Managing Organizational Innovation

Within an organization, leveraging tacit knowledge becomes complex because even though organizations can learn and possess knowledge, knowledge ultimately resides in individuals. Organizational tacit knowledge capabilities are thus made up of groups of individuals, their skills derived from tacit knowledge, and the interaction of resulting capabilities through various processes and interactions.42 These interactions naturally create new knowledge and thus skills and capabilities that, although sometimes difficult to manage and even identify, are often unique to an organization and difficult for competitors to copy or imitate. It is this that makes it possible for organizations such as Toyota and Dell to offer factory tours and have their processes and practices described in articles, yet retain their unique and effective competitive advantages.

Innovation and Customer Value

Although innovation is at the heart of competitive advantage, not all tacit knowledge leads to innovation or the creation of customer value or SCA. It is value that is created for and delivered to customers that generates profits, but profitability alone, particularly in the short run, is not necessarily a good indicator of customer value or SCA. A chef might think they've created a culinary masterpiece and the chef might indeed be talented, but if they fail to attract and retain customers, no advantage exists. Individuals and organizations must therefore leverage tacit knowledge to identify and develop skills that create innovations valued by their customers. This is the essence of strategic innovation, the creation of value that customers value beyond the cost to create that value. The process of strategic innovation begins with identifying customer needs, and ends with creating and applying tacit knowledge to meet those needs efficiently and effectively.

Structure and Resources

Innovation tends to thrive in the absence of structure, and inappropriate (i.e., rigid/hierarchical) structures have been shown to inhibit innovation. On the other hand, structures that facilitate and encourage cooperation, communication, and integration contribute positively in nurturing innovative environments.43 Cooperation serves to diffuse valuable knowledge and information, and to leverage the knowledge possessed by individuals. Communication facilitates cooperation by providing pathways by which knowledge and information flows between individuals. Integration provides structures, including physical proximity, that facilitate cooperation between individuals and groups that might not otherwise cooperate. The antithesis of these positive pathways and structures are rigid organization structures that restrict knowledge sharing across intra and interorganizational boundaries. These are sometimes referred to as silos, and often lead to "over-the-wall" processes characterized by discrete, disconnected activity rather than more continuous, cooperative activity that transcends organizational boundaries. Managers must be sensitive to both formal and informal structures and pathways and how they either promote or impede knowledge sharing and innovation.

The lack of resources or an inability to access needed resources can also be highly detrimental to the creation and cultivation of innovative envi-ronments.44 The development and testing of new ideas always requires resources, certainly of time, and usually of material and money as well. When those resources are restrained or slow to materialize, the motivation and energy driving a new idea dries up or is redirected toward other pursuits. No organization has unlimited resources with which to nurture innovation, but every organization, even those that are severely resource constrained, can effectively leverage existing resources by sharing them across functions and groups.45 This is akin to a typical retail auto parts inventory system. No individual store carries a full inventory, but by sharing inventory across regional stores, inventory availability is increased and most customer demands can be satisfied within 24 hours. To be effective, these systems require accurate inventory records and must be supported by good logistics systems. Similarly, an accurate inventory of resources across an entire organization or even an interorganizational network, combined with processes that facilitate the effective allocation and movement of resources to the right people at the right place at the right time, can go a long way toward nurturing innovation even when resources are limited.

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