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Less than 30 miles from the White House, the space shuttle Discovery silently rests on its laurels in a behemoth cargo hanger, an inanimate but undeniable American hero.
In 30 years of service, beginning with its first-of-its-kind launch in 1984, the embodiment of innovation flew 39 times—more than any other shuttle.
Despite its unnatural retirement on the ground, the spacecraft’s mission soars on. New designs are still born from the most complex thing ever built; civil servants and privateers take heart from one of the most conspicuous examples of a successful public- private partnership.
NASA took 12 years to build the space shuttle, with help from at least five other contractors; contrast that with Henry Ford’s development of the assembly line, which took only seven years and internal resources to change the world.
The shuttle’s design was the epitome of knowledge creation before the term took off. Thousands of employees—and, more important, their ideas—stood behind the development of the iconic vehicle.
We’ve come a long way since the shuttle’s glory days. The processing power required to send a man to space has been eclipsed by a single smartphone.
Now, the procedures to gather, share, and grow knowledge are increasingly viewed as an economic driver rather than a patriotic duty. The words “knowledge management” are a resounding anthem for the business world. Knowledge is the heart of innovation, and a justification for job creation, mergers, acquisitions, and alliances.
As in space exploration, innovation in the transportation sector is crucial, according to Assistant Professor Richard Linowes, who has spent much of his career comparing innovation in multinational firms.
Linowes was interested in discovering how new ideas come to fruition in such industries. How does a pipe dream—like the space shuttle, or the electric car—become a product? He recognized that knowledge management spans all units within a firm; it happens long before a prototype reaches the production floor, where it had most widely been studied.
In 2005, data collection began; in 2010, Linowes set off for Japan, Southeast Asia, the Middle East, and Europe, visiting headquarters and subsidiaries of the big guns: General Motors, Ford, Toyota.
Linowes created a model to frame the research, along with his Kogod colleague, Professor Tomasz Mroczkowski, Hideo Ueki of Tokyo Keizai University, and Mariko Ueki of Kyoto Sangyo University.
The model suggests that a change in the global business environment influences top leadership, which in turn changes management philosophy, vision, and strategy. Those choices trickle down to shape brand value, which reflects customer satisfaction and a product’s fate in the marketplace.
In other words, external trends impact the internal organizational culture, which provides the backdrop for knowledge creation to occur. Human resource systems develop the people who develop the ideas.
The researchers met with 171 executives from 28 major Japanese and US automotive and information appliance firms—competitive, knowledge-intensive global industries. They uncovered a surprising commonality in successful knowledge creation activities.
Supportive HR practices were crucial for successful knowledge creation: things like cross- functional group training, e-learning, and career development programs. Job rotation was also seen as valuable, though the Japanese were far more likely to report using this tool.
“One of the keys to Japanese success is their system of knowledge creation and knowledge management, which has not been well understood in the West,” Mroczkowski said. “Our research explains how their approach to knowledge augmentation works.”
Moon in Their Eyes
The team uncovered a telling difference in attitude about knowledge management between the Japanese and the Americans.
While the Japanese managers displayed a more methodical approach to the practice, Americans were more enthusiastic about the little bit of knowledge management they had.
The Japanese “take in stride the improvements brought on by [knowledge management enhancements],” the authors wrote. “Americans, by contrast, are more ‘romanced’ by them.”
Linowes found that the Japanese were more thorough, more systematic, and displayed less ego involvement. They excelled at the implementation of knowledge management tools; they were more likely to use cross-functional training, e-learning, career development, and job rotation.
The Americans’ romanticism was another common part of the puzzle.
“It may also be that American firms are starved for these improvements, so they’re especially appreciative of the ones they’ve got,” he acknowledged.
But the Japanese were more likely to say their organizations emphasized customer satisfaction, and they were more likely to make informed decisions based on data-proven theories.
For example, a knowledge portal for the automobile industry could be a website where dealers and manufacturer share details about new models of cars. The data showed that Japanese firms were more likely to report using a tool like this, while the Americans were more likely to see positive benefits in using it.
Here’s another telling anecdote. General Motors and Toyota used to jointly operate the NUMMI auto- mobile manufacturing plant in Fremont, California. Toyota needed help selling cars in the US, and GM wanted to learn about lean manufacturing from the Japanese leader. NUMMI built roughly 6,000 vehicles a week from 1984 until it closed in 2010 (the plant has now reopened as a Tesla Motors production facility).
When the GM executives arrived at the plant, they were surprised to see carpet spread throughout the factory floor. They scoffed. “Why do you need carpet in a production factory?” they asked. “What a waste. You really caved into union demands.”
The Toyota executives politely informed them that their research had shown when parts were dropped on an uncarpeted floor, workers would not pick them up. When the floor was carpeted, the behavior changed.
After thorough analysis of the data, the Japanese managers adopted a policy of carpeting their plants to better control inventory levels.
Location, Location, Location
Linowes’s team also found that a firm’s location— regardless of the origins of its ownership—had an impact on the success of its knowledge creation system. Despite the Americans’ professed love for knowledge management, firms located in Japan reported better knowledge creation than firms located in the United States.
This even applied to Japanese firms that happened to be located in the United States.
Linowes wasn’t surprised. He had spent extensive time in Japan, and witnessed firsthand the country’s cohesive culture.
For knowledge creation to be effective, management vision and business strategy must permeate an organization; Japanese respondents were much more likely to report that this was the case.
Culture can even impact the design of a product.
Such was the case when Toyota discovered that its cars in the Middle East would benefit from strategically repositioned air conditioning vents. Instead of having cool air blow on the customer’s knees—which, in that part of the world, are often covered by long robes—Toyota designers moved the vents to position them near the driver’s ankles. Toyota now has 80 percent market share in Oman.
Linowes admits that the tools and attitudes behind knowledge creation are only worth this amount of introspection if they result in return on investment. “What counts is success in the marketplace,” he said. “If you are introducing things customers want, it should pay off.”
The Right Crew
If we accept that knowledge creation in an innovation-driven industry is critical, the next logical step is to determine how much knowledge our employees possess.
How do you assemble the right team for a project? How should you disperse expertise across that team?
In the space shuttle’s tangle of alliances, the only challenge bigger than the technological was the human: the scientists and engineers behind the project worked for a diverse set of bosses and battled over turf both physical and ideological. Considering the need for coordination in a space mission, not to mention the close quarters of the shuttle, it was essential for astronauts to share knowledge and get along well enough to use it.
Even after the shuttles were built, it was still about people: the few, proud astronauts who relied on each other for survival. When Discovery retired to northern Virginia, former astronaut Piers Sellers said that handwritten notes from former pilots sometimes guided him on missions. “We had sheets of paper that said, ‘When this alarm goes off, ignore it.’ Or, ‘This fuel gauge doesn’t work’…[Discovery] had a lot of little quirks, but her heart was solid,” he told the Washington Post.
Without that transfer of knowledge from one pilot to the next, who knows how many missions would have been compromised?
A richer network within the team (the more members who share knowledge with others) leads to better performance outcomes. If the same amount of knowledge exists on another team but is not shared, the latter will lose.
Associate Professor Mark Clark and Professor J. Alberto Espinosa have spent several years deter- mining the best way to measure and represent team knowledge in order to better understand its influence on performance. Clark brought his extensive background in leadership, teams, and diversity to the research, while Espinosa has previously studied how teams coordinate through communication, knowledge sharing, and technology.
They know that team knowledge is a combination of two components:
“Fundamentally, organizations spend so much on the human capital within teams that they want to recoup their investment,” Clark explained. “You want a return not just financially, but also in developing team members for the best learning experience and employee satisfaction.”
Here’s the twist: Clark and Espinosa used a network analysis approach to measure and represent team knowledge. and it’s way beyond Facebook or Six Degrees of Kevin Bacon. “The beauty of the network analysis approach is that we can actually look at all the different relationships within a team,” Clark said.
“We view teams not as a collection of individuals but as a collection of dyads [pairs of individuals], with each dyad having individual and relational knowledge attributes,” Espinosa explained. “When you put all the dyads together, what you have is a network of nodes (or members) and links (or relationships).”
The end result is a sociogram, or visual representation of the network, and its corresponding sociomatrix, or the mathematical matrix representation.
The strategy is particularly useful in looking at larger teams, when it is imperative to understand relationships: who talks to whom, who knows what others know. Social network analysis also reveals cliques and isolates, among other things, and enables members who are both highly knowledgeable and centrally connected to stand out.
Most prior research has treated team knowledge as an aggregate, Espinosa said: the team as a whole knows a lot or a little about something. “We argue that the network perspective provides a more nuanced understanding of the knowledge structure within a team…team knowledge is essentially a social construct.”
Cliques < Cohesion
The pair further collected data from 57 graduate student teams; each team managed a simulated firm. They collected peer ratings of each teammate’s knowledge in specific domains (finance, production, marketing) and evaluated the pairs’ task and strategy coordination.
When the network approach was used in the analysis, they found more nuanced relations. For example:
That’s right—the fewer the cliques, the more cohesive the team.
The results suggest that some of the effects of shared knowledge within a team can be attributed to isolated members, cliques, and (lack of) centrality. Isolated people may be detrimental to coordination; centrally knowledgeable members may help build strategies; and shared task knowledge with a minimal number of cliques is good for teams.
Beyond that, their preliminary evidence suggests that the network characteristics of team knowledge—centrality, cliques, isolates—have stronger predictive power on team interaction, coordination, and performance than previously used aggregate methods.
In sum, network analysis provides a more complete picture of a team’s knowledge distribution, Clark and Espinosa determined. It also enables the extraction of a “slice” to analyze a particular relationship or clique of interest.
Managers can use the resulting models to staff and train their teams. The pair has spoken with companies and at conferences, where executives are very interested in using it.
“This has a big connection to enterprise architecture,” Clark said. “The multidimensional network approach is growing in popularity.”
It’s not just about knowledge residing within one organization, either.
Clark used the example of automotive design that is outsourced. The design team can, and often does, expand beyond an organization. The designers of the Ford Fusion might work for Ford, for lear Seating, or a smaller subcontractor, but they are all on the same team, even if their paychecks have different logos.
What connects them? Their collective knowledge, and the task at hand. Fundamentally, members must have a shared understanding of what other team members know so they can make more effective assignments.
Laboratory validation studies with colleagues at the University of Central Florida will next test how task content and structure, shared and unshared within a team, affect performance.
When Knowledge Calls it Quits
As Clark and Espinosa demonstrate, knowledge workers are literally human capital. And in a knowledge-driven economy, those humans are more mobile than ever.
Neil Armstrong didn’t have as many options as today’s talented workers: if he wanted to go to the moon, he had to work for NASA. Modern would-be astronauts have options, thanks to the privatization of spaceflight.
Neil Armstrong wasn’t alone on Apollo 11, of course—he had pilots Buzz Aldrin and Michael Collins. That team dynamic was important.
But sometimes one member of the team is the most crucial to performance. And employees are a source of competitive advantage like never before. So what happens when that source gives his two weeks’ notice?
Linowes studied the birth of innovation; Clark and Espinosa focused on the collaborative process. Assistant Professor Michelle Westermann-Behaylo wanted to see how employment laws can support—or hinder—both.
A former attorney turned business ethics scholar, Westermann-Behaylo teamed with Norman D. Bishara at the University of Michigan to survey the ethics of employee mobility. She increasingly is studying employees as a specific stakeholder group: their compensation, rights, and mobility.
The authors outlined three types of legal tools that affect an employee’s mobility:
These tools are anticompetitive, the authors say, and anything that falls into that category could ultimately stifle innovation.
Consider California, home to one of the world’s innovation hubs—accounting for one-third of all venture capital investment in the United States. Many people claim the free exchange of ideas in the tech center formed the basis for the Silicon Valley, where companies such as Oracle, Google, and apple thrive. The state made a calculated decision not to have employment mobility limitations so as to preserve such advances.
And Westermann-Behaylo believes that all parties—employers, employees, and society at large—benefit from the lack of employment mobility restraints in the Golden State.
“Sometimes letting knowledge bubble up is best for innovation as a whole,” she said. “The rapid- exchange employment pools—high-velocity labor markets, they are called—can be a natural way to spread ideas.”
She points to a 2008 HBS finding that the pair referenced in their own work, on noncompete agreements in Michigan. In 1985, employment law in the state inadvertently changed to strengthen enforcement of such agreements.
The result: a marked reduction in the mobility of Michigan inventors compared to other states— especially among those with a specific skill set that was not widely marketable beyond direct competitors (think the Big Three.) Fewer patents, less movement of engineers and creative thinkers between (car) companies. Salaries were also held down overall, since star employees didn’t move from one place to another and set the bar.
“These things really do have impacts, and they’re not all good for business,” Westermann-Behaylo explained. “After that point, the automotive industry in Michigan didn’t do well…they were already on their way down.”
What the authors found was that the British, who are among the most common implementers of garden leave, have the right idea. Londoners often read about “gardeners” in the Financial Times coverage of banking executives who are between positions.
Garden leave limits the period of time during which the employee—and her innovative skills—are kept out of the labor market. Though it’s very rare in the US (only a few cases have been litigated, with just a couple of mentions in mainstream media), the authors say it’s a win-win-win situation.
The authors provide recommendations to policy makers such as judges and legislatures to aid them in making close ethical and legal calls in a world where litigation between firms and former employees is likely increasing.
“Often legal opinions out there don’t dig down really deep and explicate the principles underlying the beliefs they’re applying,” Westermann-Behaylo said.
Though none of the mobility restrictions are optimal, garden leave minimizes the potential negative impacts on all parties:
Westermann-Behaylo conceded there is certainly a basis for some businesses to protect their knowledge through limiting post-employment mobility, especially in sectors known for poaching of top employees.
And as firms and agencies prepare to lose a sizable generation of knowledge workers to retirement and a shifting landscape, perhaps a new strategy will have to take flight.
With the retirement of the space shuttle program in 2011, NASA cut 3,200 personnel, amid more staff reductions at its contractors. at the same time, commercial pioneers are vying to take future astronauts into orbit through the Commercial Crew Development Program, which is spurring private spaceflight through new players like Jeff Bezos’s Blue Origin and Colorado-based Sierra Nevada Corporation, along with Boeing and SpaceX.
“Innovation is what America has always been about,” President Obama declared in his 2012 State of the Union address. “Don’t let other countries win the race for the future. Support the same kind of research and innovation that led to the computer chip and the Internet.”
But the brute willpower of the mid-20th century—the combination of American bravado and work ethic that led to Neil Armstrong’s first steps on the moon’s surface—is no longer enough.
As the country struggles to emerge from recession, instead of focusing on the financial recovery of the American automotive industry, a broader question demands to be asked: Is the American way to solve a problem still preeminent? Or is it time to update American management thinking?
What got us to the moon may not keep us at the forefront of the global economy.
To come out on top this time, America should mine the great ideas of the globe to build a modern infrastructure for the knowledge economy. We should learn from the knowledge management disciplines of the Japanese, and the practices that England and others have adopted to protect employees and their ideas.
“For over a decade, some observers were ready to write the Japanese off,” Mroczkowski said. “However, today Japan’s economic growth is well ahead of Europe and the US, and the country has retained leadership in a number of key industries.”
The race for the future—unlike the race to the moon—may end up being an Olympian sport, requiring the best of the best from all corners of the globe, working together.