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 / Fourth Quarter 2001 / Issue 25(originally published by Booz & Company)


Best Business Books: Knowledge

Searching for Giants of Theory and Practice

Battle lines are often drawn in the space between two truths — in life, in war, and certainly in the ongoing debate about knowledge in business. True, “knowledge” has become a cliché, a fad. Also true, as Peter Drucker argued: Our world is becoming “not labor intensive, not materials intensive, not energy intensive, but knowledge intensive.” The challenge is to find the truth within the cliché by asking, What should business do differently in a knowledge-intensive world?

Isaac Newton once said, “If I have seen further, it is by standing on the shoulders of giants.” Today’s business community needs a Newton — to fashion a unified theory of knowledge in business; to point out any giants lurking in our midst; to get us beyond the hype of the past decade. But no Newton — or giant’s shoulders, for that matter — has emerged. Without help in sight, we sifted through the hundreds of books published about knowledge in business over the past decade. Here we offer four that together provide the practitioner a sound basis for beginning to understand the knowledge-intensive world Drucker foresaw.

First, from 1989, is Charles Handy’s The Age of Unreason, a “guidebook to the new country” of knowledge-intensive business. Handy’s power — then and now — is his comprehensive vision of the interrelated changes in business, work, and society. In 2000, John Seely Brown and Paul Duguid bridged the gap between Handy’s vision and today’s cynicism with The Social Life of Information. Consistent with Handy’s vision, detailed and pragmatic, it gives a clear-eyed assessment of the 1990s — the hollow hype, the lessons learned, and the near-term opportunities. With those two books framing the question, Ikujiro Nonaka and Hirotaka Takeuchi’s 1995 The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation gives us a deep view into innovation and a different organizational vision, that of the Japanese. Finally, in 1998, from Gary Klein, a cognitive psychologist, we have Sources of Power: How People Make Decisions, the results of 10 years of research in how experts in a variety of professions learn and use knowledge to make critical decisions.

The Voice of Reason
In 1989, Handy wrote, “Increasingly, organizations consist of clever people doing clever things.” They are places where “fewer people, thinking better, helped by clever machines and computers, add more value than gangs or lines of unthinking human resources.” According to Handy, the source of superior organizational performance has shifted; it is no longer scale, business processes, or knowledge per se, but people, thinking and acting.

People are especially advantaged during periods of rapid change because they can learn. “Those who are always learning are those who can ride the waves of change and who can see a changing world as full of opportunities rather than of damages.” Humankind, Handy tells us, “is born to learn.” More than the simple transfer of answers from teacher to student, true learning is discovery. When we learn something, it changes us. Real learning, according to Handy, is a continually turning wheel. It starts with a question or problem, however immense or trivial. Why does the sun rise in the east every day? How much should a policyholder claim for a demolished car? How can I make a culinary miracle out of the leftovers in the fridge?

From the question we move to theories or possible answers, using the knowledge and information at hand. Common knowledge is that the sun moves around the earth. My company’s models suggest the car is worth $3,000. My sister is a good cook, I’ll call her.

Next, the theories or answers have to be tested, tried out, and reshaped. If the sun is moving around the earth, why does it rise on a different point on the horizon each day? Maybe the earth goes around the sun. My client can’t replace her car for $3,000; the claim should be for $3,500. My expert sister says make meatloaf and salad. Finally, we reflect — why did that work or not work? This is where learning takes hold. The meatloaf was dry. We won’t forget the eggs next time.

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