Knowledge Management: Key to success and speed

A sustainable competitive advantage of an organisation success comes from its intangibles like Brand, Culture, Knowledge etc. Because its these intangibles that cannot be copied easily by competition.

The global economy is moving towards knowledge economy. The consumption and production of intellectual capital is the new order. The organisations that do this are far more profitable than their counterparts in traditional industries. Its the knowledge that adds the extra margin to the bottom-line, that added competitive advantage which cannot be imitated. All knowledge centric companies enjoy much higher margins compared to traditional manufacturing and services industries.

A knowledge centric company prioritises managing its internal knowledge as virtuous cycle whereby the knowledge is produced, then shared, consumed and produced further more. The new knowledge generated is what flows into every area of its value chain (like strategy, products, operations,..). The organisation that produces knowledge faster than its competition invariably remains ahead.

Moving towards knowledge centric organisation requires a focus on knowledge management. Its important to distinguish knowledge management from information or database or business process management. Knowledge management is about meeting the high value knowledge needs of the organization which impacts the success of the organisation. Following are key considerations to bear in mind: 

• Take feedback on organisational high value knowledge needs from people in senior and key positions.
• External knowledge sources are equally important as internal knowledge when producing new knowledge.
• Don't loose focus on tacit knowledge like experience, insights and network.
• Quality is important than Quantity. Otherwise it will become a search for a needle in haystack. 
• Its also about behavior and culture than just the IT platform. The change management and top management support are key to success.

It was in 15th century that Sir Francis Bacon mentioned "Knowledge is Power" and its more so true today in the knowledge centric economy.

The Disconnect between Innovation function and Product/Business strategy

Why do companies trail behind the product/market trends even after having a dedicated Innovation function within the company?

At an Innovation conference, there was an impressive presentation on Innovation capabilities of a top Multinational Company. On the sidelines, I asked the Innovation Head about the new product launch, and he was too happy to explain its features. He missed entirely the question as to why their product came so late in market and still not at par.

Innovation function in companies is a separate department and has a diverse mandate. They work on new ideas and engage the main machinery in implementation and go-to-market. They also provide innovation service whereby other functions seek them to solve a problem or help explore/implement an emerging technology for them.

Where organizations fail is in connecting Innovation to Business and Product strategy. Innovation function sees the shifting product and market trends which a Strategy function fails to see and appreciate. As a result, Strategy sticks with existing plans and product strategy a bit too long while the landscape changes around them. Innovation function is also considered downstream and their inputs are not taken in Strategy decision making process.

Companies which stay ahead of trends and launch disruptive products have Innovation inbuilt as part of their business and product strategy. Innovation is upstream to business and product strategy. Such companies do not have Innovation function but an Innovation platform and every function (including strategy) uses it by default.

Coming back to the discussion with the Innovation head of the top multinational company, after much prodding he replied that they did go to Product Strategy guys earlier but were not heard.

Off the Beaten Path to tap New Markets

While working on tapping into new and emerging markets, the product development approach was that of Frugal Discovery. And it was very different and at odds with the conventional approach accepted within the organization. Hence, devised the framework below which explains when and why different product development approach should be used.

Product development of new products and services is often a linear approach. First comes the market research, then the product R&D followed by a big-bang launch. This linear approach rightfully suits the existing markets which are the bread and butter of the organization.

But when it comes to new and emerging markets, such linear approach fails to deliver. And history is replete with such examples like IBM PCjr, Apple Newton, HP's Kitty Hawk, Premier Smokeless Cigarettes... The underlying reasons for such market failures being:

1. Companies wade into uncharted territories solely based on their research & forecasts. Their efforts give them the confidence that they have figured out the unknowable/uncertain emerging market. 
2. And they put huge money, resources and execution capacity behind the launch. This big bet launch gives them little financial room later to turn back and correct course. The managers leading the launch also hurt their credibility.

The recommended approach is to use a Discovery mode for the first point above and combine it with Frugal approach to address the second point.

The framework above explains when the Frugal Discovery mode is relevant.

The Discovery mode is required when:

• Customers do not know what they want. The need is yet to be created or perceived.
• A company is not sure what customers want. Though the company may rely on its market forecasts. But the actual use may be out of their research radar.

It takes time for consumers to warm up to new product/service features. And to better understand their own needs w.r.t. to given product/service. Discovery mode allows exploration and learning for both company and customers. 

And being Frugal in discovery mode helps to:

• Conserve resources for second or even third attempt at getting the product strategy right. Companies tend to do the opposite by opening the full tap and going gung-ho with full scale implementation in the first attempt.
• In discovery mode, iterations may happen even in commercialization phase on product design and manufacturing capacity. And since such iterations are later in product development lifecycle, they are going to be costly. Hence, it helps to be frugal from the beginning.

Be frugal, make limited prototypes/demonstrators, test market and iterate. Customers will also learn in due course what they actually want and new customer segments might emerge. 

Many companies are now looking beyond their traditional markets towards emerging markets to drive growth. And to do that, they would need to move beyond the traditional big-bang and know-it-all approach to a more humble, frugal and discoverer approach.