The role of knowledge management in innovation
The Authors
Marina du Plessis, Lyttelton, South Africa.
Abstract
Purpose – This article seeks to clarify the role of knowledge management in
innovation as an aid to addressing this complexity. The article seeks to identify
the drivers for application of knowledge management in innovation. It also details
the nature of the role of knowledge management in innovation as well as its
value proposition.
Design/methodology/approach – The methodology used was literature
research and some personal experiences and interpretations.
Findings – In the fast changing business world of today, innovation has become
the mainstay of organizations. The nature of global economic growth has been
changed by the speed of innovation, which has been made possible by rapidly
evolving technology, shorter product lifecycles and a higher rate of new product
development. The complexity of innovation has been increased by growth in the
amount of knowledge available to organizations.
Originality/value – Innovation is extremely dependent on the availability of
knowledge and therefore the complexity created by the explosion of richness and
reach of knowledge has to be recognized and managed to ensure successful
innovation.
Introduction
In the fast changing business world of today, innovation has become the
mainstay of every organization. The nature of global economic growth has been
changed by the speed of innovation, which has been made possible by rapidly
evolving technology, shorter product lifecycles and a higher rate of new product
development. Organizations have to ensure that their business strategies are
innovative to build and sustain competitive advantage. Innovation has, however,
become increasingly complex due to changing customer needs, extensive
competitive pressure and rapid technological change (Cavusgil et al., 2003). The
complexity of innovation has also been increased by growth in the amount of
knowledge available to organizations as basis for innovation. Innovation is
extremely dependent on the availability of knowledge and therefore the
complexity created by the explosion of richness and reach of knowledge has to
be identified and managed to ensure successful innovation (Adams and Lamont,
2003; Cardinal et al., 2001; Darroch and McNaughton, 2002; Pyka, 2002; Shani
et al., 2003).
Due to the fact that very little clarity exists in current literature, this article aims to
clarify the role of knowledge management in innovation. In order to facilitate this,
the definition and nature of both knowledge management and innovation will be
investigated. The article also aims to identify the drivers for the application of
knowledge management in innovation as well as the value proposition of the
utilization of knowledge management in the innovation process.
Definitions
Innovation is defined in many different ways in the literature. According to Chen
et al. (2004) innovation refers to the introduction of a new combination of the
essential factors of production into the production system. Innovation capital is
the competence of organizing and implementing research and development,
bringing forth the new technology and the new product to meet the demands of
customers. It involves the new product, the new technology, the new market, the
new material and the new combination. Cardinal et al. (2001) indicate that the
innovation process encompasses the technical, physical, and knowledge-based
activities that are central in forming product development routines.
Herkema (2003) defines innovation as a knowledge process aimed at creating
new knowledge geared towards the development of commercial and viable
solutions. Innovation is a process wherein knowledge is acquired, shared and
assimilated with the aim to create new knowledge, which embodies products and
services. Herkema (2003) also states that innovation is the adoption of an idea or
behavior that is new to the organization. The innovation can be a new product, a
new service or a new technology. Innovation is related to change, which can be
radical or incremental.
Innovation can broadly be described as the implementation of discoveries and
interventions and the process by which new outcomes, whether products,
systems or processes, come into being (Gloet and Terziovski, 2004). The
authors distinguish radical and incremental innovation from one another.
Incremental innovations present themselves as line extensions or modifications
of existing products. They are usually classified as market-pull innovations.
Incremental innovation does not require significant departure from existing
business practices and are therefore likely to enhance existing internal
competencies by providing the opportunity to build on existing know-how. Radical
innovations are likely to be competence-destroying, often making existing skills
and knowledge redundant and necessitating different management practices.
Radical innovations often put the business at risk because they are more difficult
to commercialize. Radical innovations are considered crucial to long-term
success as they involve development and application of new technology, some of
which may change existing market structures. Companies that facilitate both
radical and incremental innovation are more successful than organizations that
focus on one or the other.
The author defines innovation as the creation of new knowledge and ideas to
facilitate new business outcomes, aimed at improving internal business
processes and structures and to create market driven products and services.
Innovation encompasses both radical and incremental innovation.
Many knowledge management definitions exist. For the purpose of this paper,
only selected definitions will be focused on. Gloet and Terziovski (2004) describe
knowledge management as the formalization of and access to experience,
knowledge, and expertise that create new capabilities, enable superior
performance, encourage innovation, and enhance customer value. The authors
also describe knowledge management as an umbrella term for a variety of
interlocking terms, such as knowledge creation, knowledge valuation and
metrics, knowledge mapping and indexing, knowledge transport, storage and
distribution and knowledge sharing.
Darroch and McNaughton (2002) indicate that knowledge management is a
management function that creates or locates knowledge, manages the flow of
knowledge and ensures that knowledge is used effectively and efficiently for the
long-term benefit of the organization. In the authors' opinion an organization that
demonstrates competence in knowledge management has a knowledge-
orientation and that knowledge management therefore becomes a guiding
business philosophy that influences strategies undertaken by an organization's
managers.
Parlby and Taylor (2000) is of the opinion that knowledge management is about
supporting innovation, the generation of new ideas and the exploitation of the
organization's thinking power. Knowledge management also includes capturing
insight and experience to make them available and useable when, where and by
whom it is required. Knowledge management allows easy access to expertise
and know-how, whether it is formally recorded or in someone's mind. Knowledge
management further allows collaboration, knowledge sharing, continual learning
and improvement. It underpins better quality decision-making and ensures that
the value and contribution of intellectual assets, as well as their effectiveness and
their exploitation, is well understood.
In the author's opinion, knowledge management is as a planned, structured
approach to manage the creation, sharing, harvesting and leveraging of
knowledge as an organizational asset, to enhance a company's ability, speed
and effectiveness in delivering products or services for the benefit of clients, in
line with its business strategy. Knowledge management takes place on three
levels, namely the individual level, team level and organizational level. It is a
holistic solution incorporating a variety of perspectives, namely people, process,
culture and technology perspectives, all of which carry equal weighting in
managing knowledge (Du Plessis and Boon, 2004). Knowledge management is
not solely focused on innovation, but it creates an environment conducive for
innovation to take place.
Drivers of the application of knowledge management in
innovation
According to the literature there are three main drivers of the application of
knowledge management in innovation.
The first basic driver for knowledge management's role in innovation in today's
business environment is to create, build and maintain competitive advantage
through utilization of knowledge and through collaboration practices. Cavusgil et
al. (2003) indicate that building and sustaining an innovation program has,
however, become increasingly complex due to changing customer needs,
extensive competitive pressure and rapid technological change. Organizations
find it increasingly difficult to internalize innovations. Some large organizations
such as Xerox and Hitachi have therefore started working collaboratively across
organizational boundaries to ensure sustained innovation and competitive
advantage (Cavusgil et al., 2003). Knowledge management can facilitate such
collaboration. Close collaborative relationships can provide access to the
processes other organizations use that could be applied in different contexts.
Acquiring knowledge and skills through collaboration is considered to be an
effective and efficient way of successful innovation.
The second driver of the role of knowledge management in innovation is that
knowledge is a resource used to reduce complexity in the innovation process,
and managing knowledge as resource will consequently be of significant
importance. Innovation is extremely dependent on the availability of knowledge
and therefore the complexity created by the explosion of richness and reach of
knowledge has to be recognized and managed (Adams and Lamont, 2003;
Cardinal et al., 2001; Darroch and McNaughton, 2002; Pyka, 2002; Shani et al.,
2003). According to Shani et al. (2003) the upsurge in the amount of knowledge
that is readily available to organizations seems to add increased complexity to
the design and management of new product development, but this complexity
can be addressed by knowledge management and knowledge-intensive units in
the organization that are strategic in nature.
Cavusgil et al. (2003) agree that knowledge management is a mechanism
through which innovation complexity can be addressed. It assists in managing
new knowledge created through the innovation process, but also in managing
existing knowledge as a resource used as input to the innovation process.
Cavusgil et al. (2003) are of the opinion that firms that create and use knowledge
rapidly and effectively are able to innovate faster and more successfully than
those that do not. According to Pyka (2002), creation of innovation networks are
driven by synergistic creation and management of knowledge.
The third driver of applying knowledge management to the benefit of the
innovation process is the integration of knowledge both internal and external to
the organization, thus making it more available and accessible. Knowledge
integration implies that timely insights can be made available to be drawn at the
appropriate juncture for sense making, i.e. knowledge can be exchanged,
shared, evolved, refined and made available at the point of need. Knowledge
integration via knowledge management platforms, tools and processes must
therefore facilitate reflection and dialogue to allow personal and organizational
learning and innovation. This requires linkability, adaptability and dynamic
representation of business information and knowledge. Without effective
information and knowledge management that drives knowledge integration,
which in turn underpins innovation, organizations could be underutilizing
knowledge as an innovation resource (Baddi and Sharif, 2003; Chen et al.,
2004).
In conclusion, it can be said that knowledge management systems have a
distinctive contribution in the development of sustainable competitive advantage
through innovation. Whilst information and knowledge management systems
alone do not possess the qualities required to provide organizations with
sustainable competitive advantage, the bundling of knowledge management
systems with other firm resources and core competencies is the key to
developing and maintaining sustainable competitive advantage through product
and process innovation. In such a position, knowledge management systems
play a major role in the conversion of learning capabilities and core
competencies into sustainable advantage by enabling and revitalizing
organizational learning and resource development processes (Adams and
Lamont, 2003):
Knowledge management and innovation configuration determine how
the firm can capitalize and create new knowledge, providing context
wherin new product development efforts are designed, developed and
completed (Shani et al., 2003).
The nature of the role of knowledge management in innovation
Knowledge and knowledge management fulfils a myriad functions in the
innovation realm.
The first major role that knowledge management plays in innovation is enabling
the sharing and codification of tacit knowledge. Tacit knowledge sharing is critical
for organizations' innovation capability (Cavusgil et al., 2003). According to the
authors, firms with high innovation potential employ a learning-by-doing effect
that makes it difficult for competitors to buy this know-how in the market and also
makes it difficult to replicate. According to Cardinal et al. (2001), replication of
knowledge-based competitive advantage is inhibited by two factors. Causal