5 Innovation Knowledge Management Nexus – Innovation Management

Neeta Baporikar

5 Innovation Knowledge Management Nexus

Abstract: Innovation is about helping organizations grow. Growth is often measured in terms of turnover and profit, but can also occur in knowledge, in human experience, and in efficiency and quality. Innovation is the process of making changes to something established by introducing something new. As such, it can be radical or incremental, and it can be applied to products, processes, or services and in any organization. It can happen at all levels in an organization, from management teams to departments and even to the level of the individual. Various factors encourage and drive an organization to innovate. Each of these drivers demands continuous innovation and learning so that the process can be repeated continuously. These drivers also help to create a sense of urgency around the need to create new organizational goals and generate new ideas for meeting these goals. The term innovation is often associated with products. However, innovation can also occur in processes that make products, services, or deliver products and services and also include intangible ones. This chapter focuses on innovation in the organizational context, and describes the main concepts behind innovation, what drives the innovation in organizations and tries to understand the nexus between innovation and knowledge management (KM).

5.1 Introduction

Neeta Baporikar: Ministry of Higher Education, Scientific Research Department, Salalah, Sultanate of Oman. Email: neetajb@rediffmail.com

A couple of decades ago, when economists forecast the highest earning countries across the globe, many put their money on Japan as the leader, Germany as the runner-up, and the United States in third place for the largest GDPs in the new millennium. But now that we’re seven years into the 21st century, it’s clear that those economists lost the bet. The United States’ GDP is currently $12.3 trillion, exceeding the current GDPs of Japan and Germany by about $8 trillion and $10 trillion, respectively. So what happened to make the United States’ output soar above economists’ predictions? According to some leading executives and management thinkers, the answer is innovation. In fact, many argue that innovation is the most important driver of macroeconomics today. That’s why it is interesting to understand what drives innovation and to discuss innovation, leadership, and the new economy of creativity, knowledge, and invention – and how to focus these amorphous concepts into real business dollars. These insights are relevant to executives from businesses large and small, global and local. Technological innovation is central to the progress of civilizations and economic and societal prosperity, yet most innovations fail. The primary reason most innovations fail is that end users do not adopt them. The reasons for lack of adoption are subtle, but often revolve around insufficient knowledge of end users’ preferences and requirements (these factors may also not be consciously known to the end users themselves – these may have to be revealed during ‘forced choice’ situations). Henry Ford was fond of saying that if he had performed market research prior to developing the automobile, the responses he would have received would not have pointed toward the need to develop automobiles but rather toward the invention of faster horses that ate less hay. Improved marketing research per se will probably not lead to higher rates of successful innovation adoption.

Over the past five years innovation has become one of the top priorities for organizations that want to remain competitive in a knowledge/creative economy. Various studies report the importance given by executives to the implementation of innovation management initiatives [1] [2] [3] [4]. Even during a time of financial crisis, organizations continue to strongly believe that innovation can be a solution for preparing them to bounce back once the crisis is over [2]. Innovation can be described through a variety of different lenses – application (product, service, process, paradigm or business concept), level (incremental, substantial, or radical), target (consumer, business, or procedure), and so on. Different technologies can be used to support the various phases of the innovation process but very few are fully integrated and provide the features necessary to support the new managerial approaches and models of innovation. Since knowledge is considered to be a catalyst for innovation we believe that a knowledge-enabled system could be of great value in supporting and leveraging the innovation process, which is currently rarely automated and very often not clearly defined.

5.2 Background

5.2.1 KM and Innovation: The Missing Link

Many people, including management experts and consultants, have an inkling of the linkage between knowledge management (KM) linkage and innovation in some way. Some even go further by saying that innovation would justify investment in KM. However when these people are asked how KM would be linked to innovation, one may receive divergent answers. It is hard to expect a unified answer when the notion of innovation is not immediately clear. It is not uncommon to define innovation as a process that produces new product. But, this is a pretty narrow definition of innovation. We can innovate not only on product and service, but also on business process. In fact, to commercialize innovation, organizations need to combine product/service innovation with business process innovation.

The above paragraphs shed some light on the mystery of innovation. However, it is not possible to completely understand innovation without addressing the question of who should innovate. Some experts opine that only those people, who are qualified, such as researchers or senior management, should be involved in the innovation process. Others think that everybody, including the customer and in the case of ‘open innovation’, the public, should be involved in the innovation process. “Who should be involved in the innovation process?” is a question that can never be answered satisfactorily, because we do not know for sure who has brilliant ideas, the nutrients for innovation, in their mind. Thus, the best thing to do is connect people who have some common ground, but with enough diversity, to spur innovation. To put it simply, we need what is called ‘creative abrasion’ to spark innovation. This is where knowledge management (KM) and innovation coincide.

KM is about connecting the right people to knowledge sources, which can be either experts or written records. Of course this involves stimulating conversation that matters, i.e. conversation among people who are bound by mutual interest in a knowledge domain, or shared passion, to solve their organization’s problem. It is worth noting that although these people are attracted to the same thing, they may have different views or come from different backgrounds In addition, KM could offer a ‘shortcut’ to innovation by managing what the organization knows, such as past project experience and lessons learned, which could be used as cues to build new ideas. Thus, KM facilitates innovation.

5.2.2 Knowledge Management and Innovation: How Are They Related?

Companies in today’s globalized world must innovate to compete. Many successful companies have found that knowledge management strategies and practices are central to ongoing innovation [5] [6] [7] [8]; this chapter brings together research regarding knowledge management processes and practices that are found in organizations that are basically innovative firms. The chapter contends that such practices could be employed across a range of firms to enable and enhance the potential for innovation within firms in multiple sectors.

Innovation is widely recognized as a source of a firm’s and indeed a nation’s wealth creation. Many western countries have been investigating innovation in attempts to understand and hence enhance the likelihood of increasing innovation [9] [10] [11] [12] [13]. The contributions of organizational innovation to organizational performance are of long-standing interest [14] [15] [16] and in corporate arenas [7 ], [8], [9], [10], [11], [12], [13], [14], [15], [16], [17]. Thus the focus herein is to find out the role of different factors of knowledge management in bringing about innovation. Moreover, there are different models of knowledge management and innovation. See Table 5.1. Secondary objectives include: to find out the impact of knowledge management activities in enhancing the knowledge assets of the organizations, to explore the factors underlying the success of knowledge transformation, to investigate the role of the knowledge transformation process in bringing about innovation and to find out the determinants of innovation that affect the knowledge transformation process.

Table 5.1. Models of knowledge management and innovation

Different models of knowledge management and innovation
Harnessing knowledge for innovation [23]
A contingency model for knowledge management capability and innovation [19]
Research innovation and knowledge management [28]
Macro process of knowledge management for continuous innovation [29]

Shankar et al. [18] explored the idea that knowledge management creates long term competitive advantage. Ju, Li and Lee [19] developed a strategic contingency model to identify interrelationships among knowledge characteristics, knowledge management strategy, knowledge integration, organizational learning, knowledge management capability and innovation. They explored the idea that knowledge characteristics with higher modularity and explosiveness could enhance organizational learning and knowledge integration. Furthermore, they found that levels of organizational learning, knowledge integration and knowledge management capability have significant impact on a firm’s innovation. Drucker [20] stated that in knowledge economies, knowledge is the primary factor of economic development and conventional factors of production like land, labor and capital have not been abolished but these factors have become secondary. In a contingent era, the organizations that utilize their knowledge in an efficient way will be the industry winners through offering the most innovative products. Neilson [21] integrated the knowledge management with the dynamic capabilities approach by demonstrating that dynamic capabilities could be seen as composed of concrete and well-known knowledge management activities.

Majchrazk, Cooper and Neece [22] developed an approach to reuse the knowledge for innovation by making better understanding of the knowledge reuse process when innovation is expected. They pointed out the problems and approach, including the decision to search for others’ ideas to reuse, search and evaluate others’ ideas to reuse and develop ideas to find out the performance gap which could be filled by the using others’ knowledge. Goh [23] developed an integrated management framework to harness knowledge for innovation. He explained why innovation management should not be viewed as mutually independent from knowledge management. Also, he explained the role of knowledge creation and the value of knowledge capital in support of knowledge to bring about innovation. He said that to bring about innovation organizations should support knowledge-centered principles in order to make an efficient role for knowledge creation for innovation.

Leifer, O’Connor and Rice [24] searched out the role and importance of different hubs to bring about radical innovation in mature firms. They proposed different ways to manage radical innovation projects. Malhotra [25] incorporated knowledge management technologies in business processes of organizations. He provided pragmatic understanding of how to integrate knowledge management strategy, technologies and business processes to get better performances. Plesis [26] examined the role of knowledge management to bring about innovation. She found the factors that are important for knowledge management system for bringing about innovation. She also tailored the value proposition by using personal experiences and literature available on knowledge management and innovation. She found that the world’s economic growth has changed due to rapid innovation and new technological shift, short product life cycle and increasing rate of new product development. Massa and Testa [27] explained the relationship between benchmarking and innovation through knowledge management. They found that organizations can get the explicit and tacit knowledge from outside the organization through benchmarking. To bring about innovation, organizations have to integrate the explicit and tacit knowledge that is captured and acquired from inside and outside the organization.

5.3 Innovation

Innovation has been variously defined and can be examined from a variety of perspectives, from a broad definition such as “innovation refers to the process of bringing any new, problem solving idea into use” [30], to a more outcome-based approach, where “innovation is the process whereby new ideas are transformed, through economic activity, into sustainable value-creating outcomes” [31]. Innovation in general is used to describe new products, processes and services undertaken by firms, which lead to an increase in performance. The notion here is of a change which leads to a commercial process. Similarly, organizational innovation is defined as the adoption of an idea or behavior that is new to the organization, where “the innovation can be a new product, a new service, a new technology or a new administrative practice” [32]. The changing nature of the market, the challenge of ongoing change and the emergence of the knowledge society has lead to an increased focus on innovation. Innovation is required because we cannot expect that the accumulated competence, skills, knowledge, product services and structure of the present will continue to be adequate [16]. Innovation implies improving on existing products and processes, finding new ways and also abandoning the old, or reviewing every product, service, technology, market, and distribution channel on a regular basis [16]. Much of the research on innovation in firms has come from studies of research and development (R&D) or technological changes. In research and development, the focus on knowledge involves both the creation of knowledge and the reuse of knowledge. Of particular importance in knowledge creation is the notion of sharing knowledge, particularly the tacit knowledge that has not been codified.

These studies have shaped our understandings of innovation and these understandings have since been applied to studies of innovative firms. In both R&D and innovative firms, “knowing what we know” is enhanced by a culture of knowledge sharing, which facilitates the flow and generation of new knowledge, hence capturing and using the internal knowledge base as well as being open to new ideas and technologies from external sources. The enablers of knowledge creation are seen as a knowledge-sharing inclusive culture, organizational structures which encourage interaction, leadership from people in sharing processes and learning networks. The goal is often to facilitate people contacts, such as identifying experienced people who can share their knowledge and providing access to repositories of knowledge. In knowledge practices, the focus is on connecting people. This includes company experts, communities of practice, and enhancing and enabling networks through shared social activities. In addition intraorganizational meetings, technological fairs, roundtables, scientific symposia, or technical and marketing forums can enhance a firm’s internal repositories.

There are several definitions of innovation. Harkma [33] stated that the foremost and basic purpose of innovation is to produce new knowledge which can develop and find out the doable solutions for society. Innovation is a practice and process that captures, acquires, manages and diffuses knowledge with the aim of creating new knowledge which will support the production and delivery of distinctive and idiosyncratic kinds of products and services [34]. Plessis [26] delineated innovation as the formation of new knowledge which helps new business returns, which has the purpose of making an organization’s internal business process and structure more sophisticated to produce to the market acceptable products and services.

So we can define innovation as: “Activities and processes of creation and implementation of new knowledge in order to produce distinctive products, services and processes to meet the customers’ needs and preferences in different ways as well as to make process, structure and technology more sophisticated in such a way that can bring prosperity among individuals, groups and into the entire society.”

5.3.1 Importance of Innovation

The basic objective of innovation is to create value for the business. In today’s competitive era innovation is the soul of the business because through innovation organizations produce unique products and services. Innovation is also important because of the rapid change in taste and preferences of the customer in emerging and developed markets. That is why according to a research 75 percent of CEOs of the fastest-growing organizations claim that their strongest weapon to compete in market is their innovative products and processes. The organizations which are not very capable of producing innovative products and services will be wiped out from the industry by their competitors because innovation works as a fuel for the organization to grow in any type of environment.

5.3.2 Scope of Innovation

Innovation might be radical or incremental. A radical innovation is a product, service and process with entirely unique or significant improvements in existing features which improve the cost and performance. Radical innovation is highly risky for the business because radically innovated products are more difficult to commercialize. On the other hand, radical innovation in product, service or process is crucial for the business because it involves the development and application of new technology. An important aspect of radical innovation is to what extent new technology is more sophisticated and advanced compared to current technology [35], [36]. Another idea is of different hubs to bring radical innovation. Among those hubs, one important hub is of idea generators. Idea generators are responsible for generating distinctive ideas and there are people who exploit these distinctive ideas, idea hunters, who actually exploit and execute these ideas. Idea gatherers are basically receivers of the ideas. They have skills, expertise, judgment and motivation to respond to these unique ideas. The combination of generators, hunters, and gatherers plays an important role in bringing radical innovation about in large organizations. There are two reasons that firms strive to bring about radical innovation. First, these radical innovations create barriers for the potential competitors and ruin the market share of existing industry players. Second, competitors are capable of developing or producing radically innovated products [37]. Plessis [26] explained that incremental innovation is basically a modification in a product, also called ‘line extension’ or ‘market pull innovation’. Incremental innovation does not need to significantly diversify from current business. That is why this type of innovation enhances the skills and competencies of the organizational employees. Incremental innovation is decisive for the organization because it helps the organization to increase their market share and to remain in industry for a long time.

5.3.3 Innovation at the Firm Level

In the last decade, studies of innovation at the firm level have identified common components in innovative organizations [8]. These components include strategic approaches, linkages and high involvement of staff.

Distinctive features of each component are summarized in Table 5.2.

Similar findings from other recent research on innovative firms found underlying capacities for innovation include vision and strategy, a competency base, creativity and idea management, organizational intelligence, organization and process, culture and climate [7]. These findings confirm our understanding that the ability of an organization to recognize the potential of an innovation is not a simple process and “is a function of how it collects and processes information, depends on nature of the innovation, the organization structure, systems, people, local environment and managerial dominant logic” [38]. In summary, innovation cannot be directly created. Indeed, successful innovation in an organization is based on strategy, is dependent on both effective internal and external linkages, usually requires enabling mechanisms to make change happen, and only happens within a supporting organizational context [8]. These views of requirements for innovative firms can also be applied to firms with successful knowledge management strategies and practices. For example organizations need a strategy to manage their knowledge [39], [40], internal and external linkages [41], [42], enabling mechanisms for change [43]. A more market oriented approach to innovation suggests that successful innovations are characterized by the correct anticipation of customer needs, detailed knowledge of the supply chains, and intelligent application of external technology. “All resources of a company, internal and external have to be integrated” [5]. This view contends that the benefits gained through knowledge management in innovative firms include not only the identification of technical competencies that are key to success (technical core competencies), but also the ability to communicate technical core competencies throughout the management of the whole company, with particular focus on R&D and marketing. In addition, the identification of technical core competencies with an opportunity to focus on issues of protection, exploitation and enhancement of competencies is essential.

Table 5.2. Components of the Innovative Organization. Source: Tidd et al., [8] 1997: 314.

Component Key features
Vision, leadership and the will to innovate Clearly articulated and clear sense of purpose stretching strategic intent; ‘top management commitment’
Appropriate structure Organization design that enables high levels of creativity
Key individuals Promoters, champions, gatekeepers and other roles which energize or facilitate innovation
Effective team working Appropriate use of teams to solve problems. Requires investment in team selection and building
Continuing and stretching individual development Long term commitment to education and training to ensure high levels of competence and the skills to learn effectively
Extensive communication Within and between the organization and outside. Internally in three directions – upwards, downwards and laterally.
High involvement in innovation Participation in organization-wide continuous improvement activity
Customer focus Internal and external customer orientation. Total quality culture
Creative climate Positive approach to creative ideas, supported by relevant rewards system – a ‘winner’s culture’
Learning organization Processes, structures and cultures which help institutionalize individual learning. Knowledge management

It is clear from these descriptions of successful innovation that the ‘management’ of knowledge is central to the organization’s innovation. We proceed to further discuss these concepts and use this overlap to identify knowledge management practices that contribute to innovation in more detail.

5.4 Knowledge Management

KM is an organizational process that aims to create a centralized knowledge source within the organization that acquires, assimilates, distributes, integrates, shares, retrieves and reuses the internal and external, explicit and tacit knowledge to bring about innovation in the organization in the form of the product, people and organizational process. Polyani [44] first identified the duality of the knowledge. He divided knowledge into two types:

  1. Tacit knowledge
  2. Explicit knowledge

5.4.1 Tacit Knowledge

Polyani [44] defined tacit knowledge as abilities, expertise and conceptual thinking. Further, he argued that tacit knowledge is not only attributed to what is known, but it is also attributed to the knower as well. This is because the knower’s knowledge level is sometimes soaring but he cannot explain in efficient way, or the knower sometimes does not have adequate sources to disseminate his knowledge to the person who actually needs it. Tacit knowledge is very difficult to acquire because it is embedded in the form of capabilities, skills and ideas which individuals carry in their minds. Tacit knowledge can only be seen through the application; that is why tacit knowledge is difficult to capture, exploit and diffuse among the organizational members.

5.4.2 Explicit Knowledge

Polyani [44] said that explicit knowledge can be disseminated and shared in the form of hard data, well defined procedures, and standardized principles. Nonaka, Takeuchi [45] defined explicit knowledge as “Knowledge of Rationality”. Explicit knowledge is easy to capture, manage, share and disseminate to the people.

5.4.3 Relationship Between KM and Innovation

Messa and Testa [27] stated that organizations must develop the receptors that gain or absorb the external knowledge and this activity is strongly correlated with innovation capability. Further, they said that through benchmarking, organizations can acquire explicit and tacit knowledge from external sources. These external sources of knowledge can be integrated with the organizational internal explicit and tacit knowledge and if a knowledge gap prevails, that can be filled through the new knowledge acquisition, which will be helpful in bringing about innovation. Ju et al. [19] argued that in order to get competitive advantage organizations should continuously learn from outside sources. Through the proper knowledge distribution and sharing, organizations can bring about innovation. So, organizations must develop such channels within the organizations through which employees share their knowledge with one another. Plessis [26] stated that innovation depends upon knowledge. So, to bring about innovation, organizations must identify knowledge capability and richness.

Parlby and Taylor [46] asserted that the foremost purpose of knowledge management is to bring about innovation. Plessis [26] stated that organizations can develop collaborations across the organizational boundaries to bring about innovation and to get a sustainable competitive advantage. This collaboration helps the organization to approach new knowledge that can be helpful to fill knowledge gaps within the organization. This collaboration ultimately brings about innovation in the organization and this collaboration can reduce the risk and cost to bringing about innovation.

Organizations that rapidly capture and implement new knowledge across the organization are better able to foster innovation as compared to those organizations that don’t focus on this aspect [47]. Furthermore, they argued that the first and most important aspect of innovation is to increase the innovation capability to identify and capture the tacit knowledge of the organization. Tacit knowledge can be acquired from outside the organization such as through customers, suppliers, bankers and so on. This acquisition of tacit knowledge plays a significant role in fostering the process of innovation. Tacit knowledge becomes more important in those particular industries where explicit knowledge is scarce. Through knowledge management, organizations can identify their tacit knowledge that they usually do not know before. Knowledge management also helps the organization to articulate tacit knowledge in the form of explicit knowledge and this is a strong base to bring innovation.

Knowledge management integrates different types of tacit and explicit knowledge. Through integration, organizations can discover what type of tacit and explicit knowledge subsists in the organization. Furthermore, knowledge activities like knowledge gathering, managing, sharing, learning, reuse and retrieval play important roles in bringing about innovation. Through knowledge management activities, organizations find out the extent of knowledge from inside and outside their organizations. Organizations manage this knowledge in the form of datasbases, so that, they can ensure the availability of the right type knowledge for the right person at the right time.

5.5 Conceptual Framework

The basic aim of this research is to explore the integrated approach to knowledge management and other factors which play an important role in bringing about innovation in any industry which was lacking it before. There are several components involved in this model such as KM activities, knowledge transformation, technology and culture and more importantly organizational knowledge assets which are comprised of two things: 1) human capital, and 2) data warehouses. All organizations have both tacit and explicit types of knowledge. Explicit knowledge is easy to disseminate and share with the people whereas tacit knowledge is very difficult to share, integrate and disseminate to the people. The one tool to increase knowledge and enhance the innovation process is open communication within the organization because open communication and flexible structures urge people to create new ideas and share their tacit knowledge.

5.5.1 Information and Communications Technology (ICT) Factors

As far as relationship between IT and KM is concerned, there are two schools of thought. MecDermott and O’Dell [48] stated that KM could be successful without IT. It can be used when it is necessary. On the other hand, some have argued that IT has become much more important because of globalization. It is true that technology alone cannot play any role to capture, manage and exploit the knowledge which exists inside and outside the organizations. Rather, it is the combination of technology and human capital that leverages the KM activities [49]. Today, IT supports the most important tasks of KM. ICT identifies and gathers the knowledge through different tools like web portals, internet, intranet, and so on. Not only does knowledge gathering modernize IT tools but it also helps organizations to diffuse the explicit and tacit knowledge.

ICT plays an important role in organizational communication. Technology is a tool to support the communication. There must be a proper communication structure through which people can share knowledge and ideas. One of the major sources for gaining new knowledge is the internet. Mohammad, Stonkosky and Murray [50] stated that the real challenge for IT experts is to revolutionize the objectives to select, develop and implement better technology that could serve the KM in an efficient and effective way.

5.5.2 Knowledge Management Activities

Neilson [21] made the connection between different knowledge management activities like knowledge creation, acquisition, capturing, assembling, sharing, integration, leverage and exploitation. He further divided these eight KM activities into three dynamic capabilities such as knowledge development, knowledge (re)combination and knowledge use. These eight KM Activities contain all the important activities that start from acquiring new knowledge and end at the exploitation of new knowledge. Through these activities, organizations find out new knowledge within the organization as well as from outside the organization that enhances the knowledge capability of the organization. These knowledge management activities enrich the organizational knowledge assets. This consistent acquisition of new knowledge makes more sophisticated organization processes and routines. And, by the application and use of this new knowledge, innovation can be brought into the organization.

5.5.3 Knowledge Assets

Organizational knowledge assets are the soul of innovation as knowledge assets increase the knowledge capability of the organization and knowledge capability leads to innovation. Knowledge assets include two factors: human capital and knowledge repositories.

5.5.4 Human Capital

The most important factor of organizational knowledge is human capital. Knowledge and competencies of workers have become the vital component of developed economies [51]. Human capital is the most sustainable, inimitable source of competitive advantage. Human capital consists of competencies, skills, knowledge and information possessed by the workers of the organization. Human capital creates the ideas that are the strongest base of innovation. The role of human capital is not only limited to idea generation; rather its role is also important during distinctive idea execution to deliver the innovative products and services to the customers. Organizations must know the type and level of the organizational human capital. In highly dynamic and competitive environments, the collective knowledge and expertise of employees must be utilized in an effective and efficient way so that they could create optimum economic benefits. It is not only important to discover competent human capital in the organization but organizations must create the environment to utilize the competent human capital. Thus, if organizations have a supportive culture and environment, such human capital will produce more economic value.

5.5.5 Knowledge Repositories

Organizational knowledge repositories consist of large databases, data warehouses, internet, intranet, and so on. Knowledge repositories have complete databases of skills, expertise and knowledge of organizational employees. Through knowledge repositories it becomes easy to access information and the knowledge of the organization. Through knowledge repositories, we can accomplish the important task of managing the explicit knowledge of the organization. This explicit knowledge can be diffused to the person or area where it needed.

5.6 Knowledge Transformation Success and Innovation

In this chapter we have discussed several factors that contribute to bringing about innovation, but these factors alone cannot bring about innovation. Rather organizations have to make the knowledge transformation/conversion process successful soso that these factors may effectively bring about innovation. Cumming and Teng [52] identified several factors that play an important role in the transfer of knowledge among individuals, groups and in entire organizations. They divided these key factors that make knowledge transfer successful into four broad contextual domains: knowledge context, relational context, recipient context and activity context.

5.6.1 Knowledge Embeddedness

Knowledge used to be entrenched in individuals, tools, processes and in related activities and networks of organizations. One way to transfer knowledge from one place or department to another place or department is to transfer knowledge individuals. The benefit of this is that an organization can transfer both types of knowledge, tacit and explicit, at the same time [53] [54] [55]. Whenever there is difference of knowledge and expertise between knowledge recipient and knowledge sender, the knowledge recipient fails to learn. Knowledge can be rooted in organizational activities and practices [56]. Finally, knowledge can also be embedded in multiple elements and sub-networks [51]. It is difficult to transfer knowledge within the organization without mobility of experts with recognized patterns of working mutually. Knowledge embeddedness negatively and significantly affects knowledge transfer success [51].

5.6.2 Knowledge Articulability

Knowledge articulability is an important factor that affects knowledge transfer success. Knowledge articulability is to what extent knowledge is written down, verbalized and articulated [56]. Polyani [44] stated that people explain less than what they know since individuals have tacit knowledge which is unarticulated, intuitive and can only be observed through application. Articulated knowledge can easily be captured, stored and shared with other employees because it can easily be understood and observed as there is less ambiguity in articulated knowledge. Knowledge tacitness is significantly and positively correlated with ambiguity [57]. Transfer of knowledge success depends upon how much knowledge is tacit and explicit. If knowledge is more explicit and articulated the chances of transfer success will be more. Ambiguous and less articulated knowledge is difficult to share and poorly articulated knowledge is difficult to diffuse among organizational employees.

5.6.3 Organizational Distance

The base of organizational distance is the means through which the source and receiver share the knowledge. Organizations can get knowledge from within the organization as well as outside the organization. Knowledge transfer within the organization is easier as compared to outside the organization. Knowledge is easy to transfer from selected parties [58]. For example, franchises [59], chains [60] and networks [61] can transfer knowledge more effectively and efficiently. Thus it can be inferred that transfer success will decrease with the increase in organizational distance between source and recipient of knowledge.

5.6.4 Knowledge Distance

Knowledge distance is to what extent source and recipient have the same kind of knowledge. It has been found that the organizational learning knowledge gap between source and recipient should not be too great [63]. The reason behind this is that if the knowledge gap is greater the learning steps will also be larger and knowledge transfer will be much complex, difficult and time consuming. Hence, it can be said if the knowledge and expertise gap among source and recipient is great, transfer of knowledge and learning will almost be impossible. To minimize these gaps, there must be some adjustments in knowledge and other factors in order to make the knowledge transfer successful. Cumming and Teng [62] found that there is a significant and negative relationship between knowledge distance and the success of knowledge transfer.

5.6.5 Physical Distance

Physical distance is the difficulty, type and expense of getting face to face communication and for knowledge transfer. Athanassiou and Nigh [63] found that face to face interactions are better compared to all other modes of delivering strategically important matters. Moreover, they found that physical distance negatively affects the success of knowledge transfer.

5.6.6 Project Priority

Different projects take different degrees of attention, resources and time. When the recipient gives too much priority to the project, he will be very motivated to get new information and knowledge transfer success with rapidity and with much more intensity. Researchers have identified different variables in making knowledge transfer successful, such as as motivation and learning intent of the recipient of knowledge. These factors play a vital role in knowledge transfer success. Accordingly, people will support the transfer of knowledge in highly prioritized projects than less prioritized ones.

5.6.7 Learning Culture

Learning culture is also an important factor for the success of knowledge transfer. Knowledge transfer has two aspects; first is knowledge velocity and second is knowledge viscosity. Knowledge velocity is the speed of knowledge transfer and knowledge viscosity is the richness of knowledge transfer [64]. When there are learning routines in organizations, every employee starts to get new knowledge by interacting with other people and also by approaching other means such as books, journals, and so on.

5.7 Knowledge Transformation Process

Modes of knowledge transformation as by Nonaka et al. [45] are:

  1. Socialization (tacit to tacit)
    • – Wandering inside
    • – Wandering outside
    • – Tacit knowledge transfer
    • – Tacit knowledge accumulation
  2. Externalization (tacit to explicit)
    • – Dialogue
    • – Metaphor
  3. Combination (explicit to explicit)
    • – Collecting data and acquisition
    • – Disseminating data and information
    • – Editing and synthesizing data and information
  4. Internalization (explicit to tacit)
    • – Personal experience
    • – Simulation

An organization’s top management must focus on this knowledge transformation process because it is the most important source of diffusion of knowledge among individuals, groups and in the entire organization from the top level to the bottom level in the hierarchy of the organization. This knowledge transformation process creates the leverage within the organization regarding knowledge sharing, creation, dissemination and integration of the knowledge. Important tools for knowledge transformation might be mentoring, coaching formal and informal meetings and seminars and it also includes learning by doing. Through these different activities, erudite persons share their knowledge and expertise with others, which can boost the level of knowledge in persons lacking knowledge as well as urging people to gain new knowledge and ideas and to produce something distinctive as compared to competitors which is the soul of innovation and competitive advantage. The biggest achievement for any organization is when their employees start to think in different ways, when they are passionate, devoted and motivated to push their organization to the height of success and excellence. The knowledge transformation process is affected by many factors as well.

5.8 Knowledge Transformation, Collaboration and Integration for Innovation

Knowledge collaboration is very important for bringing innovation. Collaboration might be internal or external. Through internal collaboration, organizations come to know about diverse knowledge that exists in the organization in the form of tacit and explicit knowledge. Through strong internal collaboration with the employees, organizations come to know what, where and how much knowledge exists in the organization. This internal collaboration can foster innovation because when organizations collaborate and integrate with the internal employees this can lead the organization towards the generation of a pool of expertise and creativity which are essentials for bringing about innovation. As far as the role of external collaboration to bring about innovation is concerned, external organizations play an important role, such as customers [65] and competitors [66]. Nowadays, to bring about innovation, it is crucial to make linkages with external organizations to get the knowledge and capabilities that are necessary for innovation [67], [68]. To bring about innovation, linking with external organizations and partners is a core process. Therefore it can be argued that if any firm wants to innovate successfully in a highly complex environment, the innovation process must be supported by an open and flexible structure. Organizations must integrate external knowledge and capabilities. This integration and collaboration allows the organization to get more innovative ideas which is the soul of innovation.

5.8.1 Organizational Learning and Innovation

To compete in a highly dynamic environment each and every organization must focus continuously on learning because customers’ needs and preferences are rapidly changing and to meet those requirements organization must seek and learn in new ways. These new ways and methods can only come into the organization through learning. Organizational learning enhances the organization’s knowledge capability and knowledge assets. Consequently, organizational learning strengthens the knowledge transformation process because when employees learn they have to share their experiences and knowledge with others who really need current knowledge to fill the knowledge gap. Wijenhoven [69], states that organizational learning urges people to enhance the organizational knowledge base. Organizational learning enhances the interaction among the employees so that knowledge sharing, integration and dissemination are achieved. It will not only boost the quality, and quantity of the information and accumulation of knowledge in a dynamic environment, but also enhances the ability to create new knowledge and its application.

5.8.2 Organizational Culture and Innovation

Culture is one of the most important factors to implement in the knowledge management system. Delong and Fahey [43] stated that knowledge management faces difficulties in being implemented from corporate culture, and that’s why organizations normally do not get the maximum benefit from knowledge management. In a study of 453 firms, more than half of them indicated organizational culture was the biggest obstacle to implementing the KM system in the organizations [70]. In order to implement the knowledge management system effectively, organizations must create the thirst for knowledge and achievement among the individuals of the organization. So, to implement knowledge management, organizations need to build the knowledge culture within the organization in which new knowledge acquisition and sharing will be the integral part of the strategy and culture. Gold et al. [71] stated that an encouraging and supportive culture will help to build the knowledge management system in the organizations.

5.9 Innovation Knowledge Management Nexus

The intertwining relationship between innovation and knowledge is seen in the approaches to increasing knowledge and its transfer in organizations. For example, Davenport and Prusak suggest that the best way an organization can transfer knowledge effectively is to “hire smart people and let them talk to each other” [72]. A similar prescription is provided for innovation – the ingredients are clever people and the processes are the interaction, context and a culture of knowledge sharing, or finding effective ways to let people talk and listen to one another. Some writers describe the importance of the generation of knowledge in more detail. Skyrme [42] describes two processes. First, knowing what you know i.e. having better awareness, sharing and application of existing knowledge including that which originates outside the organization. Second, faster and better innovation i.e. more effective conversion of ideas into products and processes [42]. He also describes innovation as a set of interacting knowledge processes. These processes include the absorption of existing knowledge from the external environment, the creation of new knowledge through creative thinking and interchange of ideas, the rapid diffusion of ideas and insights through knowledge networking; the validation, refining and managing of innovation knowledge, matching of creative ideas to unmet customer needs and in solved problems, and encapsulating and codifying knowledge into an appropriate form such as a tangible product, a production of a new internal process, training material for a new service a marketable design, patent, and so on [42]. Each of these sources of knowledge present different challenges and often require different knowledge processes. These forms of knowledge and the processes to implement them are summarized in Table 5.3.

The contribution of knowledge to the continued success of companies such asas 3M, Hewlett Packard and GlaxoWellcome is well known [42]. Benefits of knowledge include the avoidance of costly mistakes, such as the sharing of best practices in Chevron, and faster problem solving through videoconferencing by BPAmoco where offshore oil platforms can tap into expertise elsewhere. Other examples include faster development times through learning networks and linking customer problems to an ideas database, and better customer solutions.

A well known example is the sales and support staff at Buckman Labs who use their knowledge repository K’Netix to gain access to the best expertise and to develop innovative solutions to tricky customer problems. Other benefits obtained from knowledge management practices include gaining new business, improved customer service and reduction of risk.

Innovative success in small and medium sized firms is determined by the presence of organizational, technological and marketing competencies and if these competencies are jointly present, firms are more likely to innovate successfully [73]. This study did not specify knowledge practices per se, but the combination of a strong knowledge base, proactive management of innovations and management of the relationship with the environment were major factors in the success of these firms.

Table 5.3. Forms of Knowledge Processes. Source: Developed from Skyrme (1999) [42].

Forms of knowledge Knowledge Processes
Customer knowledge Developing deep knowledge through customer relationships, and using it to enhance customer success through improved products and services
Knowledge in products and services Embedding knowledge in products and surrounding them with knowledge intensive services
Knowledge in people Developing human competencies and nurturing an innovative culture where learning is valued and knowledge is shared
Knowledge in processes Embedding knowledge into business processes, and giving access to expertise at critical points
Organizational memory Recording existing experience for future use, both in the form of explicit knowledge repositories and developing pointers to expertise
Knowledge in relationships Improving knowledge flows across boundaries: with suppliers, customers and employees, and so on
Knowledge assets Measuring intellectual capital and managing its development and exploitation

R&D firms and innovative firms have similar and different processes and practices for creating and using knowledge for innovation.

5.9.1 KM Processes in Innovative Firms

The description of the underlying capacities for innovation includes vision and strategy, a competency base, creativity and idea management, organization and process, culture and climate and intelligence [7]. A firm can of course be at different levels with respect to different innovative capacities. Little’s study grouped multiple notions of knowledge and knowledge management under the heading of organizational intelligence. This notion described knowledge management as the generation, protection and stewardship of technology and technological knowledge, acquisition and development of knowledge from outside or absorptive capacity. Also included were knowledge articulation and deployment, awareness of own performance and limitations, commitment to understanding the customer’s both current and future (unarticulated) needs, structured thinking about the future, scanning the horizon, recognition, screening and selection of new ideas and understanding and using networks for intelligence. Managing a firm’s knowledge assets is crucial in innovation and Leonard Barton [74] focuses on three types of skills or knowledge: public or scientific, industry specific and firm specific.

Other studies have investigated knowledge management practices in leading companies in terms of knowledge flows [75] and found key enablers of knowledge in culture, infrastructure and IT tools and standards.

On the other hand, an overview of successful innovation in largely international firms argues that “knowledge creation is completely dependent on individuals, on human beings” and that “people are the primary source of innovation in high performance organizations. Both personnel co-location and job rotation help to build a network of informal linkages that provide information channels that are seen as often far superior and efficient than formal reporting structures and official message boards. In particular, mutual trust and face to face contacts are to be maintained in order to sustain the network” [5].

Table 5.4. Knowledge – innovation processes. Source: Self developed.

Knowledge Processes Activities Contexts
Making external connections as routine Sharing explicit and tacit knowledge Build networks and gain tacit knowledge Broader access to explicit knowledge Visiting scientists programs Informal meetings and conferences Job rotation Multimedia technology/ICT Informal links and networks
Learn from new approaches/technologies Diversity of experiences and challenges High visibility – new ideas diffused Common knowledge captured/accessible Cross-functional teams Intercultural project managers High impact projects Shared databases Projects and processes
Deep expertise Disciplinary ideas/multiple approaches Diffusion of technology Functional specialists Multifunctional prototyping Dual career ladders Technology Agents Hierarchical and functional
Connections for sharing tacit knowledge Expertise from top with local knowledge Increase potential for learning from diverse situations and challenges Face to face meetings Expatriates Local recruiting International dispatchments Regional and local

5.9.2 Knowledge Processes and Practices for Innovation

Taking into account the contextual nature of knowledge, Boutellier et al. [5] have suggested a number of activities that assist in knowledge sharing in a number of contexts, including informal links and networks, and projects and processes. Underlying these activities are specific knowledge processes that can be encouraged. The knowledge processes inherent in these activities and contexts have been added to the focus on knowledge creation processes in the first column in Table 5.4.

Such processes include the sharing of tacit and explicit knowledge, interactive processes, building networks, increased knowledge from diversity of ideas and experience, and diffusion of knowledge.

5.10 Solutions and Recommendations

5.10.1 Guidelines for Motivating Innovation

  • – Entrust firefighting. One cannot drive innovation when one is putting out operational fires. It is better to hire the best operations team one can, and then stay out of their way.
  • – Establish credibility. Trust breeds innovation, and communication breeds trust. Establish a formal communication program.
  • – Acknowledge criticism. Not every idea is a good one, and some are downright lousy. To improve ideas, ruthlessly seek out criticism.
  • – Attest it. Does the idea save money, increase real productivity, and equally important, is it feasible? Nothing ruins credibility faster than a business case full of holes. Better to do good homework and get some feedback before shopping the idea around.
  • – Gaze around. Staying inside your organization and keeping the lights on may be instinctual during down times, but it is hardly a pathway to innovation. Look outside the frame of reference.
  • – Keep away from technology reverence. A project need not involve brand new technologies to be innovative.
  • – Re-examine the startups. In addition to innovating inside their own companies, CEOs have a role to play in driving innovation in the industry they belong in.
  • – Constrict expenditure. Constraint breeds innovation, as it’s very tempting, when money and resources flow freely, to stick with tried and true solutions. When money and resources are constrained, one has to find new and creative ways toto solve problems.
  • – Timing. It’s all in the timing, as expecting operating units to participate in a new project at the drop of a hat is a surefire formula for failure.
  • – Discover opportunities in problems.

5.11 Future Research Directions

Innovation and KM-related issues will be critical for organizations in this millennium. For organizations to ensure quality products and services there is a need to do research into the knowledge management issues of innovation and its process. ICT-enabled KM will make it all the more difficult for organizations to really grasp and apply innovation strategy, hence understanding innovation strategy implementation would also provide insights. Case study analysis of innovative approaches and successful KM implementation may be undertaken on a longitudinal basis and the cultural aspects both organizational and individual also need to be deeply studied and rationally interpreted. Further work differentiating knowledge practices from central components of innovation in firms is another interesting and understudied area yet to be undertaken.

5.12 Conclusion

In this chapter, an integrated model that includes several factors that play vital roles in bringing about innovation is developed for holistic understanding. ICT factors help the organization to find out and manage organizational knowledge, which increases the organizational knowledge assets and capabilities. Knowledge success factors are vital in diffusing knowledge from individuals to the entire organization, which strengthens the organizational knowledge culture. In order to speed up the innovation process, organizations must implement the innovation determinants that are actually the cause of innovation. This chapter brings together literature from research on innovation, both specifically from R&D contexts and from research on innovative firms, and the importance of innovation for success at the firm and national level has been demonstrated. The essential contributions from knowledge practices and their critical role in innovative firms have been identified. The chapter concludes with some ways in which the activities seen as central to innovation in firms encapsulate knowledge management practices.

In today’s fast-paced marketplace, if a company keeps offering the same product, a rival can easily race past with a better one. And yet another competitor will blow them both out of the water when it invents something altogether different and better – something innovative. To remain competitive, companies must consider how to find and keep visionary leaders and how to foster innovation and creativity in their employees, the executives and experts at the event agreed. On the global stage, innovation could mean the difference between the United States keeping a tight grasp on economic leadership or eventually slipping behind countries like China and India, as some economists have predicted. However, those fast-growing countries also face the same challenge. Thus, innovation and KM is critical not only to business success, but to its very survival. Innovation is so important because fresh approaches, new ways of delivering ideas, visual and content changes all keep people interested and coming back. Innovation is not exclusive to big brands, but is, in fact, essential for all brands. Hence, aligning innovation strategy with KM strategy and then to overall business strategy is critical.

Any organization needs a method to capture ideas and provide a readily available source of basic concepts to feed into the corporate innovation process. But it needs more than that. Innovation is essentially a creative activity and requires freedom of thought and action. To accommodate this, a formal KM framework must be established to channel the activities into corporate assets. And the earlier this journey begins the better for organizations in today’s highly competitive, networked knowledge economies.

5.13 Key Terms and Definitions

Creativity: the ability to transcend traditional ideas, rules, patterns, relationships, or the like, and to create meaningful new ideas, forms, methods, interpretations, and so on. It includes originality, progressiveness, or imagination.

Innovation: something new or different introduced, it is the act of innovating that includes introduction of new things or methods.

Knowledge: acquaintance with facts, truths, or principles, as from study or investigation, familiarity or conversance, as with a particular subject or branch of learning and includes acquaintance or familiarity gained by sight, experience, or report. It is the fact or state of knowing, the perception of fact or truth by clear and certain mental apprehension.

Learning: knowledge acquired by systematic study in any field of scholarly application. It also is the act or process of acquiring knowledge or skill.

Organization: a group of persons organized for some end or work; an organized structure or whole for a business or administrative concern united and constructed for a particular end or a body of administrative officials, as of a political party, a government department, and so on.

Process: a systematic series of actions directed to some end; it is a continuous action, operation, or series of changes taking place in a definite manner. A process is thus a series of progressive and interdependent steps by which an end is attained.

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