Over time, globalization has almost forced business organizations to intensify their search for strategies that will give them a sustainable competitive edge. Such strategies usually require firms to continuously differentiate their products and services, that is, to be constantly innovative. This continuous innovation requires a well-planned system of knowledge management that will enable the firm to excel in knowledge creation, dissemination, application and retention. Innovation and knowledge management are two concepts with a strong but complex relationship that is not often examined. This article reviews both concepts in an attempt to show how they are fundamentally different, yet intimately connected.
While most organizations talk the talk on innovation, there is only a handful that can walk the walk. Innovation, which is seldom the result of a ‘eureka’ moment, is usually a long and cumulative process including a great number of organizational decision-making processes, ranging from the “generation of a new idea” phase to its “customer acceptance” phase. To be considered an innovation, a new product/process must be a refined mix of three ingredients: creative process, distinctiveness and impact.
While all kinds of innovation require a liberal school of thought and extended levels of commitment, some are easier to come by than others; namely, incremental innovation versus disruptive innovation. (Please refer to the article titled Innovation and Corporate Strategy on page 2 of this publication for more discussion on this topic.) The nature of disruptive innovation is such that it is almost impossible to predict the process of evolution of an idea, let alone control it. This kind of innovation is usually a long-term process (5-10 years) and its development is discontinuous and iterative with a high degree of uncertainty in gaining end-user acceptance. In comparison to disruptive innovation, incremental innovation has a much safer development trajectory with a continuous stream of improvements from conception to commercialization within a short timeframe. In this case, it is also easier to anticipate the customer reaction due to the already-established stages of opportunity recognition. Clearly, its risk-averse nature makes it a favorite amongst most innovation-aspiring companies.
To encourage the culture of innovation, organizations tend to focus on hard-core elements such as ensuring creative chaos, individual and group autonomy, internal resource variation, procedural streamlining, etc. Yet somewhere down the line, not all these companies churn out innovative products or services. What are they missing? The answer is an efficient knowledge management system.
Innovation is a knowledge-intensive process with a specific knowledge culture and has respective requirements towards knowledge management support (Paukert, Hemmje and Niederee, 2004). Knowledge management comprises a range of strategies and practices used in an organization to identify, create, represent, distribute, and enable adoption of insights and experiences. Knowledge in organizations ranges from the rich, complex, accumulated expertise that resides in organizations and is partly inexpressible (tacit knowledge) to the more structured and explicit. Tacit knowledge is personal knowledge embedded in individual experience and involves intangible factors, such as personal beliefs, perspectives, and values. This knowledge is difficult to codify and therefore difficult to transmit. Explicit knowledge, on the other hand, can be articulated into formal language, including grammatical statements (words and numbers), mathematical expressions, specifications, manuals, etc., and is thus easy to codify and readily transmit.
An organization creates new knowledge through the conversion and interaction between its tacit and explicit forms (Nonaka & Takeushi, 1995). Converting from tacit to explicit form allows for greater sharing of concepts and cross-pollination of ideas, which in turn could eventually lead to the identification of new innovations. Understanding the reciprocal relationship between these two kinds of knowledge would be the key to comprehending how information is lost and many a time, misinterpreted during conversion.
A further dimension of important innovation culture, that also influences the knowledge management culture, is the organizational context (Choo & Popadiuk, 2006). The organizational context impacts, for example, the readiness of employees to externalize their knowledge and make it available for others in the organization. The degree to which knowledge is considered a personal or an organizational asset by individuals in an organization depends on how knowledge-sharing is honored in that organization. Honoring knowledge sharing may be in the form of informal recognition by colleagues or supervisors or a mutual exchange of knowledge and support by the same; it may also happen explicitly with rewards, like a bonus or a promotion, by the management. Negative influences of the organizational context dimension become obvious when employees keep their knowledge to themselves and only reveal it when it is deemed beneficial for them, regardless of the harm to the organization.
Knowledge management is slowly emerging as an important tool often cited as an antecedent of innovation (Davila, Epstein & Shelton, 2006). By capturing organizational knowledge assets in a systematic way, knowledge management helps to develop not just institutional memory, but also a system for delivering value through experiential learning. Eventually, such an organization evolves into an innovative Learning Organization that is characterized by a high level of cross-team collaboration, timely anticipation of challenges, flexibility and agility to embrace changes, and fact-based decision-making capabilities, all of which directly contribute to creating a conducive environment for fostering innovation.
This article was written in 2011.
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