IN
DEGREE PROJECT INDUSTRIAL MANAGEMENT, SECOND CYCLE, 15 CREDITS
,
STOCKHOLM SWEDEN 2019
Knowledge Management towards Innovation
ALIX DONATA FREIIN VON DÖRNBERG
How can organizations utilize knowledge management to foster innovation?
by
Alix Donata Freiin von Dörnberg
Master of Science Thesis TRITA-ITM-EX 2019:224
Master of Science Thesis TRITA-ITM-EX 2019:224
How can organizations utilize knowledge management to foster innovation?
Alix Donata Freiin von Dörnberg
Approved
2019-06-20
Examiner
Kristina Nyström
Supervisor
Serdar Temiz
Abstract
Being innovative allows organizations to be part of the rapid competitive and environmental shifts and requires the development of knowledge as it builds the pathway of innovation. Since most companies find it troublesome to effectively utilize their existing knowledge towards innovations and literature lacks to offer solutions, this study aims to determine factors that contribute to an enhancement of the spiral of knowledge as well as to develop a concept that provides counselling for business and academia on how to overcome this issue. Therefore, this study contributes with new insights to the field of research in knowledge management and innovation management as well as to organizations with a concept on how to operationalize knowledge management towards innovation.
Based on literature review on innovation management, knowledge management and organizational agility, a hypothesis was established that claimed that agile feedback loops at the spiral of knowledge would facilitate the utilization of knowledge management towards innovation. Expert interviews allowed the identification of factors that are relevant for tapping the potential of knowledge towards innovation. The analysis of their responses disclosed a common request to include feedback during the knowledge transformation but also revealed that design thinking and an innovative organizational culture are further relevant factors. Thus, the study postulates a concept that refines the spiral of knowledge to the ‘spiral of knowledge and innovation’, which extents the ‘spiral of knowledge’ with agile feedback loops, design thinking as well as an innovative organizational culture.
Key words: Innovation Management, Knowledge Management, Spiral of Knowledge, Corporate Culture, Design Thinking, Agile Organization, Learning Organization
Acknowledgements
First, I would like to thank my thesis supervisor Dr. Serdar Temiz of the Industrial Economics and Management Department of KTH, Royal Institute of Technology. The door to Dr. Temiz office was always open whenever I ran into a trouble spot or had a question about my research or writing. He consistently allowed this paper to be my own work, but steered me in the right direction whenever he thought I needed it.
I would also like to acknowledge the experts who were involved in the validation survey for this research project. Without their passionate participation and input, the validation survey could not have been successfully conducted. This also includes Ilgi Evecan and Romina Mariano, who initiated the cooperation with The Absolut Company and whose support as mentors was unremarkable at any time.
Finally, I must express my very profound gratitude to my family and friends for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without them. Thank you.
List of Content
1 INTRODUCTION ... 1
1.1 BACKGROUND ... 1
1.2 PROBLEM STATEMENT AND RESEARCH QUESTION ... 2
1.3 CONTRIBUTION AND DELIMITATION ... 3
1.4 THESIS STRUCTURE ... 4
2 LITERATURE REVIEW ... 5
2.1 INNOVATION MANAGEMENT ... 5
2.1.1 INNOVATION ... 5
2.1.2 INNOVATION MANAGEMENT PROCESS ... 6
2.1.3 INNOVATION IN ORGANIZATIONAL CONTEXT ... 8
2.2 KNOWLEDGE MANAGEMENT ... 9
2.2.1 KNOWLEDGE BASED VIEW OF A FIRM ... 9
2.2.2 KNOWLEDGE &KNOWLEDGE MANAGEMENT ... 10
2.2.3 SPIRAL OF KNOWLEDGE ... 11
2.3 ORGANIZATIONAL AGILITY ... 13
3 METHODOLOGY ... 17
3.1 RESEARCH PARADIGM ... 17
3.2 RESEARCH APPROACH ... 17
3.3 DATA COLLECTION AND ANALYSIS ... 18
3.4 ETHICS AND SUSTAINABILITY ... 20
4 FINDINGS ... 22
4.1 CHALLENGES &KNOWLEDGE TOWARDS INNOVATION ... 22
4.2 CONTINUOUS FEEDBACK ... 23
4.3 CULTURE AS FOUNDATION ... 24
5 DISCUSSION ... 26
5.1 ENRICHED SPIRAL OF KNOWLEDGE ... 26
5.1.1 AGILE SPIRAL OF KNOWLEDGE ... 26
5.1.2 DESIGN THINKING &ORGANIZATIONAL CULTURE ... 27
5.2 SPIRAL OF KNOWLEDGE AND INNOVATION ... 31
6 CONCLUSION ... 33
6.1 RESULTS ... 33
6.2 MANAGERIAL IMPLICATIONS ... 34
6.3 LIMITATIONS ... 36
6.4 FURTHER RESEARCH ... 37
REFERENCES ... 38
APPENDIX ... 44
APPENDIX A:INTERVIEW STRUCTURE –EXPERT INTERVIEW ... 44
List of Figures
Figure 1: Innovation Process ... 7
Figure 2: Spiral of Knowledge ... 12
Figure 3: Data-based Knowledge ... 13
Figure 4: Learning Feedback Loop ... 15
Figure 5: Hypothesis: Agile Spiral of Knowledge ... 16
Figure 6: IDEO Design Thinking Process ... 29
Figure 7: Design Thinking and the Spiral of Knowledge ... 30
Figure 8: Spiral of Knowledge and Innovation ... 33
List of Tables
Table 1: Interview Participants ... 19 Table 2: Meetings overview ... 20
1 Introduction
This master thesis aims to explore how organizations can utilize their knowledge management in order to foster innovation. By means of expert interviews, factors will be determined that are relevant for operationalizing the spiral of knowledge so as to build a bridge towards the organization’s innovativeness and capabilities to innovate.
1.1 Background
The term “Creative Destruction” finds its origin by the Austrian political economist Joseph Schumpeter and describes a process as an essential fact about capitalism (Schumpeter, 1942).
Since then, it has found frequent use in the field of economics to define entrepreneurship and innovation on a more conceptual level. According to Schumpeter, creative destruction means a process of industrial mutation that “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one" (Schumpeter, 1942, p.
83). This definition refers to today’s term of “innovation” and has gained a high relevance in the business environment, which is characterized by constant changes of the operational and competitive environment. Thus it requires an agile enterprise (Dove, 1999). An organizational ability to learn from and act to such modifications has never been more important than now (Sinkula, Baker, & Noordewier, 1997). However, for companies it is challenging to continuously develop innovations, as it is essential for the survival in today’s economy. Hence, innovation management became a crucial field as an answer to the dynamically altering surroundings.
Moreover, academia has been focusing on research and developed concepts such as
‘Ambidexterity’ which describes the balance of exploiting current capabilities while at the same time exploring new opportunities (Raisch & Birkinshaw, 2008). The ‘Theory of Ambidexterity’
however, was firstly defined by James March (1991) who saw exploitation and exploration as types of organizational learning. According to March (1991), organizations that have discrimination in either exploitation or exploration will be struggling to survive. Only by gaining a suitable balance between the two, organizations are able to maintain their existence or even bloom (March, 1991).
A connection can be established between the concept of organizational effectiveness and organizational ambidexterity (Biloslavo, Bagnoli, & Rusjan Figelj, 2013). The concept considers an organization as being effective once it obtains productivity (efficiency), flexibility to the form of adjustment to internal change and successful adaption to external change. In other words, an organization is acting effectively in the today’s rapidly evolving environment, if it is efficient, flexible and adaptive. The latter two represent competences that enable organizations to be innovative by readjusting to altering requirements due to environmental influences in a flexible
way. Doing this in an efficient manner requires for the organization to exploit its current capabilities and utilize these optimally (Stone & Mott, 1973).
The internal knowledge about capabilities that exist and those that are being developed within an organization therefore embody a strong competitive advantage as those capabilities are difficult to imitate (Argote & Ingram, 2000). Thus, the potential of the hidden intellectual capital, which often remains unrecognized needs to be uncovered (Carneiro, 2000), as innovation not only requires ingenuity and focus, but especially knowledge (Drucker, 2002).
1.2 Problem Statement and Research Question
Organizations with the competence to use and broaden the knowledge within the firm are considered to be better prepared for the rapid competitive and environmental shifts (Nonaka, 1994). Thus, organizational learning might be the most strategically treasured dynamic capability (Teece, Pisano, & Shuen, 1997) as the pathway of innovation depends on the development of knowledge (Carneiro, 2000). The link and relevance between knowledge management and innovation management has been broadly discussed and proven in literature.
Organizations that are prepared for today’s rapid environmental change are capable of simulating and improving the knowledge of human capital. This shift to a fast moving business environment requires an adjustment with respect to how organizations process knowledge and create knowledge, in order to become a dynamic organization that wants not only to process knowledge but rather to create information and knowledge (Nonaka, 1994). Drawing on that, different academias have already defined innovation in the context of knowledge creation. An example is Peter F. Drucker who considers knowledge among other factors like ingenuity and focus as a requirement for innovation (Drucker, 2002). Fiol (1996) also regards the continuous establishment of knowledge stores as well and the recombination of different knowledge aspects to create novel knowledge as a determent for organizational innovation (Fiol, 1996). Thus, it seems as if in academia and economics a common understanding about the crucial importance of knowledge for innovation exists. Different publications investigated different factors of this relationship. Cardinal and colleagues (2001) discuss the importance of knowledge availability in order to reduce the complexity of an innovation process (Cardinal, Alessandri, & Turner, 2001),
literature but also developed or extended existing frameworks, thereby reflecting on a “how”
question. More precisely, it was investigated how companies can close the gap between the existing knowledge and the required knowledge for innovation (Hall & Andriani, 2002) with simultaneously focussing on the lack of intra organizational networks and the disparate identities established by different Business Units (Scarbrough, 2003). Basadur and Gelade (2006) developed an approach that operationalizes organizational learning for innovation through an innovative thinking organization (Basadur & Gelade, 2006).
Companies mostly fail to utilize their existing knowledge within the organization towards innovations and literature lacks to offer solutions for companies on how to operationalize the concept of knowledge management. Therefore, tapping the full potential of their expertise is often inhibited, even though the linkage and thereby importance has already been proven.
To counteract these limitations, this thesis will investigate the linkage between knowledge management and innovation management with the aim to understand ‘how organizations can utilize knowledge management to foster innovation’. A literature review on published research papers and frameworks represents the basis for this work, while expert interviews, conducted with managers of different departments in “The Absolut Company” as well as with external experts will provide supporting empirical evidence. On the one hand, the interviews serve the purpose to test the hypothesis that the spiral of knowledge together with agile feedback loops can foster innovation. On the other hand, further factors supplied within the interviews will be considered for the final development of the extended spiral of knowledge.
1.3 Contribution and Delimitation
This thesis aims to contribute to the research area of innovation management and knowledge management as well as to businesses in the area of organizational structures and operationalization. In literature is a gap about solutions on how organizations can utilize the existing knowledge in order to foster innovation. Hitherto, academia focussed on the gap between the existing knowledge and required knowledge for innovation, intra organizational networks and organizational learning (Ch. 1.2) rather than on how to promote the existing knowledge. Thus, based on a detailed literature review as well as on expert interviews, factors will be identified that seem to be relevant for the previously described phenomena on many company’s difficulty to successfully utilize existing knowledge for innovations. The findings of this research will result in the development of a concept that provides a suggestion on how organizations can make use of the existing knowledge towards innovation. Therefore, the thesis contributes with new insights to the literature of innovation management and knowledge
management as well as with guidance for businesses how to counteract their existing limitations of not tapping the full potential of the existing knowledge within the organization.
The central question of this research is how knowledge management can be operationalized in a way that it results in the innovativeness of an organization and thus in the capacity to innovate.
The underlying goal of evaluating the importance of an organization to be a learning organization with respect to knowledge management is discussed only briefly. Owing the restricted scope as well as temporal limitations of this project, an examination of the single-loop and double-loop learning in this context is not preformed.
Since the conducted interviews involved a global acting large enterprise as well as external experts from national acting small-medium sized companies (Ch. 3.3), the obtained result allows useful insights for companies of similar organizational size and structure. Furthermore, it is important to mention that the final results will merely provide a framework that includes suggestions for companies to conduct knowledge management in a way that is more innovative but that is irrespective of feasibility.
1.4 Thesis Structure
The first section of this research consists of the review of existing literature and frameworks that are relevant for the research question. More precisely, different terms and concepts of innovation management, knowledge management and organizational agility are discussed. At the end of this part, a hypothesis for the further research is formulated. Subsequently, the chapter research methodology depicts the selected strategy of data collection and analysis via expert interviews.
Next, the findings of the expert interviews are described in detail in Chapter 4. Following that, the reviewed literature and frameworks are combined with the findings and lead to the discussion of possible solutions to answer to the research question. The thesis concludes with the final result that answers the research question, managerial implications and suggestions for future studies.
2 Literature Review
The following section comprises a review of existing literature and frameworks for the provided research questions. Firstly, the terms of innovation, innovation processes and innovation in an organisational context will be reviewed and classified. Secondly, knowledge and knowledge management will be specified in the context of the knowledge-based theory of a firm. Based on that, the framework of the spiral of knowledge will be introduced and explained. Lastly, a review of organizational agility results in a hypothesis for the further research.
2.1 Innovation Management
2.1.1 Innovation
Today, creativity achieves a high attention as an innovation can be seen as a successful implementation of creative ideas within organizations. Therefore, it functions as a starting point for innovations (Amabile, Conti, Coon, Lazenby, & Herron, 1996). In the past, many researchers have attempted to define the term ‘Innovation’. Some of these definitions focus on the perspective of organizations. According to Van de Ven (1986) for example, something can be considered as an innovation when an idea is perceived as new to the people who are involved in the process, even if others see this innovation as an imitation from something that already exists somewhere else (Van de Ven, 1986). This perspective is further extended by defining innovation not simply as something new for organizations but also as an effective application of processes and products that are designed to benefit the organization itself and the shareholders (West &
Anderson, 1996). Shepard (1967) put the perspective on the fact that an innovation occurs if an organization has acquired a new ability and progresses conducting the new task in a sustaining way (Shepard, 1967). Thus, taking these definitions into account, an innovation can be seen as something novelty for both the organization and the actors working with it. Other publicants, however, have chosen the outcome as an additional focus in their definitions of innovation. This means, that innovation is the creation of new knowledge and ideas that result in new business outcomes, which again intend to enhance the internal processes and structures and to build market driven products and services (du Plessis, 2007). According to Damanpour (1996), innovation is coupled to internal and external change as it is conceived
“as a means of changing an organization either as a response to changes in the external environment or as a pre-emptive action to influence the environment. Hence innovation is here broadly defined to encompass a range of types, including new products or services, new process technologies, new organizational structures or administrative systems, or new plans or programs pertaining to organizational members” (Damanpour, 1996, p. 694).
Since the latter definition of innovation includes both the aspect of changes internally and externally as well as that of the newness of the idea itself this definition will be considered as the overall understanding of innovation. Grounded on that, innovation from different perspectives embrace different forms of innovation, such as process innovation, innovation as a discrete item that includes products, programs or services, and innovation as an attribute of organization (Baregheh, Rowley, & Sambrook, 2009; Kimberly, 1981; Knight, 1967; Thompson, 1965; Tidd, 2001).
2.1.2 Innovation Management Process
While the researchers Amabile and colleagues regard creativity as the starting point of innovation (Amabile et al., 1996), the more recent research of the acknowledged economist Peter F. Drucker views analysing the source of opportunities as the start of a purposeful and systematic innovation (Drucker, 2002). However, the occurrence of innovation is the result of a multi stage process that does not represent a single event at a specific point of time but rather several events occurring over an extended period of time (Kim, 1980; Thompson, 1965). While studies dealing with the innovation process often differentiate in their definitions with respect to the term of the single stages as well as the number of stages, they are similar in their conceptual basis. Knight (1967) divides the innovation process into two main stages: firstly, into creation and development and secondly, into introduction and adaption (Knight, 1967). Also Kim (1980) splits the innovation process also into two major stages; the initiation phase implies awareness, search and evaluation while the implementation phase implies implementation, routinization and stabilization (Kim, 1980). Divergent from this, other researchers regard the innovation process as a three staged action. According to Shepard (1967), it starts with the generation of an idea, it continues with the adaption and ends with the implementation of the idea (Shepard, 1967).
Compared to that, Thompson’s stages of the innovation process with generation, acceptance and implementation differ mainly in the second stage where the acceptance is paramount and a condition for the implementation (Thompson, 1965). Thompson’s and Shepard’s conceptualization of the innovation process (Figure 1) seem to be most representative of all the different models presented before, as these models indicate the capacity to change and adopt which is crucial for today’s fast moving environment.
Figure 1: Innovation Process
(Own Illustration based on Thompson, 1965, p. 2; Shepard 1967, p. 470)
The first stage implies the initiation of an idea or proposal, which will cause a certain change within the organization once it has been adopted and implemented. Secondly, the adaption phase represents a decision that has been made by the organization’s decision maker(s) to provide mandates and resources for the respective modifications. Lastly, the implementation leads to the establishment of the adopted idea into a sustaining behaviour within the organization (Pierce &
Delbecq, 1997).
With regard to the innovation process, an innovation that is considered to be adopted largely depends on the definition of innovations related to the process stages. Therefore, an innovation might be considered to be adopted either once the decision for the adoption has been made, the implementation process has been started or after an innovation has been successfully implemented (Damanpour, 1987; Damanpour & Evan, 1984). In literature innovation adoption is mostly seen in a managerial context rather than in a capital or a technological context (Kitchell, 1995). According to Damanpour and Gopalakrishnan (1998), the adoption of innovation improves the organizational effectiveness and organizational performance of the respective organization. This follows from the fact that the environment influences the organization through accepting or rejecting products/services and at the same time an organization either drives or responses to change. Therefore, the environment has a crucial impact on the ability to adopt and innovate. Thus, the authors draw a connection between innovation adoption and organizational
adaption as follows: “Innovation adoption is a means of changing the organization to facilitate the adaptation to changing environments in order to sustain or increase organizational effectiveness” (Damanpour & Gopalakrishnan, 1998, p. 4).
However, an adaptive organization is non-essentially innovative, as it does not generate many new ideas and rather reacts to the changes. An innovative organization, on the other hand, is always adaptive because it is able to implement many ideas (Thompson, 1965). Along these lines, it is beneficial, or even crucial for organizations to be an innovative organization.
2.1.3 Innovation in Organizational Context
Peter F. Drucker (2002) recognizes organizational opportunities of innovations in both internal and external sources. According to Drucker (2002), such opportunities can be found in different sources within the company and industry such as unexpected occurrences, incongruities, process needs as well as industry and market changes. Furthermore, demographic changes, changes in perception and new knowledge can additionally function as an external opportunity in organizations’ social and intellectual environment (Drucker, 2002). Fiol (1996) defines the determents of organizational innovation in the broader institutional/market context as a source of knowledge as well as in the manner of continuously building stores of knowledge and recombining them in novel ways (Fiol, 1996).
Hurley and Hult (1998), however, distinguish between the ‘capacity to innovate’ and the
‘innovativeness’ of an organization. The ‘capacity to innovate’ refers to the ability of organizations to successfully adapt and implement their new notions, processes and products. It stresses the early creation of innovation rather than diffusion between the buyers after the adaption. Distinct to this, the ‘innovativeness’ of an organization portrays the vision of an organizational culture that is open to new ideas and thus functions as a barometer of an organization’s orientation approaching innovation. This means that an organizational culture that engages the importance of learning, participative decision-making, support and collaboration has a significant leverage on the organization’s orientation towards innovation. Overall, the innovativeness of an organization and therefore the corporate culture towards innovation establishes the capacity to innovate (Hurley & Hult, 1998).
self-betterment and outreach”, corporate culture can be seen as a transforming agent that enables an innovative organization to adapt to environmental changes and harness their innovation potential (Kitchell, 1995) . Furthermore, researchers have identified the need for companies to embed a social work environment in the cultural norms since a social environment can influence the level and frequency of creativity and hence innovation (Amabile et al., 1996).
2.2 Knowledge Management
2.2.1 Knowledge Based View of a Firm
Emerging from the resource based view, the knowledge based view has gained importance in the theory of a firm. While the resource based view focuses on the organization’s internal resources, their productivity and experiences within the firm (Penrose, 1969), the knowledge based view particularizes this perspective by focusing on knowledge as the most strategically important asset of the organization’s resources (Grant, 1996b). According to Grant (1996a), by designing a new view of the firm as a dynamic, evolving, quasi-autonomous system of the knowledge bearing and knowledge application, the knowledge based view can harvest insights that are beyond the bounds of the production-function and resources based theories of the firm (Grant, 1996a). Thus, considering an organization as a repository of knowledge, accentuates the importance of both, experiences that exist within the organization and knowledge accumulation (Bontis, 1999).
Drawing on the knowledge based view of a firm, it is imperative that an organization exhibits a learning orientation, which can be embedded in various levels of a firm. It could be implanted in the organization’s strategy, processes, structure, behaviour or culture (Hurley & Hult, 1998).
Hence, learning organizations are seen as competent learners (Sinkula et al., 1997) as soon as the
“organization is skilled at creating, acquiring, and transferring knowledge, and at modifying its behaviour to reflect new knowledge and insights” (Garvin, 1993, p. 80). Literature views a learning organization as a potentially most strategically valuable dynamic capability (Teece et al., 1997), as March (1991) defines the competence of exploration and exploitation as types of organizational learning; accordingly organizational learning is a part of handling organizational ambidexterity (March, 1991).
In summary, the process of organizational learning occurs when the members (agents) of an organizations acquire useful knowledge by reacting to changes of the internal and external environment (Argyris, 1976). Consequently, each agent develops different interpretations of the learning, so that the resulting variety of potential behaviours lead to a potentially effective learning organization (Huber, 1991).
2.2.2 Knowledge & Knowledge Management
While emphasizing the strong connection between knowledge, information and data, there is a general un-clarity as to what these terms precisely represent. In literature, statements like the following can be found: “Knowledge is neither data nor information, though it is related to both, and the differences between these terms are often a matter of degree...Confusion (exists) about what data, information and knowledge are - how they differ, what those words mean” (Davenport & Prusak, 1998, p. 1). Hereinafter, the terms will be specified in order to build a clear understanding about “knowledge”, which will be valid for all following sections.
A set of discrete, objective facts about events is considered as data. Putting this into an organizational context, data sets are structured records of transactions (such as purchase orders, invoices, date and amount) without any further implications through interpretations about importance or relevance. As soon as data has obtained any meaning it turns into information, also described as a message in form of a document or communication in audible or communicative form. Thus, information potentially shapes the receiver and itself is shaped with a purpose due to the added meaning. The transformation of data into information therefore occurs by adding value to the data in various ways, with methods such as contextualizing, categorizing, calculating, correcting and condensing (Davenport & Prusak, 1998). Information functions as an inflow of new stimuli to a person and as a result triggers a cognitive processing in the individual’s mind which then leads to knowledge with an increased valuable context (Alavi & Leidner, 2001). The conversion from information to knowledge appears through comparison, consequences, connections and conversations (Davenport & Prusak, 1998). Besides the stimuli of information inflow, knowledge additionally consist of a mix of experience, values and expert insights (Davenport & Prusak, 1998). This means that organizational knowledge represents amplified knowledge created by the contribution of each individual’s expertise, which is shared through dialogues, discussions, experiences and observations (Nonaka, 1994). While data and information can be retained in transaction records and messages (Davenport & Prusak, 1998), knowledge cannot be stored easily. Consequently, it becomes information once it is articulated and presented in a different manner (Alavi & Leidner, 2001).
requirements (Zack, 1999). Moreover, it is advisable that it provides guidelines that turn knowledge into a competitive advantage (López-nicolás & Meroño-Cerdán, 2011). Academia define the managerial function of knowledge management in similar ways (Alavi & Leidner, 2001; Darroch & Mcnaughton, 2002; Grant, 1996b; Zack, 1999, 2002), but Quintas et al.’s (1997) definition covers the spectrum entirely: “Knowledge management is the process of continually managing knowledge of all kinds to meet existing and emerging needs, to identify and exploit existing and acquired knowledge assets and to develop new opportunities” (Quintas, Lefrere, & Jones, 1997, p. 387). The management of knowledge in an effective way (effective knowledge management) most likely allows organizations to attain the overall goal to be a learning organization (Sinkula et al., 1997). In this manner, organizations are recommended to focus on knowledge diffusion and responsiveness as the key components that leverage the establishment of a sustainable competitive advantage due to the organization’s ambiguity and uniqueness to the organization (Day, 1994; Fahey & Prusak, 1998; Grant, 1996b; Teece et al., 1997). An organization orientated towards knowledge diffusion and responsiveness, must therefore integrate effective knowledge management in their guiding business strategy (Darroch
& Mcnaughton, 2002). In addition, a corporate culture with a knowledge environment builds awareness to promote respective practices (Davenport, De Long, & Beers, 1997).
2.2.3 Spiral of Knowledge
As discussed above (Ch. 2.2.2), information derives from data and knowledge derives from information in combination with experience, values and expert insights (Davenport & Prusak, 1998). In other words, the knowledge creation, built on an information basis, results in different varieties of knowledge due to the diverse backgrounds of each individual. According to Huber (1991), organizational learning occurs more effectively, if varied interpretations are generated, since they affect the range of potential new insights and behaviours (Huber, 1991). Thus, it is of high significance that the knowledge, developed through the information basis as well as personal experiences, does not remain captivated in the mind of each individual but is transformed and shared with others, in order to unfold the full potential.
The economist and philosopher Michael Polanyi once expressed the challenge of knowledge sharing in the following way: “We can know more than we can tell” (Polanyi, 1962, p. 4). Older but also more recent publications (Darroch & Mcnaughton, 2002; du Plessis, 2007; Jorgensen, 2004; Nonaka, 1994; Quintas et al., 1997; Seidler-de Alwis & Hartmann, 2008) commonly refer to Polany’s (1966) categorization of knowledge, who allocates the knowledge of human being into explicit and tacit knowledge. While explicit (or codified) knowledge means knowledge that
can be transmitted in a formal systematic language, tacit knowledge contains personal quality which causes difficulties when communicating (Polanyi, 1966).
Due to the interaction between explicit and tacit knowledge, known as knowledge conversation, an organizations creates knowledge (Nonaka, Toyama, & Konno, 2000). This interaction was modelled in a knowledge spiral by Nonaka (1994) and consists of four different modes:
socialization, combination, externalization and internalization (Figure 2). Firstly, socialization allows converting tacit knowledge to tacit knowledge through personal interactions. This mode of knowledge transfer is not based on language but on observation, imitation and practice so that the key is seen in shared experience. Secondly, combination aims to combine explicit knowledge of different individuals and to convert those into a more complex and systematic set of explicit knowledge. Due to the reconfiguration of the existing knowledge the potential of new knowledge is generated (Nonaka, 1994). Thirdly, externalization focuses on articulating tacit knowledge into explicit knowledge which results in crystallized knowledge that allows knowledge distribution and acts as a fundament for new knowledge (Nonaka et al., 2000). Lastly, converting explicit knowledge into tacit knowledge involves learning through internalization of knowledge.
Based on these four modes, it can be said that the interchange between explicit and tacit knowledge, through internalization and externalization, build the centre for knowledge creation.
Sheer combination or socialization of explicit/tacit knowledge limit the effect of going beyond the existing knowledge (Nonaka, 1994). Thus, to harness the full potential of knowledge creation tacit and explicit knowledge need to interact dynamically in a continuous process (Nonaka et al., 2000).
However, academic literatures do not specify the type of knowledge that emerges out of data and information. Based on Polanyi’s categorization of knowledge into explicit and tacit knowledge, it can be said that that knowledge created out of information stimuli is most likely to be explicit at the moment it is created. Once personal experiences, values etc. are added towards the knowledge it can become either explicit or tacit. Thus, the knowledge spiral by Nonaka (1994) seems to draw on those two possible outcomes of the Data-Information-Knowledge process (Figure 3).
Figure 3: Data-based Knowledge (Own Illustration)
2.3 Organizational Agility
The increasing awareness of the term ‘Agility’ emerged from the field of software development, where agile methods are being used frequently (Ghezzi & Cavallo, 2018). However, agility can also be put into the context of organizational structures and project management (Gunasekaran, McGaughey, & Wolstencroft, 2001), thus literature offers a broader understanding in its definition. According to Preiss, Goldman and Nagel (1995), agility presents aspects such as dynamics, context-specification, embracing for change and growth-orientation. More precisely, agility focuses on succeeding in emerging competitive arenas and winning profits, market share
and customers in a competitive environment (Preiss, Goldman, & Nagel, 1995). Therefore, an agile organization is not only capable to respond to changes in the environment/competition but also to create change itself (Highsmith & Cockburn, 2001). In the same manner, an agile organization that adapts the own business through responding to those changes consequently inherits adaption capabilities (Gunasekaran et al., 2001).
At the beginning of the 21th century, an agile manifesto was developed as an answer to the emerging relevance and interest of agile methods. While it was previously intended as a suggestion for software development, yet the manifesto is also considered as applicable for other organizational tasks (Measey et al., 2015). With its values and principles the manifesto aims to enable organizations not to resist change, but to accommodate change in a most easy and efficient way, simultaneously being aware of the consequences. Overall, the agile manifesto consists of 4 core values and 12 principles that support those values. Thus, the manifesto puts individuals and interactions over processes and tools, a working software over comprehensive documentation, customer collaboration over contract negotiation and lastly, responding to change over following a plan. Furthermore, principles function as a support of the core values and are as follows: customer satisfaction through early and continuous delivery, welcome changing requirements at any stage of the development process, frequent delivery, daily cross- functional work, build environment that enables motivation, support and trust, embrace face-to- face conversation to convey information, working software as a primary measure of progress, promote sustainable development, continuous attention to technical excellence and good design, simplicity is essential, self organizing teams, regular intervals to reflect and adjust (Fowler &
Highsmith, 2001).
To fulfil the purpose to embrace and respond to change, agility is largely dependent on internal factors such as initiative employees, their skills, knowledge as well as access to information (Gunasekaran et al., 2001). More precisely, openness to the exchange of information results in the abundance of interactions between the employees, hence open and free-flowing information are premises for an agile organization. Employees of this kind of organization can benefit from the potential of knowledge, regardless of its source, and thus increase the adaptability
(Measey et al., 2015). Characteristics such as shorter time frames with clear and concise items and a specific goal (Measey et al., 2015) allow to identify indicators of potential value delivery or the requirement to change in early stages (Schwaber, 2004). Actions to generate feedback happen shortly after the actual work on hand. This way, errors can be identified timely, thereby preventing the occurrence of large failures in a later stage of a project (Rubin, 2012). Feedback loops generally vary in their length, however, a short feedback loop allows to adapt to changes quickly and is seen as the key for continuous learning (Kniberg & Skarin, 2010). Drawing on the characteristics of agile organizations to inherit adaption capabilities, such a feedback loop thus strengthens this characteristic through its build-inspect-adapt approach that encourages engagement and validation (Moreira, 2013).
Figure 4: Learning Feedback Loop (Own Illustration, based on: Rubin, 2012, p. 46)
Therefore, a ‘learning feedback loop’ results in an outcome based on a previous assumption that has been made and tested, and uses its feedback to adapt (Figure 4). This means that, through quick feedback, the loop increases the adaptability. Accordingly, continuous learning and improvement of an organization also enhance (Kniberg & Skarin, 2010; Rubin, 2012).
Innovation is considered a change in the organization through either the internal or external respond to changes, or through new ideas developed internally (Ch. 2.1.1). The innovation process therefore is used to adapt to those modifications as soon as it is initiated (Ch. 2.1.2). On top of that, knowledge is created by the interaction of the employee’s tacit and explicit knowledge within the organization (Ch. 2.2.2). Drawing on the characteristics of agility to enable organizations to rapidly respond to changes as well as creating changes while simultaneously
making use of employees’ tacit knowledge, skills and information (Ch. 2.3) the following hypothesis (Figure 5) is allowed:
H1: Extending the spiral of knowledge with an agile feedback loop allows to tap the potential of knowledge towards innovation.
Figure 5: Hypothesis: Agile Spiral of Knowledge
(Own Illustration: Extension of Nonaka et al. 2000, p. 12; based on: Rubin, 2012, p. 46)
3 Methodology
In the following section, the research methodology as well as research design will be described.
Research and data collection will be discussed in detail, taking ethics and sustainability into consideration.
3.1 Research Paradigm
In literature, multiple recommendations for different research strategies can be found, depending on the research conditions. Each strategy includes advantages and disadvantages that need to be taken into account (Yin, 1994). According to Clark, Burrell and Morgan (1981), social science research offers four different research paradigms, namely structural functionality, interpretive, radical humanism and radical structuralism (Clark, Burrell, & Morgan, 1981). Each of there paradigms fosters distinct research methods and thus focuses on different areas of studies (Greener, 2008). As the aim of this thesis is to explore the existing literature and further extend the knowledge management approach towards innovation, this research will be built on the interpretive paradigm, which “rests on the assumption that social reality is in our minds and is subjective and multiple” (Collis & Hussey, 2009, p. 57). Hence, perceptions and constructions of reality by actors in organizations (employees, managers, shareholders etc.) can be investigated through discourse analysis or unstructured interviews (Greener, 2008).
3.2 Research Approach
There are two main approaches to conduct research. While a quantitative analysis gathers and analyses data from a numerical perspective, a qualitative analysis focuses on the exploration of non-numerical data and seeks to interpret the meaning that individuals or groups ascribe to a social or human problem (Collis & Hussey, 2009). Since the research of this thesis is built on the interpretive paradigm, a qualitative research with collecting non-numerical data along with interpretive methods will be administered.
Expert Interviews are considered as a supportive method for a qualitative research. This method is mainly used to collect special knowledge from an expert who is responsible for the development, implementation or control of solutions and strategies as well as has access to privileged information (Meuser & Nagel, 1994). According to Mieg and Näf (2006), this data collection allows to investigate a phenomenon that can not be answered through literature so that the present knowledge and assessment of experts is needed (Mieg & Näf, 2006). Taking into account, that this work explores the phenomenon that organizations do not tap the full potential of their existing knowledge and investigates a solution that allows organizations to utilize their knowledge towards innovation, a combination of explorative and systematic expert interviews
are considered to be a solid research method. The purpose of an explorative expert interview is to gain an orientation in a new or unexplored area of research and provides an insight into possible solutions of a specific phenomenon. Relating thereto, the systematic expert interview focuses on the gained expert knowledge and intents to select complete information. In this case, the expert explains objective facts enriched with his personal opinion and therefore functions as a counsellor for the interviewer (Bogner & Menz, 2001).
The expert interviews will mainly be conducted with The Absolut Company in Stockholm – Sweden (5 participants out of 7), which is the fifth world largest player in the spirit industry and thus a global acting company (The Absolut Company, 2019a). This company has been chosen due to the high representative factors for other companies. The Absolut Company can be seen as a representative company for global acting companies, as of its world leading position, as well as for small- and medium sized companies because of the decentralized structures within the company (The Absolut Company, 2019b). Furthermore, the spirit industry (thus The Absolut Company) is continuously facing challenges such as changing regularities in different countries along with constantly market- and customer driven changes of needs and requirements (Participant 7). This results in the conclusion that The Absolut Company is a representative case as it covers a broader range of organizations through its organizational structure together with the rapid changing environment the sector is facing.
3.3 Data Collection and Analysis
When applying qualitative methods it is crucial, to gain a deeper understanding of the investigated phenomenon as well as to collect evidence for the desired new model. Therefore, the execution of this research including the gathering of relevant data, was conducted through methods such as literature review, interviews and participant observation (Yin, 2003).
By means of a literature review, the current state of research in the field of knowledge management and innovation management was identified. In this manner, relevant theories and studies were discussed to build the fundament for the interviews as well as to discover different factors that might be relevant to build the bridge between knowledge management and innovation management. With keywords related to this field of research, such as innovation
answers (Appendix 1). However, different types of interviews such as structured and standardized questions or informal and unstructured conversations offer different advantages and should be chosen according to the interviews’ aim (Saunders, Lewis, & Thornhill, 2016). A semi-structured interview was chosen as the most appropriate approach for collecting valid and reliable data to explore possibilities on ‘how’ a bridge can be build between knowledge within the firm and innovation. The findings of the interviews function as evidence for the hypothesis (Ch. 2.3) and provide further indications for the strived conceptual framework. In the semi- structured interview a list of themes and potential key questions were prepared, although a certain degree of flexibility in use was granted for each individual interrogation. This allowed both, the interviewer and interviewee, to react to the flow of conversation and thereby ask additional questions depending on the relevance or to open further discussions (Saunders et al., 2016).
In total 7 interviewees were conducted (Table 1). The main focus group consisted of employees of The Absolut Company from different departments to enable the interviewer to explore perspectives of different layers. In addition to that, experts in the field of knowledge management and innovation management outside of The Absolut Company were questioned.
This allowed the reduction of possible bias in the interviewee’s answers. It also facilitated a broader analysis of the obtained data. The interviews contributed to test the hypothesis of agile feedback-loops at the spiral of knowledge allowing to foster innovation. Furthermore, the final model to be developed is created based on findings from a comprehensive perspective. Thus, it has the potential to be an universal approach that can be utilized by a broader range of organizations.
Interviewees Company Type of Organization Country
5 The Absolut Company Large Enterprise Sweden
1 Anonymous SME Germany
1 Anonymous SME Germany
* Small- medium sized enterprises Table 1: Interview Participants
All interviews occurred in personal meetings with one interviewer and a single interviewee.
Special attention was paid to an interview environment, that was comfortable for both participants, so that a highly professional discussion could be held. Each meeting was scheduled to last 45-60 minutes.
In addition to the main interviews as a fundament for the data collection, two pre-interviews had been carried out. Besides providing an overview of the problematization, the pre-interviews were intended to benefit the process of identifying relevant topics that should be covered in the final interviews. Moreover, they served an in-depth specification of the relevance of the research question.
A sub-technique of data collection in interviews is the so called participant-observation, which was also practiced by the interviewer in this research (Platt, 1992). This means that the researcher additionally functioned as a non-judgemental participant-observer not only during the conducted interviews but also during the meetings and conversations (Table 2). Consequently, besides the gathered data based on the literature review and interviews, the made observations can also be included in the results as a supplemental data source.
Date Meeting Duration
13th March 2019 On-boarding The Absolut Company 3 hours
21st March 2019 Meeting 45 minutes
28th March 2019 Pre- Interview 1 hour
28th March 2019 Meeting 1 hour
1st April 2019 Pre-Interview 1 hour
4th April 2019 Interview 1 hour
5th April 2019 3 Interviews 3 hours
8th April 2019 Interview 45 minutes
9th April 2019 Interview 1 hour
23rd April 2019 Meeting 1 hour
Table 2: Meetings overview
3.4 Ethics and Sustainability
Ethics has become a significant factor in qualitative research when it comes to the process of data collection and usage as well as to the data interpretation and analysis. Ethics in the context of research means, that the process should be executed in a way that does not “wilfully exploit,
and differentiate the different point of views on innovation and knowledge sharing regarding the participant’s function or department, while at the same time ensuring anonymity. In addition to that, participant observation was managed with caution and respect for the persons.
The sustainable aspect of this research will be covered through the contribution to the sustainable development goals of the United Nations that aims to “achieve a better and more sustainable future for all” (United Nations, 2019a). More precisely, the outcomes will have a relevance for the goal of ‘decent work and economic growth’, such as the aspect of achieving higher productivity through innovation (United Nations, 2019c), as well as for the goal of ‘industries, innovation and infrastructure’ with enhancing scientific research to encourage innovation (United Nations, 2019b).
4 Findings
In this section, the findings of the conducted expert interviews will be described, based on previously assigned codifications. Main factors that are required to utilize knowledge towards innovation will be fully outlined in order to leverage a final discussion.
The interviews that were conducted with experts in the field of knowledge management and innovation management generally revealed considerable similarities with respect to the different experts’ point of views and their suggested required methods. The obtained outcome greatly supports the assumption of feedback loops being of high relevance utilizing knowledge and fostering innovation. Additionally, the interviews disclosed that an innovative organizational culture and an aid towards a free mind-set are further important aspects building a bridge between knowledge and innovation.
4.1 Challenges & Knowledge towards Innovation
According to the interviews’ result quick and continuous changes in the business environment are regarded as the main challenges that have to be faced by the experts. This can refer to changing applications of tools (e.g. Microsoft) they work with on a daily basis as stated by participant 2: “It happens quite often, that the tools and processes we work with, change their applicability which requires a fast adaptability from our side and from the customers’ side”.
Furthermore, participant 7 refers to constant changes in society and their expectations lead by their opinions, which again results in a shift of the customers’ perceptions: “The associations of people today are always different than a couple of years ago. Also, it is not always an engineering task with which you can rationally proof the logic behind something, if it is emotionally considered as wrong in the society. The societies emotions need to be brought into equation too.” Hereinafter, most of the interviewees also uncovered the demand for the ability to quickly react and adapt to those variations.
The importance of knowledge for innovation specifically was a consensus expressed by all interviewees. Therefore, the linkage of different knowledge sources was seen as a relevant aspect for fully using knowledge and treating it as a potential trigger towards innovation. Two interviews (5,7) especially focused on this, claiming that knowledge should be considered as a
participants described the challenge of innovation as a ‘bet’ indicating that it represents something unknown with a high uncertainty. Other interviewees (6,4) connected to that statement and considered the human knowledge, to have the biggest impact on innovation. This is based on the perception that ideas and creativity originate from the human mind. Additionally, most of the interviewees articulated a need for generating assumptions due to the linkage of knowledge and in the same way a continuous testing and questioning of these assumptions: “The assumptions you have based on your knowledge should continuously be tested and might lead to a new assumption and idea” (Participant 3).
4.2 Continuous Feedback
Overall, the interviewees agreed in their statements, that feedback added to the existing knowledge would allow utilizing existing knowledge towards innovation.
In the process of transforming tacit knowledge to explicit knowledge all interview emphasized the demand for feedback from others in order to be able to fill possible knowledge gaps and grasp every aspect (1,2,3,4,5,6,7). Moreover, the importance of receiving feedback during the transformation of tacit to explicit knowledge was described more specifically (2,3,4,5,7): “If you are documenting your knowledge, you are doing research, test your assumption and knowledge through the research and go back to test the assumption again (Participant 3).” “You draw conclusions for which feedback is required (Participant 4)”. In other words, the participants expressed, when tacit knowledge is transformed to explicit knowledge in form of a document, a conclusion, thus an assumption is made based on the person’s knowledge and the contribution of their emotions. According to the interviewees, feedback would allow the addition of new perspectives as well as the testing of previously made assumptions or of existing knowledge.
Finally reconnection and adaption can result in a deeper understanding of the knowledge base. In addition, all participants stressed the potential to reflect upon their previously obtained knowledge, to evaluate it and identify aspects of it that should be continuously observed for possible future relevance.
According to participant 5, when explicit knowledge is combined with explicit knowledge “you always have to collect enough information and then loop this information with different perspectives”. The majority of the participants (1,3,4,5,7) saw the need of adding different perspectives on a cross-functional level so that the information results in a broader and more detailed understanding. They also accentuated that information, knowledge as well as perspectives constantly need to be adapted by challenging the status quo of the knowledge and testing the solutions and assumptions in different ways through those different perspectives.
Additionally, participant 1 stated, “through many loops over the knowledge-base, new
combinations can be created and with free thinking you can reflect upon this base and something new can be realized”. Overall, all participants saw an immense chance in the combination and constant adaption of different perspectives, in order to discuss and discover new options, examine possible changes or establish independent thinking towards new ideas, realization and reflection.
Moreover, according to all interview participants, internalizing explicit knowledge to tacit knowledge allows continuous linkage of new knowledge with already internalized knowledge and results in a possible transformation of the knowledge base (1,2,3,4,5,6,7). The statement of interviewee 2 can exemplify this: “By internalizing the new knowledge, the existing tacit knowledge is enriched and can also be changed through the enrichment”. In this case, the importance of including options to validate and verify knowledge was also commonly underlined. In the opinion of participant 3, “the embodied knowledge should be continuously combined and following the tacit knowledge should be put into different ways. This can result in a reflection and possibility to try out how the new knowledge can be used and can lead to new ideas”. Overall, openness towards a continuous and novel mapping of the embodied knowledge, constant rethinking of made assumptions, their adjustment to the changes in the knowledge and evolution of existing knowledge was also mentioned as a requirement for this stage from the majority of participants. If these requirements are met, the participants saw the potential to identify new problems, new solutions and to comprehend a previously ambiguous phenomenon, thereby acquire new ideas.
The interviewees concordantly emphasized the significance of quick feedback through socialization. According to participant 7, “the quality of quick and direct feedback is better, since you can trust that it is a good feedback as it is not filtered through corporate politics before”. Furthermore, the socialisation should offer an option to “follow-up with the new knowledge through interactions and discussions about the new insights of the new knowledge (Participant 2), in order to challenge each other (Participant 4).” Fundamental, quick feedback would give the attendees the possibility to receive unfiltered feedback, to open discussions and to mutually comment on their ideas. Subsequently, the participants said that a fast feedback
participant 3 also sees an important factor in “giving people time to try out new things, to experiment, learn and try again”. In general, acceptance of failure, trust to share knowledge and information as well as providing time was mentioned as a requirement to allow employees to experiment with directions and assumptions. Therefore, a culture that encourages people to question the status quo, to give and demand feedback and to be reactive was considered a foundation for companies to utilize knowledge towards innovation: “The culture must be build as a basis that is pro innovation and therefore pushes towards innovation” (Participant 4).
The findings of the expert interviews revealed the general request to be quickly adaptable to the challenges internally and externally. Furthermore, the interviewees expressed the need for quick feedback at each stage of the spiral of knowledge, an open mind-set towards experimentation as well as a cultural foundation which is innovation oriented. Putting these findings into combination with relevant literature provides the necessary basis for a discussion that at the end answers the research question on how organizations can utilize knowledge management to foster innovation.
5 Discussion
Based on the findings of the conducted interviews as well as on the literature review, this section provides a final discussion and an answer to the research question on how organizations can utilize knowledge in order to foster innovation.
5.1 Enriched Spiral of Knowledge
5.1.1 Agile Spiral of Knowledge
Dynamic changes in today’s business environment represent major challenges that most companies are facing. The previously described findings of the interviews have demonstrated that there is a request for companies to acquire abilities to respond to changes outside the organizational capabilities. Agility not only prepares organizations to react on changes but also empowers them to be the change (Highsmith & Cockburn, 2001). Moreover, the here generated results exposed the need to be highly adaptable in order to respond to changes but also to effectively apply the human capital within the company as this was seen as the main repository for innovation in the participants’ opinion. Taking up on this, agile organizations are centred on people, thus employees, and enable quick reactions, thus adaptability (Gunasekaran et al., 2001).
Considering the findings’ fundamental key aspects, a clear allocation to the agile manifesto’s values can be drawn. Through emphasizing continuous changes and the demand to be quickly adaptable, the value of ‘responding to change over following a plan’ seems to be of relevance. A second value, ‘individuals and interactions over processes and tools’, is indicated by manifesting that the human capital is considered as a crucial factor for innovation. This apparent connection between the overall findings of the interviews and the agile values allow to suggest agility as a possible method for utilize knowledge towards innovation.
Furthermore, the interviews’ outcome clearly showed that there is a fundamental need for feedback during knowledge transformation in order to fully exploit existing knowledge. This can be noticed in each stage of knowledge transformation, namely externalization, combination, internalization and socialization. The participants precisely implied that receiving feedback in each of these stage would facilitate to test assumptions, add new perspectives, validate, rethink and adapt. This particularly touches upon the definition of a feedback loop which aims to
