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strategy and business
 / Fourth Quarter 2002 / Issue 29(originally published by Booz & Company)


Recent Studies

The authors contend that growth is delivered by companies that have an appetite for self-renewal. This attitude emphasizes learning rather than planning and is guided by principles involving market strategy and business competence. The authors argue that seeking to capitalize on opportunities in the marketplace while developing new competencies is dangerous. Markets need to be sought, and competencies need to be developed. But to do the two simultaneously is asking for trouble.

The authors suggest that self-renewal requires that an organization employ people who can drive the capture of markets or the acquisition of new competencies. Their other ingredients for growth are familiar — for example, a willingness to experiment and then execute fast (or withdraw speedily if things go wrong).

This is largely conventional wisdom, but, especially for Asian firms, the authors’ conclusion is not. If Asian companies are to seize the imperative for growth, they need to concentrate on organic growth (though occasional mergers and acquisitions can prove helpful) and judge their continuing success by year-over-year revenue growth and positive operating income. In short, Asian companies need to ignore the calls for instant organizational transformation and renewal and return to the basics of inspired evolution from within.

Knowledge Economy Realities
Paul A. David ([email protected]) and Dominique Foray ([email protected]), “Economic Fundamentals of the Knowledge Society,” Stanford Institute for Economic Policy Research, Discussion Paper Number 01-14.

The reality behind the much-vaunted concept of knowledge economics is often elusive. Paul A. David, of Oxford and Stanford Universities, and Dominique Foray, of Paris-Dauphiné University, manage to cut through the vagueness. They provide a pithy differentiation between knowledge — which “empowers its possessors with the capacity for intellectual or physical action” — and information — “structured and formatted data that remain passive and inert until used.”

Charting the knowledge-fueled economic transformation and pausing to poke fun at the New Economy bubble, they examine four key issues: the accelerating speed of our production of knowledge, our capacity to innovate, the growing importance of intangible capital, and radical developments in the means by which knowledge and information are produced and distributed.

These issues are most active and observable in knowledge-based communities. In many ways, this is the standard argument in favor of the innovative and commercial power of small teams or groups. Professors David and Foray, however, go further by identifying the characteristics of those communities that are more fruitfully focused on “knowledge-driven production.”

At the heart of these communities is a willingness to exchange and disseminate knowledge, often through the latest technology, but also through organizations structured around knowledge sharing. While mapping out the virtues of such communities, the professors refuse to declare an optimum size for such a community — it depends, they say, on why, how, and where the knowledge is exchanged.

If the knowledge economy is to develop to its full potential, the authors suggest that a number of challenges must be tackled. The first is the challenge of access to knowledge and information. Globally this remains highly uneven. This unevenness is also reflected in the fact that knowledge develops and is applied at different paces in different sectors of human activity and commercial endeavor.

Another unresolved issue is that of balancing intellectual property rights with public access to knowledge. The explosion of access to knowledge through technology has been matched by an expansion in patents. The two now exist unhappily together. Only the lawyers are truly happy. The authors suggest that a better balance between the two issues needs to be struck.

Perhaps the most interesting and daunting matter the authors identify is that of “a society bereft of memory.” The transient nature of knowledge means that today’s knowledge is quickly consigned to history. The knowledge economy does not look back. It moves forward vigorously and views history simply as defunct knowledge — usually written in another language. In the new knowledge economy, holding on to the past may be our greatest challenge.

Socializing the Virtual Team
Manju K. Ahuja ([email protected]) and John E. Galvin ([email protected]), “Socialization in Virtual Groups,” unpublished.

Starting work at a new organization is always stressful and fraught with complications. Socialization — defined as “the process of learning the behaviors and attitudes necessary for assuming a role in an organization” — is rarely easy. Knowledge of “how we do things around here” is largely acquired over time through observation and face-to-face interaction. Eventually newcomers make sense of their environment, of how the organization and their colleagues work, and become more effective themselves.

Manju K. Ahuja and John E. Galvin, two assistant professors at Indiana University’s Kelley School of Business, consider how socialization works differently in the case of a virtual group — “a group of people who interact through interdependent tasks, guided by common purpose … with links strengthened by webs of communication technologies.” How does the process of socialization work when e-mail is the principle means of communication among group members?

Professors Ahuja and Galvin sought an answer by examining the e-mails exchanged by a particular group of academics over three months. For this widely dispersed group in 27 locations, e-mail was the primary form of communication, although there also was personal interaction. The messages were categorized by the identity of the sender, by whether information was being requested or provided, and by those who were actually exchanging information.

In total, 673 messages were analyzed (with the permission of all involved). The general pattern was that more established members sent many more e-mails (587 versus 86). They also sent much shorter messages — the average e-mail between two established members of the group was a mere 110 words — suggesting that established group members communicate more effectively. Established members usually provided information, whereas newcomers requested information.

The newcomers were inquisitive about “regulative information” (the rules, regulations, and processes of the group), and also engaged in cognitive task-centered activity. The authors suggest that the impersonal nature of electronic communication may have proved helpful in encouraging the newcomers to seek out such information.

But newcomers were notably reticent about seeking more information or guidance about normative behavior — the expectations and the values of the group. They remained silent and watchful rather than using the impersonal nature of e-mail to explore these more ambiguous issues.

It seems that socialization in a virtual group does not simply happen. It needs to be managed and requires many of the same supports given to conventional socialization. In particular, the authors suggest that using different electronic channels of communication (such as discussion groups and chat rooms) might prove helpful, and that pairing a newcomer with an established member may be a means of accelerating the acquisition of more subtle normative information.

Des Dearlove, [email protected]
Des Dearlove is a business writer based in the U.K. Mr. Dearlove is the author of a number of management books and a regular contributor to strategy+business and The (London) Times. He is coeditor of the Financial Times Handbook of Management (Financial Times Prentice Hall, 2001).

Stuart Crainer, [email protected]
Stuart Crainer is a U.K.-based business journalist and a contributing editor to strategy+business. Mr. Crainer is author and editor of numerous management books, including the Financial Times Handbook of Management (Financial Times Prentice Hall, 2001) and The Management Century: A Critical Review of 20th Century Thought and Practice (Jossey-Bass, 2000).
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