MANAGING THE KNOWLEDGE ASSET: AMERICA'S COMPETITIVE CHALLENGE

* Dan Dimancescu

ABSTRACT The American Economy may still be riding on economic legacies that are either

outmoded or ill-suited to affect the contemporary competitive environment. One legacy is the managerial dependence of sdentUle management prindples; another is a continued belief in the linear concept of science-driven technology.

A second theme discussed in this article is the belief that firms must conceptnaliTe outcomes of their operations. Achieving them will then better focus technological research agendas as well as the need to treat management itself as a technology.

Finally, the article suggests that the phenomenon of consortia may be one of the most important economic experiments of the latter part of the century. The potential and pragmatic influence of the consortia is considered and its potential is suggested as problematic.

The United States faces the challenge of competing in an economic environment in which it no longer sets the rules. One problem is that we don't quite know what the new rules are. And in those cases where we think we do, the inertia of ingrained habits may be slowing o r stalling our ability to adapt.

The general concern of this conference -- cooperation between higher education and industry -- may be a case in point. In part, the new market driven rules require better and more timely means of tapping new knowledge. Yet, we lag in responding to market demands. Research in university or corporate labs is more

* Mr. Dimancescu is a partner in The Technology and Strategy Group, 50 Church St., Cambridge, MA 02138. He is also a Senior Lecturer at Tuck School of Business Administration, Dartmouth College, Hanover, New Hampshire.

This article was presented at the first in a series of Rotmdtables on Critical Issues, "Management of Knowledge Assets into the 21st Century:. A Focus on Research Consortium'. This first Roundtable on Critical Issues was held at Purdue University, Indiana, and was sponsored by the Technology Transfer Society in cooperation with Digital Equipment Corporation, on April 28 and 29, 1987.

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likely to sit underused or to migrate abroad than it is to be commercialized domestically.

What might have gone wrong? The answer is suggested in the form of several assertions.

(1) There is something called the knowledge asset that is neither acknowledged nor well understood by corporate managers; yet managing it is emerging as a critical competitive skill for which few are prepared.

(2) Effective use of the knowledge assets requires that we treat management as a technology, that technology embodies new concepts, new tools and new methodologies that must permeate corporate enterprises.

(3) The language and concepts used in managing the movement of knowledge -- generally described as the technology transfer process -- are out of date. It should be a language of doers concerned with accelerat- ing the commercialization of knowledge.

The rationale behind the making of these assertions is explained first by reflecting on recent American history. The goal will be to try an describe, albeit subjectively, some entrenched managerial legacies. Indeed, the mini-thesis of these comments is that it is those legacies that are causing a faltering of our economy.

S~cgnd, a possible formulation is proposed of how economic demands which are being imposed on our firms and academic institutions might be conceptualized. This formulation provides a new context for discussing technology transfer (or the management of knowledge).

Third, thi.~ paper will close by focusing on the role that newly created university/industry R&D consortia may, or may not, be playing in affecting the reconceptualization of the technology transfer process.

ONE: Historical Perspective The twentieth century witnessed the blossoming of American enterprise. The

foundations of that evolution were unique advantages of abundant resources, a vast and cheap labor supply generated by agricultural efficiencies and waves of immigrants, and an organiTational technology born in the early 1900s that is better known as "scientifie management". The late 1950s and early 1960s may have represented the apogee of this era.

But we discovered during the same 1950s and 1960s period, the economic potency of "scientific" knowledge as a raw material The birth of science driven missions during the second-war was translated into what was perceived as a science driven

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economy fueled by federal dollars. Out of it were born the National Science Foundation (NSF), federal labs of which there are now almost 900, or mission oriented agencies such as the National Aeronautics and Space Administration (NASA). And during this period an infrastructure of science-driven research universities (the Top 100) was created with generous federal support.

The success of that twenty year period -- a fabulous era of unprecedented wealth creation -- was seen by the world as an awesome "American Challenge". It was to be feared and emulated if any other industrial nation wished to survive as a peer. No one stopped to consider the implications of what, in retrospect, is the obvious: The United States formula for success matured during a period in which the nation had no competitors. ,a:ad by not considering even the remotest possibility that new competitors might someday challenge the U.S. formula, the national economic machine was put on "automatic". It epitomized the "if it ain't broke don't fix it" ditty. Nothing changed -- and a lot got worse.

Two things in particular got worse. First, we started spending money faster than we were generating it. With the Gulf of Tonkin Resolution in 1964, the military wealth spending agenda took root alongside a growing social agenda. We remember this strategy best as Lyndon Johnson's "guns and butter" vision of an ever abundant America.

Second, what we were not noticing was a flattening of our economy as productivity starting lagging -- at the very same time that competitors were growing stronger. In 1964, Japan exported a grand total of 19,000 cars to the U.S. We joked about Japanese "chain-driven" cars. That year we produced almost 10,000,000 units. By 1980, Detroit was reeling with production down by almost one-half its peak! By 1986, in its first year of exports to the U.S., Korea's Hyundai sold 150,000 units. And, our merchant semiconductor industry cannot sustain its own suppliers of manufacturing equipment or retain domestic or export markets. Even agriculture is now in trade deficit due in part to unpredicted production successes in a number of third world countries.

What we believed would sustain us hasn't. We believed that a management formula -- summarized in the name "Taylorism" or synonymously scientific management -- could endure. Production focused on quantity through enormous economies of scale wasn't working. One outcome was a system or technology of management that erected functional barriers, adversarial relations between workers and managers, and hierarchical structures with strict to-down lines of authority. And, we believed (and still believe) that a science driven economy is indeed the pre- condition to competitive success. It worked during the 50s and 60s we are reminded; it will work in the 90s and beyond, we are told. Why it didn't work in the 70s and 80s, isn't explained.

What we didn't want to believe is what has now passed us by. We didn't want to believe that a management formula invented in the U.S. during the 20s and 30s in the Bell system -- otherwise known as statistical process control as preached by

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Walter Shewhart, W. Edwards Deming and others -- could do better than Taylorism. We let it migrate to Japan in the early 50s. It now haunts us. We didn't believe that there could be such a thing as a technolo~ driven ~conomic success story. Too enamored with the linear path that "pushed" ideas from labs through countless barriers to unknowing markets, we ignored the simple opposite that demand could itself "pull" technology into the economic mainstream ha a process that defied linear definition.

Consider the implications of these legacies when it comes to conceptualizing the meaning of the phrase "technology transfer" within firms and between firms and suppliers of knowledge such as universities.

Can a definition of technology transfer tailored to the dynamics of a science driven strategic investment have any meaning in a competitive environment that is not science but technology driven?

How would a manager conceptualize the process of technology transfer in a" taylorisfie" setting characterized by functional barriers, manager/employee adversity, and strict hierarchical structure?

Would an academic whose reward system is founded on proving himself/ herself in basic science not view the process and language of technology transfer from a very different perspective than one whose work is based on translating innovative work into commercial products or services?

The answers will be as different as night is to day. Yet a vast number of U.S. managers, scientists and engineers, policy-makers, and academics remain wedded to a view -- or to legacies -- of an earlier economic setting that no longer holds true.

TWO: A New Context for Managing Knowledge If, indeed, a new set of demands are being placed on our enterprises as a result

of rising competition, what are they and how might they affect our conceptualization of the technology transfer process?

New knowledge must be developed for economic development to occur. Indeed, if we look at U.S. manufacturers (employers of 17,000,000), they are faced with having to reinvent the manufacturing process as a single knowledge-driven integrated system. To date, however, its components have been treated in large part as distinct activities in a linear process. That legacy actively discourages a continuous stream of technological innovations -- indeed our knowledge assets -- are migrating off- shore at increasing rates of speed. In short: The technology transfer process is not working.

"Desired Outcomes": What needs to be done? If a manufacturer wants to

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compete to "world class standards", it is incumbent that those standards -- or what are called the "desired outcomes" -- be understood and defined. Oniy then can an optimal strate_mr for developing knowledge assets be developed that will guide both "technology research and transfer".

What might those outcomes be? For illustrative purposes, a possible formulation of an evolving ehaha of "desired outcomes" for durable goods manufacturers is described.

Outcome 1: Q

Quality of processes, products and services is the first outcome required for firms to be competitive.

Outcome 2: C

Lo-Cost is a corollary to understanding and achieving high standards of qu~,dity by virtue of its elimination of waste, defects, and systematic inefficiencies.

Outcome 3: Unit-of-One

Unit-of-one production is an idealized outcome of flexibly managed product production lines. It expresses perfect satisfaction of a single customer's needs.

Outcome 4: Time = zero

Time=zero is an equally idealized outcome of a competitively managed firm. The concept-to-customer cycle should be compressed to its minimum time requirements. This involves the whole chain of functional activities.

Outcome 5: Nano

Nano-standards must be achieved in manufacturing processes for contemporary In'ms to remain competitive. This requires quality and cost mastery of the atomic structure of materials, of molecules and genetic codes in biotechnology, nano-seconds in electronics and bits in information processing. Nanofacturing involves constructing products from the smallest unit up. This contrasts with traditional manufacturing that generally involves reducing materials to smaller and smaller units ready for assembly.

Outcome 6: Timely-Info

Timely-informati0n. creation and use is an idealized outcome necessary for firms to remain competitive. Intensifying competition is putting more and more of a premium on

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mastery of information, and hence knowledge, as the key to competitive survival. Idealized it means knowing everything you need to know before you knew you needed it.

Achieving these desked outcomes will set winners apart from losers ha world manufacturing. To master them a new science of organiTation and new tools and methods must be conceived. That science and those tools and methods have yet to be fully developed in the U.S. Developing them means des~;ning two complementary research agendas: One agenda is alive with activity but poorly focused; the other is not commonly acknowledged or addressed.

Agenda #1: New Technologies To master the six suggested outcomes, new technologies must be developed and

tapped. For examples: What role will a particular ceramics research program play in achieving one or several of the outcomes? What importance might there be in developing new vision controls on production line machinery? What function might a particular CAD, CAM or CIM development have? What function might an expert system have?

By matching technologies agahlst desired outcomes a comprehensive grid -- as detailed as necessary -- can be constructed that wiil pin-point research needs.

Agenda #2: Management as a New Technology If a new science of manufacturing is to evolve it must treat management itself

as a new technoloKv. Some observers, W. Edwards Deming being one, have long said that 80% of the manufacturing problem may have more to do with management than any other single factor. New and well-honed concepts, tools, and procedures for managing complex enterprises and technologies are needed.

THREE: R&D Consortia A new array of R&D consortia -- about fifty new ones created since 1980 -- are

designed to engage industry, universities and government in collaborative research. They share a single-minded mission of the pooling of resources to create new knowledge, strengthen academic enterprises, and/or stimulate economic development. No two consortia are alike. Do they work when it comes to "transferring technology" or, in different words can they manage the knowledge asset that is being created? With some exceptions, there is little attention paid to what successful "technology transfer" may entail or even a direct awareness of what the management of knowledge assets may mean.

Although there is considerable agreement that these consortia are experimental efforts to link universities and industry together, often with state or federal monies,

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a prognosis on how effective they are might lead to the following judgments: One Pr_.__oo: Consortia are the most effective mechanism for pooling industry,

academic, and government resources toward solving well-defined technological problems. Con: However, consortia are highly vulnerable to inconsistencies in funding and leadership from each of the constituent institutions. Whether they can sustain long-term projects and build self-sustaining momentum is far from self-evident.

Two Pr__._oo: Consortia offer ann innovative and unique institutional setting for the technology transfer process (e.g. creation and movement of knowledge) to blossom. Co._._~n: However, there is little evidence that consortia are tack/ing the problem of treating management itself as a technology. As a result many member fn'ms of consortia are ill structured to take full advantage of the technological outcomes from consortia.

Three Pr__._oo: Consortia have the potential to change the rules of the game. They could be highly instrumental mechanisms for instituting radical structural changes within firms and within academic institutions. Con: However, there is enough evidence to suggest that consortia may be serving much more as "impedance managers" whose task is to keep the member institutions (industry and academe) from having to consider radical internal change. For academics this means buffering efforts to weaken rigid departmental barriers or the tenure system; for companies it may mean buffering pressures for a given firm to restructure or to invent more efficient internal operating systems.

CONCLUDING REMARKS The American economy may still be riding on economic legacies that are either

outmoded or ill-suited to affect the contemporary competitive environment. One legacy is the managerial dependence of scientific management principles; another is a continued belief in the linear concept of science-driven technology.

A second theme discussed in this presentation was the belief that in'ms must reconceptualize outcomes of their operations. Achieving them will then better focus technological research agendas as well as the need to treat management itself as a technology.

Finally, the phenomenon of consortia may be one of the most important economic experiments of the latter part of the century. But whether consortia will indeed exert the required influence on their members institutions to adapt to the new rules of the world economy remains problematic.

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