Strategic Management -II

Session 11 – Knowledge Management

Swapnil Garg
Objectives and Readings
Objective: In this session we describe knowledge creation and
knowledge management efforts of organizations focusing on codifying
experience.
Reading:
Nonaka,I. (2007) The Knowledge-Creating Company.
Harvard Business Review. 85 (7/8): 162-171
Case:
Bartlett,C.A. (2006) Mckinsey & Company: Managing
knowledge and learning. HBS 9-396-357 Boston, MA:
Harvard Business School Publishing

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Why knowledge?
• Strategy is about performance, which comes from competitive
advantage
• Knowledge is a source of competitive advantage
• Knowledge provides a basis for sustainable competitive advantage

• How is knowledge created and exploited?

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Knowledge
• Explicit or Tacit
• Explicit – hard data, codified procedures, universal principles
• Formal and systematic
• Usually discussed as information processing and is central to organizational
view as systems, and machines
• It increases efficiency, lower costs, improved ROI
• Another way – TACIT – highly subjective insights, intuitions, hunches
• It was usually adopted by Japanese firms
• A firm is not a machine , but a living organism
• It provides a sense of identity and fundamental purpose. Shared
understanding what the firm stands for
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Tacit knowledge
• Everyone's business, not only of a select few like the R&D
• It provides a way of behaving
• Provides a sense of purpose for the organization
• Can provide an integrating theme for the organization

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Creating knowledge
• New knowledge begins with the individual
• Making personal knowledge available to others – central purpose
• Conflicts of interest occur….. Not easy to part with knowledge
• Takes place continuously
• At all levels of the organization

• Often comes about in unexpected forms

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Creating knowledge
• If knowledge of two kinds explicit and tacit, what does it imply for
knowledge creation – Spiral for knowledge
• Four patterns of knowledge creation
• Tacit to tacit (Socialization)
• E.g., Craft apprenticeship
• Explicit to explicit (Combination)
• E.g., aggregation in financial reports
• Tacit to explicit (Articulation)
• E.g., Write out new procedures, for something so far only in the head
• Explicit to tacit (Internalization)
• E.g., Internalize the explicit knowledge to develop new ideas

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Spiral of knowledge
• Socialize→ Articulate→ Combine→ Internalize →
Restart at a higher level
• Articulation and Internalization require huge amounts of personal
commitment

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Where do the metaphors come in ?
• Tacit knowledge is inexpressible and exists in the mind
• If articulation requires tacit → explicit, how does one express it?
• Use figurative language, symbolism, poetic language, metaphors,
oxymoron, analogy, model, two ideas in one
“Lets gamble” “Tall boy”
“man-maximum, machine-minimum” “Reasoning of Detroit”
“Theory of automobile evolution” “Tall and short cars”
“Optoelectronics” “Easy maintenance” “ Easy rich”

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Making it happen – chaos to creation
• How do firms design organizations, design managerial roles and
responsibilities in knowledge creating companies!
• Redundancy
• In contrast to efficiency
• Overlapping roles, information, business activities, managerial responsibilities
• Creates common cognitive ground, and allows transfer of tacit knowledge
• BY
• Internally competing groups
• Strategic rotation of people
• Free access to company information – Everyone has to create and share

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Knowledge creation
• Dynamic interaction between three roles
• Frontline employees
• Live in chaos, and interpret and reinterpret it,
• Continuous shift in meanings is itself a rich source of knowledge creation
• Managers
• Orient the chaos towards purposeful knowledge creation
• Provide conceptual frameworks
• Serve as bridges between horizontal and vertical flows of information
• Senior managers
• Give voice to firms future
• Articulate metaphors, symbols, and concepts
• Provide a conceptual umbrella
• Resource allocation to identify what is important and what is not!
• Eqivocal management, teams,
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McKinsey Case
Strategic view….

• Rajat Gupta wonders if the organizational initiatives were enough for

knowledge creation?

• What all do we need to look at to throw more light on this question?

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“Knowledge is the lifeblood of McKinsey”
• James McKinsey
• 1926– recruit experienced executives and train them.
• Synthesize data and think for themselves
• “Undeviating sequence” of analysis
• Marvin Bower
• “Efficiency experts” “ Business Doctors”
• One firm policy, Rapid growth,
• 1945 New Engagement Guide (focus client relationships) – every
engagement should bring more than revenue --- experience or prestige!
• “ Each client’s problems were unique, but …. Well trained, highly
intelligent generalists could quickly grasp the issue, and through
disciplined analysis find its solution”

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Over the century
• James Mckinsey 1926-
• Marvin Bower 1950-1967
•1
• 2 (A decade of doubt … client relationship, growth, knowledge)
•3
• Ron Daniel 1976
• Fred Gluck 1988-1994
• Rajat Gupta 1994-2003

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“T” consultant
• April 1971, Commission on firms aims and goals
• Growing too fast
• Development of technical and professional skills neglected
• Generalist problem solvers, but lack substantive specialized expertise
• RECOMMIT to continuous development of members
• Need T shaped consultants
• Could not be implemented for 6 years

• Market challenge
• BCG → “thought leadership” , Mckinsey → “client relationship”

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Ron Daniel -- 1976
• Appointment of a Full time Director of training
• Person chosen -- Most respected and productive in client relationships
• Industry based CLIENT SECTORS
• Practice Development
• Strategy and organization
• In doubt
• Product driven approach vs local office presence (no fly in fly out)

• What is the organizational structure? Where do these come in?

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Knowledge creation (Gluck) refer slide 6

• Has to be core ( and not a peripheral activity)

• Ongoing ( and not temporary)
• Institutionalized ( and not project based)
• Everyone ( and not just a few)
• 15 centers of competence
“Spend whatever you can”, “To let a thousand flowers bloom”,
“Snow ball making” vs “Snow ball throwing”
• Challenge the internal status hierarchy (size and importance of client base)
Tacit to Tacit

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Creating a Knowledge infrastructure
• McKinsey Staff paper series -- 1978
• Books
• Practice Bulletins – 2 page summaries

• Deep rooted suspicion on

• packaging ideas, creating proprietary concepts, or standard solutions.

Tacit → Explicit

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Creating a Knowledge infrastructure
• Common database
• Every (clientele sector and competence center) full time coordinator
• Provide career path for deep functional specialists – “I”
• FPIS – Firm Practice Information System
• PDNet – Practice Development Network – 2000 documents
• KRD -- Knowledge Resource Directory – Mckinsey Yellow Book

Explicit → Explicit

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Refining Knowledge Management
• CPDC --Clientele and Professional Development Committee
• “Discover-codify-disseminate” to “Engage-explore- apply-share”
• “72 islands of activity” “garden of 1000 flowers requires weeding”
• Measuring client impact
• Engagement Team (ET) -> Client Service Team (CST)
• Two alternative career paths – client and practice

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Reflections from the 3 mini cases
• Sydney office assignment
• Identifying and collecting resources from across the globe for client delivery
• Global support for a local assignment
• European telecom
• Developing practice leadership
• Leveraging global competency
• Business market competence center
• Evolution of a new competence B-2-B marketing
• Not serving clients DIRECTLY… struggle between client delivery and practice development
• Legitimacy through --- PD Net, PD Documents, Relationships and personal bonds

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Rajat Gupta’s four pronged attack
• Capitalize on the long term investment
• Clientele Industry Sectors(Client) and Functional Capability groups (Practice)
• PDNet and FPIS
• Develop new channels, forums and mechanisms for Knowledge development
• Practice Olympics --Grass root knowledge development approach
• Six special initiatives
• Multi-year internal assignments, focus on emerging issues, led by senior partners
• For e.g.
• Shape and function of a corporation of the future
• Creating and managing strategic growth
• Capturing global opportunism
• Research center (McKinsey Global Institute), Change center, Operations Center
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Thanks
Insider trading…
• http://www.ft.com/intl/cms/s/2/0d506e0e-1583-11e1-b9b8-
00144feabdc0.html

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What did they exist for?
• Converting the vision into reality

• While addressing “issues of importance to top-level management”

• By highest standards of integrity, ethics, technical skills
• By attracting and developing young men of outstanding qualifications

• Every assignment --- bring more then revenue---- experience & prestige

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The initial struggles
• Accountancy and Management (Mac and Bower!)
• Later
• Generalist vs Specialist
• “T” shaped vs “I” shaped consultant
• Practice development vs client development
• Who earns the bread
• Internal consulting vs external consulting
• Private knowledge vs public knowledge
• Knowledge accumulation vs Dissemination
• Visibility : Books, publications,
• Value from internal consulting

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How did things change with growth
• Focus….. Loosing focus

• Competition….. Addressing competition

• Growth…… need for consolidation
• New competencies ……. Path to be adopted

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