Comprehensive intellectual capital management step by step phần 7 docx

They are supported both corpo-by the IT Department KM Program Office and the KM Resource Center, as shown in Exhibit 9.4.The main criticism made against the use of this model is that lea

better management of business assets, resource allocation, general operation, and overall ness performance.

busi-All this required the formulation of a clear IC strategy, formulated under the ICM Pilot, whichwas initiated in 2000 in the polyurethanes business unit The IC strategy defined Dow’s objec-tives for managing each form of IC, and hence identified what management should focus on fortheir development:

• Human capital Focus on the Business Management Teams’ alignment of human

resources with the needs of each project

• Customer capital Focus on the effectiveness of each business in aligning its customer

relationships with the project needs

• Structural capital Focus on building work systems, databases, tools, and practices (for

example, technology mapping and valuations) that enhance the competitive assessmentcapability of the business and hence its competitive performance

The IC strategy led and informed the development of various practices, programs, and systemsunder each of the management stages, as well as an IC measurement system Dow developed in

1999 a measurement system based both on the Intangible Asset Monitor and Balance Scorecardmethods In addition to the traditional metrics of customer satisfaction and loyalty rates, Near ini-tiated the Human Capital Valuation (HCV) project The HCV aims at understanding the futurevalue of current employee skills and measuring employee contribution to the success of businessprojects While other companies are satisfied with metrics like employee satisfaction, retentionrate, and the like, Dow is developing metrics to measure the value added per employee (in linewith Sveiby’s work), to better allocate and manage human resources This in turn will improveproject management, improve employee development and satisfaction, and enable getting prod-ucts to the market faster

Following is an examination of Dow’s ICM model presented through the CICM lens

DOW’S ICM MODEL

When Dow decided to become a pioneer in the area of ICM, it realized it had to undergo a number of changes first Unlike Skandia AFS, Dow was established in 1897 with a structured business model that to a great extent followed the old economy organizational models Beforeimplementing any new initiative, Dow had to make sure that its vision, structure, and culturewould not defeat change Fortunately for Dow, the culture was right with its long-term and his-torical commitment to management of inventions, with the first invention management groupbeing formed as early as 1958, and the first patent department in 1928 Still, Dow lacked a vision

to lead the IAM and ICM revolution, and the structure was rigid with too many hierarchical els To overcome these hurdles, Dow went through two major changes First, Dow delayered itsstructure from 14 to 5 levels, from the frontline operators to the CEO Second, it adjusted itsvision to reflect its newly gained insight into the strategic importance of IC

lev-Dow’s vision now included “creating value from our intellectual assets.” This facilitated theperceiving of intellectual assets and capital as enablers of value creation and maximization.Despite the value of this new awareness, more than a progressive vision was needed Visionaryleadership, strategic planning, ICM champions, committed managers and employees, and effec-tive teams and programs were all necessary for the transformation The vision and the excitementsurrounding the potential value of IC inspired Dow’s aggressive high-growth strategy—the New

176 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT

Value-Growth strategy developed in 1998 Under this strategy, Dow aims at increasing earningsper share by 10 percent, and to have 15 percent of revenue from products introduced in the pastfive years by 2005 Overall, Dow aims to grow revenue by 6 percent annually to reach $60 bil-lion in 2010 To Dow, ICM was not only the new way of doing business, but the vehicle for cre-ating and sustaining future value Let’s closely examine the programs that Dow implementedunder each of the ICM stages.

The Knowledge Management Stage

Dow has a matrix organizational structure wherein each business group maintains its autonomy

to a considerable extent As a result, though the KM initiatives are led by the centralized rate) top management, the extent of implementation, attention, and resources allocated to this ini-tiative is up to the vice president (VP) of each business group Dow’s KM system is led by theknowledge management director, who reports to the chief information officer (CIO), and super-vises a group of senior executives that form the KM Group The KM Group is an 11-memberexecutive team entrusted to manage knowledge across Dow’s 23 businesses, with a budget of $15million over 5 years It is responsible for supporting the information stewards, who in turn cham-pion KM initiatives in each of the business groups The information stewards report to the seniormanager of the KM Group and to the VP of each of the business groups They are supported both

(corpo-by the IT Department KM Program Office and the KM Resource Center, as shown in Exhibit 9.4.The main criticism made against the use of this model is that leadership’s commitment to KM issometimes diffused by the VP of the business group’s decision to limit the role of information stew-ards.20

Some information stewards complain that KM is not given priority by certain VPs, resulting

in their having two or three roles in addition to KM, spreading themselves too thin to effect thedesired changes.21

Despite this, Dow’s Greg Horvath, senior manager of the KM Group, praisesDow’s model for the liberty it allows each business to adopt the desired change(s) at their own pace

THE PIONEERS OF INTELLECTUAL CAPITAL MANAGEMENT 177

EXHIBIT 9.4 Dow’s Knowledge Management Model

IT Department

KM Program Office

KM Resource Center

Information Stewards

Senior Manager

KM Director CIO

Practices, methodologies, strategies

IT tools,

technological

solutions

Given the extent of cultural and other changes that KM initiatives require, it seems prudent that thedecision to adopt KM is left to the business group, according to its state of readiness and businessneeds This, however, places greater pressure on information stewards to act both as leaders of theinitiative in the business unit and agents of change for the whole organization.

Structure—Communities of Practice and IAM Teams. Dow’s KM system evolved in line withits IAM teams, who operated so much like communities of practice (CoPs) They are formed tosatisfy a strategic business need of capitalizing on IC in a defined area of technology from incep-tion through development to commercialization At the same time, around 80 of the intellectualasset managers are full timers and act as champions for new IAM teams At Dow, it is not aboutwhat you call it but about ensuring that an effective practice is implemented As Jim Allen, Dow’s

KM director, explains, the term knowledge management may fall out of favor, but the practices

and strategies of KM will remain “part of the basic strategy and culture of every successful ness.”22

busi-This statement summarizes to a great extent Dow’s approach to KM—keep it simple andeffective by “get[ting] the knowledge from those who know to those who need to know.”The information stewards have formed a CoP that meets regularly to share experiences andbest practices This community is spread over Dow’s 23 business units and global operations,covering services to 50,000 employees Information stewards form their own committees aswell, which meet on a quarterly basis to share knowledge and experience throughout the busi-ness group

A Culture of E-Learning. Dow’s commitment to KM and the value of employees’ knowledge

is reflected in many programs that are in place for knowledge sharing and professional ment Dow professes that it wants its people to have the “freedom they need to succeed,” andhence fosters values of innovation, agility, and individuality Part of this freedom is to provideemployees with the knowledge resources for them to learn and develop To that effect, Dow cre-

develop-ated the award winning learn@dow.now system which offers online continuing education

options to its employees worldwide In 2001 alone, Dow employees completed over 315,000courses The e-learning system proved to be very beneficial in addressing employees’ knowledgeneeds, improving morale, and saving over $45 million in training costs

The Knowledge Base and IT. In building the knowledge base, Dow realized that there are threestrategic components that their knowledge base should incorporate These components include23

cor-is on shifting from “reporting to prediction” in the use of information Thcor-is cor-is based on Dow’s beliefthat to better mine its knowledge resources, information should be used to predict patterns rather

178 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT

than just provide retrospective data.24

To that effect a number of information retrieval and zation tools are provided, including but not limited to patent citation trees and KM tools

visuali-The Innovation Management (IM) Stage

Dr Herbert Dow, who founded Dow in 1897, managed the innovation process very much in linewith Edison’s model outlined in Chapter 7 In his career of 40 years, Dr Dow obtained 107patents, forming the basis of the first products that Dow made Today, Dow is a global companywith 50,000 employees; manufacturing sites in 32 countries; over 2,400 chemical, plastic, andagricultural products and services; and around $35 billion in revenue Dow’s IM system hasevolved immensely from the Edison model to accommodate the network-based nature of innova-tion in the knowledge economy Here’s how

Structure—Labs as Competence Centers. Dow arranged the skills and competence of its ple across the various business units into competence centers where the skills of every person areknown to the lab manager On determining the critical skills needed for an innovation project, acentral department undertakes the responsibility of bringing the right team together Processownership is assigned to a central department to maintain consistency and improvement of theprocess (stage-gate), while team allocation is left to the leadership of every business unit or lab

peo-At Dow Polyplefyn Research Lab, for example, the Tactical Leadership Group is responsible forthe management of the innovation portfolio, including team and resource allocation.25

The Group

is made up of senior business managers and scientists The joint business and scientific ship is used to ensure a balance between administrative and technical considerations The Groupmakes decisions as to selection and prioritization of projects, and then assigns a cross-functional,multiskilled team to each project

leader-The 42 Plus Alliances Portfolio. Dow manages external alliances as part of its innovation lio, with over 42 joint ventures and R&D collaboration agreements with universities, governmentlabs, and independent R&D organizations When the benefits of collaboration are clear (e.g.,increased knowledge and speed to market), Dow does not hesitate to collaborate even with com-petitors A prominent example of this happened when a research team discovered a process in 1994

portfo-to make ethylene propylene diene monomer (EPDM) elasportfo-tomers, which were already produced byDuPont and others The process proved to produce high-performance grades with much lower manufacturing costs The research team sent the samples developed to DuPont for testing and com-parison On receiving positive feedback from DuPont, Dow decided it could complement itsstrengths with those of DuPont by working together Instead of competing in an area where processpatents are hard to procure and enforce, Dow formed a joint venture with DuPont to unite theirR&D efforts to develop the high-value new process, keeping it secret from other competitors.26

Innovation Culture and a Central Idea Bank. Being in a technological race, Dow’s innovationstrategies seem to be technologically driven Dow has heavily implemented new innovation prac-tices and tools to perform patent and technical intelligence Despite their technology-driven strate-gies, however, Dow incorporates employee-driven methods to empower employees, by fostering astrong culture of collaboration and creativity To be true to its message that employees’ ideascount, Dow established a central idea bank Though the bank does not actively solicit ideas fromemployees, it takes those submitted to it from anywhere in the organization very seriously Theideas are evaluated, filtered, and distributed to the various business units to which they are rele-vant If the ideas do not fall within the area of a particular business or are not within the strategic

THE PIONEERS OF INTELLECTUAL CAPITAL MANAGEMENT 179

plans, the ideas are then referred to the Business Development and Growth Unit for further sideration In all cases, the idea originator has to be notified of the action taken within two weeks,and of reasons for rejection if the idea was declined Near commented that in fact Dow’se-commerce business was a result of a noncore idea around which a whole new business was built.

con-The Intellectual Property (Asset) Management Stage

Patents and trade secrets constitute Dow’s primary form of IP When it first started with the IAMinitiative, Dow owned a patent portfolio of 29,000 patents The genius of Dow’s management ofits primary form of IP lies in assigning responsibility for sustaining and leveraging differentgroups of patents to the business that can and does benefit from them most In turn, this enabledevery business to focus on its core technological competencies and develop new related ones tostrengthen its competitive advantage and augment its patent portfolio At the same time, over 100IAM teams scattered across Dow function to leverage the patented and other technology bothinside and outside Dow

Structure—IAM Teams and the Tech Center. During 1992, the Inventions Management Groupworked with the business-aligned Patent Task Force to assign primary ownership of each property

in the IP portfolio to one of the businesses Each business unit was required to formulate its patentstrategy as part of its business strategy and devise investment plans using the valuation and auditingtools Consequently, each business unit was required to absorb its respective patents’ costs In 1993,the IAM teams replaced the Patent Task Force IAM teams are cross-functional teams formed tomanage a part of the portfolio according to the investment plan, with over 500 personnel The teamsare comprised of frontline functional managers and key scientists from within the businesses, whomeet two to three times a year to review the portfolio and devise strategies for its management

To support the network of intellectual asset managers, the Global Intellectual Asset Tech ter was formed in 1995 The Center, managed by Sharon O’riel, oversees matters that includemaintaining a Web site and communication network, collecting and disseminating best practices,maintaining the patent disclosure and agreements databases, and providing support to bothknowledge and intellectual asset managers

Cen-Culture—Patent Talk Equals Patent Friendly. The IP audit and the identification of the keypatents for every business immensely affected the IPM culture at Dow The exercise of identifyingsuch key patents and determining their value to business promoted debate among R&D, manufac-turing, business development, and IA managers, wherein solid understanding and appreciation ofthe value of patents to business evolved

Leveraging IP Internally and Externally—A Patent Investment Plan. The investment planaddresses the business goals of competitive positioning and commercialization Under the firstuse, the business unit addresses how the patent(s) can be used for competitive positioning andenhancing its core competitive advantage with the end goal of strengthening its technologicalcapability In this light, joint ventures and outsourcing agreements are considered

The second use relates to commercializing the patent through licensing or technology transfertransactions offered to outside parties in cases in which that is not competitively harmful IAMteams are involved at early stages in negotiations of joint ventures and R&D collaborations IAMteams initiate negotiations in cases in which they decide that Dow needs to acquire a certain tech-nology or patent to augment its knowledge in a strategic area of business The IAM teams are also

180 THE THREE STAGES OF INTELLECTUAL CAPITAL MANAGEMENT

on the lookout for opportunities to license out any of Dow’s patents It is reported that Dow’slicensing efforts have resulted in generating an additional $61 million annually.

CONCLUSIONS ON DOW

Dow’s interest in patent and technology licensing goes beyond its own boundaries, assisting increating a secondary market for patents and other forms of IP Dow was one of the very early par-ticipants in online Internet technology exchanges via significant activity with companies likeYev2.com and PLX systems Near commented that the success in creating a considerable sec-ondary market for IP may open the door for trading in IC—maybe human capital Near’s work tofind ways to measure the contribution of human capital to value creation and future performancemay be a crucial step in getting closer to this futuristic vision: a vision that is typical of Dow,where shaping the future is part of what Dow does

4

Skandia Assurance and Financial Services was originally established as a division of Skandia

AB, a leading Swedish insurance group of companies, established in 1855 Skandia AFS hasgrown exponentially to comprise most of Skandia, with subsidiaries in 25 countries

most organizations in the service industry attribute their competitive advantage to a number ofstrategic IPs, mainly software systems, business prototypes and methods, and a wealth of propri-etary information (i.e., copyrights and trade secrets—and patents in very limited situations).Brands also play a strategic role in the service industry given that trustworthiness plays a majorpart in the purchasing decision given the intangibility of the service product.

14

Special thanks are due to David Near for his gracious assistance with materials and advice forthe completion of Dow’s case study, and for sharing his knowledge and experience of ICM withrefreshing enthusiasm

See C Flash, “Personal Chemistry—Dow Chemical’s Information Stewards Are the Catalysts

for Sharing across Business Units,” Knowledge Management Magazine, August 2001.

21

Id.

22

R Whiting, “Myths and Realities—What’s Behind One of the Most-Misunderstood IT

Strate-gies,” Information Week, November 1999.

Part Three

Step-by-Step Guide to

the CICM Model

Part Two outlined the changes required to successfully implement the various stages of the CICMmodel This part presents a step-by-step guide on how to implement the required changes How-ever, before implementing any change, it is important to ensure that the organization has firsttaken some steps that are essential to effect any change It is essential before implementing any

of the programs and practices outlined in Parts Two and Three of this book to formulate a erful vision that leads change, to adopt a business model with a flexible structure, and to ensurethat the culture is the right one These issues are discussed in Chapter 10 But that is not all.Every organization is different, not only in terms of size and industry but in terms of goals andobjectives An organization’s industry and particular strategic goals may require more focus onone of the stages rather than the others That is when it is important to customize the CICM model

pow-by devising an IC strategy The IC strategy enables the organization to phase out the requiredchanges over the short and long terms, and hence manage resource allocation Over the shortterm, the change initiative should focus on the stage at which there are immediate business needsthat affect the organization’s performance in its market Long-term focus should be on the stagethat will enable the organization to enhance its future competitiveness and sustain its knowledgeresources Chapter 14 discusses the IC strategy along with the variables that should be taken intoaccount in customizing the CICM model

First Get Your Act Together

The business model, vision, and culture of an organization determine the effectiveness of anynew change or initiative that the organization tries to introduce The business model determinesthe flexibility of the structure, the command and reporting lines, and affects the way the variousdepartments and units communicate and work with each other A business model that is too rigid

or formal, with prominent boundaries between levels and departments, would defeat any lectual capital management (ICM) program Similarly, vision sets the organizational characterand the general state of mind of leadership and management This infiltrates throughout thewhole organization and shapes the attitudes of everyone in the organization toward work, co-workers, superiors, subordinates, partners, and customers A vision that lacks inspirational powerand futurism will take the zeal out of the ICM initiative, which is required to champion what is tomany organizations a major change Closely linked to the vision is the culture of the organization,which affects the way business is done and the values that everyone in the organization adoptsand functions by If these values are contrary to those required for ICM then the ICM initiativemay die in its cradle It is therefore essential before embarking on implementing any ICM stage

intel-or program to ensure that the intel-organization has the appropriate business model, vision, and culture

in place—in short, to ensure that it has its act together

THE BUSINESS MODEL OF THE KNOWLEDGE ORGANIZATION

Mysteriously, many organizations in the knowledge economy changed their organizational ture and business model in similar patterns The emerging model has two main characteristics: Aflexible structure with few layers and a range of networks that include external partners and cus-tomers The fact that organizations (regardless of size, industry, strategy, and situation) adoptedpractically the same model—what has been called the knowledge organization model—indicatesits significance in enhancing competitive performance in the knowledge economy

struc-Many writings appeared discussing the need to adopt the knowledge organization model, asopposed to models based on the industrial economy’s needs, to effectively compete in the knowledgeeconomy.1

The knowledge organization model is based on the premise that intellectual capital (IC)

is at the core of production, operation, and any critical organizational process Sveiby explains thatthe vast growth of business service companies (being close equivalents to knowledge organizations,

in his opinion) indicates the preeminence of the knowledge organization model in the knowledgeeconomy.2

Similarly, Brian Arthur, of the Santa Fe Institute, attributes the success of the knowledgeorganization model to its agility in dealing with the fast-changing environment by redeploying itsknowledge resources to meet new demands or trends.3

In Arthur’s analysis companies in high-techindustries (computer, software, and biotech) are close equivalents of knowledge organizations

As stressed by Sveiby and Arthur, the knowledge organization model is critical in industrieswith a high rate of change and hence turbulence (e.g., high tech) Still, the model is of equal

185

importance to organizations in other industries The knowledge organization model has beenadopted by many organizations in traditional industries (e.g., manufacturing, oil), some to savethemselves from the brink of bankruptcy, and others to enhance performance in general.4

Theknowledge organization model should be seen as a stage of evolution in organizational develop-ment at which the organization develops the ability to leverage the knowledge resources of itsemployees and systems to respond to change quickly and effectively, with the end goal of becom-ing a learning organization.5

Only organizations that are able to cultivate the ability to manage ICare able to successfully benefit from this model to the full, given the high level of interaction itgenerates within the organization and with external partners across dispersed networks

Before embarking on implementing ICM throughout the organization, therefore, the ing are prerequisite organizational changes:

follow-• A flat structure where the number of layers that knowledge and information have to verse are much fewer than those of the industrial economy organizational model Thelayers in comparison are sometimes less than half of the traditional model Take forexample ABB, a multinational company with 60 businesses and only four layers

tra-• Active delegation of decision making and innovation to the frontline where alliances andpartnerships with suppliers, distributors, and customers are forged and maintained Incontrast, top management would need to maintain a clear focus on strategy

• Appreciation of the nature of the workforce in the knowledge economy as knowledgeworkers who need time to experiment, innovate, contemplate, and brainstorm Hence, thesignificance of creating the right culture

• An information technology (IT) infrastructure that facilitates the generation, collection,and sharing of ideas and knowledge across departmental and divisional boundaries

• A boundaryless structure to enable interaction and cross-pollination of experiencesamong the different departments and business units Increased use of cross-functionalteams, including communities of practice when needed, to manage innovation and otherprojects, and maximize knowledge sharing

• Flexible organizational boundaries between the organization and external partners to tapinto the various networks and access them for new ideas for business growth

• Appreciation of IC as the core of production, the effective management of which willensure the availability of knowledge resources, the effectiveness of the innovationprocess, and the leveraging of IP

• Creation of new positions on the senior and frontline management levels, to deal with themanagement of knowledge, innovation, and IP These should include positions at the sen-ior executive level to define the organization’s IC strategy, define the ICM objectives,streamline management systems, and coordinate among the various programs

As evident here, the knowledge-organization business model is flexible, malleable, flat,boundaryless, and based on internal and external networks with knowledge- and innovation-intensive activity Ultimately management’s role under this model is transformed into one ofleadership rather than control—hence the need for a well-formulated, inspirational vision

VISION AND ORGANIZATIONAL SOUL SEARCHING

Vision without action is a daydream Action without vision is a nightmare.

—Japanese saying

Formulating a vision is an organizational soul-searching exercise wherein the organization definesits identity to itself and the outside world It sets the mood for leadership and employees alike andthus dictates in a subtle, yet very strong, way the mode of operation Take for example this part ofDuPont’s vision: “we deliver the miracle of science.” A vision as large as life—or is it? With a visionlike this, one wonders if any clear direction is given to leadership for steering the organization intothe future, or for employees to understand the organizational overall purpose But a deeper look atthe words reveals the organization that DuPont aspires to be: one that sees itself and is recognized

as achieving the impossible Its vision not only reveals its commitment to do the miraculous, butalso reflects the organizational character or personality The organizational character painted by thewords may be considered a little pretentious by other organizations Another leader in the samechemical industry expresses its vision with equal strength but less flamboyance, providing that “Weimprove what’s essential to human progress.” Yet that flamboyance or confidence in their ability to

do the miraculous is what sets DuPont’s organizational character apart from the rest

What Is a Vision?

A vision statement should focus on the purpose of the particular organization in a way thatdefines its character It should reflect how the organization sees itself now and in the future, andhow it wants to be seen by the outside world The choice of words should aim at provoking a cer-tain mental image in the reader coupled with an emotional charge Otherwise a vision statementwill just be another document that sits in the drawers of some employees (if they can rememberwhere they placed it) Such a vision is more of an idle, and outmoded, tool

A vision statement can be made of few words or a number of lines Sometimes it is equatedwith the mission statement Opinions differ on what the elements and function of each statementshould be but there is a general consensus that a vision statement should reflect the main spirit orpurpose of an organization or a business unit A mission statement, on the other hand, is gener-ally defined as a more detailed description of how the main purpose will be achieved by spellingout the means, the promises to customers, the main enablers (technology, creativity), and theshared values of the employees

Many vision statements are redundant as they state the purpose of the organization in terms ofwhat it does, and not in terms what it wants to be An example of this are vision statements thatread something like “we want to be the best manufacturer of x in the world.” Such vision state-ments fail to inspire employees or create a distinctive organizational identity, and are thus sterileand ineffective An organizational vision needs to be so strong as to define the personality, char-acter and identity of an organization or it runs the risk of being counterproductive by creating afake sense of unity and confusion as to the direction the organization should take

It is very important to start with formulating or amending the vision of the organization or thebusiness unit before embarking on an ICM This is because a vision statement, if properlydrafted, provides the foundation for an ICM and establishes the business case for it It groundsthe ICM in the everyday business reality by showing how it helps the organization achieve itspurpose This is of particular importance for the KM stage; therefore, it is essential that an organ-ization defines its purpose or vision first A well-formulated vision serves in several ways

Find Your People

The other purpose a vision achieves is to broadly define the character of people the organizationaspires to attract and will be able to retain In DuPont’s example, the vision reflects that theorganization wants to attract and keep employees who do not quit even when their goal seemsimpossible to achieve

That is clearly demonstrated by the vision of Disney Company: “We make dreams come true”and “We deliver the magic of Disney.” Making dreams come true takes a lot of hard work andcommitment, and needs both powerful imagination and advanced means (e.g., the latest in ani-mation technology) This reflects the level of commitment that Disney desires from its employ-ees: imagination, hard work, and commitment until a dream is made true It also conveys toprospective employees Disney’s commitment to provide the environment that fosters and encour-ages their creativity for them to make magic.

Connect with the Outside World

A vision statement should also define the business of the organization in terms of the real effectthe organization has on the outside world Such effect should be defined in a way that goesbeyond the delivery of certain products or services Coca-Cola is very good at this It sees itself

as being in the business of refreshment and invigoration of people rather than making and sellingdrinks Defining its business this way, Coca-Cola creates a distinctive character that impacts itsbusiness at both the strategic planning and operational levels Coca-Cola adopts and implementsbusiness plans that reinforce this character by delivering high emotional value with their productsand taking an active part in the communities they serve This translates into consumers whobecome increasingly loyal to the brand that delivers to them a story—an emotional value—ratherthan just a drink That connection with the outside world was a result of Coca-Cola’s envisioningitself as refreshing people rather than making a drink

Taking a look at leaders in other industries, the same trend is detected Such organizationsdefine their business and purpose in reference to the way they see themselves impacting theirsociety or the whole of humanity Dow’s business is “to improve what is essential to humanprogress” and not to make chemicals, and Pfizer sees itself as contributing to humanity’s questfor a better life Pfizer is in the business of healing, rather than the business of making and sell-ing drugs Envisioning its role in this way, Pfizer has created and maintained a distinctive char-acter of being caring of both its employees and its customers—a character that is continuouslyaffirmed by the way Pfizer responds to its community

Transform the Organization

Visions are usually set by the founding leaders of the organization Nonetheless, it is common tohave an organization change its vision if it is considered restrictive or unsuitable for the times, or

if it does not conform to the vision of a new leader who sets out to transform the organization Avision can transform an organization since it sets the tone, the culture, and the envisioned reality

of an organization

The power of vision to transform a whole organization can be seen in the story of FranklinPierce Law Center (Pierce Law) Historically, the powerful vision of Pierce Law took it from thefarm barn headquarters where it was established in 1973, to become a state-of-the-art school that

is renowned globally for its intellectual property (IP) program.6

Established at a time when the

term intellectual property (and patent law) was seen as the black sheep in legal education, Pierce

Law’s vision was to advance IP law to support inventors and promote innovation in business Attimes when little academic attention was given to IP, let alone research or law reform activities,Pierce Law’s vision was indeed futuristic

Pierce Law maintained its position as the national leader in this area of law until powerfulcompetitors joined the race,7

which—though able to join Pierce Law at the U.S nationalarena—could not effectively compete with it internationally The implications of this are cru-cial from a strategic standpoint Other competitors, who are supported by powerful financial and

administrative infrastructures, now share the once unique competitive advantage of Pierce Law

in IP law Furthermore, IP law courses per se became more of a commodity as these courseswere embraced by mainstream legal education The vision of the founders has brought PierceLaw to where it is, but as it substantially materialized, it can no longer inspire it into the future.Intellectual property law may remain Pierce Law’s cash cow,8

but to maintain its leadershipposition Pierce Law needs a new vision to take it into the future

After suffering the loss of two consecutive deans, Pierce Law was deanless for a number ofyears until the appointment of John Hutson in 2000 Faced with the daunting task of reformulat-ing a vision for the future, Hutson started with organizational soul searching For months, hefocused on consulting key people, feeling the organizational culture, discovering the strengths,testing the depths of the strengths and weaknesses, and dissecting the old vision for insight.Eventually, it became clear to Hutson that connecting business to IP and other areas of law inlegal education is the way to the future:

Our vision is to be business-oriented, our graduates will not hold MBAs but theywill certainly have a keen appreciation of business needs and concerns Augmentingtheir legal qualifications with appreciation of business we are graduating a genera-tion of lawyers who will facilitate business development

This vision led change in the school and permeated into the strategies of the various ments from admission—where the vision is offered to prospective students—to faculty commit-tees where new courses are developed and new credentials are recruited Most importantly, itaffected the culture, which should be aligned with the new initiative before any change is intro-duced, as explained next

depart-CULTURE—THE MAIN ENABLER

Culture incorporates a set of shared values, mainly implicit, that the members of an organizationhave Culture refers to the underlying philosophy, behavioral patterns, and routines or simply:

“The way we do business here.” The power of culture is that it is well entrenched in the psyche9

of the whole organization that it can destroy any new initiative that is based on values differentfrom or contradictory to those underlying the existing culture Nelson and Winter go as far asclaiming that culture and organizational routines form the “organizational genetic material.”10Having the right culture, therefore, has been noted as a major success factor in effecting any orga-nizational change Conversely, an adverse culture has been found to be the major reason for thefailure of many KM and other programs This is because, when the general consensus of values

in an organization are not conducive to sharing knowledge, the employee’s willingness to shareknowledge is suppressed

For the success of any ICM initiative (at any of the three stages), it is important that the ization have the right culture In addition to enabling the changes required for each of the stagesoutlined in the previous part, the right culture can have a powerful effect on the organization as awhole First, it emancipates the creativity of employees through recognition of their contribution.Second, it enables employees to make decisions more quickly with less formal control by man-agement, because once the cultural values are explicit, employees are more aware of what isallowed and expected, and what the organization stands for This leads to the third function ofculture, namely, increasing employee loyalty An employee who feels empowered, part of theorganizational community, whose contribution is recognized and appreciated, and who is always

challenged to improve and develop displays much stronger loyalty rates This reduces employeeturnover, which in turn reduces the effect of the brain drain, improves customer satisfaction andretention rates,11

and creates a healthy workplace that attracts more talent A prominent example

of this is Nokia, which keeps on attracting the best talent in the telecommunications marketdespite offering relatively modest remuneration Talent is continuously attracted by the popularNokia culture, which is known to be innovative, challenging workers to higher intellectualrealms, making them “happily badly underpaid.”12

In fact, it has been noted that a strong culture alone can provide a competitive advantage inmature industries (e.g., the airline industry) Southwest’s success over the years has been due toits strong culture of unity, teamwork, and collaboration where they work together as one com-munity to beat the competition This is illustrated by the following excerpt in which CEO HerbKelleher addresses his people regarding USAirways’ entry into the Baltimore market:

The outcome of the latest attack on Southwest by another of the Big Seven Carriers

is just as important to ALL of us Just as against the United Shuttle, the crucialelements for victory are the martial vigor, the dedication, the energy, the unity, thedevotion to warm, hospitable, caring and loving Customer Service I am betting

on your minds, your hearts, your souls, and your spirits to continue our great prideand our marvelous success.13

Pfeffer and Sutton refer to another very interesting role that organizational culture and phy can play in changing suppliers’ performance The authors explain how Honda was able toimprove its suppliers’ performance through alignment between its and the suppliers’ cultures.14This further highlights the role of cultural alignment in the success of strategic alliances andmergers, where it has been noted that culture alone can threaten to break a merger.15

philoso-So what arethe values that an organization’s culture should foster for effective ICM implementation? Andhow does an organization ensure that it has the right culture before it embarks on change initia-tives? There are two sets of values that an organization should instill in its culture for successfulICM: knowledge sharing and risk taking, as elaborated next

Knowledge Sharing or Idle Socialization

Organizational culture should encourage and foster information and knowledge sharing as anactivity that is part of the job rather than a form of idle socialization This requires more than sim-ply incorporating knowledge sharing in the organizational culture It requires a shift in perceiv-ing knowledge sharing as a professional, rather than a social, activity A striking example isBritish Petroleum (BP), showing how the first attempts at KM failed, despite leadership’s stress

on the value of knowledge sharing It was not until BP made it part of the job to move personnel

to other divisions and departments, where they are encouraged to share their knowledge, that KMsucceeded Incorporating knowledge sharing in the job design resulted in employees changingtheir behavior, gradually changing the culture to one in which knowledge sharing became one ofthe most admired professional skills

The most important organizational cultural value is to encourage the contribution and laboration of everyone in the organization in order for the organization to meet its strategicobjectives Southwest Airlines16

col-is one of the best examples of an organizational culture inwhich everyone collaborates to succeed In a fiercely competitive industry, Southwest’s com-petitive advantage was to establish and maintain a reputation of being on time no matter what.From the pilot and crew to its land-based airport personnel, every Southwest employee takes the

company’s promise seriously and works to maintain it It is not uncommon for Southwest pilots

to help with loading baggage to get airborne on time The company’s outstanding record andaward-winning performance are attributed by management to the collaborative culture theyhave, which the competition has continuously failed to imitate The second set of values relates

to fostering innovation

Failure or Success—A Matter of Perspective

Innovation, particularly radical innovation and the generation of new knowledge and IC, is a veryrisky business A strong brand may be affected by aggressive competition of another or loss ofpopularity if the organization fails to promote and enhance it Research capability, no matter howrobust, may fail to deliver a breakthrough invention Intellectual property rights may be renderedless effective by litigation, infringement, or misuse Still, to be risk averse may not be a choice ofbusiness mediocrity versus excellence but to some may be a choice of death over life Part ofencouraging risk taking is not to penalize, even by stigmatizing, failures by employees A risk-taking culture should at least encourage an attitude of open-mindedness by management—anopen-mindedness that may extend for as long as five years as in the following example from 3M.Research scientist Dr Spence Silver’s attempt to invent a strong adhesive initially failed, andinstead he invented adhesive spheres that would not dissolve though still very sticky For yearsSilver presented seminars throughout 3M in search for product concepts for his technology 3Mdid not kill the invention and allowed it to survive for five years when Mr Fry, a new productdevelopment researcher, attended one of Silver’s seminars and came up with what became known

as the Post-It Note Initial market research indicated that the new product, Post-It Notes, would

be a commercial failure But the entrepreneurial spirit and risk-taking cultural values cultivated

by 3M prevailed The two managers responsible for the launching decision visited a number ofstationery retailers and were convinced, despite negative market research reports, that the newproduct had a chance The result was a $384 million business that continues to grow.17

But tural change is not easy In most cases, it is hard to discern with sufficient clarity the existing val-ues embedded in the culture of an organization Without such an understanding it is hard to seehow such values can be changed

cul-Cultural Change—Uncovering the Implicit Values

One way to change culture is by effecting changes to the job design wherein knowledge sharing

is incorporated as part of everyone’s job, as explained in Chapters 5, 7, and 8 Incorporatingknowledge sharing, idea submission, and teamwork in the reward and compensation systems ofthe organization propagates this further This, however, is not enough; if the implicit values arenot made explicit it may be impossible to change them, particularly where the adverse implicitvalues are those adopted by senior and middle management In such a case, the organization has

to change implicit patterns that are entrenched deeply in its identity That can only be possible byuncovering these implicit patterns, and comparing the values of management/leadership and therest of the organization

To deal with this, Brian Hall of Values Technology suggests going through a value audit Hallapplied his study of the effect of human values on human behavior to organizational cultural val-ues and behavior.18

He found that although 125 values underpin all human behavior, an ual lives with about 20 and operates on about a third of these on a daily basis These valueschange according to the stage of human development, which Hall divides into seven stages Hallexplains that organizational culture is affected by the same set of values reflected in the collec-tive values of employees and the stage of development of the organizational vision and evolution