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Linking Knowledge Management and Innovation: Shifting the Paradigm from Scientific Management
to Intelligence Amplification
V.K. Narayanan, Ph.D. Deloitte-Touche Jones Stubbs Professor of Strategy and Entrepreneurship
Associate Dean for Research
Lebow College of Business
Drexel University
Copyright V.K. Narayanan
Plan of Presentation
1. Changing economy
2. Maturation of the Knowledge Management (KM) field
3. Tailoring KM to innovation
4. Implications
Copyright V.K. Narayanan
Changing Economy
• Characteristics of knowledge economy
• Shifting demographics and the rise of Millennials
• Decline of the nation-state
• Role of non-governmental institutions
Copyright V.K. Narayanan
Shift to a Knowledge Economy: US Employment
0
5000
10000
15000
20000
25000
30000
1970 1975 1980 1985 1990 1995 2000 2005 2010
Manufacturing
Knowledge
Source: US Bureau of Labor Statistics Knowledge = Information, Professional, and Financial
Copyright V.K. Narayanan
Year of Founding
Firm Year of Founding
GM 1908
GE 1892
Unilever 1930
Royal Dutch Shell 1907
Firm Year of Founding
Microsoft 1975
Apple 1976
Cisco 1984
Amazon 1994
Yahoo! 1994
Google 1998
Facebook 2004
Twitter 2007
Copyright V.K. Narayanan
Market Capitalization
Firm Market Cap ($B)
GM 53.9
GE 275.2
Unilever 113.5
Royal Dutch Shell 212.1
Firm Market Cap ($B)
Microsoft 316.1
Apple 474.7
Cisco 112.9
Amazon 167.5
Yahoo! 35.9
Google 345.9
Facebook 117.7
Twitter 24.0
Copyright V.K. Narayanan
Employees
Knowledge economy demands
innovation.
Firm Employees (000s)
Market Cap/Employee
($M)
GM 212 0.25
GE 305 0.90
Unilever 171 0.66
Royal Dutch Shell
87 2.44
Firm Employees (000s)
Market Cap/Employee
($M)
Microsoft 99.1 3.19
Apple 50.3 9.44
Cisco 75.0 1.51
Amazon 97.0 1.73
Yahoo! 12.3 2.92
Google 53.9 6.42
Facebook 5.8 20.29
Twitter 2.3 10.43
Copyright V.K. Narayanan
Rise of the Millennials
• Who are they?
– Born: early 1980s-early 2000s
– “Digital natives” – grew up with technology
– Described as both civic-minded and narcissistic
• What are their expectations for the workplace?
– Unconventional path
– Jobs demanding innovation
– Lack of company loyalty
– Work-life balance
Millennials demand
innovation. Copyright V.K. Narayanan
Decline of the Nation-State
• From a single polar world to a multipolar world
• Strong and weak institutional infrastructures
• Weak global institutions and strengthening corporations
• Key implications:
– Innovation is increasingly likely to be globally distributed
– ‘Intellectual property rights’ has emerged as an area of national policy
Copyright V.K. Narayanan
Role of NGOs
• Bill and Melinda Gates Foundation
• Alfred P. Sloan Foundation
• David and Lucille Packard Foundation
• Robert Wood Johnson Foundation
• XPRIZE Foundation
These foundations are all significant funders
of innovation. Only foundations located in the US listed above Copyright V.K. Narayanan
The Shift in Actors in the Global Economy
Before
• Government
• Universities
• Industry
After
• Government
• Universities
• Industry
• Non-governmental institutions
Copyright V.K. Narayanan
Developmental Trajectory of KM
• Tasks
• Types of knowledge
• Impacts of KM
• Expectations
Copyright V.K. Narayanan
Expectations of KM
1. KM yields its benefits only in the long run
2. KM has to be integrated with other organizational functions
3. To be successful, KM requires interfacing both technical and social/human aspects
4. One shoe does not fit all organizations
5. Has been reasonably useful in knowledge-lean domains
Copyright V.K. Narayanan
Knowledge-Lean Domains
Knowledge-Lean
Content Know what Know how
Search Content & Speed
Interpretation Fast
Technology Drives/Enables
Modes Codification Personalization Social network
Paradigm Scientific management
Copyright V.K. Narayanan
Migration of KM Technology
Knowledge-Rich
Knowledge-Lean
Kn
ow
led
ge
Maturity
Lessons/Technology
Copyright V.K. Narayanan
Migration of KM Technology
Knowledge-Rich
Knowledge-Lean
Kn
ow
led
ge
Maturity
Lessons/Technology
Innovation
Copyright V.K. Narayanan
Knowledge-Lean and Knowledge-Rich Domains
Knowledge-Lean Knowledge-Rich
Content Know what Know how
Discover what Discover how
Search Content & Speed Speed
Interpretation Fast Difficult & Slow Iterative
Technology Drives/Enables Enables
Modes Codification Personalization Social network
Information arbitrage Visualization Fail fast
Paradigm Scientific management Intelligence amplification
Copyright V.K. Narayanan
R&D Spending and Innovation
Top 10 R&D Spending
• Volkswagen
• Samsung
• Roche Holdings
• Intel
• Microsoft
• Toyota
• Novartis
• Merck
• Pfizer
• Johnson & Johnson
Most Innovative Companies
• Apple
• Samsung
• Amazon
• 3M
• GE
• Microsoft
• IBM
• Tesla Motors
Source: Strategy and Business Copyright V.K. Narayanan
Innovation Success B
reak
thro
ugh
In
crem
enta
l
Ch
arac
teri
stic
s o
f In
no
vati
on
Process Product Type of Innovation
High Risk – High Return New product success = one in eight New business startup = one in twenty
Persistent Application of Routines
Copyright V.K. Narayanan
Breaking Down Innovation Over Its Lifecycle
Sourcing & Screening of
Ideas
Design
Produce & Commercialize
After Sales
Knowledge-Lean
Knowledge-Rich
Copyright V.K. Narayanan
Sourcing And Screening of Ideas Te
chn
olo
gy
Incr
emen
tal
Bre
akth
rou
gh
Met Unmet Market Needs
The key challenge is to match unmet market
needs with a technological solution to earn returns greater than the cost of capital.
Copyright V.K. Narayanan
So What Is the Challenge?
• Many technology developers are not really aware of the market needs
• The market for which a specific technology is targeted is often not the “best” market for the technology
– Post-it Notes
– Kevlar
• First designs are usually not customer-friendly
Copyright V.K. Narayanan
Innovation
KM’s role in innovation is to enable performing three key tasks:
1. Information arbitrage
2. Visualization
3. Fail fast
Copyright V.K. Narayanan
Task 1: Information Arbitrage
• Linking solutions and market needs
• Migrate technologies to their most profitable uses
– For technologies, find “right” markets
– For market needs, find “right” solutions
Easier said than done!
Copyright V.K. Narayanan
Task 1: Information Arbitrage Requirements
Elements
• Knowledge Depositories
• Innovation Ecosystem
• Knowledge Brokers
• Arbitrage Routines
• Supportive Culture
Illustration
• Chemical Biology Platform
• Intel
• CVC Managers, Consulting Firms
• Netflix
• Crowdsourcing – Chatter Communities
Incubators and National Policy Makers are slow to wake up to the Information Arbitrage Requirements Copyright V.K. Narayanan
“In a move that recalls the early days of computers, when collaboration trumped competition, Motorola announced it was teaming with Hakkens on the project”
Cristina Lindblad, Bloomberg News November 4-10, 2013
Motorola and Dave Hakkens
Copyright V.K. Narayanan
Task 2: Visualization
• Electrolux Story: Bagless Vacuum, and Innovation Triangle (Design, R&D, and Manufacturing)
• Visualization has been enabled by various tools: e.g. CAD, 3D Digital Modeling, Rapid Prototyping
• Deeper engagement of the Customers
Copyright V.K. Narayanan
Visualization: Bringing the Voice of the Customer into the Design Process
• Obsolete Approach
• Needed Approach
Idea Design Process
Prototype
(Design, R&D, Manufacturing)
Deeper Understanding of Customer’s Needs
Engage Customers in Design
Monitor Use
Copyright V.K. Narayanan
KM’s Role in Visualization
1. Build Voice of the Customer
– e.g. Customer Immersion Laboratories
• Engaging Lead Users
2. Critical Analysis of Product Feasibility
– e.g. Boot Camps
• Google’s bootcamp for design
Copyright V.K. Narayanan
Task 3: Failing Fast
• Innovation is riddled with failures
• This necessitates three activities:
1. Learn from failure (Uniquely KM)
2. Rapid abandoning of unworthy projects (Enabled by KM)
3. Tolerate failure (Cultural shift)
Copyright V.K. Narayanan
KM’s Role in Stimulating Failing Fast
1. Project Execution
– Linking of KM and Human Resource Management (HRM) in Project Management Practices
2. Strategic Experimentation
Copyright V.K. Narayanan
Strategic Experimentation (SE)
SE involves a number of low-investment, strategic initiatives, some of which will be weeded out quickly
• Components of SE
1. Rapid decision making
2. Learning from experiments
3. Rapid diffusion of learning
4. Maintaining a portfolio of initiatives
Copyright V.K. Narayanan
Implications
1. We have shifted into a knowledge economy where innovation is the central productivity task
2. Corporations must view innovation as central to their competitive advantage, and orient KM to stimulate and enable innovation
3. Incubators have to enable information arbitrage, visualization, and fail fast mechanisms in addition to their traditional role
Copyright V.K. Narayanan
1. Switzerland 2. Singapore 3. Finland 4. Germany 5. US
6. Sweden 7. Hong Kong SAR 8. Netherlands 9. Japan 10. UK
35. Spain 49. Italy 51. Portugal
Copyright V.K. Narayanan
Implications
1. We have shifted into a knowledge economy where innovation is the central productivity task
2. Corporations must view innovation as central to their competitive advantage, and orient KM to stimulate and enable innovation
3. Incubators have to enable information arbitrage, visualization, and fail fast mechanisms in addition to their traditional role
4. For the nation-state, institutionalized structures for innovation must be developed for both reducing unemployment and enhancing national wealth
Copyright V.K. Narayanan