Organizational Knowledge, Capabilities, and Resources

Further adding to the complexities of organizational innovation is the fact that innovation and tacit knowledge reside not just within individuals but within groups of individuals and even organizational cognitive structures. Research in organizational knowledge and learning suggests that organizations learn and can possess and use knowledge, including tacit knowledge.37 While the knowledge may reside in individuals, it combines to form organizational knowledge, which resides in organizational processes, practices, culture, and norms.38 Therefore, in addition to having an innovative chef, one can also have an innovative cooking staff. Just as chefs can use their tacit knowledge skills and capabilities in their culinary creations, so can an organization use its individual and group tacit knowledge and corresponding skills and capabilities to create products, services, and processes that deliver superior customer value.

Failure to Succeed

The key to developing skills and capabilities based on tacit knowledge is practice. This is true for both individuals and organizations. While understanding about the innovation process continues to evolve, one thing that is well understood is that the development, improvement, and refinement of skills and capabilities, including those related to innovation, requires consistent and ongoing practice. This has been referred to as "routinization."39 Although seemingly obvious, the inextricable connection between practice and skill development has profound implications for individuals and organizations. The relationship between practice and tacit knowledge brings to light the most significant barrier preventing individuals and organizations from achieving superior skills based on tacit knowledge—skills cannot be honed without practice, and practice cannot be performed without error and failure.

Despite this truism, most individuals and organizations are at least error adverse, if not intolerant of failure. A few organizations have embraced the fact that skills and capabilities along with the resulting innovation cannot occur without error. They are also finding ways to not only tolerate but also embrace failure because they understand that without error there is no learning, and thus no innovation and creation.40 For example, in a video entitled Failure: The Secret to Success, Honda extols failure as a necessary precursor to success.41 In fact, recognizing that tacit knowledge, innovation, and competitive advantage cannot be obtained without failure or error, they claim to happily embrace failure. Another example is the award-winning global design firm IDEO, which has gone so far as to adopt the motto "fail soon to succeed soon."

What happens when error is forbidden, punished, or deemed unacceptable? Most individuals would likely want to give up whatever creative endeavor they are pursuing. If forced to continue, they would likely proceed with extreme caution, avoiding anything innovative or risky, and resisting any significant challenge or opportunity. It is easy to suggest that allowing mistakes sounds great in theory but real businesses cannot afford to make mistakes or to let employees take risks. No doubt, Honda, IDEO, and other businesses are not embracing error and failure for its own sake or allowing it to adversely affect their overall financial success. It is natural for any person or organization to seek to avoid costly mistakes. The solution therefore, although as varied as the organization, rests on having some basic tools that can be used to create a balance that nurtures an innovative environment, allowing failures that lead to success, while simultaneously discouraging costly errors. Among these tools are Nonaka's tacit-to-tacit learning model (part of the SECI [Socialization, Externalization, Combination, Internalization] model), which encourages intense association between people with tacit knowledge and those who want to learn skills based on this. Under the guidance of a mentor or master, individuals can learn skills based on tacit knowledge while practicing under the watchful eye of an expert who is prepared to intervene before costly errors occur. Other tools include simulation, role playing, and other opportunities for socialization between the haves and have-nots of tacit knowledge. Given what's at stake, no less than the life blood of innovation, finding ways to provide opportunities for employees to practice so that they can acquire new, value-adding skills deserves more attention than it usually gets.

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