INTRODUCTION
In 1959 Penrose referred to the importance of knowledge for using resources more innovatively and profitably, and in the same year Drucker indicated greater value should be placed on knowledge workers. An article by Nonaka (1991) suggested that the source of lasting competitive advantage is knowledge. Since then there has been a growing interest in knowledge, and an emerging view that the sharing of knowledge and creation of new knowledge leading to innovations is the key to providing future economic growth. In 1998, Amidon referred to the survey in 1996 produced by The Economist describing how rich economies will increasingly depend upon “their ability to innovate” (p. 24).
THE ORGANIZATION
At the corporate level it is important for organizations to recognize the value of knowledge. An environment accepting that knowledge sharing is the norm provides a conduit for the generation of innovations. Continuous innovation is necessary for survival in what is now a highly competitive global environment. Innovation springs from the knowledge within the organization. Corporate knowledge is accumulated through its systems and procedures, its databases and its technology, and from its employees sharing and applying their knowledge to the operational requirements of the business. The interaction of employees with external parties such as customers, suppliers, industry contacts and those residing in the wider community also provides a considerable source of knowledge for the organization.
Employees bring to an organization their individual knowledge bank gathered as a result of their education and experience of life. The longer they work in an organization, the more knowledge they accumulate about its operations, products and customers. Nonaka (1991) refers to the spiral of knowledge in the organization and says that knowledge begins with the individual. Taking this further, Inkpen (1996), when referring to the spiral of organizational knowledge creation, indicates the importance of moving knowledge from the level of the individual to group level and on upwards to organizational level.
It is perhaps worth taking cognizance of Davenport and Prusak (1998, p.108), who say, “Despite the corporate mantra that employee knowledge is a valuable resource, most firms do not make concerted efforts to cultivate the knowledge oriented activities of their personnel”. Although knowledge comes from employees, Teece (1998, p. 62) indicates it is the organization that provides “the physical, social, and resource allocation structure so that knowledge can be shaped into competences”. It is worth remembering that Drucker (1994, p. 71) said it is the knowledge workers who own the tools of production. Previously, “The industrial workers needed the capitalist infinitely more than the capitalist needed the industrial worker,” but in the knowledge society organizations “…need knowledge workers far more than knowledge workers need them”. It should be kept in mind that employees take their knowledge home with them each evening, and in some situations they may not return, thus depriving the organization of valuable knowledge. However, if it is recognized that employees have knowledge of value, then organizations need to maximize the benefit of that knowledge, and determine how to harness it to the advantage of the organization and the individual (Mitchell,2002a).
When assessing the potential of knowledge, Carneiro (2000, p. 87) suggests organizations “.need to look for the knowledge that is able to add value. Value adding knowledge is very different to an information-mix.” Lester (2001) also advises, “Managing knowledge is not like managing information, it involves focusing on, nurturing and winning the trust of the professional knowledge workers and the confidence of customers and suppliers” (p. 172). This means organizations need to look closely at encouraging a culture involving the development of good relationships based around trust, and in which knowledge is readily shared. Sharing knowledge increases the knowledge among those who share and adds value to the organization while at the same time making it difficult for competitors to copy.
It is, therefore, important for organizations to try to move the tacit knowledge of its employees into explicit knowledge to be embedded in the organization’s knowledge repository for all to share. Codifying tacit knowledge is not easy, and all the knowledge the employee holds will never be captured. However, knowledge that can be codified becomes available for sharing with others in the organization. Knowledge sharing and creation of new knowledge emerges as a result of working in teams where problems that arise need to be resolved. Opportunities for social interaction should be encouraged – it is not unknown for useful knowledge to be exchanged in such an environment. While sharing knowledge for the benefit of the organization involves everyone, knowledge is also shared, wittingly, or unwittingly, with those external to it. This can present a two-edged sword. While knowledge can be lost, it can also be gained. However, from the knowledge of all those involved in the knowledge sharing process, along with the knowledge held within the structure of the organization, there emerges collective knowledge. Whether it is focused within the organization, or encompassing knowledge external to it, collective knowledge provides a catalyst for the development of innovations (Mitchell, 2002b).
THE ORGANIZATION AND INNOVATION
According to Kanter (1996, p. 94), “Structures and practices that may work well for the perpetuation of the known tend to be at odds with innovation.” Creativity is a product of knowledge, and shared knowledge provides opportunities for organizations to be innovative – an important element for moving ahead (Mitchell, 2002b). Innovative organizations are growing organizations, with 3M being a classic example; therefore the organizational environment is important if innovation is to occur.
Amidon (1997) refers to Japanese firms placing customers at the heart of the innovation process. She goes on to say that innovation should be a strategic focus and to make a commitment to work with customers. Amidon provides a framework to assess the ability for organizations to develop ideas and take them to market. The innovation assessment encompasses 10 modules, identified as: collaborative process; performance measures; education/development; learning network; market positioning; products/services; market penetration; market image, leadership/leverage; technology/internet. For each module there are questions to be asked, and answered, and the model used views the organization from both an internal and external perspective. According to Amidon, executives who have followed the process have found creative ways of improving efficiency and effectiveness. Innovation is not solely dependent on new knowledge. Ideas emerge from unexpected sources and applying knowledge, recognizing potential and seeing opportunities is what brings innovative ideas to fruition (Mitchell, 2002d). As Drucker (1998) indicated, innovation needs knowledge, ingenuity and focus.
The view put forward by Johannessen, Olaisen, and Olsen (1999, p. 116) is that “Managers need to focus their attention on innovation. .create commitment.initiate change. To enhance innovation managers also need a high level of integrity. This means the ability to create trust Johannessen et al. identified the characteristics of people who manage the innovation process as being proactive in creating opportunities; willing to take risks; and goal setting. It is also necessary for managers to recognize the importance of innovation and its relationship with the knowledge of employees, its customers, suppliers and other external parties, and the need to promote an innovative culture.
However, management must thoroughly understand the level of knowledge, expertise, skills and competencies resident within the organization, and be able to identify what additional capabilities are needed if it is to successfully work for the development of innovations in a collaborative environment. Organizations that are aiming for success will maximize the benefit, for example, of cross-functional teams from which a montage of knowledge provides the opportunity for the creation of new knowledge from which new innovations can emerge. It may, therefore, be necessary for organizations to be prepared for changes arising from introducing an innovative environment that encourages closer working relationships with customers. No organization stands in isolation. Every organization is dependent upon and has responsibilities for its customers, suppliers, stakeholders and the wider community. There are real opportunities for organizations to effectively work together to become more innovative
The Organization, Innovation and Customer Relationships
“Customer loyalty is an asset” (Brooking, 1996, p. 26). Getting to know about customers – their needs, wants, expectations – is critical to the ongoing success of the company. Brooking identifies what she terms “Customer Audit Questions” that include: who are we selling to, why do those customers buy from us, who are repeat buyers, how do we monitor such events, and how often are customers contacted. Armed with such a knowledge base, the organization is in the position of being not only informed about its customers but also in a positive situation when interacting with them.
Research carried out in 1999 by Mitchell (2002c) found that organizations routinely increase their knowledge of customers in many ways, for example through the salesperson, credit cards, sales analysis, warranty cards, customer databases, surveys, and customer focus groups. However, many organizations do not give sufficient recognition to the importance of mining those sources for hidden gems of knowledge that could provide the means through which to enhance the potential of the business and at the same time more effectively meeting the needs of its customers. While knowledge about customers can be obtained through the organization’s resources, more importantly it will come from associating closely with customers (Amidon, 1997; Byrne, 1993; Evans & Wurster, 1997; Fahey & Prusak, 1998; Kanter, 1996; Jordan & Jones, 1997; Teece, 1998).
Working collaboratively with a customer to jointly develop a product, or for the introduction of a new technology, brings benefits to both parties and there is a likely spin-off for other customers (Tidd, Bessant & Pavitt, 2002). Tidd et al. make reference to the approach taken by international energy and construction firms of having “policies of collaboration with customers overseas and source technologies from countries in which they wish to sell products” (p.178). Actively promoting a collaborative approach opens the way to being able to respond positively to opportunities as they arise.
Organizations working alongside customers on new products, or process innovation, or designing innovative solutions to meet specific needs, adds value to both the organization and its customers (Grant, 1997). Rowley (2002, p. 500) also supports the employee/customer connection: “Another rich seam of customer knowledge resides with the people who interact with the customer, whether they be the promoters of small business in B2B interacts or the service agent or retail assistant in B2C interactions.” Suppliers to organizations must not be forgotten; after all, the organization is the suppliers’ customer and there is much to gain from working collaboratively.
Research being undertaken by Mitchell in 2002/3 indicates that businesses are reaping benefits through working closely with customers. Some of those businesses have produced a number of innovative products, increased their intellectual property portfolio, and as a result of commercialization of those products have created increased wealth. Their customers are benefiting by gaining new and enhanced products. The following are some examples found by Mitchell of organizations successfully working collaboratively with customers:
A food manufacturing company that generates a number of ideas works closely with its customers and suppliers for all new products. A customer with an idea will put it to the company to assess its feasibility. One product the company is involved with was the result of such an approach and it has triggered a revolutionary method of production by the food company, resulting in a new product. The technological development was hailed as a breakthrough at an international trade fair, and has been welcomed by other companies involved in making similar products. An additional service provided by the company was the development of a document of agreement for its clients to protect their rights.
A packaging company worked alongside a customer to design a sophisticated system of packaging to prevent damage to a very delicate, perishable product. The success of the packaging has resulted in reducing damage claims to virtually zero. The customer is very satisfied, as are the customer’s customers, and the packaging company developed technology that can be transferred to other products in its range.
Sales representatives working for an electronic products distributor keep a weekly log on feedback and suggestions and all suggestions are reviewed and followed up. A Web site has been developed for customer feedback. It was found that children, because of their interest in electronic games, give very good feedback and provide very good ideas. On the commercial side, customers will suggest specific types of software be developed to complement a product, or ask for the package to be designed as a mobile system.
Other benefits of working with customers are that they have considerable knowledge not only about an organization’s products and how they are used, but also about the products of other suppliers. Observing how products are used provides valuable feedback that may instigate modifications, new customer solutions, or the customizing of products. It is also important to know what customers are thinking, and their rationale for changing to another supplier (Fahey & Prusak, 1998), and this is another reason to keep in close contact. Kanter (1996) suggests focusing on demanding customers. Difficult as these customers may be, it is a sensible approach as it is those customers who are likely to produce the greatest and most valuable knowledge, which may well lead to new innovations.
CONCLUSION
Without customers, organizations will not survive. As competition in the global market increases, the value of knowledge will become more important and working collaboratively with customers more critical. The future of organizations is dependent upon knowledge and the directing of it towards innovation. Organizations need to satisfy their customers, and their customers’ customers. Linking the knowledge of the organization with the knowledge of the customer has the potential to lead to innovative activity opening up an avenue through which to combat competition while at the same time providing a sense of achievement and satisfaction to those involved.
KEY TERMS
Collective Knowledge: The knowledge of the organization, including the knowledge of its employees, customer/supplier and industry knowledge that can be actioned to bring about innovation.
Corporate Knowledge: The knowledge owned by an organization – its databases, technology, beliefs, culture, structure, processes and procedures. The organization has access to, but does not own, the knowledge of employees, and through research acquires knowledge of the external environment.
Explicit/Codified Knowledge: Knowledge that can be written down, for example a formula, policies and procedures, or a recipe, and readily available for sharing with others.
Innovation: Something new. It can be a product or a process and must provide benefit to the organization and to the advancement of society. An invention only becomes an innovation when it has become commercially successful.
Knowledge Sharing: Involves giving people some of the knowledge you have. It may be about how to do a particular job, where to find information, knowledge of a customer’s products, and of industry developments.
Tacit Knowledge: Knowledge owned by the individual. It is personal and is developed through life experiences and education and is not readily shared or made explicit.
