Teaching Old Dogs New Tricks

Article excerpt

So what exactly is a knowledge company?

There is no such thing as a "knowledge company". Books have been written about it. Millions of pounds and hours have been spent in pursuit of it. Managerial careers have been launched entirely on the reputation of understanding it. It doesn't exist and cannot exist; but, like many chimerical visions, there is great value in pursuing it even if it can never be achieved.

Here's the first contradiction. Knowledge exists only in people's heads and, at least since the abolition of slavery, companies can't own people. To try to put knowledge into a form that companies can own and control - in files, documents and archives - robs it of life and relevance. Any number of companies now sell "knowledge management systems" that make it easier to codify and search documents and records. Many of them are extremely useful when put into the hands of knowledgeable people. But, despite the name, they do not manage knowledge, they manage information. And to confuse the two is at best to create management by filing system.

There is a second problem bedevilling the idea of the knowledge company. Knowledge is useless in isolation. With only rare exceptions, it's disastrous for a company to be a lot smarter than its customers. What people don't understand, they won't buy. Strictly, what managers really want are smart markets, not knowledge companies. And to focus on knowledge only within the company increases the risk that its smartest and best innovations will whoosh straight over the heads of the very people they are meant to benefit.

If the knowledge company is impossible, why do people spend so much time in pursuit of it? Ultimately it is because the pursuit focuses managers' attention on the main source of competitive advantage in today's economy: ideas in people's heads. In the industrial economy, competitive advantage came from the ability to produce, to make things - and the machinery to do that was a company's core asset. Today competitive advantage comes from the ability to make choices; production can be taken largely for granted. For an example of how the world has changed and why it matters,just look at that paragon of the industrial age, the Ford Motor Company.

Ford defined the industrial era and the assembly line. Its River Rouge plant, completed in 1927, took iron ore and coal in one gate and sent Model As out the other. Today Ford buys in about two-thirds of the components that make up its cars from a global network of specialised suppliers. In the summer of 1999 it reorganised its Brazilian operations to shift even more work to suppliers, and began talking openly about becoming a design and marketing firm rather than a manufacturer. Nike, one of today's best-known brands, owns no production facilities; its asset is simply the reality-distortion field that is its brand.

Managing decision-makers is very different from managing production workers. Today's managers face the dilemmas of what Tom Malone and Erik Brynjolfsson of MIT's Sloan School of Business have called "postmodern management". You can't really control decision-makers, because if you tell them what to do all the time they aren't really decision-makers any more. Indeed, bosses can't even predict what a decisionmaker will do. Nor can they understand it with hindsight. The best way to deploy decision-makers is to hire people with different knowledge from the boss, to put them into situations where they have different information, or both. …