Sitting by Nellie - and other options

Knowledge management makes companies more successful. Small and medium-sized firms (SMEs) of all kinds have a number of characteristics in common, the most obvious (but least useful for analysis) being size. New technology-based firms as a group show some clear distinctions, determined largely by their formation and early growth; their processes of learning and knowledge management are also likely to be different.

Much has been written recently about learning, knowledge management and information flows in organisations. Some of this derives from studies of organisation management and has a strong sociological flavour, some comes from innovation studies (innovation equals transformation and transformation results from learning), and some from systems research. This last has produced much of the work on technology transfer, plus some of the more practical guides of the "how to do it" variety and publications discussing intellectual capital.

In a company, the term intellectual capital is a recognition that knowledge, information, experience and intellectual property (patents and copyrights) can create wealth. But despite the different approaches available, these parameters are not only difficult to identify in a particular company but even more difficult to energise, develop and use effectively.

Some large companies have created learning centres or company universities to address these complex issues. For example, each employee has an annual entitlement which is put towards learning - and what is learned is often deemed less important than the engagement in the learning process. This approach is too resource-intensive for SMEs, which need to be able to demonstrate direct links between learning, knowledge, growth and profit. Many small companies do not manage corporate knowledge and learning well nor, indeed, recognise the assets they have. Yet knowledge is power and intellectual capital managed well frees up other resources including equipment, inventory and cash and increases the agility of a company - essential for strategic competitive advantage.

Learning is both a process and an outcome. It is the way firms build, supplement and organise knowledge around their activities and adapt and develop their organisational effectiveness through people. Some firms construct strategies and structures to enhance and maximise organisational learning and, while the costs of learning are immediate, the benefits are longer term; no organisation can afford not to manage learning.

Rather than regarding knowledge as something people have, it is useful to focus on knowing i.e. something that people do. Knowing is manifest in language, technologies, collaboration and control as well as being context specific, constantly developing and purposive. Three learning-based factors contribute to business success:

• Well developed core competencies (including technologies) that are the launch point for new products and processes;
• The ability fundamentally to renew and revitalise a company;
• A culture in which continuous improvement is second nature - working with what already exists rather than sweeping it away or ignoring it.

The process sounds quite simple: deceptively so. It can be divided into knowledge acquisition, knowledge sharing, knowledge utilisation and assimilation. It is helpful to consider what learning is and where it occurs, on the one hand, and what promotes and facilitates learning, on the other.

A company usually has a preference for developing knowledge internally or externally. The focus of skill development may be either individual or group based and the dissemination of learning relatively formal or informal. It helps if managers feel invol- ved and if new methods can be put forward by employees from any level. An Òexperimental mindsetÓ - curiosity about how things work, an ability to play, the acceptance of failure without punishment - is important, as is a climate of openness where problems and successes are shared and debate and conflict regarded as acceptable.

Organisational learning cannot occur without individual learning, but individuals can learn without organisational learning being effected. Organisational learning is taking place if it remains in the company even if individuals move. There is also a difference between information and knowledge. Information consists of the flow of messages or meanings which might add to, restructure or change knowledge. It can - but does not necessarily - yield knowledge. The routes of information flow are as important as the content.

It is also possible to distinguish between explicit and tacit knowledge. Explicit knowledge is codified, transmittable in a systematic language and is located in discreet databases and generally sequentially accessed. Tacit knowledge is much harder to formalise and communicate. It is located in action, embodied in people. It involves beliefs, viewpoints, images - as well as know-how, crafts and skills - that are applied in specific contexts. To operate more effectively a company needs to consider how to acquire explicit and tacit knowledge and how to transfer these from person to organisation. A key attribute at both levels is commitment.

Organisational knowledge creation takes place when knowledge acquisition is managed to form a continuous cycle. This happens particularly effectively in self-organised teams, where members share tacit knowledge and talking brings it to the surface. They exchange thoughts and experiment with new methods and ideas; they initiate problem-solving routines and manage and repair the social context within which they work. Concepts are refined and redefined and then shared with other staff, developing and emerging in more concrete, explicit form through an iterative process of trial and error.

Knowledge can then be transmitted by a process of internalising, of learning-by-doing so that tacit knowledge spreads within the company. The distinction between tacit and explicit knowledge helps to explain why, up to a point, "sitting by Nellie" (now an unfashionable concept) can work where "translating learning to the workplace" from training often does not.

The company wondering where to start is well advised to focus on what is already known - but to be careful not to consider only explicit knowledge. Accessing tacit knowledge through "creative conversations" not only elicits descriptions of that knowledge but also gives clear signals that tacit knowledge is valued. Underlining the importance of what is known by individuals at all levels of the organisation is energising and builds commitment. Working, learning and innovating are closely related forms of human activity and are essential for the competitive technology-based SME.

Jennifer Tann is Professor of Innovation Studies at the University of Birmingham Business School.

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