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


Why Know-Who Trumps Know-How

Conservative and anti-entrepreneurial managers often are lulled by their company’s past success and are misguided by the lessons drawn from this success. Entrepreneurs who have the courage to let go of the old have better possibilities to catch Schumpeter’s waves of dynamic disequilibrium and discover new oceans.

4. Multiple Competencies and Redundancy for Cross-Functional Learning. Excessive employee specialization and corporate fragmentation prevent both cross-functional learning and technology transfer from taking place in a large number of companies. The lack of knowledge of where to find the relevant knowledge and technologies is a frequent cause of long lead times and expensive projects.

A division manager of a global telecommunications company observes, “There is good know-how around in our company, but very few people know where to get it. Our engineers only see their own limited parts without considering the whole.” Two directors at a strongly compartmentalized company agree that, “Our company is like a Harrods department store without a directory — all you need is there, but you don’t know where….Due to time restraints and lacking knowledge about where all experts are, we only use those sitting in the same office.”

The best way to get around this knowledge isolation is to rotate people across functions and divisions. One common barrier to implementing multiple competencies and metaknowledge is that a transfer from one function to another is often perceived as a sign of individual failure. Instead of thinking of the value a person brings in from another function, we tend to think that this person must have failed in the old function.

Know-who based companies continually disperse their global knowledge base across functions, divisions, and geographic units to make sure that all knowledge is available everywhere through human know-who networks. Markus Bayegan, the chief technology officer of the ABB Group, drives multiple competencies all the way up to the department managers of the corporate labs: “We are constantly striving for a leaner and more flexible R&D organization so that we can get more results out of every dollar spent,” he says. “The idea is that even department managers will be involved in R&D work and as little as possible in administrative tasks. This will give them a broader and more practice-oriented competence base.”

5. The Leveraging of Extracorporate Creativity and Human Know-How Channels. Many know-how based companies are reluctant to rely on external sources of technology. The head of development of a large global automotive company gives two reasons his company does not yet leverage alliances with partners or suppliers to a sufficient degree: “First of all, we think that we are far better than they are, and secondly, [we worry] that external suppliers may steal our innovations. This ‘we-are-the-best’ mentality unfortunately works very much against any type of innovation alliances or the acquisition of external innovation.”

Arie de Geus argues convincingly that a company’s success depends “more on the ability of its people to learn together and produce new ideas” than on its ability to raise capital. (See “Arie de Geus: The Thought Leader Interview,” by Randall Rothenberg, s+b, Second Quarter 2001.) The former finance director of Royal Dutch/Shell Group of Companies and the author of The Living Company (Harvard Business School Press, 1997), Mr. de Geus clearly puts human interaction at the core of business performance: “I see more and more people from conventional business recognizing that the new business reality is a human-centered one,” he says. “They see that their critical competitive success factor is producing more talented output than their competitors; and they recognize that they can only accomplish this by getting people to learn and to work together better, rather than to simply work more efficiently, as with machines.”

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