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 / Second Quarter 2002 / Issue 27(originally published by Booz & Company)


Why Know-Who Trumps Know-How

A six-step guide to the promotion of corporate entrepreneurship and the exploitation of innovation.

Illustration by Lars Leetaru
The innovation process is no longer limited to intracorporate know-how, but leverages instead global know-who. Know-how is the ability to solve problems efficiently based primarily on internally accumulated knowledge, experience, and skills. Know-who is the ability to acquire, transform, and apply that know-how.

Know-who based companies know who has the know-how; have the active empathy to rapidly establish the trustful relationship required to acquire that know-how; and have the multiple competencies required to transform and apply it in a new context so that innovation can occur.

To know who has the know-how gives new opportunities for corporate entrepreneurship through exploration and creation of new knowledge and invention. Know-who can also transform the results into practical processes for global exploitation of innovation.

Three Key Propositions
Know-who based companies attract and develop outward-oriented entrepreneurs, and systematically develop multiple networks — not only for R&D and innovation, but also for the overall management of knowledge and skills within and beyond the company. In a highly holistic manner, these networks exploit external sources of creativity and technology to commercialize the knowledge acquired through external and internal networking.

The synergistic combination of external and internal networking is a process by which the acquisition of technology from outside sources enhances a company’s ability to commercialize that technology, thus avoiding the “innovator’s dilemma” identified by Professor Clayton Christensen of the Harvard Business School. “External networking” is the process of linking a firm with extracorporate sources of technology. “Internal networking” refers to the integration of the research, development, production, and marketing functions that make up the innovation process.

It’s important to understand the mechanics of know-who based companies for three reasons:

• Know-who based companies excel at product innovation by deliberately eschewing the reliance on internal technology development that is still characteristic of many firms, and instead focusing on identification, acquisition, and transformation of know-how, which is primarily tacit knowledge.

• Knowing what we know is less powerful than knowing who knows what. A next-generation knowledge and information (K&I) management structure needs to more purposefully address tacit knowledge, rather than deal primarily with explicit knowledge and databases. More often than not, the tacit dimension — deeply rooted in people’s heads, but hard to codify — has the bigger business impact when managed correctly.

• External sourcing of technologies and skills energizes and creates powerful synergies in know-who based companies, networking tacit knowledge into innovation. It does not have to result in a hollowing out of internal research and development capabilities.

Measurement Myopia
A central challenge in moving from know-how to know-who is to break away from the performance measurement myopia that causes excessive compartmentalization and intracorporate competition.

Paradoxical as it may seem, many companies’ efforts over the past decade to compartmentalize and maximize performance of strictly controlled individual units have resulted in sums smaller than the whole. Instead of being allowed the flexibility of moving in new directions, compartmentalized units have been isolated in a kind of decentralized bureaucracy that kills most networking capabilities and hits the brakes on most innovation activities.

Large companies must recognize the paradoxical organizational needs for exploration and exploitation. Instead of boxing themselves into decentralized bureaucracies, companies need to build up networking capabilities to combine and interlink small, organic creative networks, while exploiting the results through rapid transfer and transformation into process networks. As explained in more detail in the s+b article “The Organization vs. the Strategy: Solving the Alignment Paradox” (by Jeffrey W. Bennett, Thomas E. Pernsteiner, Paul F. Kocourek, and Steven B. Hedlund, Fourth Quarter 2000), this requires a good balance between adaptability and alignment in the organization.

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