Chapter 7 Managing organisational knowledge
The Battle of Trafalgar 228
Technology trajectories 229
The acquisition of firm-specific knowledge 230
The resource-based perspective 230
Dynamic competence-based theory of the firm 231
Developing firm-specific competencies 233
Competencies and profits 234
Technology development and effort required 235
The knowledge base of an organisation 236
The whole can be more than the sum of the parts 237
Organisational heritage 237
When the performance of the organisation is greater than the abilities of individuals 238
Characterising the knowledge base of the organisation 239
The learning organisation 241
Innovation, competition and further innovation 242
Dominant design 244
How firms cope with radical and incremental innovation 244
Developing innovation strategies 248
Leader/offensive 249
Fast follower/defensive 250
Cost minimisation/imitative 250
Market segmentation specialist/traditional 250
A technology strategy provides a link between innovation strategy and business strategy 251
Case study: The cork industry, the wine industry and the need for closure 251
Chapter summary 260
Discussion questions 260
Key words and phrases 260
References 261
Further reading
Acquiring knowledge about technology takes time, involves people and experiments and requires learning. To exploit technological opportunities, a firm needs to be on the ‘technology escalator’. As we will see later in this chapter, firms cannot move easily from one path of knowledge and learning to another. The choices available to the firm in terms of future direction are dependent on its own capabilities, that is, the firm’s level of technology, skills developed, intellectual property, managerial processes and its routines. Furthermore, the choices made by any firm must take place in a changing environment, characterised by changing levels of technology, changing market conditions and changing societal demands. Teece and Pisano (1994) refer to this concept as the dynamic capabilities of firms.
Hamel and Prahalad (1994) use the metaphor of the tree to show the linkages between core competencies and end products. They suggest that a firm’s core competencies are comparable to the roots of a tree, with the core products representing the trunk and business units smaller branches and final end products being flowers, leaves and fruit. Technology in itself does not mean success; firms must be able to convert intellect, knowledge and technology into things that customers want. This ability is referred to as a firm’s competencies: the ability to use its assets to perform value-creating activities. This frequently means integrating several assets, such as: product technology and distribution; product technology and marketing effort; and distribution and marketing.
Key features of these competencies are the ability to convert technical competencies into effective innovation and the generation of effective organisational learning. The observations made earlier suggest a need to analyse organisational knowledge and the processes involved in realising that knowledge, rather than analysing organisational structure. If we can uncover the internal processes that determine a company’s response to a given technology, this may help to explain the longevity of large innovating companies.
But what is meant by organisational knowledge? One may be tempted to think that the collective talents and knowledge of all the individuals within an organisation would represent its knowledge base. It is certainly the case that one individual within an organisation, especially within a large organisation, rarely sees or fully understands how the entire organisation functions.
The resource-based perspective 230
Resource-based perspective (RBP).
The perspective is dependent on two basic principles:
● There are differences between firms based upon the way they manage resources and how they exploit them (Nelson, 1991). (In more detail, based upon the resources they have, the way they manage resources, the way they use these resources in design, production and marketing activities and the way in which they acquire new resources)
● These differences are relatively stable.
If the RBP is dependent on these two key principles, then a key question arises, which is: how does one identify these differences that determine the success of a firm?
By differences, we mean strengths. Strengths have been interpreted as resources, capabilities and competencies. Hamel and Prahalad (1994) developed the idea of core competence. Core competence is a very specific type of resource. They gave three tests that they argue can be used to identify core competencies, namely ‘customer value’, ‘competitor differentiation’ and ‘extendibility’.
A competence is core competence of a company, when customers value it, it provides differentiation, competitors are not providing it in adequate way and it can be extended to many products and services.
Developing innovation strategies 248
Leader/offensive
Fast follower/defensive
Cost minimisation/imitative
Market segmentation specialist/traditional
A technology strategy provides a link between innovation strategy and business strategy 251
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