September 2014Strategy

Tapping Strategic Knowledge to Source Competitive Advantage

Tapping Strategic Knowledge

In his book The 8th Habit, Steven Covey argued that the Industrial Age had given way to the Knowledge Age. In this new paradigm it is not physical assets but deep insight-driven knowledge assets — embedded in your key employees’ experience and know-how, your intellectual property, your customer insight — that the most successful companies are exploiting to build unique core competencies and drive innovation. As they use their knowledge assets to disrupt their competition and continuously re-create their competitive advantage, many other firms are still wrestling with what their knowledge assets are and why they are important.

Wharton’s unique new program Strategic Management of Knowledge Assets helps executives to learn the what and the why, and then shows them how to exploit those assets and convert them into profits. Martin Ihrig, learning director of the program, notes, “Just gathering knowledge — what most companies think of when they hear the term ‘knowledge management’ — doesn’t do anything for you. Real advantage comes from mapping, developing, and exploiting networks of strategic knowledge assets. You need to know how to bring them together in ways your competition can’t, and continuously monitor and grow those assets. Simply documenting a KM database gets you nowhere.”

According to Ihrig, the program’s four key takeaways include learning:

  • What your critical knowledge resources are
  • How to map and manage both tacit and explicit knowledge assets
  • How to link these assets into knowledge networks for better performance and competitive advantage
  • What additional knowledge you could use and where you might acquire it from

Ihrig, who has helped organizations including the ATLAS collaboration at CERN identify and map their knowledge assets, continues, “One consideration that gets little attention is the selective sharing of these assets. Many companies at some point have to decide if they will share knowledge with other stakeholders, and also whether they can strategically acquire knowledge from outside the organization. These efforts are rarely coordinated, and opportunities to reach out and exploit current knowledge are lost.

“Like Tesla, you might decide to share some of those assets with your competitors. Or like Airbus, you might look outside your company for new ideas with a competition like ‘Fly Your Ideas’, in which teams of three to five students from top technical universities like MIT, Stanford, and around the world submit their innovative concepts.”

Ihrig is joined by Wharton management professor Ian MacMillan, co-author of Discovery-Driven Growth, Marketbusters, and many other books. In the program, MacMillan shares the tools that help decision makers strategically create and develop knowledge, from deep insights into customer experience to business models for growth in uncertain environments. He explains how to continuously change the rules of the game using Marketbusting Moves and how to engineer risk out of uncertain opportunities using Opportunity Engineering. MacMillan notes, “The program is not just about looking at existing knowledge, but how to develop new knowledge that will position you to continuously reinvent your advantages.”

Strategic Management of Knowledge Assets also taps the expertise of Peter Cappelli, director of Wharton’s Center for Human Resources, for thinking through the strategic development of human talent and that of Karl Ulrich, Wharton’s Vice Dean of Innovation, for teasing out strategic directions for R&D.

Professor Cappelli’s research addresses a critical challenge for corporate America as experienced baby boomers near retirement: the management of talent and the knowledge imbedded in that talent. Specifically, how do you transfer valuable knowledge that will eventually walk out the door? Cappelli notes, “The idea is to use work experiences to learn, more or less as apprentices. What we need to do is build a program to delegate innovation projects to subordinates mentored by senior experts as a way to help subject matter experts to teach younger innovators and enable them to learn. Doing it this way costs nothing and can generate considerable value for the organization.”

Dean Ulrich argues that the profitability and competitive advantage that come from R&D stems from a deliberate, balanced portfolio of projects that draw off short-term incremental profit enhancements in the core business to fund longer-term business-building projects.

Ultimately, the Wharton program helps executives look at their entire business through the knowledge lens, and for that reason, teams or small groups from individual organizations will benefit. “You have to be purposeful about knowledge development,” says Ihrig. “At most companies today, the creation and sharing of knowledge is quite random. They might occasionally get a big win, but it’s almost impossible to sustain because there is no roadmap showing how they got there. Superior performance and profits come when the leaders of a firm have tools and frameworks that allow them to map their critical knowledge, design a program to strategically develop their knowledge, and then continuously exploit it to disrupt their competitors.”