Innovation is essential but will only get you so far. Companies that struggle to come up with new ideas for products and services but then rest on their laurels once these products succeed are not fully meeting their strategic challenge. If they are not careful, their ingenious product will become a commodity. Competitors will learn the secret, the market will grow crowded, the price will drop, the idea will become old hat. The product may still be useful and worth selling, but that doesn't have to be the end of the story.
There must be a way to squeeze longer life out of the intellectual capital embedded in a product-even when the initial product ceases to be cutting edge.
Wouldn't it be shrewd for Intel Corp. to reevaluate, say, the aging 486 microchip and discover that this faded has-been of the PC world deserves a new lease on life powering toys or small appliances? Might IBM Corp. have remained the PC hardware champion had it better understood the life cycle of ideas behind its products?Bipin Junnarkar helped develop this concept while working in knowledge management at Monsanto Co. in St. Louis. He feels all companies can benefit from a life cycle approach to intellectual assets and innovation. Now a consultant, he aims to help clients figure out where the knowledge advantage in their products lies; that is, what knowledge the product or service contains that its competitors lack. He urges companies to develop a portfolio approach to their development of products and services based on this knowledge advantage. Executed correctly, Junnarkar argues, management of what he calls the knowledge cycle should improve speed to market, lower risk and better exploit intellectual resources. His model also provides a visual framework to manage a company's internal portfolio of IT investments.
Like any consultant worth his hourly fees, Junnarkar has a matrix to illustrate his point. According to Junnarkar, two intangibles define the life cycle of a product: the amount of information your company and others possess about the idea or product and the depth of understanding you and competitors have about the product and the market. Bold innovation starts with little information and little understanding. A high level of both information and understanding about an idea makes it a commodity.
Ironically, the tremendous increase in the use of information technology in business has encouraged a misplaced reliance on what large quantities of information can do, Junnarkar says. Thus IT executives try to play where there is a lot of information, but the idea behind the tool is new and untested. The problem is that mountains of data do not necessarily make for insight.
Junnarkar likes to quote Murray Gell-Mann of the Santa Fe Institute in New Mexico, who told him once: "People can make almost complete sense out of incomplete information. Computers need mostly complete information to make partial sense."An example from the auto industry shows how voluminous data can be at odds with understanding. Some innovative thinkers at Chrysler Corp. in the early 1980s came up with the idea that eventually became the minivan. The company's extensive market data then showed no demand for such a product. But its own strategists had a gut instinct-intuitive knowledge about their customers-that led them to develop the minivan. Chrysler initially dominated the new market it created. But now that market is mature, DaimlerChrysler AG must set its sights on new products to develop.
The Premium Zone
If your company is managing its knowledge cycle well, as Chrysler did, it should always have a product competing in what Junnarkar calls the premium zone, where you have developed high clarity of understanding but the public domain information around that capability/ product/process may be incomplete.
One method to keep operating in the premium zone is knowledge bundling. This means adding knowledge to an existing product as The Goodyear Tire & Rubber Co. has done with its smart tires, which, besides performing the regular duties of tires, sense tire pressure and communicate that information to the driver. At Monsanto, knowledge bundling means, among other things, constantly adding genetically engineered traits to agricultural products it's developing so that they always have a higher value than their competitors.
Another tactic to stay in the premium zone is to follow Intel's model of rapidly, constantly and radically upgrading a product-in this case, computer chips-to offer more speed and power than competitors can. Intel's chips eventually age into the commodity quadrant where competitors can also play. But the new models, imbued with knowledge competitors lack, keep on coming.
One stumbling block to this strategy is executive talent. Someone who is an ace at managing mature products, which demands operational efficiency and project management skills, can be a failure at leading new product development, which depends on creativity, subjectivity and recognising trends and patterns, Junnarkar notes.
A Tool for CIOs
At Monsanto, a modified version of the knowledge cycle concept is being used internally as a framework for developing a broad mix of new IT initiatives. "If you look at an IT portfolio, that is, the sets of projects you are working with, most are in the upper right and middle; [Junnarkar's] framework says that [to be innovative] you must have a piece in the lower left," explains Patrick Fortune, Monsanto's CIO. "I say I need [IT applications] that range from the upper right to lower left" of the knowledge cycle matrix.
Systems and applications that rely on complete information, such as financial data, business transactions and processes, create value through efficiency and optimisation, Fortune says. But they won't make an organisation creative or innovative. Applications that fit into the low information/low understanding corner in the lower left will, however. Examples are collaborative tools that use machines to connect people with other people, visualisation tools and data mining applications. Such approaches are suited to research and development in which researchers need to work with complex sets of data.
The Royal Dutch Shell Group has used Junnarkar's work in designing the company's recent round of global scenarios for strategic planning. Shell naturally is not publicising its upcoming product and development strategy, but it is using the framework to look at the knowledge content of products and services and the cycle they go through, says Marcus Speh, business strategist for Shell Services International in London. Speh says Shell has typically invested lots of capital and gotten little back. From now on, though, all strategies will have to work toward the same goal: to improve the effectiveness of capital by turning Shell from a hard-asset company to one that honours and gets the most value from its soft assets.
Internal Knowledge Chain
Speh came to Shell to implement knowledge management across the company and has his own framework for managing the knowledge chain, which he says is compatible with Junnarkar's. Speh traces the increased sophistication of knowledge sharing at the company through four stages. Stage one is capturing core knowledge that drives the business. It proceeds to sharing knowledge among communities at Shell. In the third, more IT intensive phase, knowledge is consolidated for practical use. In the final phase, employees take the initiative to use the knowledge for creativity and learning.
Whereas Junnarkar focuses on the increasing intensity of knowledge in products and services, Speh looks at increasing sophistication of knowledge use in an organisation. "Where Shell is at the moment is hard to say, since it is a matrix organisation; [most of the company] is between the second and third phases-a lot of communities are starting to break through the [corporate] silos [that separate them]," Speh says.
Learning from Metaphors
Call it a knowledge life cycle, a knowledge chain, a knowledge map-the name and metaphor will vary from company to company. The lesson to absorb from these models is that while many companies have focused on the technologies associated with knowledge management, IT solutions can deliver value only when they are part of a knowledge-based strategy. Junnarkar and others struggle with ideas about knowledge in corporations that are yet to be proved. You may not adopt them tomorrow. But can you afford to ignore innovative ideas about innovation?(Senior Writer Gary Abramson can be reached at firstname.lastname@example.org. Bipin Junnarkar can be reached at email@example.com.)
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