Entovation International
Customers - A New Twist on Knowledge Management

After Total Quality Management (TQM), Business Process Reengineering (BPR) - what next? The new management idea is Knowledge Management. While some are quick to dismiss it as another fad, the evidence grows that it is more fundamental. It pervades every function, sector and industry. Since writers like Drucker and Prahaled described knowledge as “the only sustainable source of competitive advantage”, we have witnessed a growing community of organisations putting the principles of knowledge management into practice. We see pharmaceutical companies jealously guarding their hard-won patents. We see companies with few tangible assets, commanding high market values (Netscape being a recent example). The common factor in such cases is the added value of practical know-how.

Growth in Practice

Last October the first major conferences in Europe on the topic of Knowledge Management took place in Zurich. In March this year, Business Intelligence ran a conference Leveraging Knowledge for Sustainable Advantage, and every day sees news of more such conferences. The common message that emerges is that unless knowledge is effectively managed, companies will not maximise the return on their investment in people, R&D and other intellectual assets. At the Business Intelligence Conference many cases of good practice were described, in industries as varied as chemical, oil, finance and electronics. Speakers identified the importance of ‘tacit’ knowledge (as defined by Nonaka and Takeuchi in their book The Knowledge Creating Company). Some speakers talked of ways of trying to identify it and capture it through audits or other evaluation tools, though several warned of the “just another Lotus Notes database” syndrome.

Momentum of Practice

One person who has been tracking developments in the state-of-art and state-of-practice in this field for several years is Debra Rogers (now Debra M. Amidon) of ENTOVATION International. She has seen a critical mass of theorists and practitioners emerge, which she links strongly to the need for companies to innovate, not just in their products but also their processes. An important twist that she puts on the subject is that of Customer Connections. When you think about it, the best source of knowledge to help a company develop its products and markets is its own customers. Yet in our experience many places of interacting with the customer, such as service help lines, do not complete the loop back to R&D.

The point is that most enterprises view their customers - both internal and external - as the end point of the value-chain. Rogers (Amidon) articulates the need for a value-system approach in which the insights from customers become integral to new R&D efforts. Rather than being perceived only as a point-of delivery, customers (an the quality of interaction) are viewed as integral to developing new products and services to meet the unarticulated need and unserved markets. Only through this dialogue can a company begin to envision the unleashed business opportunities.

These notions gel with my own experience of successful innovation - in problem solving, or creating new products or services, namely that symbiosis among nodes of a network creates new knowledge and opportunities. Two people sharing ideas generate new ideas that neither of them thought about:

1+ 1= 3

By making customers an integral part of your own enterprise knowledge base, you create a Strategic Business Network (SBN), which Rogers (Amidon) claims as being a more suitable enterprise model for the dynamics of the new millennium, than the fifty year old enterprise models many organisations still cling to today. She brings these powerful concepts together in her model of Innovating with the Customer. She uses a paper strip to illustrate this in her Knowledge Innovationworkshops. One side of the strip represents your company, the other the customer. Each works through seven well defined stages of an innovation cycle:

1. Discovery of ideas
2. Competitive positioning
3. Strategy Alignment
4. Conversion to products
5. Marketing/Sales
6. Service delivery
7. Market penetration.

The feedback loop from output to input is complete when you put the top of the strip (the results) alongside the bottom (the strategy) to complete a ‘hoop’. However, it is only when you twist the ends to create a Mobius strip, that you gain the full synergy, with customer results linking to your strategy and vice versa (see diagram).

Think of this simple device and ask yourself - how do we gather insights from our customers? Are there mechanisms to systematically feed those ideas back into our strategy formulation processes? The Mobius strip also indicates that the success of a customer feeds your own success. In fact - depending upon your business, you may actually be dependent upon the success of your customer. Consider therefore how you can align your own competencies to ensure the success of your customers. These perspectives take us well beyond the established paradigms of customer satisfaction and total quality. Work on what makes your customer successful and it will ultimately lead to your own success. Rogers poses the highly relevant question:

"What good are your customers if they are satisfied, but not successful?"

Knowledge Processes

This new customer twist is just one of many tools and techniques can be deployed to manage knowledge for improved business performance, leading to:

- Better understanding of new markets
- Faster time-to-market for new products
- Enhancing the value of products and services
- Realising the value in knowledge assets
- Improved customer service
- Higher quality processes

A thorough understanding of the mechanisms by which individuals, teams and organisations enhance their knowledge processes is the essence of effective knowledge management. Such processes are:

- Creating and gathering
- Assimilating and organising
- Applying and using
- Diffusing and exploiting
- Protecting and licensing.

That will give them the basis for really understanding their knowledge capital and how well it is being developed, nurtured and exploited.

Achieving Success

ENTOVATION’s research has identified ten critical success factors, that are the subject of Ten Knowledge InnovationModules, by which a company can assess and develop winning Knowledge Innovationstrategies. Some, like appointing Chief Officers (of Knowledge, Intellectual Capital etc.) are happening in only a few cases. Others, like initiating programmes to measure intangible assets, are moving quicker up top management agendas - aided for example by the Hawley Report in the UK. However, most organisations would benefit by being more taking a broader look across all ten factors and how they stack up against best practice.

ENTOVATION International is compiling a series of Profiles of Innovation (e.g. Steelcase, Hoechst-Celanese and Nortel) to illustrate the significant change factors and how this more intimate interaction with customers can lead to product/service success.

David Skyrme Associates is pleased to be a partner in the international ENTOVATION Network, that is developing and validating these new approaches to Knowledge Innovation. See accompanying Web pages for details of ENTOVATION's services or contact David Skyrme (UK/Europe) or Debra M. Amidon (US/Rest of World).

- Knowledge Innovation and Innovating with the Customer are trademarks and service marks respectively of ENTOVATION International.

[Article originally appeared in one of the early editions of I3 Update - a monthly newsletter of David Skyrme Associates. (April 1996)]

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© 1996-2001 ENTOVATION® International. All rights reserved.
Reprinted from I3 Update.