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Book Review
Organizations as Knowledge Systems: Knowledge, Learning and Dynamic Capabilities
Hardimos Tsoukas and Nikolaos Mylonopoulos
ISBN: 978-1-403911-40-7 2004 328 pages Palgrave Macmillan
JC Spender
Visiting Professor, Open University Business School, Milton Keynes, United Kingdom; University of Zurich, Switzerland
This is a significant contribution to the knowledge management (KM) debate. It contains at least four pieces that deserve to be widely read and cited. It is, for the most part, the proceedings of 3rd European Conference on Organizational Knowledge, Learning, and Capabilities hosted by ALBA (Athens Laboratory of Business Administration) in April 2002. That conference was on organizations as knowledge systems, bundles of dynamic knowledge assets, and their effective management. The contributors were asked to focus on such organizations' abilities to communicate, share, learn, and develop knowledge.
This careful positioning led to the book's limited concern with the issues that still dominate the KM literature: how to identify an organization's knowledge assets and manage them better. Instead, the chapters tend to explore the possibility of a distinctive knowledge-based theory of the firm/organization. As is often remarked, and is clarified here in Pitelis's chapter, economics is characterized as a discipline addressing two principal problems: wealth creation and wealth distribution. This split in economics, the latter being the core of neo-classical economics and the former being the goal of classical political economy, is already being mirrored in our own literature. Hence it is increasingly difficult to know what KM is really about. The loose answer 'better management of the organization's intangible assets' does little more than obscure, and while this volume does not go so far as to propose final answers, it certainly helps clarify the basic questions.
Knowledge as an asset
The mirroring becomes evident as soon as we recognize the KM literature comprises two divergent bodies of thought. The most widely read, and the one that attracts most managerial and commercial attention, treats organizational knowledge as an asset analogous to those on a firm's balance sheet, often costly to generate or acquire, difficult to measure, move, and appropriate value from, but analytically separable from the individuals or groups that either generate or apply it. Such knowledge assets are often presumed to be the source of the firm's rent-streams and/or competitive advantage. But there is little concern with how knowledge is created or with its essential nature. Rather it is mis-location, unavailability, or un-codified and/or un-owned status that is the focus. Knowledge is not considered to be problematic save in these respects. Crucially, the implicit theory of the firm is not considered axiomatically distinct from that predating our interest in KM; it is organization theory, or microeconomics, as usual. So this literature is largely in the Scientific Management or OT-based tradition, in the sense that resolving the problems of mis-location, communication, and so forth will lead to greater organizational efficiency. Or it is in the organizational economics (OE) monopolistic competition tradition, especially as re-articulated by Porter and, perhaps, the RBV school, within which such knowledge assets, whether dubbed capabilities, competences, or something else, are assumed to be the most secure source of rents.
The problematic nature of knowledge
The much more important and complementary part of the KM literature turns more on the problematic nature of knowledge rather than on any problems with its distribution or appropriation. The goal here is to work out a new theory of the firm based specifically on the differences between knowledge as an asset or process and the firm's economic assets. In this endeavor the works of Polanyi and Ryle, by suggesting an explicit/tacit distinction, or reflections of Durkheim, in the suggestion of an individual/collective distinction, have proved popular ways of problematizing knowledge as a fundamentally different genus of asset. The theory of the firm, and of its management, must then deal directly with how such differences of asset types are overcome.
In marked contrast to the first body of KM thought, which takes the nature of knowledge for granted and thus cannot address its creation as the source of wealth, the second type of KM allows creativity and dynamism to be introduced through the device of problematizing knowledge. Various metaphors for entrepreneurial, managerial, or organizational creativity have emerged. The synthetic processes of organization and integration is the most traditional, familiar through Grant's re-presentation of the corollary to Adam Smith's specialization argument. The single/double loop discussion is also relevant, while Nelson and Winter proposed an evolutionary model somewhat akin to Popper's concept of scientific progress. The work of Nonaka and Takeuchi remains an attractive bridge between these two literatures because it suggests that the problematic introduced via the explicit/tacit distinction can be resolved through a manageable corporate process, the knowledge growth spiral, so bringing all the relevant knowledge differences under rational control.
But making sense of KM and knowing whether it is a distinct discipline ultimately comes down to establishing its axioms or, put in a different way, establishing the ways in which KM's axioms differ from those of OT or microeconomics or any of the other established social sciences. The weakness of the first body of KM literature is that it does not seem to be axiomatically distinct; it is more a matter of using new terms to present old ideas drawn from systems analysis, organizational communication, even organizational development, in addition to those from microeconomics and OT. The notion of learning as the unproblematic accrual of knowledge assets from experience is especially naive.
Focus on practice
From the first introductory piece by John Seely Brown, this volume gives us new insights into how KM might eventually stand on its own distinctive axiomatic base. Even the last two chapters by Soo, Devinney and Midgley; and Anyfioti, Dutta, and Evegeniou are interesting explorations of conventional KM. While the first of these might well be inherently tautological, measuring 'knowledge quality' in terms of its impact on the firm's performance, the findings on the importance of informal networks for knowledge acquisition are provocative. Anyfioti et al's final chapter, dealing with customer relationship management (CRM) or one-on-one marketing explores how, in specific contexts, firms make use of the ways in which customers define products in terms other than price. The authors suggest the interesting notion of path-dependency in consumption as a complement to the much discussed path-dependency within the production function.
Seely Brown's short foreword on the importance of respect reaches deeper than might appear on first reading, something that can be said about most of these chapters. The conclusion, that inter-departmental relations will be more productive if the departments treat each other with respect, seems mundane. But Seely Brown is not only an experienced manager. He adopts the subtle notion of 'listening with humility' and thereby stresses that inter-departmental relations go better when they are constructed collaboratively - not quite what most people would get out of the mundane advice. While there are echoes of Weick's notion of mindfulness, the crux is that the shared practices of respectful collaboration reconstruct concepts, language, and perception in ways that go far beyond the conventional ideas of simply facilitating communication between different work-groups.
This focus on practice is actually the key to this volume's contribution. Three remarkable and very different chapters - the Editors' introduction, Gourlay's on tacit knowledge, and Lewin and Massini's on innovating and imitating firms - explore the difficulties facing anyone wanting to theorize about practice's relationship to knowledge. The result is considerable insight into the possible bases for distinguishing KM from its associated social sciences.
Tsoukas and Mylonopoulos - Editors' introduction
The most important chapter, ironically, is the Editors' introduction. Three of its complex of points are worth noting at the level of this review. First they consider the shift since ancient times from a focus on self-knowledge to today's utilitarian knowledge of the external world, arguing that what we now take to be factual knowledge has become been abstracted and separated from its previously situated and evaluative dimensions. The gap is now between the ancients' knowledge as entwined with the process of living and being, ie everyday practice, to today's purely cognitive knowledge of the world in which we live. Representations, the Editors argue, inevitably miss something crucial.
So their second point is that the identity of a phenomenon is always more than the sum its manifold representations. The most consequential loss is insight into the phenomenon's 'potential', what it might become, for representations do not give us the knowledge necessary to understand practice. Practice, and the knowledge which shapes successful situated practice, is fundamentally unlike the representational knowledge we have of the world. While there are obvious links with Polanyi here, there are some interestingly different conclusions. Tsoukas and Mylonopoulos use the distinction between representation and potential both to problematize knowledge, and, as their third point, make a place for managerial and organizational creativity. The gap between representation and situated social practice is their locus of innovation.
Gourlay - on tacit knowledge
The Editors' ideas about the difference between cognition and practice are well balanced by Gourlay's important chapter on tacit knowledge. The KM literature has used this term to excess and as a result it now has at least as many meanings as yesteryear's 'paradigm'. Readers with little more that a fleeting familiarity with Polanyi's writings will find this chapter a blessing. Gourlay, drawing on Collins, first considers three current meanings: (a) unarticulated motor skills, such as bicycle riding; (b) the rules-regress model, reflecting our ultimate inability to justify the rules of action through anything other than an appeal to institutionalized practices; and (c) a 'forms of life' approach. Gourlay notes the last may be a confusion between (b) and the philosophical proposition that a system's fundamental properties cannot be observed from inside that system. He goes on to consider the writings of Baumard, Boisot, and Boiral for whom the meaning of tacit is more tied up with the practice of codification; their debate is over whether or how the tacit can be codified.
In the face of this confusion Gourlay goes back to Polanyi to point out that he seldom spoke of tacit knowledge, rather about tacit knowing; in particular the relationship between tacit knowing and the Gestalt notions of coherence which are, by definition, beyond the reach of language. Gourlay's argument, then, is analogous to Hume's about the unobservability of causality. We impose both on our sense data, neither can be regarded as proven aspects of the world. Tacit knowing is the practice of creating coherence in what we then take to be our knowledge of the observed world. But since it is not of that world it must always stand outside and beyond what we might call objective knowledge. The phrase 'knowing more than we cay say' has little to do with codification and more to do with the limits of language, the Wittgenstinian point, and the resulting gap between language and the experience of practice, or, in the Editors' words 'between representation and potential'.
Gourlay goes on to consider semiotics and awareness, concluding the 'tacit dimension' is the human practice of selecting what to attend to and to imposing coherence upon it. This aspect of practice can never be separated from the entity practicing since it is part of its consciousness and identity. Thus the competent bike rider selectively attends to a number of sensations and actions which, when functionally relevant, take on coherence and drop into subsidiary awareness. Likewise it is only through practice that professionals and craft workers acquire or communicate their expertise. But, at the same time, it is crucial to see that different people have different identities manifest as different ways of attending and acting, practical techniques which can only be compared fully through competitive practice.
Lewin and Massini - on imitation and innovation
While the Editors and Gourlay deal with the more theoretical and epistemological dimensions, Lewin and Massini struggle with the differing practices of imitating and innovating firms and the resulting relationship between these differences and the economically framed theory of the firm. The fact that they ultimately fail to justify such differences is beside the point, for their discussion of organizational capabilities is certainly one of the best available.
Pitelis - on Edith Penrose
The fourth stand-out among these chapters is Pitelis's on the work of Edith Penrose. There is a new cottage industry of explaining what Penrose 'really said', and Pitelis is a leading commentator along with Foss and Loasby. Their work is important because, as with Polanyi, all too many with fleeting knowledge of Penrose suggest an association with the RBV. Pitelis argues Penrose went a long way towards correcting the imbalance between the older economic concern with wealth creation and the dominant neo-classical focus on distribution from which the RBV emerges. She specifically relied on the notion of human agency, an issue which lies completely beyond the RBV. Thus human practice and the resulting generation of managerial knowledge, is at the center of Penrose's theory of the firm. Pitelis argues that firm-like collaborative practice is therefore as much the key to a society based on knowledge as Hayek argued markets provided the means for knowledge's distribution and use. He also makes an important point about Penrose's seeming inattention to organizational conflict, suggesting organizational stability as a co-product of the practices that lead to innovation.
Remaining chapters
The remaining chapters, with the exception of Argyris's on double-loop learning, are thoroughly readable and workmanlike explorations of what it means to pay proper attention to practice when theorizing about organizations. Bogenreider and Noteboom explore the emergence of shared beliefs within work communities. Huysman re-examines the literature on communities of practice. Haefliger and von Krogh add to our understanding of how the open source software community's practices become so productive. Boer, van Baaalen and Kumar reconsider the practices of knowledge sharing and offer a useful typology of social relationships. Treleaven opens up the important issue of power in knowledge-sharing relationships with a Foucauldian critical discourse case about creating a new school in an Australian university. Daskalaki and Blair explore activity theory as a basis for their research into the film-industry's semi-permanent workgroups and its knowledge generation, retention, and application processes.
Argyris's opening chapter
Then there is Argyris's opening chapter. This is remarkable for its lack of fit with the Wittgenstinian thrust of the rest. Learning, we are told, is the detection and correction of error. While this takes us back to Plato's essences, thereby totally missing the point with its presupposition of actionable knowledge about what we clearly do not know, it runs completely against what Polanyi, Penrose, and any social constructionists would tell us. Action, we are told, is 'behavior with meaning' (p.35), the latter being the actor's intentions, so there is nothing tacit here. Again 'in order to produce effective action, it is necessary to begin with knowledge that is generalizable' (p.39). Thus Argyris sees knowledge itself as unproblematic save in its absence, and practice as a minor concept with no axiom-shaping place in the theorizing. This is precisely the kind of explicit cognition-intensive theorizing that has so constrained managerial analysis since the rise of the Carnegie-Mellon decision-making paradigm, and which KM may now - at last - be beginning to help us get beyond. It reminds us yet again of Simon's colossal pivotal and paradoxical position: on the one hand a huge contributor to the hegemony of the decision-making school; on the other, one of the handful which argued from its beginning that management would remain a mystery until we found ways of going beyond the rational decision making framework that Turing sketched which cannot recognize managers from appropriately programmed computers.
Even more remarkable is the striking combination of Argyris's insubstantial defense of his important and widely known work with Schön, and his vitriolic attack on the work of Burgelman. The accusation, also flung at others such as March and Van de Ven, is that they are 'scholars colluding with practitioners in ways that inhibit, and in some cases actually prohibit, double-loop learning' (p.33). Quite apart from whether double-loop learning is to be taken as the proper objective of all scholarly activity, we are not told, of course, about Argyris's own consulting practices. No question, the relationship between a theorist's normative writings and his pay-for-hire implementations are of great interest, and there is not likely to be less hypocrisy and self-serving among academics than in any other part of society (Koestler A [1972] The Call-Girls: A Tragi-Comedy with Prologue and Epilogue, London: Hutchinson). But this is an exceedingly strange way of considering issues that deserve the kind of careful contextualized historical analysis writers such as Kuhn, Merton, Shapin, and Latour have already shown us how to do.
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