K-Era

Welcome to the Knowledge Organisation!

Everyone agrees that we are leaving the industrial way of "seeing" the world, but no-one can say with any certainty what will take its place. We already live in a world in which Services constitute more than 2/3 of both GNP and employment, so we must shift perspective or paradigm. Some, call it the Knowledge Economy (Quinn 1992). I have chosen the label Knowledge Paradigm or to see the world from a Knowledge Perspective. The right hand column in the table is at the same time a summary of the guiding principles for the organisation I have designed as an archetype for the future: the Knowledge Organisation. So, what are the practical management consequences of these sweeping principles? I believe some of the answers can be found among the companies in the business services sector, because many of them are already "there" – in the Knowledge Economy. Human beings have an infinite ability to create knowledge. Add the convenient fact that unlike conventional assets, knowledge grows when it is shared and you have the two most powerful features, which will change how we manage in the Knowledge Era. In Knowledge Organisations knowledge flows are more important than financial flows. People are revenue creators, not cost items. Their true output is a better performance among their customers. It is a world in which the customer relation is no longer one-way market driven, but partnerships in which solutions are co-created and knowledge flows both ways. Such organisations are not easy places to manage, because the power balance has shifted. Knowledge workers know more about the technical field than their bosses, have a better feel for the market and are closer to the customers. They are environments where the staff value the approbation of their professional peers more than the approval of their leaders. And how do you stay in control when the primary production factor - creativity of the staff - flourishes best in chaos? How do you exercise power when your level in the organisation´s hierarchy is irrelevant and your primary power tool, control of the information flow, is usurped by the internet and collegial networks? How do you know that you are on the right track when the management information system does not report knowledge flows and the financial results are hopelessly out-of-date by the time they reach you? In such a world managers´ power base is their relative level of Knowledge. Their role shifts from supervising subordinates to supporting colleagues. Their management information system reports competence utilisation, value added, knowledge flows, customer image and staff attitudes. This information is available for everyone on the central network. The managers no longer manage people or even knowledge, but the space in which knowledge is created. This space is both the intangible culture and the tangible environment, such as the office. The culture encourages knowledge sharing so people are recognised publicly and rewarded for sharing. Top management recognises trust as the bandwidth of sharing and have made investments in trust building one of their top priorities. Hoarding of knowledge and information as a means of career advancement is actively discouraged and the best knowledge workers are paid more than their bosses. The open culture is further encouraged by the lay-out of the office. The top managers no longer hide on the top floor, but have their desks on the same floors as the knowledge workers, because they recognise the value of the informal information networks. The corner rooms are used intensively for knowledge creation; they are no longer empty symbols of power occupied by bosses who are seldom there. The coffee machine is recognised as a generator of creative encounters, so it is in the center and not tucked away in a corner. Can you deal with such a world? I believe you can and you have no choice - you are already there! Karl-Erik Sveiby	...is/are seen as...	...with an Industrial Paradigm or from an "Industrial Perspective"	...with a Knowledge Paradigm or from a "Knowledge Perspective"
	People...	...being Cost generators or "Resources"...	...becoming Revenue generators.
	Managers´ Power Base...	...being relative Level in organization´s Hierarchy...	...becoming relative Level of their Knowledge.
	Power Struggle...	...being Body workers vs. Capitalists...	...becoming Knowledge workers vs. Managers.
	Main Task of Management…	...being Supervising Subordinates...	...becoming Supporting Colleagues.
	Information...	...being Control Instrument...	...becoming tool for Communication and Resource.
	Production...	...being Body workers processing physical resources to create tangible products...	...becoming Knowledge workers converting knowledge to create intangible structures.
	Information Flow...	...being via organization´s Hierarchy...	...becoming via collegial Networks.
	Primary form of Revenues...	...being Tangible (money)...	...becoming Intangible (learning, new ideas, new customers, R&D, etc).
	Production bottlenecks...	...being financial capital and human skills...	...becoming time and knowledge.
	Manifestation of production...	...being Tangible products (hardware)...	...becoming Intangible structures, (concepts and software).
	Production Flow...	...being Machine-driven, sequential...	...becoming Idea-driven, chaotic.
	Effect of Size...	...being Economy of Scale in Production Process...	...becoming Economy of Scope of Networks.
	Customer Relation...	...being Oneway via Markets...	...becoming Interactive via personal networks.
	Knowledge...	...being a Tool or resource among others...	...becoming the focus of business.
	Purpose of Learning...	...being Application of New Tools...	...becoming Creation of New Assets.
	Stock Market Values...	...being driven by Tangible Assets...	...becoming driven by Intangible Assets.
	Economy...	...being of diminishing returns...	...becoming of both increasing and diminishing returns.

The new environment that managers have to tackle in the future has been eloquently described by many authors.

They outline a "new" dangerous (Toffler 1990) society, age or era, labelled, the Third Wave (Toffler 1970), Information Society (Masuda 1980), Knowledge Society (Masuda 1980, Naisbitt), or Post-Capitalist (Drucker). It will be the virtual (Rheingold 1993) Knowledge Era (Savage 1995) characterized by the Smart Machine (Zuboff 1988) and Unreason (Handy 1990).

The new world is a challenge for manager. Classical management theory assumes that leaders make decisions and the led carry them out, that talk is one thing and action another, and that leaders are always better informed than the staff, or can easily become so, because they control the flow of information.

It assumes, in short, that the bosses are in charge.

But suppose classical theory is wrong. Suppose the staff know more than their bosses, have a better feel for the market and are closer to customers. Suppose talking or writing is acting and suppose staff value the approbation of their professional peers more than the approval of their leaders.

Is it possible to "lead" such an organization? Not according to classical theory. It would be like herding cats. Yet that is precisely the kind of situation heads of tomorrow´s organizational creatures have to confront.

The creatures are described as fishnets (Johansen & Swigart 1994), networks (Grenier& Metes 1992), virtual (Davidow & Malone1992), irrational (Brunsson 1985), three-dimensional (Czarniawska-Joerges 1993), hyper-text, knowledge creating (Nonaka & Takeuchi 1995), adhocratic (Mintzberg 1979), intelligent (Quinn 1992, Pinchot 1995), transcendent (Gustavsson 1992), learning (Senge 1990), or imaginary (Hedberg 1995)

Yesterday´s managers could rely on their workers´ loyalty (born out of necessity). Not so in the future. The operatives of knowledge organizations are highly educated knowledge workers (Drucker 1993) and reflective practioners (Schön 1983). They are the illoyal new invidualists (Leinberger / Tucker 1991) from a Generation X (Coupland 1991) that form a new elite.

They keep well informed by contacts with customers and vendors, and membership of informal networks, in which knowledge flows freely, and information is abundant.

"Production" in future organizations appears totally different from the production envisaged by classic theory, which occurs within the four walls of a factory, and takes the form of the movement of tangible material, through the stages of a production process. Much of the organization´s business will be done off-site, in customers´ offices or private meetings, to which leaders are never invited. They cannot possibly interact with all the networks, or have access to all the sources of knowledge.

Do companies that are lean (Womack & Jones 1994), nice (Lloyd 1988),self-organizing (Jantsch 1980) or self-ruling (Wheatley 1995) really need managers?

The answer seems to be Yes, but they must learn how to dance (Moss-Kanter 1990), and they must thrive on chaos (Peters 1987), because they will manage on the edge (Pascal (1990). They must master the fifth discipline (Senge 1990). So they must communicate silently (Hall 1959) ) in teams on a global basis (Johansen, Robert&al 1991), reengineer (Hammer & Champy 1993) and implement total quality (Cullen & Hollingum 1987).

If the managers succeed in managing their invisible balance sheets (Sveiby&al. 1989) they are promised a new world of increasing returns (Arthur 1996).

Reference List

Arthur B. (1996): Increasing returns and the new world of Business. Harvard Business Review July-August.

Brunsson N. (1985): The Irrational Organization. Wiley

Coupland (1991): Generation X. St. Martins New York.

Cullen & Hollingum (1987): Implementing Total Quality. IFS Publications Bedofrd England.

Czarniawska-Joerges (1993): The three-dimensional Organisation. Studentlitteratur

Davidow & Malone (1992): The Virtual Corporation Harper Collins

Drucker P. (1993): Post Capitalist Society. Butterworth&Heinemann.

Grenier & Metes (1992): Enterprise Networking. Working together Apart. Digital Press.

Gustavsson B. (1992): The Transcendent Organization. PhD Dissertation. University of Stockholm.

Hall R. (1959): The Silent Language. Doubleday.

Hammer & Champy (1993): Reengineering the Corporation. Free Press.

Handy C. (1990): The Age of Unreason. Random House.

Hedberg Bo (1995): The Imaginary Organization. Sage

Jantsch E. (1980): Self Organizing Universe. Pergamon Press

Johansen & Swiegert (1994): Upsizing the Individual in the Downsized Organization. Addison Wesley

Johansen, R. & al (1991): Leading Business Teams. Addison-Wesley

Kuhn Thomas (1962):The Structure of Scientific Revolutions Univ.of Chicago Press

Leinberger/Tucker (1991): The New Individualists. Harper Collins.

Lloyd Tom (1988): The Nice Company. Bloomsbury

Moss-Kanter R-B (1983): The Change Masters: Innovation and Entrepreurship in the American Corporation. Simon&Schuster.

Naisbitt J. (1982): Megatrends. Warner Books New York.

Nonaka&Takeuchi (1995): The Knowledge Creating Company. Oxford University Press

Pascal (1990): Managing on the Edge. How the Smartest Companies use Conflict to stay Ahead. Simon&Schuster.

Peters T. (1992): Thriving on Chaos. Alfred A, Knopf.

Pinchot & Pinchot (1995): The End of Bureaucracy & the Rise of the Intelligent Organization. Berret-Koehler.

Quinn (1992): Intelligent Enterprise. A Knowledge and Service based paradigm for Industry. Free Press

Rheingold (1993): The Virtual Community. Addison Wesley.

Savage C. (1995): 5th Generation Management: Digital Press

Senge P. (1990): The Fifth Discipline. The Art & Practice of the Learning Organization. Century Business.

Simon Herbert (1971): Designing Organizations for an Information Rich World. In Models of Bounded Rationality Vol 2:6.6. MIT Press.

Simon Herbert (1982): Models of Bounded Rationality. Volume 2. MIT Press.

Stewart T. (1994): Your Company´s most Valuable Asset: Intellectual Capital in Fortune Oct 3 1994.

Sveiby KE & al. (1989): Den osynliga balansräkningen (The Invisible Balance Sheet), Ledarskap Stockholm.

Sveiby KE (1990): Kunskapsledning, (Knowledge Management) Ledarskap Stockholm

Sveiby KE (1994): Towards a Knowledge Persective on Organization. University of Stockholm PhD dissertation.

Toffler A. (1980): Third Wave. Esselte Info.

Wheatley M. (1995). Leadership and the new Challenge. Berrett-Koehler

Womack & Jones (1994): The Machine that changed the Worl. Macmillan

Zuboff S. (1988): In the Age of the smart Machine. Basic Books.