Tim Wood Powell     The value of knowledge

As you know if you are a regular visitor here, I serve on the faculty of a graduate program called Information and Knowledge Strategy at Columbia University. It’s exciting, with world-class faculty and talented students — with the added energy that we feel that, together, we are forging a new field of study.

But what, exactly, is Knowledge Strategy?

A few posts ago I shared my views on the essential distinctions between Information and Knowledge. But what is Knowledge Strategy (KS), as opposed Knowledge Tactics? The skill sets and techniques of knowledge strategists usually include tactical components — building online Communities of Practice, building SharePoint sites, designing and building and curating best practices and lessons learned databases, and so on.

But those are components, not the essence of KS. I’ll offer a working definition: Knowledge Strategy is the practice of developing and deploying enterprise knowledge and its component assets as essential and integral resources in competitive business strategy. KS means, simply, actively recognizing and using knowledge as a strategic resource and a direct bridge to competitive advantage.

Knowledge strategy and business strategy

In other words, knowledge strategy should not be developed separately from a competitive business strategy.  The two should be developed and implemented in close coordination, as shown in the Strategic Knowledge Architecture diagram at left — and should both respond to the value model defined by the overall purpose and mission of the enterprise.

Professor Michael Zack, in his thoughtful paper “Developing a Knowledge Strategy,” agrees in saying, “the most important context for guiding knowledge management is the firm’s strategy.” Though this may seem obvious, Zack then notes the irony that “the link between knowledge management and business strategy, while often talked about, has been widely ignored in practice.”  (Emphasis added.)

Knowledge-based industry transformation

What does this tight linkage between KS and competitive strategy mean in practice? In business, examples abound. The poster child for KS is Amazon, which built a huge business around displacing an entire segment of the consumer product value chain — the retail channel, a tangible physical resource — with a web site, a back-end product database, and a network of physical warehouses — a lower-cost physical resource powered by a nexus of knowledge assets.

The result was an industry disruption of transformational proportions — first in retail books, then in a seemingly endless succession of other retail categories. The customer was given a roughly 30% reduction in price — the retail channel cost and margin — along with the convenience of ordering online and a generally flawless user experience. The traditional retail sector continues to struggle to meet the permanently higher level of consumer expectations that Amazon has created.

Buying R&D

An equally transformational shift in knowledge strategy was the gradual shift of the pharmaceutical industry’s drug discovery and development process away from an in-house “fortress R&D” model toward the scan-the-environment-and-purchase-or-license-the-best approach pioneered by Pfizer during the early 21st century — and now the de facto industry standard.

This “multi-sourced” approach to intellectual property development and innovation has since been replicated in other industries. For example, Procter & Gamble deployed this approach to great success under A.G. Lafley, as described in Henry Chesbrough’s brilliant book Open Innovation.

My sense is that the financial services industry is beginning to move toward this model, so that fin-tech innovations will be increasingly developed and nurtured in start-ups — then once they are successful, brought into the mainstream of consumer financial services where they can be rapidly scaled.

Acquiring knowledge enterprises

The quest for knowledge and other epistemic resources can also drive acquisitions of entire enterprises. It was recently announced that CVS, the retail drug giant, was planning to buy Aetna, the health insurance giant for $66 billion. A key driving factor in this tie-up was said to be the “large and diversified store of health data, an important asset in today’s competitive environment.” It’s amazing to think that this knowledge balance sheet item is likely at best a footnote on their GAAP balance sheet — a subject I’ll address another time.

Knowledge strategies need not be transformational in scale to be effective. Drug maker Allergan recently announced an unusual deal with the Saint Regis Mohawk Tribe to transfer patents of the eye drug Restasis to the tribe, with the intent of giving the drug immunity from certain patent challenges. (Certain Native American tribes are, for certain purposes, their own sovereign nations.) While the strategy may not achieve its desired effect for other reasons, it stands as both an inventive and strategic application of knowledge resources.

Knowledge goes nuclear

Nor are knowledge strategies confined to companies. Governments can, and often do, lead the way in knowledge strategy. Consider this recent headline: “Behind North Korea’s Nuclear Advance: Scientists Who Bring Technology Home.” After years of relying on other countries (first the Soviet Union, later Iran and Pakistan), North Korea is now able to develop its own nuclear scientists. Many of these scientists study in China, sometimes gaining knowledge that is banned under UN sanctions.

This scale of effort is reminiscent of the Manhattan Project during the 1940s in the US, which eventually employed 130,000 people and cost the equivalent of $27 billion over several years. That knowledge-driven arms race was in effect a race to the existential finish line — the end of World War II.

Strategy = leadership

That’s my take on what KS is. But whose job is KS? Where does it sit in the modern enterprise? Here, things begin to get sketchy — primarily because most organizations have, at best, only just begun to adapt to the new strategic opportunities and threats that the “knowledge economy” presents.  They’re just not set up for it.  Yet.

Strategy comes from the Greek strategos, defined as a military leader. Strategy is essentially the job of leaders — the challenge of “doing the right things”. By extension, knowledge strategy is the job of knowledge leaders — not knowledge managers, tasked with “doing things right,” and whom in key respects I regard as the polar opposites of leaders. I have written previously about this need for Knowledge Leadership.

The problem in many organizations is that we now have knowledge managers, sometimes many of them — but few true knowledge leaders, capable of envisioning, designing, executing, and curating a knowledge strategy at the enterprise level. This may be partly due to gaps in their training — something we are working to address at Columbia.

But there are also powerful organizational forces impeding KS. One of these is embedded deeply in organizational structures.  Knowledge producers sit in a range of enterprise silos — in IT, in market and competitive analysis, in libraries, in R&D, sometimes in a a dedicated knowledge management function, even in the legal department — with little in the way of oversight or coordination among the many fiefdoms.

What is the cost?

Without full integration (or at least tight coordination) among the management of various knowledge assets and disciplines, there cannot be a true knowledge strategy. Some of the deficits produced by such “dis-integration” include:

• gaps in coverage
• redundancies of effort
• constrained ability to rapidly mobilize multi-modal knowledge resources

The knowledge silos that persist in many enterprises are entrenched by years of organizational habit — and not likely to change without significant engagement and direction from the top leaders of the enterprise.  Leaders make strategy, and knowledge leaders make knowledge strategy.  The two must work together to bring about changes in no-longer-adaptive organizational habits.

All too often, this motivation to change arises with sufficient force only when there is such a clear existential opportunity — or threat — that everyone pulls out the stops to make something happen on the order of an enterprise Manhattan Project.  For example, if you are a brick-and-mortar retailer in danger of being “Amazoned” out of existence, your people may suddenly find the wherewithal to change quickly. But by then it may be too late.

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