Over the course of 2016, Marcus and I worked on a piece of research on systemic change in market systems development, funded by the BEAM Exchange. In this work, we question the utility of the concep…
Source: The next step in systemic change, an update on our research written by Marcus Jenal on the Systemic-Insight.com website
Knowledge in organisations can either be explicit or tacit, or a mixture of the two. Let us first try and sort out the difference between explicit knowledge and tacit knowledge.
Explicit knowledge is easier to identify and is typically captured in processes, systems, routines, documents, guidelines and so on. Some explicit knowledge from outside the organisation can also shape the internal environment, such as regulations, standards, professional codes and broadly accepted practices. Explicit knowledge flows in society, over organisational borders through channels like the media, the education system, professional bodies, accepted good practices, conferences, manuals, trade journals or the appointment of new staff, and so on.
Tacit knowledge is much harder to detect, capture and disseminate. It spreads slower, both because of the difficulties of detecting and transmitting it, as well as the challenges of absorbing it and figuring out how to use it. Most people are not fully aware of the value or perhaps even the existence of this kind of knowledge. What you do and why you do it in a particular way is shaped not only by the task at hand, but by your experience, your own values, your education and the current environment. Often when you ask a person how they knew what to do in a unique situation, they merely shrug and say “it felt right”. Tacit knowledge is often hard to explain and even harder to document or capture.
We gain, absorb, leverage and integrate these two kinds of knowledge in rather different ways. For leaders this distinction is important, as it provides clues on how knowledge that enables adaptation, improvement and innovation can be created or harnessed.
We pick up explicit knowledge from our environment, even if this process is imperfect and prone to all kinds of errors. For instance, we may misinterpret rules, overlook a regulation, or use the wrong form. With the dramatically increased amount of information that is now available in many organisations, we find that people often simply don’t know which explicit or codified knowledge to use. This applies to individuals, organisations and in some cases even industries. We can simply become overwhelmed by contradictory information, even if it is well articulated or explained in detail. The fact that it is sometimes very difficult to know which explicit knowledge to use gives rise to the use of brokers and gatekeepers, which could be a good thing or a bad thing. For instance, when rules are not clear, or are inconsistent, individuals might use their insight into the workings of the system to their advantage in return for favours.
But here is the rub. Tacit knowledge, as far as I can tell, starts mainly within individuals, and then spreads to teams. If we draw an arrow representing knowledge flow, we see that the arrow moves from the individual to the organisation, that is if the organisation is aware of the existence and of this knowledge and is attentive to its value. Many organisations are managed in such a way that tacit knowledge is suppressed, even if this is unintentional. Tacit knowledge is personal, although some of it may be shared with some close co-workers or trusted people. Tacit knowledge mostly spreads through personal exchange, trust, close observation or working closely with colleagues. For instance, one way in which tacit knowledge spreads is by mimicry, where you copy how other people behave or carry out a task. When people are able to express their insight into tacit knowledge, they do so conditionally, depending on their assessment of the intent and trustworthiness of the person asking for advice.
Many organisations have no way to determine the value of the tacit knowledge of their employees, and often the value of an employee’s contribution is only realised when they leave. It is these people who are sorely missed when they leave. Neither is it as simple as merely asking people to write down what they know – we’ll discuss this in more detail in the next post.
In the next few posts I will elaborate on the role of knowledge in enabling learning organisations. In a previous post (here), I have concentrated mainly on how knowledge for innovation is generated in organisations. The response from readers was very positive, and as I worked with management teams to strengthen their innovative culture I realised that there are some further concepts that I must elaborate on. It is not only about what workers do, it is also about the environment created by leaders.
The first post in this series will look at the difference between tacit and explicit knowledge, and how both are formed. The second post explores why explicit knowledge dominates organisations. The third post will discuss how leaders can embrace tacit knowledge and encourage their teams to create new knowledge together.
Following the interview on Cliffcentral.com two weeks ago on innovation during The Leadership Platform show, I was asked to return. This time the conversation was about technology. You can download the podcast here.
Richard, Shawn and Daniel (left to right)
After 30 minutes, the attention switched to a small and medium enterprise. I had invited Daniel Paulus, one of my clients, to the show to be interviewed. Daniel is one of the founders of the Louie Daniel jewellery company, a speciality retailer of custom made jewellery and diamonds. They are one of the leadership teams that I have been coaching on technology, innovation, strategy and culture.
I promise to reveal more about my formal coaching programme shortly.
If you want to feel inspired by a great story of innovation, then take a look at the great post by Morgan Housal. It is about the Wright Brothers and the consequences of their innovation and also their vision. If you are inspired by this story, you will also enjoy the Knowledge Project Podcast where Shane Parish from the Farnhamstreet blog interviews Morgan about his way of reading, writing and doing research before writing. You can find the podcast here . From his writings I have learned how to filter a lot of information, and how to supplement what trusted sources claim by my own research. For instance, I have unsubscribed from many newsletters and now only read curated news sources that I trust.
I had the privilege of being interviewed by Richard Angus (CEO The Finance Team) on the Business Masterclass programme on Cliffcentral.com. The topic of the interview was about concepts on knowledge and knowledge management that are relevant for business leaders. Listen to the podcast here.
During this 30 minute interview we talk about several knowledge concepts, like the distinction between tacit knowledge and codified knowledge and why this matters. I explained my favourite concept of how knowledge creation can be enhanced to improve innovation.
This interview is based on the article that I wrote earlier this year for the University of Stellenbosch Business School Executive Education newsletter.
Thank you to Richard and the show host Adriaan Groenewald from the Leadership Platform for this opportunity to talk about a topic that I love so much.
I am preparing for a presentation at a conference in May about development programmes shifting from a sectoral to a regional or local perspective. This got me thinking about these shifts in focus and why they appear.
In economic development, it is often necessary to choose whether to intervene at a sectoral level, or whether it would be better to take a locational or geographic approach. In my experience I have learned that when you start with the one, i.e. with a specific sector or value chain, you often end up with the other, i.e. supporting specialization or addressing specific issues in a certain location. But this is of little consolation to managers of development programmes and Local Economic Development units who are then typically measured by the wrong indicators or that have different incentives due to the design of their programme or institutional mandate.
During my MBA, the Professor in Organisational Development introduced us to a really elegant tool to assess whether a tension or conflict between different approaches could really be addressed. He introduced us to Polarity Management, a simple instrument developed by Johnson (1992). According to Johnson, many problems that we face today are not really problems to be solved, but polarities to be managed. Johnson argues that we can continually try to solve these problems by shifting our strategies to another mode where we perceive lots of benefits. The trouble is that after a while of some negative aspects emerge, and suddenly the benefits of the other strategy seems to be more attractive.
Polarity management is an instrument that can be used by change management practitioners to understand these polarities and to manage them. It implies that perhaps these different strategies even depend on each other, like breathing in versus breathing out. We need both, even if they have very different objectives, benefits and downsides. This means that the strengths and the weaknesses of alternatives must be understood, and then managed.
In development we have many polarities, for example wealth creation versus poverty reduction, or designed interventions versus enabling evolution, project versus process, top down versus bottom up, and many others. It is very expensive and even risky to shift between these, and an organisations current expertise, instruments and orientation may find it very hard to make these shifts effectively. But some try and some even manage to do this.
This post is for those organisations that are undecided about their strategy and their focus.. A key question then is how do we manage these alternatives, especially if we want the best of both worlds?
There are 3 steps to better understand a polarity:
Below I have quickly written down some of the positives and negatives of both approaches. This is an incomplete list but I think it is sufficient to illustrate the point. The PDF of the graphic below can be found here. For those that cannot read so small, the bottom line is this: there are pluses and minuses to both paradigms. Under each strategy, the benefits of the one approach may outweigh the negatives of that approach, but be aware, these weights are changing and after a while the other strategy may become more desirable!
The third step in understanding the polarity is to look at whether there is a shift between these polarities. From my experience working in a dozen or so developing countries, development programmes are either designed to be sectoral or geographic, with very few programmes designed to do both. From a local perspective, institutions and programmes are designed and resourced to either be targeted at specific industries and sectors, or they have a locational focus. It is very hard for programmes and institutions to build a case that a strategic shift to the other paradigm may be needed, even if for only a part of the resources to be dedicated to the other approach. This typically happens when the negatives of a current path starts to outweigh the positives, and the benefits of the other approach increasingly looks appealing. The danger is that a compromise is reached, instead of a synergy being developed.
From a Local Economic Development perspective, growing the technical capability to pursue both strategies simultaneously is important. This does not imply that both are equally important at any given time, as both these approaches have different timescales, resource requirements, and objectives. For example, it would be unwise to leave a dominant sector to its own devices in order to focus on emerging enterprises. At the same time, focusing on the issues of a dominant sector might distract attention from purposefully promoting emergence, diversification and economic resilience. Yet, many programmes and organisations are forced to choose, often too early when not enough is understood about the dynamics of the place or the industries. For me the worst reason to choose an particular approach is because some or other decision maker has attended a training course or conference, or because a particular approach is deemed “best practice”. In fact, most of my time is spent trying to help leaders and decision makers get out of a mess because their programme or institutions was designed based on some ideology or “solution” without enough attention being given to the requirements, trajectories and complexity of the specific context.
For national governments and international development programmes there seems to be a continuous shift between these two. Almost like a flip-flopping from one to the other. I think that the shifts are counter productive, as the learning from the previous shifts are often lost. If I just think back over my 16 year career how often the value chain or sub sector approaches or alternatively cluster and Local Economic Development have become fashionable again and then losing its appeal after a short time.
My conclusion is that while there is a tension between these approaches, the shifting between the strategies are not taking place at an institutional or programmatic level. Decisions about these strategies are made at higher levels of government and development cooperation with little regard for the challenges faced at sub national level in developing countries to build and grow “the right” institutions that can ensure long term economic evolution and development.
At the implementation level, regional development programmes should do both:
But most importantly, the economic activity, available institutional capabilities and the regional context prescribes where to start. And when you have started down a chosen path, be sensitive to when it may be necessary to foster additional organisational or collaborate with other institutions with different more adequate capabilities to enable the benefits of the other strategy to be leveraged. A key challenge in developing countries is that we do not have a rich layer of supporting institutions pursuing different strategies. Everyone seem to be trying more or less the same approaches, or chasing the same politically set targets.
In our capacity building sessions in Mesopartner we always elaborate on the importance of value chains and sectors to Local Economic Development practitioners, and the importance of regional competence development for value chain and sector development specialists. Actually, the process of diagnosing industries and regions are very similiar, even if you would give slightly more attention to different issues and perspectives.
In the end, from a bottom up perspective, supporting specific industries allows for scale and focused public investment, but caution must be taken to not create path dependence or institutional lock in. At the same time, a regional approach is critical as it allows for emergence of new kinds of economic activity and for diversity to emerge. I think we need to development of synergies for both, but it depends on the context what your priority should be. Simply being aware that there are pluses and negatives to either strategy is already a good start! This makes it much easier to collaborate with other organisations and programmes that have different objectives and priorities.
Now I have some questions to my readers:
References:
JOHNSON, B. 1992. Polarity management : identifying and managing unsolvable problems. Amherst, Mass: HRD Press.
I am acutely aware that I often make grammar and spelling mistakes in my blogs. I do apologize about these. I feel silly when I realize I made a mistake. I have no excuses. As my favorite cartoonist Hugh Macleod @gapingvoid put it, excuses are a disease.
The intention of my blog is not to write perfectly composed articles, but to share my thinking with a broader audience than just the small group of clients, collaborators and friends in my network that I get to work with on a frequent basis. Ask me about those perfect articles and books and I can tell you which ones to buy. I collect them.
Just like the practitioners and decision makers that I support have to confront clients, decisions and complexities without always having time to perfectly prepare; so I capture conversations, arguments or ideas developed with my clients – on the fly. The point is that in the field knowledge and ideas are not always perfectly described, neatly organised, thoroughly prepared. Sometimes the best explanations happen on napkins, flipcharts or a piece of paper.
The purpose of my blog site is to help the people I work with to explain some of these concepts on the fly. Hopefully they can do it shorter than it sometimes takes me, or maybe they can even do it more eloquent. Every time these concepts or thoughts are explained it becomes easier and easier.
I found it works best to write at my client sites, on the way home (on the plane, not while driving – yet), or between meetings – and then to post these articles before I start doubting the relevance of my ideas or the insight gained by explaining something to somebody (yes, most of my posts are based on real conversations with clients out there facing complex situations). I have a huge collection of articles written in the safety of my office, far from the coalface, that I have never published because they suddenly seem less than perfect or even insignificant. It is easy to feel challenged when I sit in my office surrounded by books written by articulate scholars. I wish I could say these scholars always inspire me to write, but that would not be honest. Sometimes they do. Especially when I can connect the different kinds of literature that I have collected over time. However, often this collection makes me feel discouraged. I just have to look at the amazing content my late friend Jorg Meyer-Stamer wrote on a wide range of topics to feel like I should rather not commit anything to the official record.
I assure my readers that when the text on these blogs make it into other publication forms I usually first get an editor to fix all those pesty grammar mistakes.
I thank those of you that read regularly, those that share your ideas with me – even if you don’t agree with everything I post. Thank you for pointing out the mistakes, the inconsistencies or your disagreements with what I post. I especially want to thank those that also take the risk of sharing their comments on Linkedin or directly as a comment to this blog, because you also take the risk of making mistakes or feeling exposed. Please don’t stop. I won’t.
I have often considered stopping blogging, just like I often wanted to quit co-producing the LEDCast (more than 1,000,000 downloads now!!) on many occasions, also due to my challenges to say ‘s’ or ‘r’ when my tongue gets tied. Somehow the workarounds when I speak have made its way into my writing.
So as long as I receive your ideas, comments, notes, emails, tweets and calls I will keep on blogging.
The post about how I teach on the topic of innovation systems two weeks ago really elicited a much bigger response than I expected. The tips, ideas, confirmations and questions received inspired me to think how I can share more practical training advice. I have a lot to share, simply because I love teaching on a wide range of topics. True to my mental construct of an innovator, I constantly develop small modules that can be combined, re-arranged, shortened or expanded to meet the requirements of the teams I support and coach.
For instance, the innovation systems outline that I explained in this previous posts consists of two parts: Part 1 is made up of modules on innovation and technology:
Part 2 then builds on this foundation with topics central to the promotion of innovation systems, with modules on:
If needed it is easy to bring in many other topics such as:
Yesterday I was reflecting with Frank Waeltring about the order of these sessions, why in my experience Part 1 goes before Part 2 and how difficult it is to present part 2 without the basics of part 1 in place. We reflected on why it is easier to start with foundation topics on innovation and technology management, and thereafter moving to the more abstract content of innovation systems.
In my experience, development practitioners and policy makers often believe the link between the subjects of innovation/technology management and innovation systems promotion is the concept of “innovation”. Almost as if innovation happens in enterprises, and innovation systems is then the public sectors way to make innovation happen in enterprises. This logic is an important stumbling block that many people I have supported struggle with. In my book on the promotion of innovation systems I created the following table to explain the difference.
The connector between these two domains is not innovation (despite it being common two the names of the two domains). It is knowledge. Not necessarily formal knowledge (more engineers & phds = more innovation kind of over simplistic logic), but various forms of knowledge. Tacit knowledge. Knowing of who to speak to. Being exposed to other people from different knowledge and social domains. The costs and ease of getting information from somebody you know or don’t know. Learning from your own mistakes and the attempts of others.
Some places, countries and industries get this right, others struggle. Trust is central. This dynamic takes time to develop. You can sense its presence way before you can figure out how to measure it. While many of these issues can be addressed at a strategic level in an organisation like a company (or a publicly funded institution), many of these kinds of knowledge flows are inter-dependent and can be accelerated by taking an innovation system(ic) perspective.
The conclusion is a real tongue twister: The connection between the body of knowledge of innovation/technology management and the body of knowledge about innovation systems development is the body of knowledge on knowledge and how it emerges, gets assimilated, absorbed and further developed.
That is why knowledge generation, learning by doing fits in so well with part 1, but why it is not complete if not also addressed in part 2, especially the systemic elements of knowledge dissemination and absorption. It is the bridge.
When promoting territorial economic development from an innovation systems perspective it is important to find ways of increasing the use of knowledge and innovation in the region. However, in mainstream economic development there is a tendency to target the private sector based on scale. This means that practitioners look at quantitative measures such as jobs, numbers of enterprises, numbers of beneficiaries, etc. when deciding where to do analysis and focus support. This is common practice in value chain promotion, sub sector selection, etc. Many development programmes do this as well prioritizing scale measures such as jobs, women, rural individuals, etc.
From my experience of assisting development organisations to strengthen the economic resilience of regional economies (which means more innovation, more experiments, more diversity, increased use of knowledge, more collaboration between different technological domains), I have found that the scale argument is distracting and too focused on the beneficiaries (whatever is counted) and not focused enough on those indirect public or private agents that are significant and that enable a whole variety of economic activities to take place. With significant I mean that there could even be only one stakeholder or entry point (so the direct scale measure is low) but by addressing an issue it enables a whole variety of economic activities to take place.
Of course, scale is very important when a local politicians need votes. It is also important when you have limited budget and must try to achieve wide spread benefit. For this reason scale is very important for social programmes.
However, when local institutions are trying to strengthen the local innovation system, in other words improve the diversity technological capability of a region, then scale becomes a second priority. The first priority then becomes identifying economic activity that enables diversity or that reduces the costs for enterprises to innovate, use knowledge more productively should be targeted. The reason why this does not happen naturally is that these activities are often much harder to detect. To make it worse, “significance” could also be a matter of opinion (which means you have to actually speak to enterprises and their supporting institutions) while crunching data and making graphs often feel safer and appear to be more rigorous.
My argument is that in regions, the long term evolution and growth of the economy is based on supporting diversification and the creation of options. These options are combined and recombined by entrepreneurs to create new economic value in the region, and in so doing they create more options for others. By focusing exclusively on scale, economic actors and their networks increasingly behave in a homogeneous way. Innovation becomes harder, economic diversity is not really increased. I would go as far as saying that success becomes a trap, because once a recipe is proven it is also harder to change. As the different actors becomes more interdependent and synchronized the system becomes path dependent. Some systems thinkers refer to this phenomena as tightly coupled, meaning a failure in one area quickly spills over into other areas. This explains why whole regions goes into decline when key industries are in decline, the economic system in the region became too tightly coupled.
But I must contradict myself just briefly. When interventions are more generic in nature, meaning they address market failures that affect many different industries and economic activities, then scale is of course important.
The experienced development practitioners manage to develop portfolios where there are some activities that are about scale (for instance, targeting a large number of informal traders) and then some activities that are about significance (for instance ensuring that local conformity testing labs are accessible to local manufacturers).
The real challenge is to figure out what the emergent significant economic activities are that improves the technological capability in the region. New emergent ideas are undermined by market failures and often struggle to gain traction. Many new activities requires a certain minimum economic scale before it can be sustained, but this is a different kind of scale than when practitioners use scale of impact as a selection criteria. Many small but significant economic activities cannot grow if they do not receive public support in the form of promotion, awareness raising or perhaps some carefully designed funding support.
There are a wide range of market failures such as high coordination costs with other actors, high search cost, adverse selection, information asymmetry and public good failures that undermines emergence in local economies. It is exactly for this reason that public sector support at a territorial level (meaning sub national) must be sensitive to these market failures and how they undermine the emergence of new ideas that could be significant to others. The challenge is that often local stakeholders such as local governments have limited influence over public institutions in the region that are funded from other spheres of public administration.
Let me wrap up. My argument is that scale is often the wrong place to start when trying to improve the innovation system in a region. Yes, there are instances where scale is important. But my argument is that some things that could be significant, like the emergence of variety and new ideas often get lost when interventions are selected based on outreach. Furthermore, the focus on large scale impact draws the attention to symptoms of problems and not the the institutional or technological institutions that are supposed to address market failures and support the emergence of novelty.
I will stop writing now, Marcus always complains that my posts are too long!
Let me know if I should expand on the kinds of market failures that prevent local economies from becoming technologically more capable.
