Towards
a
Knowledge Perspective
on
Organisation
Karl-Erik Sveiby
Department of Business Administration
University of Stockholm
Doctoral
Dissertation 1994
Department
of Business Administration
University
of Stockholm
S-106 91
Stockholm
Abstract
The role of
knowledge during the period 1975-1993 in five areas in one Swedish publishing
company is studied. The empirical data is combined with the author´s own
practical experience from the company, which was run as a partnership. A
theoretical framework based on Michael Polanyi´s epistemology and information
theory is developed on a constructivist foundation. By using this framework the
empirical data can be said to be focused through a knowledge perspective.
The core
process-of-knowing in processing of information was found to be reduction of
information, defined as "Infoduction".
Tradition
of the processes-of-knowing and indirect transfer of information were found to
constitute vital elements in how organising took place.
Two
markets, an Information market and a Know-how market, were identified. Both
markets were based on infoduction and were interrelated but they were
characterised by different customer relationships. The information market could
be seen as a market for products characterised by surplus. On the know-how
market, the whole process-of-knowing is transferred in an interactive process.
A
dichotomy between professional and organisational traditions of knowledge was
identified as the most influential. Organising was found to be
"non-managed". Power was found to cycle between one of two traditions
determining the agenda for discussion.
The
strategy was found to be a process that emerged from the professional knowledge
tradition. Later, two tracks of expansion emerged so a dual strategic pattern
was identified: one based on the professional knowledge tradition and the other
on the organisational knowledge tradition.
General
implications of the study for other information processing organisations are
discussed and further research leading towards a more comprehensive Knowledge
Perspective on Organisation is suggested.
© 1994
Karl-Erik Sveiby
Address:
Korsudden, S-132 42 Saltsjö-Boo, Sweden.
Cover
design: Olof Nauclér
Distribution:
Akademitryck AB, Edsbruk, Sweden.
Telephone:
0493-40101
Facsimile:
0493-40131
ISBN
91-7153-267-6
index
Abstract
Acknowledgements.
1.
INTRODUCTION. 2
1.1. The "Discovery" of the Knowhow Company. 2
1.1.1. Cognitive dissonance. 2
1.1.2. Affärsvärlden - a Short Background. 3
1.1.3. Questions. 3
1.1.4. Some First Answers. 4
1.3. Some Basic Assumptions. 7
1.4. The Research Process. 10
1.4.1. The Research Approach. 10
1.4.2. My Method. 12
1.4.3. My Techniques. 13
1.4.4 The Research Process - a Summary. 15
1.4.5. The Empirical Data. 17
1.4.5.1. Written documents. 17
1.4.5.2. Memory as a Source. 17
1.4.5.3. Computer Aided Technique. 18
2.
The Concepts knowledge and power. 19
2.1 Michael Polanyi´s Concept of Knowledge. 20
2.1.1. A Hierarchy of Knowing. 23
2.1.2. Knowing and Knowledge - a Summary. 24
2.1.3. Tradition of Knowledge. 25
2.1.3.1. Information. 28
2.2. Knowledge and the Concept of Power. 31
2.2.1. Knowledge, Information and Power in Organisation Theory. 33
2.2.1.1. Knowledge in Organisation Theory. 33
2.2.1.2. Power in Organisation Theory. 36
2.3. Summary. 37
3.
summary of the affärsvärlden case. 38
3.1. History of Affärsvärlden 1901-1974. 38
3.2. The Business Environment 1975-1990. 39
3.3. The Founder Phase 1975-1979. 42
3.4. The Expansion Phase 1980-1986. 44
3.5. The Retreat Phase 1987-1989. 45
3.6. The E+T Phase 1990 ->. 45
3.7. Affärsvärlden <-> Veckans affärer in Numbers. 48
3.8. Summary of Financial Development 1975-1990. 52
4.
interpretation of the case. 54
4.1. The Infoduction Process. 54
4.1.1. Productivity in Infoduction. 56
4.1.2. Technology Impact on Infoduction Process. 57
4.1.2.1. Impact on Journalistic Process-of-Knowing. 57
4.1.2.2. Impact on Analytical Process-of-Knowing. 59
4.1.2.3. Impact on Productivity. 59
4.1.2.4. Summary of Technology Impact. 60
4.2. The Dichotomy Profession - Organisation. 61
4.2.1. Professional Knowledge in Affärsvärlden. 61
4.2.1.1. Tradition of Knowing. 65
4.2.1.2. Power of Professional Knowledge. 66
4.2.1.3. Journalistic vs. Analytical Knowledge. 67
4.2.2. Organisational Knowledge in Affärsvärlden. 68
4.2.2.1. Marketing and Sales Knowledge. 68
4.2.3. A Hierarchy of Values Develops. 69
4.2.4. Organisational Knowledge Takes Over Agenda. 72
4.2.4.1. The Partner System. 72
4.2.4.2. The Management Troika. 73
4.2.4.3. The Sales Department. 73
4.2.4.4. Summary. 75
4.3. Knowledge in Organising. 76
4.3.1. The Findata Case. 79
4.4. Knowledge in the Market. 80
4.4.1. The Information Market 81
4.4.1.1. Competitive Factors. 83
4.4.1.2. Two Sources of Income. 84
4.4.1.3. Information as a Resource. 85
4.4.1.4. A Summary. 86
4.4.2. The Know-How Markets. 87
4.4.2.1. Acquisition of Professional Know-How. 88
4.4.2.2. Selling Know-How - the Consensus Case. 92
4.5. Knowledge in Strategy. 93
4.5.1. The Business Strategy of Affärsvärlden Magazine. 95
4.5.2. Partnership as Strategy. 96
4.5.3. The Cost Control Strategy. 96
4.5.4. The Diversification Strategy. 97
4.5.4.1. The Analytical Track. 98
4.5.4.2. The Publishing Track. 99
4.5.4.3. The International Track. 99
4.5.5. Analysis of Diversification Strategy. 100
5.
Towards a knowledge perspective. 102
5.1. Synthesis. 102
5.2. Infoduction as the Core Process. 104
5.3. Relating to Two Different Markets. 106
5.4. The Dichotomy Profession - Organisation. 107
5.4.1. Cyclic process. 109
5.5. Non-managed Organising. 110
6.
References. 114
appendix:
treatment of empirical data. 117
Documents. 117
Computer Aided Technique. 119
Criticism of the Documents. 120
Memory as a Source. 120
Validation of Empirical Data. 121
subject
Index. 122
Acknowledgements.
A
dissertation is the product of the help and the encouragement of many people. I
greatly appreciated the kind involvement of the staff at the Stockholm
University and the creative atmosphere among the doctoral students at the
Department of Business Administration. I am indebted to many of you but space
allows me to mention only a few of the contributors by name.
I am
especially grateful to my tutor, Professor Solveig Wikström. Her enthusiasm,
experience and commitment all through the long process have been a great
support. She and my other tutor Dr. Göran Brulin, have given me invaluable
advice in every step of the thesis.
I am also
grateful to Professor Ewert Gummesson who got me over the first metho-dological
thresholds and who encouraged me to use empirical data from my own ex-perience.
A special thanks to Dr. Richard Sotto, who inspired some of my basic
assumptions regarding the process of human knowing and who gave useful advice regarding
the structure of the thesis. Professor Bo Hedberg contributed with valuable
comments on the final draft and both he and Dr. Kaj Sköldberg advised me on
structure in that critical phase of the process. Dr. Hans de Geer gave helpful
advice on historic methodolgy.
I owe
gratitude to Associate Professor Bertil Rolf at the department of Philosophy in
the University of Lund, who gave me precious comments on chapter 2 and to
Pro-fessor Sven-Erik Johansson, Högskolan i Skövde, who was kind to read and
comment on the final draft of the manuscript.
I am of
course especially grateful to my colleagues and friends at Affärsvärlden, with
whom I have shared fifteen years of working life. Many of you are mentioned as
contributors in the book containing the empirical data and several of you have
also helped me with valuable comments to the drafts in various stages. Special
thanks go to Ronald Fagerfjäll, who was kind to open his private archives for
me, and to Håkan Lambert-Olsson whose interest and understanding attitude
helped greatly during the period when I was part working at E+T Förlag and part
doing research. My thanks also to Bob Skole and Camilla Widjestam who helped me
to avoid the worst gram-matical errors and spelling mistakes.
Last but
not least I wish to thank my daughter Karolina and my wife, Kati Laine-Sveiby,
Dr. in Ethnology. Karolina´s sense of humour and healthy scepticism helped me
more than once to return back to earth after high-flying theory sessions over
the breakfast table. Kati was a moral support and knowledgeable critic both as
regards the concept of culture and the process of thesis writing. She even
baked buns on several occasions!
1.
INTRODUCTION.
1.1.
The "Discovery" of the Knowhow Company.
The
research for this thesis begins in 1980. I illustrate the start of the research
process with two episodes that happened only a few months after I had joined
the company Affärsvärlden as a partner and the new manager in charge of
administration. I advise those readers interested in a more comprehensive
account of the empirical data to read the separate book, När Kunskap är Makt
(Sveiby 1994) here called "Book 2".
1.1.1.
Cognitive dissonance.
The cars accelerate up the Kungsgatan street. Their exhausts surge towards the sky, mingle with the January frost and wrap the houses in a blue grey haze. I hear the cars through my window, four floors above them. I can smell them too through the badly isolated and dirty windows. The day is already darkening towards afternoon and I´m sitting in my little office with a crumpled manuscript in my hand.
I´m not feeling well, but it has only little to do with the carbon monoxide - I´m hardly aware of it. It is 1980 and I have been an employee of Affärsvärlden for less than a month and I am seriously pondering over my decision. Did I really make the right choice when I left a secure career with Unilever?
The manuscript is a well written analysis with the title "The Art of Cleaning the Affärsvärlden Office". I have just heard the author in the corridor outside talking to a colleague in the somewhat pompous style he reserves for important messages:
- I have just attended to the Cleaning Issue.
Attended to the "Cleaning Issue"! With my foot! He was the initiator of the "Cleaning Issue" on our partner conference. He came up with the idea to clean up the mess in the office and he drove it with such frenzy that he made me and the others to believe that he would actually clean the office himself. And what was the outcome of his action? An article!
I remember
another episode a couple of months later:
I´m standing in front of the overhead projector with a heap of fresh charts. They contain the latest figures about Affärsvärlden. This is an important occasion for me. It is the first time I am about to present the estimated yearly results to my partner colleagues. I have prepared intensely for this. I have made comparisons with last year, the budget and series since 1975 up till this year. I have made an analysis of the market shares of the competition and drawn some informative and beautiful charts in many colours. This is something an ex-Unilever man knows how to do.
But. Nobody arrives.
Yes! Camilla. (Our secretary/receptionist/sales order clerk). I ask her:
- What has happened? Everybody must know that we have this meeting.
- I have no idea, she said sulkily. Nobody ever tells me anything, so how should I know?
A quarter of an hour later. One of the editors passes hurriedly through the corridor:
- Hi. So you are still here?
- ??
- Don´t you know? Volvo is having a press conference right now and I´m late. So long!
The meeting ends before it begins and I leave for home.
1.1.2.
Affärsvärlden - a Short Background.
In 1980
the financial magazine Affärsvärlden was 79 years old. In 1975 it had undergone
a management transformation. The trust that owned it was just about to close it
down but some of the editorial staff had come up with a proposition: Let us
take over!
The board
had agreed and the staff had taken over management completely. It was still a
trust but the staff had the right to dispose of any profits. They had recruited
a couple of ambitious young financial analysts and gone ahead in a completely
new fashion. In 1979 they had experienced three years of steadily increasing
circulation and a small but increasing profit. They were twelve people
altogether, eight of them were editors. Some of the basic values of the company
were:
"Work
hard", "Be analytic", "Be competent", "Be
loyal", "Collective" rather than "Individual".
A kind of
coffee table democracy with consensus as the basis for decision making
had developed.
The
company I arrived to in the autumn of 1979 was a very odd organisation indeed
measured by my Unilever standards.
Affärsvärlden
was a Foundation and Foundations are not supposed to run businesses. They had a
board of directors that had nothing to do with the business. The company was
run by the staff as their own - but they did not own it. The staff had profit
sharing - but no legal right in the profits. They had a managing director - an
analyst/journalist - whose function was to be "the Chairman of the Coffee
Table Conference". Affärsvärlden had an advertising salesman who was the
former editor of the magazine and he was the only one who had an official title
"Secretary". The Editor-in-Chief was also called
"Secretary", the managing director´s title was never mentioned. But
the journalists were called "Editors" (normally a manager´s title).
The magazine had appointed a Responsible Editor - but he was not an employee,
and he worked as a free-lance advertising salesman.
1.1.3.
Questions.
So, when I
arrived I was hit by a severe culture shock. Nothing I had learned in the
university, nor during my six years at Unilever had prepared me for a situation
like this.
They had
profit sharing. Still nobody interested in the organisation. Why? How could
professionals in information be unable to handle their own internal
information? Why did not all the great ideas and all the talk result in action?
How could they translate a demand for action into thinking?
1.1.4.
Some First Answers.
My first
answer to the questions above was an intuitive action: If nobody cares about
what I´m supposed to do, I suppose I will have to do what all the others are
doing.
So in the
coming two years I changed my job entirely. I volunteered to write articles in
Affärsvärlden. I recruited a new accountant and in 1982 we launched a new
magazine, Ledarskap, Sweden´s first management weekly, and I joined as one of
the editors.
But I was
one of the three managing partners of our growing company and I could still not
make out the answers to my puzzle. I became more and more convinced that we
were "unique" (as indeed my fellow partners believed) so I used my
position as an editor to write about topics that I believed could shed some light
on my management puzzle.
One of the
articles I wrote was about advertising agencies in 1983. The interviews
fascinated me. I found that the managers in the advertising agencies
experienced the same problems as I did in my own company. Why? Was there something
universal about my own problems?
In the
article I categorised employees according to whether they were involved in
"professional" work or "organisational" work. This seemed
to give some clues to some of the questions I had.
I
continued to research the issue by writing more about computer companies,
management consulting firms, auditing firms, etc. In 1985 I collected my
thoughts in a longer piece that became one of the two parts in a book together
with Anders Risling. I put the label "Kunskapsföretaget",
("The Knowhow Company") as the title of the book.
The book
was launched in the spring 1986, the media got interested and soon the concept
was on its way into the minds of people. The success of the concept created a
number of followers.
The
journalist Göran Albinsson-Bruhner however hit the head on the nail in an
article in Svenska Dagbladet 1989:
When I started my job at Svenska Dagbladet I was taught that it was a Publishing Company. A few years and a dozen management books later I was working in an Information Company. Now I am employed by a Knowhow Company A career without even having to change employer! I sometimes wonder whether the development only has happened in the heads of some authors.
He
illustrates the way powerful metaphors steer our interpretation of the world.
As soon as a concept is invented it takes on a life of its own. Once such an
reification has taken place and there has become a reasonable understanding
among actors on that "image", it becomes a shared object,
"institutionalised" (Berger & Luckman 1966).
This
process of reification serves as the human way of understanding and
interpreting the world around us. The structure of knowledge is thus less in
the known or in the knowable but more in the form that the knowing assumes. We
are not ruled by the material things themselves, more by the meaning we give
them.
The media
play an important role in this game. The journalists are professional baptisers
which is a valuable skill for anyone who is working with words on a
professional basis.
The
opportunity to set the agenda or to be in the position to formulate the
question to be discussed are powers which are frequently used by politicians
and managers. The TV-screen and the front page are the Magic Mirrors which the
politicians and the top managers of the western countries look into for a proof
of their existence: I am on the screen, therefore I exist!
Since the
time available in the most powerful media, TV and radio, is limited, the fight
for prime time becomes a prerequisite for political survival. Being the
first to attract the media´s attention is thus very effective. The first
person to coin the first meaning, is forming the first link of a semiotic chain
which defines the starting point of the following links. People with a special
gift to coin catchy metaphors thus get a much higher attention from the media
than they "should" get.
The power
of media over our perceived reality is one the forces behind the trend that
information content of human activities and products seems to be increasing at
an almost exponential rate. It might be the power of the media and the
fascination with computer technology that lies behind the taken for granted
idea that information is valuable and something similar to knowledge.
However,
the behaviour of the actors on the financial markets indicate a more
problematic relation: It was for instance not the case that the enormous
increase in financial information in the 1980s gave a better understanding
among the actors of the financial markets.
On the
contrary, the growth of financial information was accompanied by two of the
worst collapses (1987 and 1990) on the financial markets since the 1930s. This
was a discomforting experience which I encountered as a manager in a company
producing financial information. Why did not all information from the financial
media result in better performance among the actors? It was as if the more
information we were processing, the less we all seemed to understand.
The
financial journalists and analysts like to think that they are producing
valuable information, even knowledge, but are they? Is one reason for the
present confusion perhaps that we tend to explore this field using obsolete
perspectives?
This
thesis is an attempt to start developing a perspective on organisation using
insights from the theory of knowledge, epistemology, in order to gain insights
into the problems. I suggest that we should take steps Towards a Knowledge
Perspective on Organisation.
I regard
the media as belonging to a "family" of Information Processing
Organisations which may be found in many other sectors of the economy, like
consulting, accounting, advertising. They may also be elements (departments) of
larger organisations or governments. Also governments, and many other public
authorities may be regarded as belonging to this family. The visible output of
their production process is a rapidly increasing volume of information: books,
articles, research reports, consultant reports, videos, TV-programs and
electronically stored data.
The
information processing organisations would then be distinguished by their
output and their production process. This distinguishes them from organisations
in which the output of infoduction is used mainly for controlling the
organisation itself.
I suggest
that the added value in the process lies in information reduction - infoduction.
- rather than in adding new information. I further suggest that the process of infoduction
and the format of the outcome constitute organising.
The
majority of the actors are professionals, knowledge workers, who are directly
involved in infoduction. They write, calculate, analyse, talk and think. Their
physical visible output is very small as compared to their intellectual input.
They use and create knowledge in several ways and areas: as a function (for the
infoduction, for marketing, for sales and for administration) or as a raw
material (facts, information, knowledge) in the infoduction process.
The
empirical data of this thesis comes from publishing. The media are
organisations as well as markets for concepts and ideas, their staff are active
players on the markets themselves because their staff allocate space for
competing ideas and information. This is why the media have powers and why
media organisations are contested by other players on the markets for competing
concepts and ideas.
The focus
of the thesis is on media as organisations, not as markets or power centres.
The publishing industry has existed since the middle ages but it entered an era
of rapid transformation during the period I am covering, which adds an extra
dimension of understanding. Publishing is thus a very old and at the same time
a very new industry.
Although
simple in physical production, publishing is confusing to understand and it
plays many roles. A publishing company can be regarded as being involved in
manufacturing (production of physical publications), in sales (advertising
space), in art (creation of ideas expressed as texts and pictures), in
entertainment, in information processing (analysing and presenting facts) or
knowledge (producing facts). Focus in this thesis is on the information
processing organisation.
1.2. Purpose and Research
Question.
Given the
problems above:
The
purpose of this research is to start developing a knowledge perspective for
describing and interpreting some crucial processes in information processing
organisations.
I do this
by asking the following research question:
What
was the role of knowledge in Affärsvärlden during the period
1975
- 1990?
A
perspective is guiding the perception of the world and thereby the patterns
formed in the mind of the user. A perspective is according to the Oxford
English Dictionary:
The relation or proportion in which the parts of a subject are viewed by the mind; the aspect of a matter or object of thought, as perceived from a particular mental ´point of view´; a way of regarding (something).
For the
researcher a perspective is the starting point for asking questions about the
world. I have used Michael Polanyi´s concept of knowledge as the starting point
for asking questions about the empirical case Affärsvärlden.
1.3.
Some Basic Assumptions.
A research
process generally starts with some basic assumptions, some call them a
paradigm.
My
conviction is that at least social reality is the result of the subject´s
activities. This view is inspired by the constructivist view which might be
contrasted to a more common sense attitude. The difference is that according to
a constructivist view the subject does not discover structures that belong to
an independent existing reality. Reality is constructed by the subject. The
subject constructs his or her knowledge by being an active experiencer rather
than being a passive receiver of stimuli (information). This does not mean that
the subject is free to do as he/she wishes. The construction is constantly
confronting constraints. The recurrent experience of constructions confronted
with constraints lends an aspect of subjective reality to those constructions
which turn out to be viable. The constructions are private but not entirely
subjective. There is no way of transferring knowledge - every knower has to
build it up for him/herself.
I
therefore do not try to explain reality, because there is nothing to explain.
Instead I look for cognitive structures (i.e. concepts, rules, schemes,
metaphors etc.) that help human beings in their efforts to construct their own
reality. There exist an infinite number of such structures. None can be said to
more true than another. The task of research is therefore to "explore
practices" (Czarniawska-Joerges 1993).
With my
background it has been natural for me to think in constructivistic and
linguistic terms. The words of the language function both as limitations and
tools for our construction of reality, in the human efforts of finding
equilibriums in a world of paradoxes and chaos.
Words are
poor vehicles for transferring knowledge so they must be under constant
surveillance because the taken-for-granted is powerful, blinding even the most
insightful. As Max Planck once sadly stated:
"A new scientific truth does not triumph by convincing its opponents and making them see the light but rather because its opponents eventually die, and a new generation grows up that is familiar with it."
I believe
that efforts to question the taken-for-granted metaphors as well as
articulation of new concepts are among the most important areas of science.
If the
object for knowing is constructed by the subject, the Knower becomes just as
interesting to study as the object, the Known. Theories, concepts, models and
analogies are always used with a (often implicit and even unreflected) purpose
by the researcher. The motive for doing a particular piece of research
thus emerges as very important. The purpose might be unknown or implicit. Whose
interest does the researcher serve? Why does someone want to know?
Also the
origins of the concepts are significant. If scientists use metaphors with
origins in mechanics or information theory in organisation theory - and people
use these implicitly for constructing their reality - the perceived
organisation might begin to resemble a machine or a computer. Metaphors that
avoid such analogies have a greater likelihood to lead our thoughts in a human
way - and in the end help us to construct a more human world.
I
appreciate an approach to science as understanding rather than explaining. It
is called the "hermeneutic paradigm :" and the overlapping
"qualitative research paradigm" which both can be labelled
"interpretative paradigms" even if I am aware of the traps in all
these labels.
The
research paradigm is also influenced by Michael Polanyi and - to some extent -
Ludwig Wittgenstein;. Polanyi´s influence therefore comes out twofold in this
thesis: as the paradigm governing my understanding of "knowledge" and
as one of the elements in the paradigm guiding the research process.
A
practitioner who decides to use qualitative data from his/her own practical
experience in a research project finds little or no guidance in the traditional
academic world. There are some implicit demotivating "rules": the
researcher must not be engaged, must not "go native". The implicit
ideal is to be distant, cool and analytic. Such ideals are the opposite of good
practise. Good practise (also in science) is to be engaged as a subject, to be
passionate and empathetic.
Most
authors on scientific methodology, however, treat the researcher as a tabula
rasa, void of feelings and preunderstanding. It is as if the ideal researcher
should be standing on the outside looking in - does it not just as easily
become the opposite; locked in, looking out?
The tabula
rasa view is an unnecessary limitation of the potential of social research. I
regard research into organisations and management as the art of being able to
articulate the tacit practical knowledge of human beings who are acting in
social environments. By developing this art, research adds to the knowledge of
practise and both learn from each other. Both are basic elements in the never
ending human process of understanding the chaotic world.
Burrell
& Morgan (1979) argue that social theory can be analysed in terms of four
broad world views, paradigms which are based on assumptions about the nature of
science, the subjective <-> objective dimension and the nature of
society, the regulation <-> radical change dimension, see Figure 1 below.
The
functionalist paradigm is based on the assumption that society has a real
existence and a systemic character. Research under this paradigm focuses on
understanding the role of human beings in a real world of concrete
relationships. There is a belief of a value free objective social science.
Figure 1. Four possible paradigms on Organisation Theory. (Source
Burrell & Morgan 1979).
The
interpretative paradigm is based on the assumption that the social world does not
exist in a real sense but is the product of the experience of the individual.
Scientific knowledge is seen as no less problematic than practical knowledge or
common sense.
The
radical humanist paradigm also assumes that reality is socially constructed and
believes that the process of reality creation may be influenced by psychic and
social processes. Research is focused on how human beings can escape their
"psychic prison".
The
radical structuralist paradigm assumes a materialist world independent of the
individual. Society is seen as a dominating force. Reality is characterised by
tensions and conflicts which lead to radical change in society.
The
paradigm of this thesis may be placed in the interpretative box in Figure 1.
See below.
The
paradigms may (as often in practise) be implicit. Each one of the paradigms
contains a number of possible perspectives by which the human being
views the world. They may view organisations from a cultural point of view,
from a political, a cognitive, etc. I suggest in this thesis a perspective
based on knowledge.
1.4.
The Research Process.
By research
process I understand the researcher´s path from reality to final text. I
distinguish between four levels of the process. I call them Basic
Assumptions (highest level, discussed above), Research Approach,
Research Method and Technique (lowest level).
1.4.1.
The Research Approach.
The
Research Approach is how I choose to "close in on" this
particular object for research under the umbrella of the paradigm.
To be a
practitioner trying to articulate own experience and using data from one´s own
company as a case is a rather unusual research situation, with little
assistance in traditional methodology.
Also, the
field of business is complex, which business administration research acknowledges
by being interdisciplinary; the discipline has a tradition of borrowing
approaches from most scientific fields and applying them to the field of
business.
These are
my main reasons for trying to find my own approach.
An
increasingly popular approach among organisation researchers is action
research. Action researchers are not only participating and observing, they
are also change agents. Their intention can be described as to feed back their
observations to the actors, thereby influencing the actors´ ability to learn.
One might argue that I was an action researcher during the period in question,
because I was observing the reality, analysing it and also feeding it back to
the organisation with the purpose to change it. Both I and my colleagues were
learning from our experience all the time and we were also change agents. But
on the other hand - who are not learning? Are not all managers "action
researchers" with these definitions? I think the crucial point is my
intention at the time I was actively involved in the process. I was not
doing conscious research. The important difference between an action
researcher and a manager is that the action researcher is consciously using the
double roles in reporting, reflecting and acting.
I decided
that a pure action research approach would not suit my research situation.
Could I
use an ethnographic approach? I believe that for a researcher seeking the inner
context of a process, the ethnographic approach is superior. It also brings the
actors into the centre as I want to do. Using the ethnographic approach would
imply using its prime method, participant observation. I have been both
participating and observing during the period in question. One of the most
important features of being both participant and observer in a process is the
researcher´s ability to move between two research methods
(observing/participating and reflecting/writing) in a conscious and reflexive
manner.
One might
say that by writing books and articles I have been reflecting upon my experience.
However, when the process was taking place, I was not aware of my own intention
to use Affärsvärlden as a case in research in the future. I think this is again
a crucial point, because I was not reflexive at the time I was experiencing the
reality. My intention at the time was to be fully socialised into the
organisation. I was not continuously stepping back to reflect and stepping
forth to participate and observe. Nor did I make research notes reflecting upon
my feelings and observations along the way. So, I was much more participating
than observing, even if I reflected in the books and articles which now form a
part of my preunderstanding.
The
approach I chose was to borrow from both ethnographic and action research and
regard myself as an observant participator, i.e. more taking part in the
process than observing it. I think the label fairly well describes my behaviour
and my attitude while I was participating in the process.
But the
choice of approach did not solve my problem with techniques for gathering
empirical data.
Could I
regard the case as a company history? The members of the Affärsvärlden
organisation were journalists and tended to write quite a lot. I knew that we
had fairly good archives, and both I and other members of Affärsvärlden had also
saved old documents, both private and public documents. Again I had problems
with role models. On the one hand economic historians often write company
histories. On the other hand, historians are not managers and per definition
they do not participate in the process that they are describing. There are also
many managers who have written their own biographies in retrospect but their
texts are not intended as contributions to research.
I could of
course not regard myself as a historian but I found inspiration from how
historians treat sources.
Journalism can be considered both a profession and an approach. The journalistic method might be regarded as a method to construct reality. The journalistic mission is therefore similar to the scientific. The work of both the journalist and the scientist can be described as reducing chaos into structured texts, infoduction. Both are also looking for "the truth" and both are driven by their curiosity and both of course want to find readers for their texts. There are thus similarities.
However the approaches are different. The journalistic approach has grown out of three constraints: Time pressure in production, limited space on the pages and limited time for the readers to read. The journalist must in a very short time produce a short text about a complex event or process that catches the eye of a reader who has many other things to do except reading articles. The journalist competes against time in every moment of his/her work, from the conception stage till the reader.
So, while the scientist looks for the general in the specific the journalist seeks the specific in the general. While the scientific approach puts a premium on a systematic and thorough technique for arriving at a conclusion, the journalistic approach puts attention and speed first. While the scientific community must be able to question the results of the scientist, the journalist may under Swedish civil law conceal the sources if necessary.
A summary of my research approach is thus a personal blend of three approaches: The ethnographic approach, the action research approach and some techniques inspired by the historic approach.
1.4.2. My Method.
Method is how I in practise solve the scientific problems in my thesis. I regard my method as a selection of techniques influenced by or belonging to a scientific approach.
Since I had free access to all the archives I decided that documents would be my prime source of data.
A frequently used method for generating theory in social sciences is the grounded theory method (or approach). The method presupposes a total open attitude to data, inducing inferences and patterns from them. I realised that I was too involved in the data to be able to have such an open attitude. A similar but for me more suitable method is suggested by Miles & Huberman (1984) who suggest preunderstanding as the starting point for induction. I have been inspired by their approach. They also suggest a large number of validation techniques which have been of assistance in my work.
However, none of those methods solved my greatest problem as an "observant participator": how to retrieve empirical data in retrospect.
I found some assistance in what is sometimes called heuristic method or "phenomenological reflection". It is "to know the essence of some aspect of life through the internal pathways of the self". The problem of introspective techniques is that they are difficult to comment upon since they are to a great extent tacit or subconscious. The techniques do therefore not fit research made under the positivistic paradigm and they are looked upon with suspicion by western societies. However, the field of philosophy relies heavily on introspection. Also arts build more or less entirely on introspection. The problem does not lie in the method but in how general the findings can be regarded. Data recollected from my own memory (as well as from the memories of others) are poor, scattered and affected by the well-known tendency of our minds to form patterns of the past that suit the situation of our present.
I found that methods inspired by a dialectic approach also suited my research situation. The dialectic approach assumes that human beings are under a constant conflict of paradoxes. This notion also helped me to overcome some of my taken-for-granted preunderstanding. Since I was gathering empirical data from my own past, whereby retrieval of documents had to be combined with data from my own memory, my preunderstanding could be a hinderness. See further below under Chapter 1.5.3. I did however not use dialectics as a general research approach since it is full of traps.
Having been working as a journalist for several years, the journalistic method forms a part of my tacit knowing. I have probably been using some journalistic techniques tacitly, but I have tried to limit the journalistic style to the text in Book 2.
1.4.3. My Techniques.
By techniques I understand:
1. The techniques I used for gathering empirical data.
2. The style I used for writing the case story.
3. The form of presentation of the thesis.
4. The techniques I used for challenging my taken-for-granted.
5. My personal tacit "tool kit" of techniques.
•1. The method I used for gathering empirical data was to collect documents as the main source. I was inspired by historic methodology for treating sources (Nordenfelt 1978). I also used the computer for text analysis, something a historian would perhaps hesitate to do. I did not use many interviews. Why not? Interviewing is the most common technique in social research and is seldom questioned as a data collection technique. The first reason is that I already had an overwhelming volume of historical documents. Also, having used interviewing a lot myself, I am only too aware of the limitations of interviews as the prime source of empirical data. Since I had been a participant of the process I am describing I had a very good picture of the case.
Still, data from the memories of others as source add a dimension "outside" the self. Such data are no less subjective but they reduce the possibility that I am conveying a "false" picture not shared by other participants. I think that the documents fill that need to a great extent. They are authentic remnants often more reliable than memory. I however used some interviews for data that were not covered by the documents and my memory. I tried to avoid the potential problem of a false picture by the validation technique, see below.
•2. I also regard the style of writing as a technique. I have written two books. The first I did was to write the Source Case story. An edited version is published as a separate book (Book 2). Documents from three archives were the main source . The technique I used in writing the source case might be described as an account of what I found in the documents supported by my memory and filtered through my present understanding. A kind of "interview with myself" supported by documents. I did not have any theoretical perspective when I wrote the source case story. Instead I tried to be personal, emotional and journalistic in style. The language was Swedish, since my past was experienced in Swedish.
For writing the Source Case I used a rather common technique. It might be described as "cutting the interviews or documents to pieces" and "pasting them back categorised by variables". One of my variables was Time so the quotes were structured in chronological order. I used the cut & paste-technique with the purpose to allow the documents "do the talking" by letting the story develop with the aid of a large number of quotes from the documents, while I filled in the narrative between the quotes. I had extracted a rich source of documents (see below). Since the documents were remnants from the past, not stories based on memories, this technique allowed "the past to talk to the reader" (if ever possible). For doing this work I used the aid of the computer (see below).
The second text I wrote was this thesis. I switched into English which reduced my ability to express myself and assisted the style in being more distant.
•3. The form of presentation that the researcher chooses to articulate his/her personal knowledge from a research governs the way the receiver constructs his/her new knowledge. Business administration and especially the fields of strategy and organisation theory often present their concepts in pictures presented as closed models with boxes and circles linked with causal relationships pictured as arrows. I have used some pictures for focusing my knowledge with the main purpose to summarise the text. Pictures as are often superior to words. However, pictures are dangerous in that they might give a false impression of exactness.
Even if I have used pictures for presenting the sub-elements of the Knowledge Perspective , I have therefore chosen a more open form of presentation for the Knowledge Perspective itself. The perspective is presented as a list of concepts and notions with empirical illustrations.
•4. The dialectic technique I used was to try and find negations and transcend contradictions. I looked for failure instead of success, tried to find success in failure, looked for conflicts where I previously had believed there was harmony and tried by reflecting upon the categorisations distinguish contradictions.
•5. The only tacit technique that I find worth commenting upon are those that count their origins from the journalistic method. I regard writing as a natural way of reflecting (a technique for focusing my tacit knowing). Scientists should probably benefit from using more journalistic techniques because that makes their texts more interesting to read, which in its turn should improve the reflection and the readers´ process-of-knowing. There are however some risks involved with journalistic techniques. Tacit journalistic techniques might tempt the researcher to take shortcuts in the search for knowledge and too short in articulating it, to be too far-reaching in the conclusions, to be too focused, to be too generous with pictures and metaphors. I have tried to find a balance.
1.4.4 The Research Process - a Summary.
My research process can be divided into three periods, the first starting the moment I arrived at Affärsvärlden in 1979. The second part beginning when I became a doctoral student in 1990. The third period beginning when I started to write this thesis in the autumn of 1992.
The first period is my period of "observant participator". It is partly described as an element of the case description in Book 2.
The second period is best described as a process which brought me from being an observant participator into being a intentional researcher. It involved a change in attitude and also in scientific paradigm. When I arrived as a doctoral student in 1990 I carried with me a kind of unreflected "positivistic" paradigm from my pre-doctoral studies 20 years ago. I was thus very hesitant to use my own experience for research purposes. It was not until spring 1992 that I - with considerable agony - decided to use empirical data from Affärsvärlden in the research process.
The third period was the process of gathering empirical data and writing the thesis. This part of the process started with sorting the archives (see below) from August 1992. I then wrote the Source Case during four intensive months December 1992 - March 1993. It was natural to write chronologically and I allowed the structure of the case story to evolve during the process. I used no theory and I had not developed any of the metaphors and I allowed my feelings to come out in print because I did not intend to publish the text.
I allowed myself to be surprised by what I found in the documents, (and indeed I was). The process became a rediscovery of a well-known past but through the lens of the present. I worked as absorbed in a dream. In a way it was like going in psycho-therapy with the documents as the therapist.
I did not print out the text even once during this process so when I had finished on March 19th 1993 I read it in sequence with some astonishment. A picture of the past was emerging. A picture that I had not been fully aware of before.
Figure 2. A summary of the research process.
So, I now had the case but what was the purpose of my research? For what scientific purpose could I use the empirical data as a source? I read the text in confusion. I allowed a couple of weeks to pass by. What had I written about? I searched the text and looked for patterns - a whole. I did not use the computer or any systematic technique. Instead I relied on the capacity of the human brain to find holistic patterns.
I had of course written about strategy and organisation. I also found that I had written a lot about knowledge. I was surprised to find that I had written so much about power and I recognised how the text was impregnated with values.
These four components formed an interlinked structure which could be described as an Event-State Network (Miles & Huberman 1984:131). The network contained a large number of scattered and unstructured sub-variables and some vaguely suggested links between some of the variables in a chronological order.
A very subjective perspective on strategy or on organisation seemed to emerge from the case. I decided that I wanted to develop this further into a more general perspective.
The next step was to go through theory. I had already decided that I wanted to use a philosophical theory of knowledge: theory of for improving my understanding of the concept of Knowledge. Also the concept of Power needed theory.
The theories I studied gave a number of suggested concepts and variables. I used these concepts to construct a number of questions as a starting point when I went through my case again. Could I find answer to these questions in the case?
The original case story thus became my source in the next step of the process.
I focused my process-of-knowing on the concepts and tried to articulate both the questions and the answers into pieces of texts. This led to further questions, I had to find more theory which led to new questions, I then had to rewrite the texts etc. It was a process with many reiterations.
Then came the moment of condensation. I had to choose between developing many concepts on a superficial level or a deeper understanding of fewer concepts. I chose to concentrate the illustrations in Chapter 4 to the five questions presented there.
Finally, I rewrote the original case story so that it could be presented as a separate book (here called Book 2).
1.4.5. The Empirical Data.
For a more comprehensive discussion about the empirical data, see Appendix 1. I have used three kinds of sources (in order of significance):
1. Written documents.
2. My memory.
3. Interviews.
1.4.5.1. Written documents.
My main source of data are documents from three archives, the company archive, Ronald Fagerfjäll´s private archive and my own private archive.
It was a huge amount of documents, some eight meters of archive. Mainly documents that could yield insight in the internal process were selected. They were almost entirely confidential and personal.
I had an entirely free and unrestricted access to the archives. Problems of authenticity or restricted access did not exist. The history was still fairly fresh in my memory and I had seen many of the documents before. The quality of the documents was thus highest possible.
1.4.5.2. Memory as a Source.
The human memory is a fragile source of information. Still it is the most common source of empirical data in social research, mainly because there often exist no alternatives.
In this thesis I rely on my own memory as a source and - to some extent - on the memory of others. Tapping the source of memory of others is mostly done by interviewing, a technique that adds to the fragility of the data.
Tapping the source of my own memory as I did in the research process improved the quality compared to interviewing. The first reason for that was that the process of writing tended to bring forward memories that I did not know that I had. The second reason was that the documents of the old archives triggered off a number of memories that I was unaware of. The third reason was that the combined effort of reading old documents and writing added a combined quality to the data from my memory that I think was of a higher order than the data themselves.
I thus think that the data I have retrieved from my memory using this process are of higher quality than the data researchers normally get from asking people to tell stories relying on their memories.
The problem with empirical data collected from memory is that they are subject to a number of inconsistencies, tendencies, rationalisation in retrospect etc.
I have tried to validate memory data through triangulation, i.e. checking data against other independent sources. One important source for triangulation was the book by Ronald Fagerfjäll, Affärsvärlden 1901-1990. Another source of triangulation were the documents themselves. There were numerous cases in which two or more documents were covering the same event.
A third method of validation has been to let senior colleagues with a long record in Affärsvärlden read and comment the text. I have a/o sent the edited case story (Book 2) to eight of my colleagues both still employees and who have left the company for comments before I finalised the last version of it.
I therefore believe that the empirical data do not show a false picture of the development, albeit written from my own personal perspective of course.
1.4.5.3. Computer Aided Technique.
I used a computer technique for some of the text analysis. The computer is very good at speeding up the coding, sorting and structuring procedure. It enables the researcher to cover a much larger volume of data in a short time compared to cutting with scissors and pasting with glue, which is otherwise the fate of the qualitative researcher.
However, a researcher that uses scanned documents in this manner looses a lot of information which can not be stored: coffee spots, hand written commentaries, bored scribbles etc., that tell the researcher a lot about the context of origin.
I thus found that the computer both enhanced and reduced the information intake of the researcher. Therefore I was careful not to loose the original documents. They were coded and stored in such a manner that they could be easily retrieved for checking. This proved very important because I noticed that some of my memories were intimately tied to the physical appearance of the documents.
2. The Concepts knowledge and power.
Organisations involved in information processing use knowledge in a complex and intensive fashion. They both buy and sell knowledge. They use knowledge as raw material but also as a function. They acquire knowledge and information, use it in a process involving knowledge as a function and they sell information and knowledge as physical products, ideas or in the form of problem solving. They are also subject to several more or less visible expressions of power and power play between many actors both outside and inside the managers´ offices.
Therefore the process by which individuals acquire, form and transfer knowledge becomes - their process of knowing - becomes a key issue, not only for understanding the production process but also for understanding how individual actors create what they perceive as organisation.
As mentioned in Chapter 1.1 my preunderstanding is that there exists a dichotomy between individuals involved in the production (professional knowledge) and individuals involved in marketing, administration and management (organisational knowledge) in these kinds of organisations. Therefore the internal relation between knowledge and power is crucial for understanding both some of the inherent conflicts as well as long term development.
I regard all human knowledge articulated through language as essentially metaphoric in character. "Knowledge about knowledge" is therefore a question of which metaphors one chooses to express one´s knowledge in.
The Concept of Knowledge is traditionally the area of epistemology but also computer science, cognitive psychology, pedagogy and (lately) brain research have made contributions to the field. Metaphors from computer science and information theory have been very influential since the 1940s.
The reason I have chosen Polanyi´s conceptualisation of knowledge is threefold:
• 1. Although the concept of tacit knowledge is common today, Polanyi´s theory is not frequently quoted in organisation theory. As a source of metaphors it might therefore yield fresh interpretations.
• 2. Polanyi´s theory bears resemblance to my own practical experience.
• 3. His theory has roots in constructivism.
Michael Polanyi (1891-1976) was a Hungarian medical scientist whose research was mainly done in physical chemistry before he turned into philosophy at the age of 55. He accepted a personal chair in social studies at the university of Manchester in 1948. His lectures were collected in his opus magnum "Personal Knowledge, Towards a Post Critical Epistemology in 1958". Although very influential in the background he was never recognised as a "true" philosopher by his contemporaries. He and his works are for instance not listed in the Swedish language encyclopaedia on philosophy, "Filosofilexikonet".
I have considered an alternative to Polanyi, namely Ludwig Wittgenstein and the theory school inspired from his works, represented by the Norwegian philosopher Kjell Johannsesen (1988, 1992) and Swedish research by Bo Göranzon (1988) and Ingela Josefson (1988). Their research has mainly been directed towards enhancing the value of practical tacit knowledge in working life. There are links between Polanyi´s and Wittgenstein´s theories and several efforts (Johannesen 1992a) have been made to combine the two.
The reason I prefer Polanyi´s theory to that of Wittgenstein and his successors in this thesis is that Polanyi´s understanding of the process of knowing, was developed with examples from scientific professions which are quite similar to professions involved in information processing.
2.1 Michael Polanyi´s Concept of Knowledge.
Polanyi´s concept of knowledge is based on three main theses:
• First, true discovery, cannot be accounted for by a set of articulated rules or algorithms.
• Second, knowledge is public and also to a very great extent personal (i.e. it is constructed by humans and therefore contains emotions, "passion".).
• Third, the knowledge that underlies the explicit knowledge is more fundamental; all knowledge is either tacit or rooted in tacit knowledge.
Knowledge is thus not private but social. Socially conveyed knowledge (see further tradition in Chapter 2.1.1.) blends with the experience of reality of the individual. New experiences are always assimilated through the concepts that the individual disposes and which the individual has inherited from other users of the language. Those concepts are tacitly based. All our knowledge therefore rests in a tacit dimension.
When we are tacitly involved in a process-of-knowing we act without distance. This describes how and why we take things "for granted". The individual changes, "adapts", the concepts in the light of experiences and reinterpret the language used. When new words or concepts are brought into an older system of language, both affect each other. The system itself enriches what the individual has brought into it.
In each activity, there are two different levels or dimensions of knowledge, which are mutually exclusive:
• Knowledge about the object or phenomenon that is in focus - focal knowledge.
• Knowledge that is used as a tool to handle or improve what is in focus - tacit knowledge.
The focal and tacit dimensions are complementary. The tacit knowledge functions as a background knowledge which assists in accomplishing a task which is in focus. That which is tacit varies from one situation to another. For instance, when reading a text, words and linguistic rules function as tacit subsidiary knowledge while the attention of the reader is focused on the meaning of the text.
Inspired by Gestalt Psychology, Polanyi regards the process of knowing as fragmentary clues, senso-motoric or from memory, which are integrated under categories. We make sense of reality by categorising it. The patterns of categories contain, theories, methods, feelings, values and skills which can be used in a fashion that the tradition judges are valid. We attend from the particulars to the focus upon which they bear. This act of integration is an informal act of the mind and can not be replaced by a formal operation.
This integration of knowledge is a personal skill in itself and can not be disposed of. A special kind of meta knowledge is required for integration; knowledge about knowledge as integrated. It is possible to have this meta-knowledge without knowing its details.
Polanyi´s theory is about how human beings acquire and use knowledge, i.e. about the process of knowing. In his earlier works he frequently uses the verb "knowing" and the noun "knowledge" as synonyms. In his later works (Tacit Knowing) he emphasises the dynamic properties, i.e. the verb:
Knowledge is an activity which would be better described as a process of knowing.
Polanyi thus regards knowledge as both static "knowledge" and dynamic "knowing". When the dynamic properties are emphasised, verbs like knowing or learning are used. The dynamic properties describe how human beings strive for acquiring, coming to know, new knowledge.
Polanyi emphasises that the human being is knowing all the time, we are switching between tacit knowing and focal knowing every second of our lives, it is a basic human ability to blend the old and well-known with the new and unforeseen, otherwise we would not be able to live in the world.
But Polanyi also sometimes describes knowledge as an object that can be articulated in words. When tacit knowledge is made explicit through language it can be focused for reflection. By distancing the actor from the knowledge and articulate it in language or symbols, the knowledge becomes possible to distribute, criticise and thereby increase. Polanyi´s emphasis on the dynamic properties makes articulate propositionary knowledge (facts) - metaphorically speaking - only the top of the iceberg.
Because we can know more than we can tell it follows that what has been made articulate and formalised is in some degree underdetermined by that of which we know tacitly. Language alone is not enough for making knowledge explicit. All articulated propositionary knowledge has originally been constructed in someone´s mind, be it in my own or somebody else´s. Facts are thus personal, not objective in a positivistic scientific sense. Facts can be tested for their truth content by an act of assertion but the act of assertion contains a tacit part too.
Polanyi also emphasises the functional aspect of knowledge, i.e. he regards knowledge as a tool by which we either act or gather new knowledge. This tool is unreflected knowledge that we take for granted in a situation.
When we use a hammer to drive a nail, we attend to both nail and hammer, but in a different way....The difference may be stated by saying that the latter (hammer) are not, like the nail, objects of our attention, but instruments of it. They are not watched in themselves; we watch something else while keeping intensely aware of them. I have a subsidiary awareness of the feeling in my palm of my hand which is merged into my focal awareness of my driving the nail.
Whether an object is a tool or not depends on the actor's attitude. If a stone is used as a hammer it is a physical tool. Methods, rules, beliefs and theories are intellectual tools.
Polanyi uses the notion of rules. A "rule" is thus tied to the result of an action. The knowledge of the rules also functions as a tacit knowledge, i.e. a kind of tacit "tool of tools".
A rule is a standard for correctness, a norm. The difference is that the norm is entirely static whereas a rule can be changed. The rules develop in the process of knowing or come from tradition. Mastery of the rules also brings with it the ability to change them or extend them. Rules are generally tacit but they may be articulated into explicit rules-of-thumb, maxims.
When the static properties are emphasised, Polanyi thus use nouns like knowledge, or emphasise the function of knowledge, tools or criteria for standards like rule or value. The static dimension describes the functional properties of knowledge; how knowledge as an object can be used in various contexts. The nouns however need the dynamic verbs for describing how new knowledge is acquired, created or made obsolete.
Polanyi wanted to prove that there is little difference between the non-scientist and the scientist when it comes to actual practical work. Polanyi´s motives were however much wider than that. He also wanted to enhance the value of the human being by giving her and her culture a "higher position in cosmos".
Polanyi maintains that craftsmen, "makers", use the same kind of methods as other practitioners "doers". They both follow rules and exemplars and they rely on experience for making judgements in their work just like scientists have to do in their work. Polanyi makes no clear distinction between practical knowledge and other kinds of knowledge, like theoretical propositionary knowledge. Polanyi therefore makes no difference in principle between the analytical skills of a Bertrand Russel or the blind man´s rod. The process-of-knowing is the same.
Intellectual tools are however different from physical tools in that they are based in a social context. A person needs to be confident in that social context in order to be able to use intellectual tools. It is an important distinction as regards the rules and the tools.
The scientist´s and the professional´s tools and rules are more intellective than the craftsman´s or the practitioner´s more agentive tools and rules. This distinction is important because intellective tools are a main feature of professions involved in information processing. One important feature is that experts working with physical tools can detach themselves from their tools. Intellective tools can not be disposed of that easily.
A common notion is that thinking is not doing and a common distinction is made between "thinkers" and "doers". I suggest instead a distinction between agentive and intellective doing. To focus one´s thoughts as in writing an article can be seen as an intellective act, thus = "intellective doing". To move one´s body or to "get things going" through other people can be seen as an agentive act, "agentive doing".
2.1.1. A Hierarchy of Knowing.
If one regards the dynamic properties of knowledge the most material, the notion Process-of-Knowing probably gives a better description than the word "knowledge".
Rolf (1991) suggests a hierarchy of knowing based on how the rules are followed:
• The lowest level of knowing is to follow rules which can be controlled by the subject itself.
• The next level is to follow rules which are established by a social context outside the individual.
• The highest level is to be able to (and be allowed to) change the rules.
Each level contains both tacit and focal knowing. Rolf calls them skill (lowest), know-how and competence (highest), respectively.
Skill is the ability to act according to rules which depend on feedback from a non-social environment. Polanyi (1967):
Skills combine muscular acts which are not identifiable, according to relations that we cannot define.
Skills might be the ability to chop wood or type on a typewriter. The actor him/herself is able to judge whether the action has been successful or not.
Know-how includes skill and is the ability to act in social contexts. Other actors, like a professional institution or the tradition (the fourth level) establish the rules. Know-how implies problem solving. The ability of reflection on the rules, however, is of a higher order and should not be a part of skill or know-how. Ryle (1949)points out that the boxer or the surgeon or the poet all apply their special criteria when they accomplish their special tasks. And they are regarded (by others) as good or bad or creative - not because of their ability to reflect over what they are doing but because of the result of their performance.
Competence is know-how + the ability of reflection. Competence in Polanyi´s sense implies the ability of know-how within a certain domain and the ability not only to submit to the rules but also by reflection influence the rules of the domain or the tradition. Competence is thus not a property but a relation between individual actors and a social system of rules. A person is competent within a tradition:
In a competent mental act the agent does not do as he pleases, but compels himself forcibly to act as he believes he must.
Polanyi also makes an illustration of incompetence:
We draw here a distinction between two kinds of error, namely scientific guesses which have turned out to be mistaken, and unscientific guesses which are not only false but incompetent.
An individual is thus not competent per se, rather it is the individual in a role and in a context who is competent or not. In order to change the rules a competent individual needs a social or interpersonal (Argyris 1962), communicative knowledge in addition to know-how. Competence therefore encompasses both know-how and skill. It is the expertise of mastering the rules of the profession so well that they no longer need to be obeyed. This is where the two concepts knowledge and power meet. A characteristic of competence compared to know-how and skill is that the actor has power over his own knowledge, i.e. over the rule system which decides quality standards. Only when an individual has this kind of power is the system in the position to learn from the experience of the individual.
Polanyi´s notion regards individual competence, which is according to the original etymology. The Latin root competo simply means that an actor has sufficient ability to fulfil his/her goals. Rolf (1991) translates Polanyi´s competence into the Swedish word "kompetens". However, the English word has other connotations than the Swedish, which causes confusion. Sandberg (1987) for instance, introduces a "competence circle", which encompasses Knowledge, Skills, Attitudes, Network and Capacity. He refers to Polanyi although Polanyi´s uses competence in the English tradition.
2.1.2. Knowing and Knowledge - a Summary.
In this thesis the dynamic properties of knowledge are emphasised, so "knowledge", and "knowing" are used as synonyms. The word "process-of-knowing" is sometimes used in order to emphasise the process. Knowledge or knowing is also seen as individual, not as a property of an organisation or collective.
Polanyi´s main contribution in the theory of knowledge is that knowing can be both tacit and focal. It depends on the situation whether it is used tacitly or being focused and/or as articulated knowledge. Tacit and focal are not categories or levels in a hierarchy but are more like two dimensions of the same knowledge. Skills which are very difficult to articulate and to transfer between individuals thus have a large proportion tacit knowing, whereas a competent person must be able to focus more of his/her tacit process-of-knowing in order to articulate and communicate in a social context.
As suggested in this thesis, work also has an Intellective and Agentive Knowing dimension. Agentive knowing is more oriented towards using the body as a tool whereas intellective process-of-knowing is oriented towards using the mind as a tool. Agentive skills are therefore more emotional and body oriented than intellective skills. Intellective abilities tend to be more analytical. Agentive skills are more oriented towards the syntetical.
The distinction is made because these two dimensions are important in the information processing professions and in organisations employing mainly professionals. It is not possible to be too distinct, however, since knowing includes always usage of both mind and body. The border between the two is thus fuzzy. One might see the categorisation as a family of abilities with biases towards one of the two categories.
A summary:
• 1. Knowledge can be both tacit and focal.
• 2. Tacit knowing can be made explicit, but not all of it. We know more than we can tell.
• 3. Knowing includes both the intellect ("intellective knowing") and the whole range of body, atmosphere ("agentive knowing"), etc. Words and texts are therefore not sufficient for knowledge transfer.
• 4. Knowledge is action-oriented but can be both static and dynamic. In this thesis the verb knowing is preferred over the noun knowledge. It is acquiring knowledge (learning) rather than having knowledge.
• 5. Knowing is based on rules and exemplars, which can be either invented by the subject itself or learned (within a tradition).
2.1.3. Tradition of Knowledge.
One of the central concepts in Polanyi´s concept of knowledge is tradition. Tradition describes how knowledge is transferred in a social context. The tradition is a system of values outside the individual. Both language and tradition are social systems which take up, store and convey the knowledge of society. "Personal" knowledge is thus not the same as subjective opinions. It is more like the knowledge of a judge who within the framework of the law and praxis (= tradition) gives a judicial decision based on his judgement in a particular situation. Another judge should in principle be able to take the same decision.
Polanyi is mainly interested in transfer of a process-of-knowing from one person to another(s) and he identifies three tacit psycho-social mechanisms for this: Imitation, identification and learning by doing. They are mechanisms for direct knowledge transfer. Facts, rules and exemplars are transferred without intermediate storage in a medium. The term I use - Knowledge "transfer" - is therefore not quite appropriate, since knowledge is not moved as goods. The "receiver" reconstructs his/her version of the "supplier´s" knowledge.
A tradition transfers its patterns of action, rules, values and norms. They create a social order because people can foresee both the action of others and the implied expectations on themselves. The tradition also tells what attitudes one should take. The individual defines him/herself as someone by submitting to the tradition. The formation of knowledge within a tradition is done both locally (by master/apprenticeships) and in a larger context through professional bodies.
Values are not subjective but part of a professional tradition outside the individual self. In the value an individual's experience is integrated with a claim of being general within the tradition of a profession. Personal knowledge contains elements from how reality is perceived by the tradition. The individual lets the lingual forms and cultural patterns of the tradition form his own idiosyncrasies into an image of reality, irrespective of whether his tools are patterns of thought, patterns of action or social institutions. As time passes, some of the values are validated and transformed cognitively into beliefs about how things are. They are therefore no longer in need of being tested so they become a taken-for-granted tacit knowledge shared by the members of the group.
The notion of values has been addressed by other authors .Some (i.e. Olsson 1990) regard values of individuals as a number of paradoxes or dichotomies. The dichotomies and paradoxes are solved for the time being by the most powerful of the actors or group of actors within the dominant tradition. They are however always present and pop up in situations of crisis. I believe that it is fruitful to regard also the tradition of an organisation in a similar way, i.e. using the metaphor dichotomy of values to describe the organisation´s tradition.
Even if Polanyi does not discuss this particular aspect one might use his concept for identifying traditions of a particular industry, organisation or department, the latter being the "tradition within the organisation".
There is an important distinction between organisation and tradition. Tradition is a dynamic unarticulated process by which a process-of-knowing is transferred between individuals, it has no purpose, no written rules and no power centre. Tradition exists independent of organisation boundaries.
It is useful to distinguish between two main competing traditions in a publishing company, originating from two groups of individuals with relations to the customers; journalists and marketing/salesmen. One is the journalistic tradition and the other could be called the commercial or organisational tradition. The organisational tradition transfers the knowledge of management, accounting, marketing etc. Some of the organisational knowledge is as Spender (1989) suggests formed within the publishing industry itself (as "recipes"), some is transferred via higher education.
Polanyi´s notion of tradition is based on the psycho-social context of scientific professions, which have procedures for enforcing compliance of unwritten rules. He therefore sees the older professional as having authority over the younger (= socially sanctioned knowledge). The apprentice lacks the ability to question what he learns, tradition thus implies submission. In addition credibility, trust and confidence are necessary. Credibility (which in this thesis is equalised with legitimacy) carries the social exchange of views between equal individuals within a tradition. Tradition of knowing thus takes place only if the combination of legitimacy (on behalf of the sender) and trust (receiver) exists. When the relation between master and apprentice is shifted to the ideals nurtured by the tradition the apprentice becomes liberated.
However, using tradition in the way I suggest - as a metaphor referring to individual action in an organisational context and referring to the less cogent journalist profession - is still to bring it outside the original intention. The concepts "organisational tradition" and "professional tradition" are therefore open to the same criticism as "organisational culture". They might be criticised for being too individual and too unprecise. An advantage is however that Polanyi´s tradition is a more narrow concept than culture, it involves mainly knowledge transfer. It is as such the concepts are used in this thesis.
I distinguish four limitations in Polanyi´s concept of tradition of knowledge which have implications for the thesis:
• Polanyi seems to regard tradition as a process in which the master is always the older. This notion fit the 1960s and 1970s of the journalistic profession fairly well. In the 1980s however, a large number of young financial journalists entered the profession. They were higher educated and could master the new technologies and then new financial instruments much better than the older generation.
• Tacit knowing and tradition function as a taken-for-granted knowledge, which in its turn delimits the process-of-knowing and sets boundaries for learning. Polanyi does not problematise this aspect.
• Polanyi does not distinguish the implications of the difference between interactive knowledge transfer (as in a tradition) direct from individual to individual and indirect knowledge transfer via a medium. Organisations involved in production and selling of information rely on more indirect vehicles like massmedia, manuals, books, or computer programs. Articulated rules (maxims) for guiding behaviour like texts in manuals or accounting procedures, check lists, handbooks, guidelines for salesmen etc. are also examples of indirect knowledge transfer. The medium functions as a passive storage of information.
• Polanyi regards scientific articles as pieces of articulated knowledge but he considers them as a part of the tradition. In situations where knowledge is to be transferred outside a tradition, as is the case of journalism, the tradition concept needs some supplementary theory.
Since the concept of information is of such importance in society today I have chosen information theory as the complement. Another reason for the choice is that Polanyi is discussing cybernetics in connection with communication. Information theory however, originates from a non-constructivist paradigm, which one must take into consideration when discussing its definition.
2.1.3.1. Information.
The word information is derived from Latin informare which means "give form to". The etymology thus connotes an imposition of structure upon some indeterminate mass. This is probably the most widely used (Allén & Selander 1985) meaning of the word. Most people tend to think of information as disjointed little bundles of "facts".
In the Oxford English Dictionary definition of how the word is used it is connected both to knowledge and communication:
Knowledge communicated concerning some particular fact, subject or event; that of which one is apprised or told; intelligence, news.
The word information can thus refer to both facts themselves and the transmission of facts.
The double notions of information are also inherent in one of the foundations of information theory: cybernetics introduced by Norbert Wiener (1948). The cybernetic theory was derived from the new findings in the 1930s and 1940s regarding the role of bio-electric signals in biological systems, including the human being. The full title was: Cybernetics or Control and Communication in the Animal and the Machine. Cybernetics was thus attached to biology from the beginning.
Cybernetics is also the foundation of system theory which regards information as something that is used by a mechanism or organism, a system which is seen as a "black box", for steering the system towards a predefined goal. The goal is compared with the actual performance and signals are sent back to the sender if the perfor-mance deviates from the norm. This concept of negative feedback and stimulus and response has proven to be a powerful tool in most mechanical and electrical control mechanisms.
Organisation theory in the 1950´s all until the 1970´s is heavily influenced by system theory, (see below). Most organisation models all until our days build on the stimulus/response concept and describe organisations with metaphors borrowed from cybernetic theory.
Cybernetic theory regards information as conveying facts with a meaning independent of the reader. Meaning is seen as a structure. There is thus more information in an ordered system than in disorder. Order, like a sentence, contains more meaning than words in a stochastic order. Articulate propositionary knowledge does indeed seem to share many of the features of the cybernetic notion of information.
Also Polanyi (1958) is impressed by the new theory of communication and bases his understanding of information on cybernetics. But Polanyi does not compare information with knowledge. He sees information more as communication. He maintains that knowledge transfer, also among animals, is social and takes place in an atmosphere of "conviviality" and that the mechanistic cybernetic theory therefore can not explain how human transfer of knowledge takes place. Polanyi emphasises that the process of knowing and the transfer of human knowledge demands much broader and richer means of communication than the written or oral word.
However, today we consume information in such enormous quantities that no one, born before the technical media revolution, could possibly have imagined it. Wiener´s words. . .
. . . to live effectively is to live with adequate information. . .
. . . do not fit a world filled by the flickering of TV-screens, fragments of texts, snatches of music, "authored" by copy-writers, journalists, electronic devices, commentators etc.
We live in societies that are rapidly approaching a stage where 50% or more of the citizens are writing and speaking words and processing texts, numbers and pictures which are reproduced in milliseconds. The "fact" in one text book or encyclopædia or CD-Rom may be contradicted by another fact in a later edition. It does not matter how well the information has been structured or how potentially valuable the knowledge is; as soon as it leaves the presses, the loudspeaker or the screen it adds to, or drowns in, chaos.
Chaos is randomness and entropy. This is another notion of information which implies an opposite view: Claude Shannon´s communication theory. He was a contemporary of Wiener and as an AT&T mathematician he was primarily interested in the limitations of a channel in transferring signals and the cost of information transfer via a telephone line. Shannon is primarily interested in the cost of information transfer irrespective of the meaning of the information and develops a mathematical theory in which information has no connection with the semantic content. Shannon defines information as a purely quantitative measure of communicative exchanges.
Weaver (in Shannon & Weaver 1959), links Shannon´s mathematical theory to the second law of thermodynamics and states that it is the entropy of the underlying stochastic process in the information source that determines the rate of information generation (p.103):
The quantity which uniquely meets the natural requirements that one sets up for "information" turns out to be exactly that which is known in thermodynamics as entropy.
For an information theorist based on Shannon it does not matter whether we are communicating a fact, a judgement or just nonsense. Everything we transmit over a telephone line is "information". Weaver links Shannon´s mathematical theory to the second law of thermodynamics and states that it is the entropy of the underlying stochastic process in the information source that determines the rate of information generation.
The mathematical and statistical content of the two theories are of no interest here. They cover only the technical level of communication, i.e how accurately the symbols of communication can be transmitted. The problem of how precisely do the transmitted symbols convey the desired meaning, is not covered by any of the theories.
However, one of the conclusions from Shannon´s theory is that chaos contains more information than structure, the opposite of Wiener´s definition.
There has been a long debate among scientists whether a theory of information should deal with the problem of meaning. By doing so authors think they can link information with knowledge. Especially cybernetic theory lends itself to such interpretations but successors of Shannon have also suggested theories which add concepts of meaning to his theory.
The widely different views on what is really transferred - meaningless symbols or facts with a meaning - have left the label information open as a platform for all kinds of interpretations. By building on the cybernetic notion that structure contains more information than chaos it is often suggested that by adding more structure through analysis, selection and interpretation, information enters a higher sphere and becomes facts of knowledge.
Such hierarchies are suggested by several authors. Their concepts tend to be fairly similar and I choose to quote from one example, Barabba & Zaltman (1990) who are discussing the use of market research information and how one is to know whether the information are "facts" or not. They propose the following hierarchy: Data (numbers, words), Information (statements), Intelligence (rules), Knowledge (combination of the levels below) and Wisdom (combined knowledge bases).
Shannon´s information on the other hand, must not be confused with meaning. His notion relates not so much to what you do say as to what you could say (or do not say).
Information is a measure of one´s freedom of choice in selecting a message. The greater this freedom of choice, the greater the information, the greater is the uncertainty that the message actually selected is some particular one. Greater freedom of choice, greater uncertainty greater information go hand in hand. (Weaver in Shannon & Weaver 1959)
Both theories concern one medium and one sender/receiver relationship. Therefore none of the theories cover messages broadcasted from one sender to many receivers via a massmedium. In our massmedia rich societies, information is - from the receivers´ point of view - more like chaos than facts. Therefore Shannon´s infor-mation concept seems more suitable in this thesis, because it represents potential knowledge rather than knowledge. By articulating our knowledge into facts or information we move it into a potentiality, over which we have no power. In this light information should not be seen as knowledge when communicated via media, information is meaningless in itself. Meaning has to be constructed by the receiver.
The receiver of such potential knowledge will have to make a choice from a non-structured chaos. This kind of communication is quite different as compared with a tradition of knowledge according to Polanyi.
I thus see a clear distinction between knowledge and information, much clearer than common usage of the words implies.
What is the advantage in trying to make this distinction? First of all, it is a complement to Polanyi who regards knowledge transfer as a mainly interactive psycho-social mechanism. The entropy-like feature of Shannon-information fits better with present society than the cybernetic notion. The distinction further implies that it is not possible to assume a higher value on some information; "All information is equal and meaningless", which is a simplification compared to the problems involved when assuming the opposite.
The main disadvantages is that Shannon´s notion of information is not commonly used outside the technical field. And, as with all distinctions and categories it is difficult to be precise.
2.2. Knowledge and the Concept of Power.
Polanyi does not discuss the relation between power and knowledge explicitly, it is beyond the purpose of his work. But in the previous chapters it is possible to see power in Polanyi´s metaphors describing knowledge in three ways:
•1. The concept of Knowledge transfer implies a direct power relation between individuals in the hierarchy of knowing. An individual thus takes three steps in liberation from the power of the master´s process-of-knowing, moving up in the hierarchy by:
1. first acquiring the profession by blindly obeying master´s interpretation of the rules,
2. then liberation from the master into an own interpretation and,
3. then on the highest level being able to bend the rules into new rules.
We might call item 1. the legitimacy of competence. It is the power often utilised by scientists, journalists and other professionals not holding formal positions. By using the legitimacy of superior competence they decide which metaphors will be used in human beings´ efforts to understand reality.
•2. The concept of Tradition implies an indirect power relation. Human beings submit to the unwritten rules of behaviour of a society or accepts to behave within the values and rules of within a groups as found in organisations. An individual cannot exist outside a tradition. The tradition functions as from the outside imposed and/or accepted norms for the individual process-of-knowing.
The important feature of the norms of a tradition is not their psychological consequences but that they give people an identity. One identifies as someone by submitting to the norms. By breaking the norms one takes the risk of loosing one´s identity. This is why the tradition itself exert power over humans.
•3. The concept of Tacit knowing implies that we are subject to more power than we are consciously aware of. We are ruled by our own desires and our own taken-for-granted. It is also a more indirect power relation.
Items 2. and 3.above might be called the legitimacy to decide the agenda of discussion. Foucault (1965, 1973) points out that such power is independent of the actors and that it may not be traced to individual relationships. Foucault regards power as a concealed structure, which governs the thinking of human beings in a subtle and unreflected way. If one is to "see" this power one must therefore not look for "power" but for the rules of formation by which power manifests itself, the taboos, the contextual rituals. Who are allowed to be the initiators of the talking? Who define the "truths"? Who are the powerless? Who are allowed to exert the power of knowledge?
Daudi (1984), building on Foucault, regards the organisation as an arena on which the individuals strive for expanding their freedom of action. They try and reduce the freedom of action for others if it is necessary (or if they feel it is worth it) for their own expansion. Such a power relation is characterised by the fact that one actor (the subject) is able to get his own way with or against another actor (the object). Daudi is perhaps underestimating the desire of submission (as mentioned above individuals are often willing to submit to legitimacy) but his view is useful in cases where independent professional individuals share a common arena. It should also fit in cases where formal ownership is weak or evenly spread as in partnerships. Professionals, seeking professional autonomy, often see the power of managers and of other professionals mainly as a restriction on their individual freedom.
In this thesis I therefore see power like this:
• Power is primarily regarded as a relation between actors who guard or try to expand their space of freedom in order to reach autonomy. Such power relations might turn into concealed structures when seen over a long period of time.
The power aspect of knowledge is important because it is always there, even if it might be concealed. Any concept based on a conceptualisation of knowledge thus contains (at least) one power aspect and one knowledge aspect.
Three examples taken from the Affärsvärlden case:
•1. A distinction between Agentive and Intellective knowing was shown in two different patterns of action: The power of agentive knowing was to be the first to move by taking initiatives. The power of intellective knowing was to be the first to create a new powerful metaphor, which governed the process-of-knowing among the others.
•2. A conflict between knowledge transferred via Professional or Organisational tradition was found in an area which existed between those involved in the infoduction process and those involved in "the rest"; both groups wished to extend their space of freedom.
•3. There emerged conflict areas within the Infoduction Process; individuals fighting over whose picture of reality was to be the dominant. I.e. there were conflicts between various professional experts.
2.2.1. Knowledge, Information and Power in Organisation Theory.
2.2.1.1. Knowledge in Organisation Theory.
Organisation theory development influences knowledge in how to run a business, i.e. it is an important part of the "organisational tradition".
The concept of knowledge in organisation theory and strategy theory is mostly regarded as a function, or a managerial tool for performing a task in a relation with the environment. The concept of competence has therefore gained some attention. Organisation theorists distinguish competence as an organisational feature. Competence is often regarded as the link between Knowledge and Strategy, as the ability (power) of an organisation to implement or to act relative other organisations. Philip Selznick (1957) defines competence in relation to organisations as "distinctive competence", something like the "competitive advantage" of an organisation. Prahalad & Hamel (1990) build on the same tradition when they include the technical and managerial skills that enable an organisation to survive and call it "core competence". Snow ;& Hrebiniak (1980) define a number of factors ranging from top management to technology to distribution to personnel as "competence".
The presumption that a concept that functions as a label in an individual context will be meaningful when used as a metaphor in an organisational context is however not without complication. The metaphor easily turns into a platitude - a dead metaphor that no longer gives meaning, it just defines a normal state meaning almost anything that is "good".
The constructivist view avoids that problem by keeping competence as an individual concept and seeing tradition of competence (and knowledge) between individuals as the key element in what constitutes "organisation". In this thesis competence is thus not something than an organisation "has". The usage of the word is further in the English tradition, as a subordinate concept to Knowledge or Knowing.
Examples of views on knowledge as a raw material in a production process acquiring, developing and selling knowledge are still rare. One example is Wikström & Normann (1992), who see the organisation as a knowledge processing system. The new developments in computer technology have given rise to recent organisation theories in which the concept of knowledge is based on information theory (Hammer & Champy 1993, Dawidov & Malone 1992). The information based theories tend to be quite normative, as is often the case in early stages of a new research field.
Research into professional service organisations sometimes relates to the non-functional aspects of knowledge. Consultants have been seen (Gummesson 1977, Wheatley 1983) as processors of knowledge, in a close relation with their clients. Also the Swedish so called Uppsala School (Hammarqvist & Håkansson 1982, Hägg & Johansson (ed) 1982) with their network view on organisations emphasises relations as a transfer of knowledge between customers and suppliers in manufacturing industries.
The cognitive perspective has inspired research into how individuals acquire knowledge, (learn) and how cognitive schemata and value structures function as limitations for learning. Focus is mostly on decision making. Insights from cognitive psychology have been quite influential in organisation theory because they explain "irrational" behaviour in terms of differing individual perceptions of reality. Organisation theorists have since the 1950s and Simon´s (1976) bounded rationality pictured the decision makers as satisfiers rather than optimisers. Much of the organisation theorists´ research into decision making depicts it as a messy, disorderly (Mintzberg 1980) and irrational (Brunsson 1985) process in which the decisions are difficult to distinguish (Mintzberg & Pettigrew 1990) or even taken at random (March & Olsen 1972). In this randomness individual actors are nevertheless trying to act "rationally" so the process may be characterised as an incremental process characterised by attempts to take rational decisions (Quinn 1980).
Two important lines of organisation research have tried to explain individual behaviour based on sociological theories and theories from cognitive psychology respectively. Theories about how we construct reality as mental models or schemata in our minds and how individuals enact their environment (Weick 1979, 1983) have been used to explain the anomalies and irrational behaviour in organisations. Such metaphors are used for research into how organisations change and "learn" by reacting to environmental forces and moving through stages of change.
The advantage of the cognitive theories is that they bring the individuals (at least the top managers) to the scene and that they explain irrationality in organisations in terms of individuals´ perceived or constructed reality. Knowledge is seen mainly as individual and is formulated in terms of rules, values and beliefs. There are however problems in using metaphors constructed from insights into individual learning and/or behaviour as metaphors for explaining how organisations change or "behave". Cognitive theories tend to concentrate on the inner context or - at most - the link between inner and outer context. They therefore tend to regard the outer context - including the market - as an independent variable.
The cognitive perspective is closely linked to the cybernetic notion of information and the stimulus/response model. Such research often focuses on models for decision making. One of the most influential researchers in this area is Herbert Simon (1976, 1982). Metaphors based on information theory often give interesting insights into the opportunities that lie in information processing systems and have been of great help in creating computer systems for information processing.
Such theories however often suffer from the problems involved in basing their understanding of knowledge formation and information on cybernetics. Information is regarded as facts or even knowledge (i.e. by Simon 1971:179), so researchers have to develop theories for the problem of how information can be meaningful and meaningless at the same time. Irrelevant (Ackoff 1967) information, information relevance (Streufert 1973), information overload (Simon 1971), information rich environment (Simon 1971) and a distinction between news and understanding (Simon 1983:93) in mass media are examples of such efforts.
The cultural perspective in strategy and organisation theory is inspired by metaphors from anthropology. Organisational culture is often described (Alvesson 1993, Schein 1991) as the deeper level of basic values, beliefs and assumptions that are shared by the members of an organisation. They represent the taken-for-granted view among managers and employees as regards the organisation´s self and its environment. Therefore Gahmberg (1992) and Czarniavska-Joerges (1988) suggests semiotic tools for understanding the importance of symbols in strategic management and organi-sations respectively. The Affärsvärlden case underlines the relevance of symbols.
The popularity of the culture approach in the 1980s however, has brought some ideas which have been criticised, for instance that there should exist "ideal" cultures (Peters & Waterman 1982) that can be managed or that there exist certain types (Deal & Kennedy 1982) of cultures which could be linked to industries. Alvesson (1989) gives insight into the problems managers in a computer company come across when they try to manage their culture.
A special problem with the culture perspective is that it tends to regard culture as the least common denominator. The implicit paradigm is harmony and ambiguity Meyerson (1991) should be avoided. Especially the management "cook books" with a cultural bias tend to prescribe tight control and non-ambiguity as the goal of managing the culture. Culture is then often reified into something that an organisation has and the authors give quite prescriptive advice about what kind of culture an organisation should have in order to be successful. The cultural view on knowledge formation thus has much in common with both Polanyi´s notion of tradition (i.e. Schein 1991) and by the notion of reality as a social construction (Berger & Luckman (1966/1985).
This thesis is mainly inspired by constructivism. Organisations are thus not seen as real entities. They are seen as constructed in a constant process by people. If one looks for an organisation one will not find it. What one will find are events linked together. These sequences, their pathways and their timing are the forms we tend to make into objects when we talk about organisation. Most "things" in organisations are such relationships. Weick (1969/79) calls such response patterns double interacts.
The unit of analysis in organising is contingent response patterns, patterns in which an action by actor A evokes a specific response in actor B (interact), which is then responded to by actor A (this complete sequence is a double interact).
The verb organising therefore captures the notion better than the noun organisation. Weick (1969/79):
Organising is first of all grounded in agreements concerning what is real and illusory, a grounding called "consensual validation", the things people agree upon because their common sensual apparatus deeply common interpersonal experiences make them objectively do so.
Much speaks in favour of this view, especially when regarding the information processing organisations. If one for instance combines Polanyi´s concept of tradition with Weick´s view of how organisation is constructed by individuals, one gets some clues to the problems involved when individuals with different traditions share the same arena, as they do in publishing companies. Many investors in organisations containing no "substance" have also become painfully aware of the ephemeral quality of knowledge during the period covered in this thesis.
On the other hand, individual action is to a large extent determined by what they perceive as the organisation. Actors behave on behalf of an organisation, they reward and punish in the name of an organisation. Individuals may come and go but the others keep organisings. Organisations therefore survive individuals. A realistic view is thus that individuals tend to act as if organisations do exist. Therefore, it is often a practical assumption to treat organisations as real entities. Using Weick´s microprocesses as unit of analysis can be both unpractical and misleading for understanding the strategy of a whole company, for instance.
Still, a view with a constructivist bias is probably justified when interpreting processes and actions in the kind of industries I have in mind in this thesis. Throughout this thesis the noun organisation and the verb organising are therefore used as synonyms because it is impractical and not correct to discuss phenomena in terms of verbs or nouns only. Only one notion or a single perspective is not enough.
The problems involved in singular perspectives have encouraged researchers to integrate various schools of thought into "thicker" descriptions using metaphors from several perspectives. Morgan (1986) advocates that organisation analysis should use metaphors with several origins and distinguishes eight possible perspectives. By making typologies, Mintzberg (1978, 1979) tries to enhance understanding of complexity. Andy Bailey and Gerry Johnson (1993) advocate a view that combinations of six different perspectives are likely to cover strategy formation in most industries. Czarniawska-Joerges (1993) suggests three dimensions for constructivist research into organisations: the symbolic, the political and the "practical". Pettigrew (1985) advocates a contextual view by which he means that a process is dependent on context and that a perspective integrating both inner and outer context has greater explanatory power than single perspectives.
The integrating efforts however, tend to disregard all other key individuals except the top managers. Information processing as understood in this thesis is an activity which involves a high individual participation from both highly competent professionals as well as from top managers.
2.2.1.2. Power in Organisation Theory.
Power and political processes have traditionally more been the focus of sociology and political (Peterson 1987) science. The western political sciences are interested in reconciling divergent interests in democracy without violence (Weston 1978). The political view assumes an open system, conflicts are not "explained" by political theory. Conflicts are seen as normal and order must be imposed by an authority which has a monopoly of physical violence.
Internal decision processes and the interaction with outer environment can be described as political processes. The focus of analysis is on conflicts of interest and power relationships between individuals and groups of individuals. The analysis concentrates on the actors (Pfeffer 1992) and their actions. Their relations are understood in terms of power relationships and depending on the individual and collective capacities (Mintzberg (1983) for dealing with such relationships.
The stake holder model has been influential in the political perspective, i.e. the organisation is seen as an entity in an environment affected by both internal and external stake holders; individuals, trade unions, clients, shareholders, suppliers etc.
The concept of knowledge is often implicit in the texts and when explicit - tends to be formulated in terms of its function (see competence above), as a power resource to reward or punish (Peterson 1987, Morgan 1986) or as a position (Pfeffer 1992).
The advantage of the political perspective is that it is close to the day-to-day reality of the managers who always feel influenced by the wishes of various stakeholders. It is also dynamic since it takes into account that the power of the actors differs according to the situation. The managers know that they must be able to play the political game (Crozier 1964) in order to get things done or in order to reduce their own uncertainty. This is probably one of the reasons why the political view has got renewed attention lately as the key element in how to implement decisions.
The cultural perspective acknowledges power play because it suggests that managers are influenced by competing subcultures (Mason & Mitroff 1981) and that these a/o form a organisational frame of reference which governs the way decision making is done.
2.3. Summary.
The information processing organisation is constituted by the process-of-knowing of individual actors. Their process-of-knowing can be described as a hierarchy. The most competent individuals are able to influence others by changing the rules of knowledge formation. The actors transfer knowledge within two main traditions of knowledge: professional and organisational. It is a direct transfer of rules and values similar to an interactive master-apprentice relation. The boundaries of their knowledge transfer determine what they regard as the organisation.
Their interactions tend to be divided in the two traditions which make their organising efforts develop along two conflicting paths. This may be understood as a conflict over freedom of space between the actors of the two traditions.
There is also an indirect transfer of knowledge in the form of manuals, agreements, and other formats which survive individuals´ coming and going. They function as boundaries for the process of knowing of individuals. They also function as boundaries of organising.
The process-of-knowing of the professionals is influenced by the professional tradition, which in the Affärsvärlden case were two: journalism and financial analysis. The professionals use their tacit knowing in the production process. The outcome of the process can be transferred as articulated tacit knowing in the form of information, like articles, magazines, written or oral reports, seminars or books. Another way is to transfer their process-of-knowing to customers in an interactive process in a direct relation with clients.
The other actors, (management, marketing, sales, administration etc.) are mainly influenced by another tradition, here called the organisational tradition. They use their process of knowing in organising for what they regard as organisation intact and prospering. Their knowing is determined by formal legislation and their own systems for knowledge transfer. The boundaries of their systems of knowledge transfer determine how they regard the boundaries of the "organisation".
3. summary of the affärsvärlden case.
This chapter is a summary of the Affärsvärlden case primarily in quantitative terms. The full case description in Book 2 is mainly qualitative, as are the illustrations from the case in Chapter 4.
I distinguish five phases in this summary of the Affärsvärlden case.
1. The Historic Phase 1901-1974, which Affärsvärlden, owned by a trust, ended in a crisis 1974 after a period of tough competition from Veckans Affärer.
2. The Founder Phase 1975-1979, when a new team took charge and began to develop the business and a new organisational structure.
3. The Expansion Phase 1980-1986, when the team took over from the trust, formalised as a partnership and diversified the business via joint ventures.
4. The Retreat Phase 1987-1990, when the strategies were reversed and the competition got tougher.
5. The E+T Phase 1990 -> 1993, when the partners merged with the technical publisher Ingenjörsförlaget and the international publishing network Eurexpansion. In 1994 the partners then finally sold their holding.
The Case description concentrates on the three phases covering the period 1975-1990.
3.1. History of Affärsvärlden 1901-1974.
Affärsvärlden was founded in 1901 and is today the oldest surviving business magazine in Sweden. One of the founding fathers was Marcus Wallenberg. Affärsvärlden was not the only magazine started in those booming days but none of the others survived for more than a few years.
The first editorial idea was to write both analysis and news. In 1910 Emil Fitger was hired as the new editor-in-chief. He was to remain the editor and main owner all until 1953 when he died from a heart attack in front of his typewriter.
The magazine had become synonymous with Fitger and was folded but revived a few weeks later by Arne Nilsson who acquired the magazine with some support from the Wallenberg family. He ran the magazine with considerable financial success until 1965 when Bonniers launched Veckans Affärer, on a concept inspired by Business Week.
Veckans affärer had the best available journalistic staff available, appeared in colour and immediately reached a circulation of 25 000. The launch more or less knocked out both Affärsvärlden and Finanstidningen which both had circulations of 4-5 000. The two ancient looking magazines merged and were taken over by a trust. The founders of the trust were a number of the largest companies at that time in Sweden. The merger was no success, the circulation remained at 5 000. With a cost structure trimmed to the bone, the merged magazine Affärsvärlden/Finanstidningen managed to survive until the end of 1974 when a new crisis questioned the survival of the company.
The editorial staff in 1974 consisted of four people. Two of them got other offers and left. The trust had no equity left. The remaining staff in the beginning of 1975 consisted of two journalists, one administrative support and one salesman. The Trust was faced with the decision to fold the magazine.
This was the situation in the spring 1975.
3.2. The Business Environment 1975-1990.
The 1970s was an era when the Swedish economy was regulated and when politicians expanded their influence over the economy. The labour markets got a large number of new laws increasing the employee´s right compared to the employer´s. "Industrial democracy" and the law of co-determination (MBL). It was an era when even non-socialist (1976-1982) governments socialised.
Despite its dependence on international trade, Sweden was rather insulated and wanted to build its own future. Sweden made the decision not to join the EEC in 1971 without any debate.
In 1974 the world was hit by the first oil crisis. The oil crisis sent an inflation burst through the whole world and Sweden experienced double digit inflation rates for the rest of the decade. Because of the regulated economy the interest rates did not follow the inflation and Sweden had a long period of negative real interest. Real estate investors made their first speculative billions.
The industry had some tough years. The government tried to save the shipbuilding industry and the steel industry with heavy subsidies but failed. Sweden devalued the krona in 1978.
Each year of the 1970s was also marked by a tax increase. The combined effect of inflation and income tax increases pushed a large proportion of Swedes into marginal tax rates above 70%, which encouraged tax evasion. One important loop hole was to find means for converting salaries into capital gains which were taxed much lower. It also encouraged property investments, since the inflation profits on property were taxed with the lower rate, whereas the negative real interests on loans were tax-deductible. Sweden became a country of property speculators and tax evaders during the 1970s, which was to have profound effects on the next decade.
One might say that the 1970s lasted 15 years from 1968 until 1982. The last year of the "decade" was celebrated by a last attempt of the traditional policy from the new Social Democratic government, the Wage Earner Funds.
In 1975 the Swedish financial markets were a slumbering and strictly regulated sector. This situation prevailed until the early 1980s when first the stock market took off and a few years later currency regulations were lifted. In 1970 some 38 000 people were employed in the financial sector in Sweden. The growth rates were quite high despite the regulation. The banks grew by 40% between 1975 and 1980.
In the golden decade 1980-1990 the number of people employed increased by almost 50% in the financial sector. One might say that the international "golden decade of the 1980s" existed for seven years. It started with President Reagan´s tax reductions in 1982 and ended with the fall of the Berlin wall in November 1990. It was an era of speculation, conspicuous consumption and recklessness all over the world.
Assisted by new technology the turnover of money increased. The global flow of money over the national borders trebled to 1500 billion dollars between 1980 and 1991.
Two big Swedish devaluations of together 25%, the first in 1981 the second in 1982 made the profits of the export industry shoot up. Stock prices shot up in an incomparable pace. The Stockholm Stock exchange was further vitalised by an infusion of capital from new Wage Earner Funds and funds with tax incentives. Property prices increased by eight times during the decade and the financial sector boomed.
Sweden experienced even more volatility during the golden era than other countries because the Social Democratic government dared to deregulate the currency and the capital markets and change the "perverse" tax system in the same period 1985-1989. The regulations were a heritage from the war and had been kept because they were a convenient way of exercising political power over industry and commerce. There were very few Swedes living in 1985 who had experienced an unregulated economy.
The labour market got overheated, Swedish
salaries increased 30% more than the OECD average and households increased
their spending. Restaurants and hotels were the two most rapidly increasing
industries in Sweden and internationally. Swedes´ spending was due to
the fact that they stopped saving, from a savings ratio of 4.8% in 1980 to a
minus 5.1% in 1988.
Figure 3. The stock market went through a metamorfosis.
The
growing financial sector was thus the first of the two most influential
forces that moved the markets for financial information from a stage of sleep
1975 into a boiling frenzy only ten years later.
The
second force was the development of the stock market. After a decade of sleep in the
1970s Sweden´s stock market exploded in the 1980s.
Figure 4. The advertising markets increased very rapidly until 1989.
The
third force were the advertising markets: The advertisers found a new interesting
group of potential buyers of their goods and services: businessmen and the financial
sector.
Between
1975 and 1980 the trade press moved in line with the rest of the media,
outgrowing. During the 1980s the trade press moved with higher volatility than
the rest of the market. The boom period for the trade press was the last half
of the decade. It peaked in 1989 at double the volume compared to 1982.
The
advertising aimed at the financial sector was small but growing much faster.
There is no break down analysis available in the official statistics. The
general development of the business press is thus unfortunately not possible to
distinguish but the combined advertising revenues for Veckans Affärer +
Affärsvärlden below give an indication.
Business
advertising segment was a healthy growth segment during almost the whole period
1977-1990. The trade press was severely hit by the recession in 1981-82, but
not the financial and business segments. The recession can be noticed as a
small decrease in the combined AFV+VA numbers although AFV kept the growth.
Veckans Affärer was a financial success story in 1975 and remained so all until
the end of the 1980s. Dagens Industri was suffering from an unclear editorial
concept until 1983 but was not a loss maker. The other small magazines on the
segment were small and had insignificant advertising revenues.
Figure 5. The two Business weeklies increased their combined advertising
revenues every year from 1977 until 1990, with the exception of one year. (1983
figures for VA are lacking).
3.3.
The Founder Phase 1975-1979.
The
climate was not favourable for finance when the Affärsvärlden founders started
their venture in 1975. Swedes were still living in the aftermath of 1968 and the
best and the brightest of the young people wanted to work in the public sector.
The financial sector was a labour market for the old and the odd and this was
particularly the case in the minuscule sector of financial and business
information.
The number
of financial journalists at this time in Sweden was no more than fifty. Most of
them had no academic degree in finance or economics. Veckans affärer had about
half of them, the rest were spread among the dailies. Sweden´s biggest daily
Dagens Nyheter had a staff of 5 financial journalists. Including the new
recruitments, little Affärsvärlden employed six, all of them with academic
degrees and all of about the same age 28-31.
The new
staff at Affärsvärlden decided to do a big relaunch and managed to get hold of
the subscription register of the old GHT, a business daily that had been folded
two years earlier. It was a success. They increased the paid circulation by 23%
to 7 000. (In fact no campaign was ever again to yield the same result). By an
amount of luck, personal risk taking and entrepreneurial drive the small new
team managed to establish themselves as an alternative to Veckans affärer.
Without
planning for it, the young Affärsvärlden team hit a growth trajectory that
pulled them forwards at a frantic pace. Affärsvärlden in the years 1975-1979
could be labelled a typical "rapid-growth surfer" (Ahrens 1991) with
growth rates of between 38% and 69%. The team had no means of forecasting their
rapid growth. They did not dare believe that it would continue so they were
careful with new recruitments and fell a step behind all the time. They had
very hard work just filling the increasing number of pages.
Figure 6. Affärsvärlden in 1973 was a very small actor on the financial
information market compared to the dailies and Veckans affärer. The Bonnier
Sphere dominated the market.
During
these first years the values vere firmly established as a balance of
dichotomies. The question of how the team would organise themselves, i.e. the
question of Power created tensions. The strategies emerged as an
organic learning process. They established a notion by which Affärsvärlden was
the core from which other information products would be spinned out. But
some were also doing some analytical consulting.
The supply
of journalistic/analytical Knowledge became an all important issue,
especially as the talent they needed was so scarce on the market. The profit
sharing system was established, primarily for allocating the value created
but it also proved to be a very powerful competitive tool for recruitment. This
system plus their growing reputation as the professionally best financial
analysts on the market made it possible to beat other magazines and newspapers
on the Know-How Market.
They were
inexperienced as publishers but developed their own approach to most issues
including organisational knowledge, which was not seen as sufficient.
3.4.
The Expansion Phase 1980-1986.
The favourable
trend for the magazine Affärsvärlden continued all through the Expansion Phase.
The magazine grew in volume each year, increased both staff and profits most
years, albeit at a slower rate towards the end of the period. The strategy of
the magazine was kept firm and was never challenged. One might say that the
team during this Phase tried to repeat the success of Affärsvärlden on other
markets, through a diversification strategy with Affärsvärlden as the
core. The diversification was primarily made as joint ventures because of the
small size of the Affärsvärlden organisation.
There were
three different tracks of diversification:
• New magazines or
newsletters, Sweden Business Report, Ledarskap and Affärer&Företag, were
based on journalistic knowledge.
• New consulting businesses, Aktiemarknadsbevakningen,
Consensus and Findata were founded on analytical knowledge.
• Efforts in Norway and an investment in UK based
Financial Weekly were based on the desire of some of the partners to become
more international.
At the
same time the team tried to make the organisation more "orderly" by:
• The construction of the
Partnership and their own limited company.
• The build up of a formal power structure with
separate functions for owners, board and management.
Figure 7. The revenues increased each year but stagnated towards the end
of the period. Affärsvärlden Magazine was the dominant revenue and profit maker
all through the period.
The
journalistic/analytical work - infoduction - was heavily influenced by
the growing computer technology. The first technology was the mini-computer era
1983-1987. New technology arrived with the introduction of the PC and the
computer became more of an individual tool encouraging new business and
new information products based on analysis.
Affärsvärlden
remained as the core both in terms of revenues, people employed and profits.
3.5.
The Retreat Phase 1987-1989.
In the
autumn 1986 Consensus crashed and sent a shock wave through the whole
organisation. Ledarskap had simultaneously surprised with an unexpected big
loss for the financial year ending April 1986. The Findata team were beginning
to complain. The reports from Financial Weekly were a never ending story of
disappointments. The new small business magazine Affärer & Företag was also
a disappointment. Still, the core business, the magazine Affärsvärlden, kept
ticking in profits.
During the
Retreat Phase many of the "old truths" were questioned. Even the
partnership strategy seemed to have lost its relevance. It had lost its
competitive edge on the Know-How Market for talent and some of the old partners
seemed tired of being owners. The management made an offer to the partners to
buy out the company but did not achieve full consent.
3.6.
The E+T Phase 1990 ->.
The
strategic position of Affärsvärlden in 1989 was not good. Bonnier´s daily
Dagens Industri had become dominant on the market and had pushed the two
weeklies Affärsvärlden and (their own) Veckans Affärer away from the
advertising markets.
Dagens
Industri could display very healthy readership growth. The recently launched
other daily Finanstidningen, owned by private investors, was also growing,
albeit from a loss position. Affärsvärlden´s circulation was still growing, but
slowly now.
The
business readers seemed to prefer faster media. The advertisers preferred to
advertise in the biggest media. The large scale operation of Bonnier gave them
advantages on a market that more and more had turned into an advertising
business.
The market
forces were assisted by the taxation policy in Sweden. For political reasons,
the dailies were favoured by:
• Exemption from 25% VAT.
• Distribution subsidies.
• Lower advertising tax, 3% against 10% for weeklies.
The
taxation policy was neutral in the fight between the two weeklies but it
favoured Dagens Industri which was classified as a daily eligible for
subsidies, despite its high profitability. Taxation policy also favoured the
new computerised media and thus enhanced the trend towards a faster pace on the
information markets, by putting especially the slower media in an awkward
position.
The market
for the trade press in 1990 was roughly SEK 1500 mill. It could be divided into
two main segments, business press 750 mill and technical press 750 mill. The
revenues came from two sources, advertising (70%) and circulation (21%). It was
thus an "advertising business". Advertising in the business segment
had grown rapidly whereas it was more or less stagnant in the technical press
segment.
Bonniers
dominated the business press segment with a market share estimated at about 75%
of the combined revenues in that segment. Affärsvärlden (AFV) as the second,
had only 9%.
The
technical press segment was much more fragmented. The largest player was
Ingenjörsförlaget with about 23% of the revenues. Number two was the rapidly
growing CW-Communications with computer magazines.
A picture
of the market is shown below. Most publishing companies were involved in other
areas than trade press. The technical press segment was dominated by
"non-professional" publishers, with an interest in sending
information, like the professional associations. Two engineers´ associations
owned Ingenjörsförlaget. The medicine profession owned the biggest medicine
magazine, the farmers´ association (LRF) owned the press involved in farming
and forestry etc.
The trade
press publishing market was thus a main activity for few of the competitors.
Affärsvärlden was the only publishing company active on no other markets
outside the business trade segment and with no "sender" as owner.
Affärsvärlden´s
implemented strategy since 1980 could in the light of 1989 be described as an effort
to diversify out of a corner position. The effort had failed. What could be
done?
The
solution was found to be a merger with Ingenjörsförlaget. On August 28th 1990,
the two engineers´ associations, Civilingenjörsförbundet and Ingenjörssamfundet
signed the formal agreements with the Affärsvärlden partnership and
Eurexpansion forming the new Ekonomi + Teknik Förlag AB.
The new
company had an ambitious and expansive business plan. The intended strategy was
to utilise the combinations between the two companies. E+T Förlag was to defend
Affärsvärlden´s position on the business segment and to expand on the technical
segment by acquisitions.
Only a
couple of weeks before, Saddam Hussein had invaded Kuwait. The actors on the
world markets held their breath, which was sufficient for the overspeculated
financial markets to collapse.
Figure 8. The trade press market in 1990 was divided in two segments of
approximately the same size.
The
advertising markets followed suit and began to cut back at a very fast pace.
The new management of the young E+T Förlag had to react very fast, reversed
(some of) the intentions and had to reduce personnel, rather than the opposite.
Figure 9. The new E+T Förlag was created through a merger in 1990
between Affärsvärlden Group and Ingenjörsförlaget. It became the second biggest
publishing company in the trade press sector after Bonniers. The combined sales
according to the first budget was 220 Mill
The first
budget of the combined publishing companies for 1990/91 was revenues of 220
million and profits of 16 million. The year ended in 191 Million revenues and
E+T Förlag suffered a loss of 8,3 Million after extraordinary items amounting
to 21,9 Million.
In 1993,
after three years of consecutive fall the markets hit bottom at a level that
left E+T Förlag with revenues of 145 mill SEK and a management that was proud
to display a profit of 6,3 mill for the financial year of 1992/93. The
following year the profits soared again and reached alomost 25 mill in the
financial year ending August 1994.
The
Eurexpansion Group (owning 30% of Eurolink, thereby controlling 15% of E+T
Förlag), however suffered even more than E+T Förlag during the crisis and
decided already in 1992 that they wanted to sell their holding. After almost
one year of negotiations, the solution was to sell all shares including those
owned by the remaining Affärsvärlden partners to Liber AB, a 100% subsidiary of
Dutch Wolters Kluwer.
3.7.
Affärsvärlden <-> Veckans affärer in Numbers.
In 1976-77 Affärsvärlden was the small runner-up on the market with six journalists and total revenues of 5 mill. Veckans Affärer had 30 journalists and revenues of 25 mill.
Figure 10. The official circulation figures of the two main contenders
Veckans affärer and Affärsvärlden. The new team of Affärsvärlden in 1975 hooked
on a growth trend that had started already a couple of years before.
Affärsvärlden was gaining market share all through the booming 1980s and the
depression starting 1990 hit Veckans affärer hardest.
The volume
development of a journal can be described in many ways. One is circulation,
i.e. number of subscribers, another is readership, i.e. number of readers, a
third is number of pagers printed.
There are
distinct economy-of-scale advantages in the technical production of newspapers
and magazines, which act as efficient entry barriers for smaller competitors.
The starting set-up is costly whereas the marginal cost for printing one more
copy is often no more than 10% of the average print cost.
Figure 11. The total number of pages printed and distributed is an
indicator on the economy of scale advantage. In the 1960s and 1970s Veckans
affärer printed six times as many pages as Affärsvärlden. Towards the end of
the 1980s the difference had shrunk to twice as many.
This
economy-of-scale effect can be seen below. In 1983/84, printing one of Veckans
Affärer´s 204 000 full colour pages cost 8,5 öre, whereas as one page of
Affärsvärlden´s 73 000 pages (with less than 50% colour) cost 11.9 öre, a cost
disadvantage of almost 30% for Affärsvärlden. Despite sinking production costs
for both magazines, the relative printing cost disadvantage remained during the
whole decade.
The small
journal Affärsvärlden therefore had no alternative but trying to beat the big
player on the other costs. This meant less resources for editorial staff and
for other costs. This was the only strategy that Affärsvärlden could possibly
choose in 1975.
The
strategy implied heavy work load for the Affärsvärlden journalists, however.
They were writing twice as many pages as their VA-colleagues: in 1983 133 pages
per year on average as compared to 62. The editorial costs per printed page in
Affärsvärlden therefore amounted to a mere 7,9 öre as compared to Veckans
Affärer´s 13,7 öre in 1983/84. This difference in editorial productivity
remained the whole decade, even if the productivity went down for both. In 1990
Affärsvärlden´s journalists were writing 114 yearly pages compared to 54 for
Veckans Affärer´s.
The
strategy of Affärsvärlden paid off when the depression years hit the two
magazines in 1991. Affärsvärlden could fend off the drop in advertising by
rapidly reducing pages, whereas Veckans Affärer was caught with its higher
break-even level because of more costly lay-out and larger staff. VA had to
publish its first negative operating margin since the launch in 1965.
Figure 12. Affärsvärlden compensated for Veckans Affärer´s
economy-of-scale in technical production by having a low-cost strategy on
editorial costs.
Veckans Affärer
was in a much more awkward strategic position in 1990 than Affärsvärlden. 
Figure 13. Affärsvärlden was able to keep a higher profitability in relative
terms than the main contender Veckans affärer during most of the period. The
difference increased in the first depression years of the 1990s.
The
concept of the journal was to be "newsy" and "glossy" and
the yellow news pages had a high reputation The faster media had taken the news
niche and Affärsvärlden was firmly positioned in the analysis niche. (See also
Chapter 4.4.2.1.). In the spring 1994 Veckans Affärer was relaunched with an
entirely new concept.
The
operating profit levels of both magazines peaked in 1985-86 at a level around
30%. Thereafter, the success of Dagens Industri squeezed the margins and the
best days were over.
Figure 14. Veckans affärer was double Affärsvärlden´s size in absolute
terms, revenues and profits during most of the period.
3.8.
Summary of Financial Development 1975-1990.
The profit
development of Affärsvärlden Group was favourable all through the fifteen years
covered in the thesis. Rather little of profits was distributed as profit
sharing - a maximum of one month´s salary. The main parts of profits were
retained or put into new projects. The core was the magazine Affärsvärlden,
while most new businesses contributed only negligible amounts or amounted
losses.
Figure 15. Net profits after financial net.
Affärsvärlden
Group had a favourable profit development all through the period.
"Internal" profit is the profit calculated internally before
extraordinary items. The losses incurred by the start-ups and diversifications
were generally small, with the exception of Financial Weekly, which cost 6,5
mill over a period of four years. In 1985/86 the losses in Financial Weekly and
A&F were written off as extraordinary items and in 1987 sales of the shares
in Findata added a capital gain.
Figure 16. The Business Press market
1975-1992.