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Friday, September 09, 2005

How can knowledge management act as a catalyst for innovation?

Over the past few years a number of surveys have consistently placed the ability to be innovative in the top ten list of priorities for executives. That's not surprising when you read statistics such as those in a 1996 study of 150 major U.S. firms which found that innovative companies experienced profit growth at four times the rate of non-innovative organizations.

Knowledge management does not only act as a catalyst for innovation and creativity but also provides the means by which 'innovative ideas' can be captured, shared and leveraged, leading to more new ideas. According to Tom Peters, "Innovation comes only from readily and seamlessly sharing information rather than hoarding it.

A recent PricewaterhouseCoopers study on innovation and creativity identified "an effective ideas management process" to be an essential element of innovation within organizations. Also research by top business schools in North America and Europe suggests that creativity around the world is fostered or inhibited by a number of factors. In addition to tolerating risk-taking and rewarding creativity, the free flow of information is one of the crucial "promoters" of innovation/creativity.

This "flow of information" is at its most effective when people work in teams - the more diverse their experience, the better the creativity/innovation that ensues. A study by the Massachusetts Institute of Technology suggests that 80 percent of ideas that have led to breakthrough products and services originate from routine discussions. At MCI Communications, in addition to the technology used to capture and share ideas, the company has set up a "Hearth"-a family room setting with meeting tables, a fireplace, and 31 inch television monitors. There are also numerous whiteboards and modular furniture that can be configured to any given need. In fact there are four types of office space: offices for individual work; team rooms for collaborative work; offices for privacy; and the "Hearth."

Of course coming up with a new idea is just the start of the journey. Some ideas need to be put into practice but they also need to be captured and shared for new knowledge to be created. The people at Buckman Laboratories realize that not all innovative ideas are "right" at first. By capturing these ideas and "bouncing" them off other people the idea can be developed and perhaps used as a catalyst for new ones.

In today's global business environment, bringing people together (physically or virtually) is still the best means of knowledge-sharing. Innovation becomes less pressing when you can bring the harvested knowledge of the same people together. This is one of the ways in which some of the most successful global/virtual organizations, such as 3M, are using knowledge management practices to keep creativity alive despite the huge distances that separate their employees.

Ikujiro Nonaka and Noboru Konno touch on this issue in their latest work on the concept of "Ba" which they consider to be: "A shared space that serves as a foundation for knowledge creation."

This space can be physical (e.g. office), virtual (e.g. e-mail), mental (e.g. shared experiences), or a combination of all three - as long as it provides a platform for advancing knowledge. Of course, the new ideas or the flow of information do not necessarily have to come from within the organization.

Some companies are using KM practices to take advantage of the creativity of their customers and suppliers. At Chrysler the "SCORE" (Supplier Cost-ReductionEffort) program is such an initiative. The notion is simple - suppliers are responsible for sharing ideas with Chrysler which help them get cheaper parts. The goal for each supplier is cost-cutting opportunities that equate to five percent of its annual billings to Chrysler. The program has been a great success, with ideas flooding in at a rate of more than 100 a week, with estimated savings of over $2.5 billion to Chrysler. With these corporate innovations all being enabled by knowledge management practices, the next question to consider might be: "How can innovation be used to improve knowledge management practices?"

References
  1. Business Horizons, March/April 1996
  2. The Circle of Innovation: You Can't Shrink Your Way to Greatness, by Tom Peters
  3. Creativity Promoters and Inhibitors, Asian Business, Feb 1996
  4. The Concept of Ba, Californian Management Review, Spring 1998

Biography
Paul O. Pederson led Global Core Competencies and best practice knowledge sharing for PricewaterhouseCoopers Management Consulting. He was responsible for knowledge-sharing methods for the management consulting practice of over 11,000 people globally. The co-author of Better Change and Paradox Principles he has also written several white papers on benchmarking and is a charter member of the International Benchmarking Clearinghouse.


This article was taken from Knowledge Management Review.


Comments:
Found a lot of useful info on your site about Management Consulting - thank you. Haven't finished reading it yet but have bookmarked it so I don't lose it. I've just started a Management Consulting blog myself if you'd like to stop by
 
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