On Management: knowledge is no longer power

Competence, community and the courage to make a difference constitute the new trinity of competitiveness.

by Jonas Ridderstrale
Last Updated: 23 Jul 2013

More or less all companies around the world use similar recipes for how to compete, shaped as they are by globally standardised MBAs. But sameness sucks. Articulate knowledge is increasingly becoming a commodity. We see this happening in diverse areas, such as architecture, medicine, engineering and business. Such knowledge is unfortunately as vital to the competitiveness of a corporation as having a toilet back at the office - necessary, but no longer sufficient for the creation of sustainable advantages.

Note, however, that tacit knowledge, which is much more specific to the organisation and builds up cumulatively, is a different story. Socialisation can lead to uniqueness and the development of knowledge-handcuffs that make it more difficult for critical employees to leave the firm.

To boost the value of their intellectual capital (IC), companies need to launch four different types of initiatives simultaneously. Consider the two by two matrix implied by the strengths and weaknesses, respectively, on the level of the corporation on the one hand and of individual employees on the other.

Developing those with the greatest needs in our weakest areas is pure damage control. Exposing people with weak spots to training in areas where the firm has strengths amounts to learning the tricks of the trade. Let stars with unique skills transfer these to the rest of the organisation in missionary-style training programmes.

Finally, gather the best of the best in spear-head ventures aimed at knowledge transformation rather than transfer. Only the latter type of initiative is truly strategic, but to succeed companies need to think of IC development in terms of such a competence development portfolio.

There is more. In future, there will be two kinds of companies: the quick and the dead. The secret to speed rests with understanding the business implications of the equation that states that velocity is a function of mass and energy. Until recently, companies have been obsessed with processes focused on decentralisation. Managers have out-sourced and off-shored. In the asset-light company, 1.3 kilograms of brain per employee is the only mass left.

Now, the time has come to start re-energising the corporation. The 1990s gave us a competence-based view of the firm. Today, we must move on and profit from a psychology and sociology-based perspective that boosts the energy level of the enterprise.

While research shows that the combined effect of the education and experience of people in organisations explains some 28% of work-related performance, studies also suggest that confidence or self-efficacy - the belief in your own ability - alone accounts for approximately 38% of performance. Add to that, the impact of hope, optimism and resilience, and the influence of positive psychological energy becomes even clearer. As a leader, you may be able to envision the future, but unless you can engage the people around you, the corporation will be operationally impotent.

The level of social capital also has a strong impact on performance. So, how do you transform a corporation into a cohesive community - a tribe that can triumph? When the objective is to develop trust, values and a network of true believers, it is hard to neglect the world religions as a source of inspiration. All religions, secular and non-secular, are set in motion by an ideological dimension - there is a dream - a big, hairy audacious idea (BHAI). Reverend Martin Luther King probably had solid reasons for saying: "I have a dream" rather than "I have a five-year plan". Dreams are inspirational; they are magnets for the mind.

Consider the US - the powerhouse of the world economy. The US is not a nation state in the traditional sense, but rather a BHAI. This is interesting because it means that each and every person on this planet can become American. How long do you think it would take to become French or Japanese? But even if you are born in Graz, Austria, by the time you are 29 you can move to the US, become a D-actor, a C-actor, a B-actor and then governor of California.

Know-how means little unless it is complemented by know-who and a can-do attitude. Thriving boils down to maximising the social and psychological capital of the corporation. Competence, community and the courage to make a difference together constitute the new trinity of competitiveness.

- Dr Jonas Ridderstrale is a visiting professor at Ashridge Business School, UK. The '2005 Thinkers 50', the bi-annual global ranking of management thinkers, ranked him and his colleague, Kjell Nordstrom, at number nine. He has also co-authored two books with Nordstrom, Funky Business and Karaoke Capitalism.

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