Innovate by Knowing More
In an age in which enterprises face competitive pressure and the threat of disruption at every turn, many have come to believe that innovation belongs exclusively to the young and lean. After all, fast-growing startups and a select group of tech giants like Amazon and Netflix have achieved tremendous results by designing their businesses around agile operating models from the very start.
Chapter 11 filings increasingly feature mature enterprises that allowed organizational bureaucracy, rigid functional silos, and entrenched cultures of risk aversion to sap their ability to innovate, react rapidly to new data, and execute quickly. While age and size all too often hamstring enterprise innovation, the argument that large enterprises can’t innovate ignores a key innovation advantage held by established firms: mature companies simply know more.
While startups must figure out how to tackle each new product cycle, operational challenge, and sales process for the first time, mature enterprises possess reams of qualitative and quantitative data, employees with decades of experience under their belts, and networks of partners across the globe. GE Transportation engineer AJ Kumar, for example, personally holds over 300 U.S. patents, while GE has collectively generated over 179,000 patents throughout its 126 year history. Corning Inc.’s 167 continuous years of technical and contextual understanding of how to develop, refine, and sell innovative glass products remain unrivaled in the industry today. This depth of knowledge and understanding does not emerge overnight.
patents held by General Electric Transportation Engineer AJ Kumar
total patents held by
of continuous operation for glass maker Corning Inc.
Sources: The Problem Solver: This Train Engineer Can’t Stop Inventing a Better Locomotive, GE Reports
Company Profile: General Electric, PatSnap
Our Company, Corning
Company Profile: General Electric, PatSnap
Our Company, Corning
An ROI for Knowledge
As first glance, knowledge seems like a difficult thing to measure when compared with an organization’s more tangible assets, but the ROI of what a company knows can be quantified. Historically, companies have primarily faced the challenge of effectively capturing, cataloging, and deploying the knowledge they generate to create lasting value.
According to research by the Society for Human Resource Management, Fortune 500 companies lose over $31 billion dollars annually because employees fail to efficiently and effectively share knowledge. Common drivers of these costs include wasted or duplicated work, reliance on expensive outside experts when knowledge exists internally, and the failure to correct costly past mistakes or missteps.
Fortune 500 enterprises lose $31 billion annually due to ineffective knowledge sharing
Source: Shedding Light on Knowledge Management, Society for Human Resource Management
The need for more effective knowledge sharing has given rise to Knowledge Management (KM) as a defined discipline. Bain & Co.’s Mark Horwitch and Robert Armacost define knowledge management as “the practice of creating, capturing, transferring, and accessing the right knowledge and information when needed to make better decisions, take actions, and deliver results in support of the underlying business strategy.” As enterprises seek to monetize the things they know, knowledge management roles increasingly appear within functions and business units, and analysts project the global market for knowledge management software to expand at a CAGR of 12% to over $33 billion by 2023.
the practice of creating, capturing, transferring, and accessing the right knowledge and information when needed to make better decisions, take actions, and deliver results in support of the underlying business strategy.”
Source: Helping Knowledge Management Be All It Can Be, Bain & Co.
While it’s clear that enterprises recognize the importance of organizing and monetizing what they know, a new era of disruptive threats in which knowledge increasingly defines winners and losers calls for a renewed focus on effective, adaptive knowledge management. Knowledge management is no longer just a “nice to have,” it is imperative for business agility, rapid execution, and driving innovation.
Knowledge Management: Imperative for Agility
According to management scholars Morten Hansen, Nitin Nohria, and Thomas Tierney, knowledge management strategies typically fall into one of two camps. In a “codification” strategy, “knowledge is carefully codified and stored in databases, where it can be accessed and used easily by anyone in the company.” Traditional knowledge management software tends to enable this approach. A “personalization” strategy on the other hand, is one in which “knowledge is closely tied to the person who developed it and is shared mainly through direct person-to-person contacts. The chief purpose of computers at such companies is to help people communicate knowledge, not to store it.”
An era in which innovation projects are increasingly complicated, technical knowledge is increasingly niche, and teams span countries and continents demands an novel approach to managing the knowledge generated by a company’s work. The knowledge management strategies and tools of the future will simultaneously codify the information generated by discrete projects using advanced technologies, map this information to key strategic goals and initiatives, and connect members of modular, cross-functional teams spread across remote geographies. In other words, tomorrow’s approach to knowledge management will enable employees working in agile operating models to access what they need to know, when they need to know it, whether that information exists in a file or in a colleague’s mind.
Throughout an organization, effective knowledge management allows companies transitioning to an agile operating model to:
Move Mission Critical Work Forward, Faster
Knowledge is one of the greatest potential accelerants to ongoing work, enabling better and faster decision-making. Oil companies, for example, share technical knowledge among drilling teams to better anticipate problems, speed the process of drilling new wells, and generate savings across oilfields. Delivering the knowledge gained through past work effectively enables collaboration across asyncronous workstreams, with the added benefit of allowing teams to learn from past successes and failures.
Innovate, Without Reinventing the Wheel
Giving others access to stored knowledge gained through prior work enables the reuse of ideas, documents, processes, methods, and expertise. Consulting firms, some of the earliest proponents of centralized knowledge management strategies, build central repositories of anonymized presentations and research to give case teams across the organization a head start on new engagements. Rather than building from scratch every time a new idea or body of work emerges, employees can access and utilize the collective learnings of their colleagues and past efforts. This helps avoid redundant projects, save time and money, streamline execution, and empower employees to feel like their work is meaningful over time.
Bring Clarity to Chaos
As enterprises grow in size and geographic distribution and projects become increasingly cross-functional, business leaders find themselves faced with unprecedented levels of operational complexity. Effective knowledge management provides visibility and insight into the skills, expertise, and experiences of individuals who work on current and past projects. With a multitude of different initiatives, and workstreams starting and ending at any given time in a company, it’s extremely difficult to keep track of all the individuals who contributed to a given body of work, not to mention the learnings that they accumulated along the way. The U.S. Army, for example, has tackled the problem of capturing learnings from varied operations around the world through its Lessons Learned knowledge management program. Through effective knowledge management, a commander in the field can more assess and react to strategic problems with greater clarity using lessons learned by others thousands of miles away.
Spread the Wealth (of knowledge)
Effective knowledge management makes scarce knowledge and expertise more widely available. According to an experiment by Xerox, providing field technicians with access to a database of specialized copier repair information and best practices (previously limited to the memories of experienced employees) cut costs across their pool of technicians by 10%. Many resources – especially highly specialized ones – are in high demand across multiple projects and business units; knowledge management enables others to access elements of their knowledge in an immediate, low-cost, unobtrusive way. Employees with access to central knowledge repositories no matter where they’re deployed instantly become more modular, reducing the time and cost of onboarding resources to new projects or teams.
Today’s business environment brings enterprises face-to-face with greater pressure to innovate and more disruptive threats than they’ve ever known. Confronting these forces means more effectively leveraging the things they already know to drive greater business agility.