Dynamic Knowledge Capabilities

In examining the functions of knowledge organisations, the dynamic nature of knowledge becomes
clear. Their functions are an ongoing process of gathering information and knowledge, integrating
that into existing organisational knowledge, sharing and leveraging it, and appying it to create value
for clients. The success of the organisation depends wholly on its ability to perform each of these
processes more effectively. These are the organisation’s knowledge capabilities, which are the
foundation of organisational success. It is far more useful to think in terms of developing the
organisation’s dynamic knowledge capabilities than about knowledge as a static asset which needs
to be managed.

3.1 Knowledge Processes and Knowledge Capabilities

We have seen that the functions of knowledge organisations are based on knowledge processes,
many of which are fundamentally similar across organisations, even those in quite different
industries. The success of knowledge organisations depends largely on how effectively and
efficiently they can perform those processes. As such knowledge capabilities can be understood as
the capabilities of organisations to perform effectively the knowledge processes on which their
success depends.

3.2 Dynamic and Static Knowledge Capabilities

The specific knowledge processes which have the greatest impact on organisational value creation
are different for each organisation. In some cases, there is a large existing base of knowledge or
intellectual capital which can be leveraged with appropriate initiatives. An example is where a
company owns many patents which are not being fully exploited, either directly in production or
licensing, or through undertaking research which builds on the intellectual property. Dow Chemical,
for example, began its knowledge management initiatives by seeking to leverage its existing base of
patents. Another example is where organisations endeavour to capture the knowledge of their staff
in expert systems. The kinds of knowledge capabilities required to achieve these tasks are relatively
static in that the central tasks remain the same over time, and there are generally not severe time
pressures, however these capabilities can be developed and improved as they are applied.

Other organisations require geographically distributed teams to collaborate effectively on client

projects, or to add value to information on a real-time basis. The timeframes and rapidly changing
parameters of these tasks means that the knowledge capabilities which determine their success
must be highly dynamic. This situation is more representative of the knowledge processes that are
central to organisations today, especially in key areas such as product development and marketing.
Each organisation requires a different set of knowledge capabilities to perform its core knowledge
processes effectively. Some of these capabilities may be relatively static in nature, however all
organisations require dynamic knowledge capabilities, in particular in their market and strategic
responses. Shifts in the business environment are resulting in an increasing emphasis on dynamic
rather static than knowledge capabilities. Since static capabilities can far more easily be emulated,
dynamic capabilities must be at the source of any sustainable competitive advantage.

3.3 Scope of Knowledge Capabilities

In the case of ‘pure’ knowledge organisations, which provide information and knowledge-based
services, almost all of their core capabilities are essentially knowledge capabilities. While these can
be fairly diverse in nature, seeing them all as knowledge capabilities not only helps to gain greater
insight into the common aspects of those capabilities, but is very valuable in designing initiatives to
develop and reinforce those capabilities.

3.4 Knowledge Capabilities as Meta-Capabilities

In the case of organisations which have physical outputs or provide services which are not heavily
information or knowledge-based, knowledge capabilities can be seen as meta-capabilities, in the
sense of developing other lower-order organisational capabilities.[15] In this way, knowledge
capabilities have the greatest leverage and impact on overall organisational performance.
Argyris has differentiated between single-loop and double-loop learning; single loop learning results
in better ways of doing things within existing norms and assumptions, while double-loop learning
involves questioning and changing those norms and assumptions.[16] This is both intrinsic to the
concept of knowledge capabilities, and to their dynamic nature, in terms of being able to evolve and
adapt to rapidly changing conditions.
3.5 Knowledge Capabilities and Organisational Development
Knowledge capabilities are at the heart of the effectiveness of organisations. Since the market and
competitive environment of all companies is rapidly changing, the value of existing capabilities will
quickly decay, resulting in a lack of competitiveness. It is an imperative for organisations to focus on
developing their knowledge capabilities on an ongoing basis, or they will face extinction.
Organisational development must be centered on the continual enhancement of knowledge
capabilities, as the foundation of organisational effectiveness in all fields.

4 Strategy and Knowledge Capabilities

Organisational strategy defines the organisation relative to its environment. This includes defining
the core competences of the organisation—that which distinguishes it from its competitors—and how
these result in sustainable greater value creation for its clients and itself. The establishment of the
strategic positioning and direction of an organisation—and the implementation of that strategy—are
almost certainly the factors which have the greatest impact on its success.

4.1 Strategic Capabilities are Knowledge Capabilities

Since strategy is all about the relationship between the organisation and its environment, its success
depends on the effective gathering, filtering and synthesis of information about both the organisation
itself, and the organisation’s environment, including how current and future developments may
impact it. As such, capabilities in scanning, sensemaking and pattern recognition in the
organisation’s environment—which are core knowledge capabilities—are also fundamental to its
strategic capabilities.[17] These are the key capabilities in interfacing with the external environment,
however value must be added to that information by making it relevant to the issues and decisions
that face the organisation. Again, this is a core knowledge capability, which is a central process not
only in how the organisation creates value for its clients, but also in being able to make effective
strategic decisions.
The pace of change in the business environment means that strategic plans can no longer be set for
a fixed term and then implemented, but must continually evolve in response to management’s
evolving understanding of the organisation in the context of its environment. The ability to implement
real-time strategic response is becoming the core strategic capability, which underlines that it is a
knowledge capability, and that organisational knowledge capabilities must be dynamic.

While strategic decision-making is usually concentrated at a senior management level, the

knowledge which is required to establish an effective strategy must be obtained from and filtered
through the organisation. This filtering and concentration of input into strategic decision-making is
perhaps the most valuable knowledge process of the organisation, as the quality of the long-term
strategic decisions of the organisation—which are the greatest determinant of value creation—
depends on its effectiveness.

5 Developing Organisational Information and

Knowledge Capabilities
Since information and knowledge capabilities are the source of competitiveness, and the heart of
organisational development and strategy, organisations must focus on developing these dynamic
capabilities. Here we present a framework which is valuable for establishing and monitoring these
initiatives.

5.1 Domains for Developing Knowledge Capabilities

Knowledge organisations almost by definition depend on knowledge workers, who are at the heart of
the processes that create the most value for the organisation and its clients. These individual
knowledge workers and their ability to add value must form a focus for development. These
individuals, however, work within an organisational context that provides them with an infrastructure
and framework that enables them to maximise their value creation. In terms of developing
knowledge capabilities, the key aspect of the organisational context is the flow of information and
knowledge, which is fundamental to how an organisation comprised of many individuals can create
greater value than those individuals working separately. Thus the two domains on which we must
focus in developing knowledge capabilities are the individual and organisational levels.

5.2 Means for Developing Knowledge Capabilities

Technology is clearly invaluable for enhancing capabilities at dealing with and adding value to
information and knowledge; it is a primary means of developing knowledge capabilities. This alone is
insufficient, however; the skills and behaviours of people in fact provide the bulk of the added value
in knowledge processes. Certainly technology has little value unless it is complemented by effective
skills and behaviours on the part of those using the technology. Thus the two primary means of
developing knowledge capabilities are technology, and human skills and behaviours.

5.3 Four Fields for Developing Knowledge Capabilities

Applying the two domains of developing knowledge capabilities of the individual and the
organisation, and the two means of developing knowledge capabilities of technology, and skills and
behaviours, yields a two-by-two matrix. Each of the four fields in the matrix represents a key area for
developing knowledge capabilities. While developing each field on its own will result in greater
organisational knowledge capabilities, each one relies substantially on all of the fields; to achieve
large and sustainable gains in capabilities all four fields must be addressed and developed on an
ongoing basis. Here we briefly describe some of the specific tools and initiatives which can be used
to develop each of fields, as shown in Table 1.

Table 1. Four fields for developing organisational information and

knowledge capabilities, with examples of focal issues, processes and
tools.
Individual use of
information and Organisational flow of
knowledge information and knowledge
Technology Search enginesE-mail E-mail
 filters Intranets and groupware
Intelligent agents Knowledge yellow pages
Information visualisation Videoconferencing
Filtering information
overload Organisational culture
Analysis Teamwork and team objectives
Skills and Synthesising ideas Group processes
behaviours Decision-making Communication skills
Individual Technology. This refers to technology which can increase the effectiveness and
capabilities of knowledge workers. Some of these tools are already commonly implemented in
knowledge organisations, such as search engines, e-mail filters and rule-based push technology.
Others are only just beginning to be implemented, such as intelligent agent technology. A critical
aspect of individual technology is facilitating the internalisation of information as personal knowledge
by people; the importance of information visualisation and similar tools will rapidly increase.
Organisational Technology. Digital technology is an extremely powerful tool for assisting the
organisational flow of information and knowledge, and most knowledge management efforts are
focused on the implementation of this technology. At the simplest level this introduces e-mail and
shared storage of documents, moving on to intranets, threaded discussion boards and knowledge
directories. The key elements are effectively capturing individual and organisational knowledge in
digital documents, and making these easily available to others across the organisation, or possibly
discriminately ‘pushing’ these to individuals who may find them useful. Collaborative filtering, in
which users rate the value of documents, can greatly increase the effectiveness of these processes.
Individual Skills and Behaviours. The effectiveness of knowledge workers—whatever the field in
which they work—depends on their basic information and knowledge skills. Since their tasks are
dealing with information, adding value to that, and using it to create value for others inside or outside
the organisation, their abilities at these tasks are intrinsic to the organisation’s knowledge
capabilities. These knowledge skills include filtering information overload, reading and note-taking,
analysis, synthesising ideas and information, communicating concepts and knowledge to others, and
of course skills in using technology. While high-level professionals may be already excellent at these
tasks, their skills can always be developed further. Organisations should embed development of
these fundamental knowledge skills into all of their internal training and development programs.
Organisational Skills and Behaviours. Even when the other three fields are well developed, if an
organisation’s culture and internal behaviours do not support its knowledge capabilities, these will
remain largely ineffective. People may have the infrastructure and ability to share knowledge and
work effectively with others within knowledge processes, however they also require the motivation to
do so, and ultimately this depends on the organisational culture and the behaviours manifested.
Some of the key enablers are leadership, remuneration and recognition.[18]
5.4 Developing Strategic Capabilities
The preceding matrix has mapped out the key areas which must be covered in order for an
organisation to develop the full spectrum of its knowledge capabilities. As we have seen strategic
capabilities are knowledge capabilities, however they are highly specialised; as such they can be
developed with a high degree of specificity.

Since strategy depends so largely on understanding changes in the organisation’s environment, as

well as the organisation’s competences and capabilities relative to that, filtering, gathering,
synthesising and sensemaking of information from both external and internal sources is critical to
strategic capabilities. Some elements which will assist greatly in this are developing the skills of key
individuals in their abilities in filtering and sensemaking, developing technology both to assist in
scanning external information and in communicating high-value information to decision-makers, and
building a culture which encourages market intelligence from front-line sales and support staff to be
channeled to decision-makers, as well as distributing decision-making within the organisation.

Strategic capabilities are perhaps the most dynamic of organisational knowledge capabilities—a
relatively static approach will not keep pace with environmental change, and places the organisation
at substantial risk. Since the dynamic aspect of knowledge capabilities depends largely on individual
and organisational skills and behaviours, these must be developed specifically in order to build a
high degree of responsiveness, and a willingness to re-examine continually the frameworks and
implicit mental models of individual and organisational strategic thinking.[19]