, indirectly obstructs the effort.

Many organizations have suffered the misfortune of investing in new technology, only to find that the swift integration and efficiency enhancement that they hoped for has been thwarted. The problem in many instances is not the technology itself. Instead, elements within the company are resisting the cultural changes the technology enables. A classic example: When voice mail was first introduced at a major global professional services firm, one senior partner wasn’t ready to take on the management of his own phone traffic. Instead, he asked his administrative assistant to listen to all of his voice mail messages (as many as 30 at a time) every morning and evening and provide him with a transcript. Instead of realizing the labor- and time-saving potential of voice mail, he managed to make it more laborious than the old system—since his assistant was still answering his phone and writing down messages all day.

More broadly, the business intention of knowledge management tools is often to accelerate decision making by providing unlimited (or vastly expanded) information at all levels. But in cultures that believe that information is power and that those who guard the most information have the most power, information-guarding habits will win out over the new technology—unless that belief is brought to the surface and managed.

In our work with companies focused on learning and innovation, we see three essential cultural components for developing a knowledge management system:

•   Openness around information sharing

•   Leadership accountability for supporting and modeling collaboration and empowerment

•   A core function linked to business strategy

Information Sharing. Music may be the food of love, but information is the food of learning. Unless a culture permits and supports open access to information, knowledge management will have a hard time taking root. When information is restricted and pathways blocked, researchers can’t find key pieces of the puzzles they are solving—and eventually they learn to stop looking. When workers are free to forage in whatever fields they think might be fruitful, encountering new possibilities and collaborating with other searchers as they proceed, accelerated learning and just-in-time learning happen. One success tends to encourage others, opening the doors to information-sharing, collaboration, and even wider learning.

Leadership. In a study conducted by the Economist Intelligence Unit and IBM (see box), 60 percent of respondents stated that “top management leadership by example” is the most important element in building a learning culture. Leaders of learning organizations possess, as one of their core assumptions, a commitment to valuing knowledge and collaboration. They believe these things contribute powerfully to corporate success. They show their commitment both in their behavior and in how they dedicate resources. If there is a discrepancy between what leaders say they support and what they do, intentional or not, the organization will follow what they do rather than what they say.

Paul O’Neill, the CEO of Alcoa from 1987 to 2000, showed his commitment to the power of information, collaboration, and learning with his intense involvement in the design of Alcoa’s new headquarters building in Pittsburgh. O’Neill had spent years gathering information about how buildings affect the way people work. He worked with a Pittsburgh architect to create a working environment that would support his learning-driven management strategy. At Alcoa’s former headquarters, a 30-story building with banks of elevators, departments were sequestered on different floors and staff behind doors. The new building’s interior spaces follow an open floor plan. Everyone, including the company’s most senior management, has virtually identical workstations that alternate with plentiful informal meeting areas. Larger open spaces and the total layout (including escalators rather than elevators) encourage chance meetings and a much greater awareness of who is who and what they do than is possible in a traditional office building. O’Neill himself and his senior leadership team occupied workstations just like everyone else. “I see more people now by accident than I ever did on purpose because it’s a natural consequence of the way we have organized the flow,” he told a reporter for the New York Times in 1998.³

Companies who are very serious about building a learning culture demonstrate their intent where it will show the most—in their compensation systems. 3M, for example, promotes ongoing innovation by tying senior compensation to the percentage of sales that comes from new products.

Core Function. To be effective, knowledge management must be a core business function in the culture like marketing, finance, human resources, or any other function. As a core function, it is aligned with the company’s objectives, it is broadly implemented, and it has appropriate resources. The function’s performance is measured against defined performance targets and is evaluated and reshaped according to how it meets those targets.

A leading consulting firm has organized its knowledge management system around its primary communities of practice and has established formal processes for collecting best practices. The company has set up three levels of consultants to support the capturing, screening, and selecting of information. The partner responsible for each industry area acts as a knowledge sponsor outlining the big picture. With that direction, a knowledge integrator defines the content for each practice area. Herman Miller, a furniture design and manufacturing company, has 20 full- and part-time learning coaches assigned to functional business areas to identify learning needs and provide coaching.

Nokia, a global telecommunications company, has instituted team-based technology to support corporate strategy planning and conducts team-based executive development.

Take a Moment

Assessing Your Organization’s Readiness to Become a Learning Organization

Before you invest time, effort, and resources in building a learning organization supported by knowledge management, it helps to know how ready your organization is—how prepared the culture is for using learning as a business asset. The following questionnaire can help you identify strengths that will support the effort, as well as roadblocks that could slow it down.

Recap

In this chapter, we introduced a model that helps you focus knowledge management efforts on building the core competencies that make your company the best in the world at what it does. We emphasized how knowledge management is the systematic use of processes that enhance organizational learning—which is what builds core competencies. We introduced the RICE model—responsiveness, innovation, competencies, efficiency—as a way to structure and focus how you develop knowledge management in your organization, keeping it linked to strategy and business value. We discussed how learning begins with individuals, as they acquire competencies, and spreads into the organization to promote efficiency—the ability to do things right over and over again. We explored how a knowledge management approach can bring structure and results to responsiveness—the process of taking in information from customers, markets, and other key stakeholders—and to innovation—the process of developing new products and services that meet and anticipate customer needs and wants. Finally, we examined the key role culture plays in supporting knowledge management.

Endnotes

¹ The RICE model was created by the authors and other Lotus colleagues through research at Lotus.

² John Seely Brown and Paul Duguid, “How to Capture Knowledge Without Killing It,” Harvard Business Review, May–June 2000, 73-80. Reprint #R00309.

³ Trish Hall, “And the Walls Came Tumbling Down,” New York Times Sunday Magazine, December 13, 1998.