Know Who Know How

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Why Know-Who Trumps Know-Howby Sigvald J. Harryson

from strategy+business issue27, second quarter 2002 reprint number 02201

2002 Booz Allen & Hamilton Inc. All rights reserved.

strategy +business

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he innovation process is

no longer limited to intra-corporate know-how, butleverages instead globalknow-who . Know-how isthe ability to solve prob-lems efficiently based pri-marily on internally

accumulated knowledge, experi-ence, and skills. Know-who is theability to acquire, transform, andapply that know-how.

Know-who based companiesknow who has the know-how; havethe active empathy to rapidly establish the trustful relationshiprequired to acquire that know-how;and have the multiple competenciesrequired to transform and apply itin a new context so that innovationcan occur.

To know who has the know-how gives new opportunities for

corporate entrepreneurship throughexploration and creation of new knowledge and invention. Know-

who can also transform the resultsinto practical processes for globalexploitation of innovation.

Three Key PropositionsKnow-who based companies attractand develop outward-oriented

entrepreneurs, and systematically

develop multiple networks notonly for R&D and innovation, butalso for the overall management of knowledge and skills within andbeyond the company. In a highly holistic manner, these networksexploit external sources of creativity and technology to commercializethe knowledge acquired throughexternal and internal networking.

The synergistic combination of

external and internal networking isa process by which the acquisitionof technology from outside sourcesenhances a companys ability tocommercialize that technology, thusavoiding the innovators dilemmaidentified by Professor ClaytonChristensen of the Harvard Busi-ness School. External networkingis the process of linking a firm withextracorporate sources of technolo-

gy. Internal networking refers tothe integration of the research,development, production, and mar-keting functions that make up theinnovation process.

Its important to understandthe mechanics of know-who basedcompanies for three reasons:

Know-who based compa-nies excel at product innovation by

Why Know-WhoTrumps Know-HowA six-step guide to the promotion of corporateentrepreneurship and the exploitation of innovation.

by Sigvald J. Harryson

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deliberately eschewing the relianceon internal technology developmentthat is still characteristic of many firms, and instead focusing on iden-tification, acquisition, and transfor-mation of know-how, which is

primarily tacit knowledge. Knowing what we know is

less powerful than knowing whoknows what. A next-generationknowledge and information (K&I)management structure needs tomore purposefully address tacitknowledge, rather than deal prima-rily with explicit knowledge anddatabases. More often than not, thetacit dimension deeply rooted in

peoples heads, but hard to codify has the bigger business impact whenmanaged correctly.

External sourcing of tech-nologies and skills energizes andcreates powerful synergies inknow-who based companies, net-

working tacit knowledge into inno-vation. It does not have to result in ahollowing out of internal researchand development capabilities.

Measurement Myopia A central challenge in moving fromknow-how to know-who is to break away from the performance meas-urement myopia that causes exces-sive compartmentalization andintracorporate competition.

Paradoxical as it may seem,many companies efforts over thepast decade to compartmentalize

and maximize performance of strict-ly controlled individual units haveresulted in sums smaller than the

whole. Instead of being allowed theflexibility of moving in new direc-tions, compartmentalized units havebeen isolated in a kind of decentral-ized bureaucracy that kills most net-

working capabilities and hits thebrakes on most innovation activities.

Large companies must recog-nize the paradoxical organizationalneeds for exploration and exploita-tion. Instead of boxing themselvesinto decentralized bureaucracies,companies need to build up net-

working capabilities to combine andinterlink small, organic creative net-

works, while exploiting the resultsthrough rapid transfer and transfor-mation into process networks. Asexplained in more detail in the s+b article The Organization vs. theStrategy: Solving the AlignmentParadox (by Jeffrey W. Bennett,Thomas E. Pernsteiner, Paul F.Kocourek, and Steven B. Hedlund,

Fourth Quarter 2000), this requiresa good balance between adaptability and alignment in the organization.

External networking is good forbusiness results, and a number of companies including ABB,Canon, Ericsson, Hewlett-Packard,IBM, Philips, Sony, and TexasInstruments are moving forceful-ly in this direction. Still, many com-panies are far from this level of

excellence. Their inability to makeeffective use of an ever-increasingsea of knowledge prevents necessary self-renewal from taking place, andmanagement may not discover thatthe companys products (or even itsbusiness model) are outdated untilit is too late for corrective action.

Extracorporate networking canalso free R&D personnel to focusmore intensively on the require-

ments and tasks of successful prod-uct innovation. Gunnar Brock, for-mer president and CEO of TetraPak Group, captures this well whenhe talks about overcoming criticalbarriers to innovation: We need tofoster a culture that does not expecteverything to be developed in-house, and we must focus moreefforts on integrating the knowledge

Sigvald J. Harryson([email protected]) is a principalin Booz Allen Hamiltons Zurich officewho focuses on growth through innova-tion and new business creation. He hasimplemented knowledge networks andextended enterprise models in numerouscompanies. Prior to becoming a consult-ant in 1994, Mr. Harryson worked as adevelopment engineer at a leading globalpackaging company.

This article is adapted from the forthcom-ing edition of Managing Know-Who Based Companies: A Multinetworked Approach toKnowledge and Innovation Management ,by Sigvald J. Harryson (Edward ElgarPublishing Inc., 2002).


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of others. Moreover, we shouldrotate our engineers out of R&D sothat they better understand theneeds of our customers instead of becoming too myopic in their ownspecialized fields.

Six Managerial PrinciplesSix fundamental managerial princi-ples are required to implementknow-who based management:open sharing and global diffusion of know-how; holistic and long-term-oriented performance measurement;the courage to perform creativedestruction; multiple competenciesand redundancy for cross-functional

learning; the leveraging of extracor-porate creativity and human know-how channels; and respect for the

primacy of customer needs andmanufacturability in R&D.

Companies that have thecourage to adapt these principlesand develop a staff profile with mul-tiple competencies will achieve anew dimension of innovation man-agement. A new breed of outward-oriented engineers with an equally developed understanding of re-

search, development, production,and marketing will secure seamlessknowledge transfer throughout theinnovation process. A skillfully managed shift from internal know-how to global know-who can actual-ly tear down most organizationalbarriers that otherwise prevent greatinventions from turning into break-through innovations. For those who

choose to pursue it, global know-who ultimately will become moreimportant to corporate success thanspecialized know-how .

1. Open Sharing and GlobalDiffusion of Know-How. Corporate

infrastructures must resonate withthe open sharing of ideas, technolo-gies, and human resources, both

within and between business units. At the Sony Corporation, promo-tion criteria explicitly include thesharing of mistakes, which helpssecure open communication andsharing of know-how. In 1993,Sonys Akio Morita explained, Youcan only be promoted to manager if

you are known for a success and fora failure that you have committed soeverybody can learn from it instead

of possibly repeating the same mis-take again that caused the failure.

Many know-how based compa-nies are not even close to fulfillingthis principle. A senior manager in astrongly compartmentalized multi-national told me, We have neverlearned to cooperate within thiscompany. Instead, we build gardensof our own, and keep the knowledge

in our own drawers. In a very dif-ferent, yet also quite knowledge-based business, an R&D manager,responsible for one of the four busi-ness areas, observed, I would ratherthrow all my R&D results out the

window than share them with my colleagues in the other businessareas. I would not allow them toborrow any of my people either.

The compartmentalized cultureof isolation is particularly commonin strong companies that allow or even support internal compe-tition. Not only do such companieshave strong cultural barriers be-

tween their isolated and deeply spe-cialized functions, but individualperformance is more valued thangroupwide innovation. The narrow specialization and performancescope of each individual makes itdifficult to turn creative ideas intoproduct innovations responding toglobal market needs.

2. Holistic and Long-Term-Oriented Performance Measure-

ment. For open sharing and collec-tive learning to take place, incentiveand performance measurement sys-tems must consider holistic resultsand reward collective achievementsinstead of individual performance.Only then will the corporate-wideforums of interaction bring theintended benefits: Individual know-how will be continually enrichedand applied throughout the compa-

ny instead of remaining isolated incompeting business units.Many global companies have

launched programs to enhance worldwide sharing of best practices.So far, only a few companies recog-nize that for each best practice iden-tified, pairs of givers and takers haveto be explicitly assigned. Perhapsmost important of all, the knowl-edge taker must receive at least as

much positive recognition in thecorporation as the giver does.The Balanced Scorecard (BSC)

is often proposed as the perfect solu-tion to all problems. Mapping andtranslating important strategicobjectives into individual goals andputting these on a scorecard for clar-ity and follow-up certainly has somemerit, but the BSC needs to be both

Corporate infrastructuresmust resonate with the opensharing of ideas, technologies,and human resources.


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well balanced between short-termand long-term objectives and intelli-gently applied to drive desiredbehaviors like knowledge sharingand entrepreneurship.

At Canon Inc., the BSC has

been replaced by vision-drivenholistic evaluation. The CorporateStrategy and Development Head-quarters formulates corporate visionsand ensures that business groups setgoals in accordance with thesevisions. This headquarters also playsa key role in the evaluation of busi-ness group leaders and project lead-ers. The key evaluation criterion isthe extent to which achieved goals

correspond to the visions, not indi-vidual P&L results.3. The Courage to Perform

Creative Destruction. Lewis Platt,the former chairman and CEO of Hewlett-Packard Company, oncesaid, We have to be willing to can-nibalize what were doing today inorder to ensure our leadership in thefuture. Its counter to humannature, but you have to kill your

business while it is still working.Its the kind of creative destructionthe economist Joseph A. Schum-peter described in 1951 as dynamicdisequilibrium a process thatpromotes creativity for further inno-vation. Creative destruction is anexplicit business strategy of compa-nies like Sony, Canon, and HP.

Only the paranoid survive is akey mantra at the Intel Corporation

another creative company withthe courage to make its own prod-ucts obsolete before others do so.Developing an entirely new productthat competes with and kills otherproducts offered by the same com-pany is a difficult task that usually meets a lot of internal resistance,especially when there is no holisticperformance measurement.

A senior project manager in a Western IT company says, Weneed more entrepreneurial bosses

who dare to take risks and expandthe horizon. Similarly, a large num-ber of middle managers in a large

company complain, No one in ourglobal leadership team dares to back up a new concept until it is a provensuccess in the marketplace. This lack of courage and risk taking kills a lotof entrepreneurship. Clearly, entre-preneurship takes both visionary and challenging leadership, with atop management that actively showsinterest and willingness to take cal-culated risk.

Excessive criticism of failurecan also build strong barriers againstentrepreneurship. A human re-sources director at a large insurancecompany blames top managementfor his companys lack of innovative-ness: The most critical problem of our company is that nobody wasever punished for a decision he didnot make. In contrast, when some-one actually makes a decision that

turns out to be [a bad one], we takean unhealthy pleasure in punishingthe poor guy. How can you expectanybody to be innovative and will-ing to take risks in such a culture?

Conservative and anti-entrepre-neurial managers often are lulled by their companys past success and aremisguided by the lessons drawnfrom this success. Entrepreneurs

who have the courage to let go of

the old have better possibilities tocatch Schumpeters waves of dynamic disequilibrium and discov-er new oceans.

4. Multiple Competencies andRedundancy for Cross-FunctionalLearning. Excessive employee spe-cialization and corporate fragmenta-tion prevent both cross-functionallearning and technology transfer


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from taking place in a large numberof companies. The lack of knowl-edge of where to find the relevantknowledge and technologies is a fre-quent cause of long lead times andexpensive projects.

A division manager of aglobal telecommunications compa-ny observes, There is good know-how around in our company, butvery few people know where to getit. Our engineers only see their ownlimited parts without consideringthe whole. Two directors at astrongly compartmentalized compa-ny agree that, Our company is likea Harrods department store without

a directory all you need is there,but you dont know where.Dueto time restraints and lackingknowledge about where all expertsare, we only use those sitting in thesame office.

The best way to get around thisknowledge isolation is to rotate peo-ple across functions and divisions.One common barrier to imple-

menting multiple competencies andmetaknowledge is that a transferfrom one function to another is

often perceived as a sign of individ-ual failure. Instead of thinking of the value a person brings in fromanother function, we tend to think that this person must have failed inthe old function.

Know-who based companiescontinually disperse their globalknowledge base across functions,divisions, and geographic units to

make sure that all knowledgeis available everywhere throughhuman know-who networks.Markus Bayegan, the chief technol-ogy officer of the ABB Group,drives multiple competencies all the

way up to the department managersof the corporate labs: We are con-stantly striving for a leaner andmore flexible R&D organization sothat we can get more results out of every dollar spent, he says. Theidea is that even department man-agers will be involved in R&D work and as little as possible in adminis-trative tasks. This will give them abroader and more practice-oriented

competence base.5. The Leveraging of Extra-

corporate Creativity and HumanKnow-How Channels. Many know-how based companies are reluctantto rely on external sources of tech-nology. The head of development of a large global automotive company gives two reasons his company doesnot yet leverage alliances with part-

ners or suppliers to a sufficientdegree: First of all, we think that

we are far better than they are, and

secondly, [we worry] that externalsuppliers may steal our innovations.This we-are-the-best mentality unfortunately works very muchagainst any type of innovationalliances or the acquisition of exter-nal innovation.

Arie de Geus argues convinc-ingly that a companys successdepends more on the ability of its

people to learn together and pro-duce new ideas than on its ability to raise capital. (See The ThoughtLeader Interview: Arie de Geus, by Randall Rothenberg, s+b , SecondQuarter 2001.) The former finance

director of Royal Dutch/ShellGroup of Companies and theauthor of The Living Company (Harvard Business School Press,1997), Mr. de Geus clearly putshuman interaction at the core of business performance: I see moreand more people from conventionalbusiness recognizing that the new business reality is a human-centeredone, he says. They see that their

critical competitive success factor isproducing more talented outputthan their competitors; and they recognize that they can only accom-plish this by getting people to learnand to work together better, ratherthan to simply work more efficient-ly, as with machines.

6. Respect for the Primacy ofCustomer Needs and Manufac-turability in R&D. Companies that

commit to a high degree of rotationand transfer of researchers and engi-neers can be successful not so muchbecause of individual motivation,but because of their commitment toa corporate-wide uniform rotationaltraining program. This helps ensurethat all researchers understand theimportance of adding value to thecompany by sharing their R&Dachievements openly and by bring-

ing them directly to the manufac-turing floor a place of true valuecreation that is known and respect-ed by the entire organization. Thisalso helps researchers consider thevalue chain as a whole.

Weakness arises from a lack of market orientation on the part of R&D. A marketing section leaderfrom a European company tried to

Know-who based companiescontinually disperse their globalknowledge across functions,divisions, and geographic units.


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bring some market feedback to the work his colleagues in R&D weredoing. This R&D section haddeveloped a technology that wasalready available on the market. Theresponse: a total lack of interest. He

remembers the reaction of the headof R&D: We dont need those mar-ket observations! Our new product

will have the best technology in the world. Youll just have to wait andsee. In one year when it is ready you

will understand. Well just have toconvince the customers that this isexactly what they need. The proj-ect continued, drawing resourcesaway from more important product

development projects all of which suffered from massive delays. When the new technology wasfinally ready, no business unit want-ed it. The CEO resigned.

Such problems are uncommon within know-who based companies.Because researchers and engineersare not allowed into a lab before they have completed an initial sales train-ing in addition to production

training their research activitiesare far more attuned to market needsthan those of a researcher who doesnot want to discover these needs.Mutual insight into market needs isa valuable driver of teamwork.

Ultimately, creative K&I man-agement processes are no longerlimited to internal know-how, butdraw instead on know-who andglobal sources of invention that con-

tinually nurture corporate learning.This is why know-who based com-panies can drive product innovationthrough collective cross-functionalaction that turns tacit knowledgeinto tangible and market-drivenapplications. +

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