A study of 10 technology-intensive companies in North America, Europe and Asia by the Center for Effective Organizations (CEO) in the USC Marshall School of Business shows that most are falling short in the critical task of managing their most valuable resource – knowledge.
“Leveraging knowledge is a core justification for a company’s existence but most companies haven’t succeeded in making knowledge accessible, reusing it and applying it to their advantage,” said Susan Mohrman, senior research scientist at CEO.
“The management of knowledge has never been more important or difficult,” she said. Companies and work teams are spread across the globe, information and knowledge growth is accelerating, and company knowledge often resides in people who can leave at any time.
The research team surveyed 4,500 scientists, engineers and managers, conducted focus groups with 500 business and technical leaders and examined knowledge management practices at the 10 companies.
The study found that knowledge management practices contribute to business effectiveness. However,the majority of employees in the companies studied reported that knowledge-sharing among different areas of the company rarely occurred. More than 70 percent said knowledge was not reused, and 87 percent said they didn’t have access to lessons learned in other parts of their company. Another 64 percent said they didn’t make full use the electronic tools that were available to them.
“Companies set up very sophisticated information technology, but that is not enough,” Mohrman said. Companies need a clear strategy not only for generating knowledge but also for leveraging it to the organization’s advantage. “Knowledge management has to be part of the fabric of an organization,” she said.
“All aspects of the organization have to be designed to encourage the generating of organizational improvements and knowledge and the sharing and application of this knowledge,” Mohrman said. For example, organizational goals often don’t include knowledge, job definitions don’t include knowledge sharing, and important information may not be well communicated.
“Organizations doing a good job of knowledge management work to increase the connections between people, both by building teams that bring people together and by facilitating the networking of people with related knowledge,” she said.
David Finegold, associate research professor at CEO, said that in the past, companies tried to protect their valuable knowledge with a “cloak and dagger” strategy that kept key information secret and parceled it out on a need-to-know basis. But like non-democratic governments, companies have found the command-and-control model increasingly obsolete in the wide-open Internet Age.
“One way companies gain knowledge today is through effective external partners,” Finegold said. “Companies combine their special expertise with the competencies of other organizations to reach the market quickly on a global basis. The companies that are most successful in these partnerships approach each one as a learning opportunity, with clear processes for transferring what is learned to the rest of the organization.”
Often companies have not taken advantage of the knowledge they create, only to see it migrate to other companies. In the 1970s, frustrated engineers who felt their ideas were being ignored at companies such as Digital Equipment, Xerox and IBM brought their knowledge to Apple, Sun, Microsoft and Hewlett-Packard, which quickly turned the ideas into new and successful products.
Companies risk losing knowledge through openness, particularly in the current environment of talent shortages and a mobile workforce. These risks can be reduced with good human resource practices – an important, and sometimes overlooked, part of an overall knowledge management strategy.
“Organizations should give people a stake in the performance of the company, such as stock options. They should provide opportunities for people to develop their talent and create career paths and business opportunities for them to effectively use their knowledge,” Mohrman said.
Highlights of “Strategies for the Knowledge Economy: From Rhetoric to Reality” were presented at the World Economic Forum annual meeting in Davos, Switzerland, in January. The research was funded by the 10 companies studied and by a grant from Korn /Ferry International, an executive search firm. Gretchen Spreitzer, associate professor of management and organization at the Marshall School, and Jan Klein of MIT were members of the research team. The next phase of the study examines the impact over time of various knowledge management approaches at the 10 firms. It is scheduled for completion in June 2001.
More information about the Center for Effective Organizations can be found at http:// www.marshall.usc.edu/ceo.