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First Get Your Act Together

The business model, vision, and culture of an organization determine the effectiveness of any new change or initiative that the organization tries to introduce. The business model determines the flexibility of the structure, the command and reporting lines, and affects the way the various departments and units communicate and work with each other. A business model that is too rigid or formal, with prominent boundaries between levels and departments, would defeat any intellectual capital management (ICM) program. Similarly, vision sets the organizational character and the general state of mind of leadership and management. This infiltrates throughout the whole organization and shapes the attitudes of everyone in the organization toward work, co­workers, superiors, subordinates, partners, and customers. A vision that lacks inspirational power and futurism will take the zeal out of the ICM initiative, which is required to champion what is to many organizations a maj or change. Closely linked to the vision is the culture of the organization, which affects the way business is done and the values that everyone in the organization adopts and functions by. If these values are contrary to those required for ICM then the ICM initiative may die in its cradle. It is therefore essential before embarking on implementing any ICM stage or program to ensure that the organization has the appropriate business model, vision, and culture in place - in short, to ensure that it has its act together.

THE BUSINESS MODEL OF THE KNOWLEDGE ORGANIZATION

Mysteriously, many organizations in the knowledge economy changed their organizational struc­ture and business model in similar patterns. The emerging model has two main characteristics: A flexible structure with few layers and a range of networks that include external partners and cus­tomers. The fact that organizations (regardless of size, industry, strategy, and situation) adopted practically the same model - what has been called the knowledge organization model - indicates its significance in enhancing competitive performance in the knowledge economy.

Many writings appeared discussing the need to adopt the knowledge organization model, as opposed to models based on the industrial economy's needs, to effectively compete in the knowledge economy.1 The knowledge organization model is based on the premise that intellectual capital (IC) is at the core of production, operation, and any critical organizational process. Sveiby explains that the vast growth of business service companies (being close equivalents to knowledge organizations, in his opinion) indicates the preeminence of the knowledge organization model in the knowledge economy? S imilarly, Brian Arthur, of the S anta Fe Institute, attributes the success of the knowledge organization model to its agility in dealing with the fast-changing environment by redeploying its knowledge resources to meet new demands or trends.3 In Arthur's analysis companies in high-tech industries (computer, software, and biotech) are close equivalents of knowledge organizations.

As stressed by Sveiby and Arthur, the knowledge organization model is critical in industries with a high rate of change and hence turbulence (e.g., high tech). Still, the model is of equal importance to organizations in other industries. The knowledge organization model has been adopted by many organizations in traditional industries (e.g., manufacturing, oil), some to save themselves from the brink of bankruptcy, and others to enhance performance in general.4 The knowledge organization model should be seen as a stage of evolution in organizational develop­ment at which the organization develops the ability to leverage the knowledge resources of its employees and systems to respond to change quickly and effectively, with the end goal of becom­ing a learning organization.5 Only organizations that are able to cultivate the ability to manage IC are able to successfully benefit from this model to the full, given the high level of interaction it generates within the organization and with external partners across dispersed networks.

Before embarking on implementing ICM throughout the organization, therefore, the follow­ing are prerequisite organizational changes:

•   A flat structure where the number of layers that knowledge and information have to tra­verse are much fewer than those of the industrial economy organizational model. The layers in comparison are sometimes less than half of the traditional model. Take for example ABB, a multinational company with 60 businesses and only four layers.

•   Active delegation of decision making and innovation to the frontline where alliances and partnerships with suppliers, distributors, and customers are forged and maintained. In contrast, top management would need to maintain a clear focus on strategy.

•   Appreciation of the nature of the workforce in the knowledge economy as knowledge workers who need time to experiment, innovate, contemplate, and brainstorm. Hence, the significance of creating the right culture.

•   An information technology (IT) infrastructure that facilitates the generation, collection, and sharing of ideas and knowledge across departmental and divisional boundaries.

•   A boundaryless structure to enable interaction and cross-pollination of experiences among the different departments and business units. Increased use of cross-functional teams, including communities of practice when needed, to manage innovation and other projects, and maximize knowledge sharing.

•   Flexible organizational boundaries between the organization and external partners to tap into the various networks and access them for new ideas for business growth.

•   Appreciation of IC as the core of production, the effective management of which will ensure the availability of knowledge resources, the effectiveness of the innovation process, and the leveraging of IP.

•   Creation of new positions on the senior and frontline management levels, to deal with the management of knowledge, innovation, and IP. These should include positions at the sen­ior executive level to define the organization's IC strategy, define the ICM objectives, streamline management systems, and coordinate among the various programs.

As evident here, the knowledge-organization business model is flexible, malleable, flat, boundaryless, and based on internal and external networks with knowledge- and innovation-intensive activity. Ultimately management's role under this model is transformed into one of leadership rather than control - hence the need for a well-formulated, inspirational vision.

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