Tim Wood Powell     The value of knowledge

I’ve been preparing to help Guy St. Clair teach his course Management and Leadership in the Knowledge Domain. This is part of Columbia University’s exciting new master’s degree program in Information and Knowledge Strategy, which I am pleased and honored to be part of.

This for me is a perfect opportunity to link my ideas about competitive strategy with my ideas about information management.  If you’ve read any of these posts, you’ll know that I believe strongly that the latter should serve the former, with few exceptions.

Guy and I will be presenting a high-level view of how to develop “knowledge strategies” in a range of industries. We’re using as our examples investment banking, pharmaceuticals manufacturing, advertising, and higher education. All are relatively knowledge-intensive as industries, yet each faces significantly different challenges at both strategic and tactical levels from each of the others.

Three basic questions

In approaching these industries, as I would approach any new client, I find the answers to the following qualifying questions essential in setting a direction for further diagnosis.

1. What is their value model? How do they produce revenue? Is the value produced solely economic, or are other value components (like societal benefit) also in play?

2. What are their competitive differentiators? How do they make themselves more attractive than their rivals? How are these factors weighted in importance and investment?

3. What knowledge/information do they require to support these value-producing and competitive factors, at both strategic and tactical levels?

Once I have reasonably complete answers to these three questions, I can begin to get a handle on where they need to be in terms of knowledge strategies.

You may realize that this is essentially a truncated version of the Knowledge Value Chain model. It drives down from the top — the organizing principle is the value model, which is then supported by — and even “given life” by — the knowledge model and infrastructure.

For example

How does this work? Let’s take, for example, pharmaceuticals. The primary value model of most of the largest companies is the high margins captured by manufacturing and marketing innovative drugs that are in the greatest demand. By “innovative” we imply that the drugs are proprietary and protected under patents, and can therefore command premium profit margins that would be impossible in the absence of such protection.

They differentiate themselves by offering innovative new products, among other things. (Those “other things” include communicating with doctors and patients through in-person visits to the former, and through TV and print advertising targeted to the latter.)

So a huge part of the pharma industry’s knowledge strategy revolves — or should revolve — around the issue of R&D productivity. Put simply, how do we produce more innovative drugs, that reach a larger number of people, at the same (or lower) cost? This is a critical issue for the health — some would say even the survival — of this industry as we know it.  (See my previous post about our research on this topic.)

It’s an inverse tree.  For each source of value, there may be several differentiating factors.  For each competitive factor, there may be several supporting knowledge strategies. But the knowledge strategies in the end serve the business strategies, which in turn serve the production of value — however that may be defined by the organization.

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