4.2.1 Strategic directions for knowledge

It is management's role to ensure that there are the technological knowledge and capabilities to fulfil the company's overall innovation strategy and to implement product development strategies for the company. It is important to understand where they have been, where they are at present and where they are going.

In the 1990s, there was a spurning of historical knowledge, which ended many times in 'reinventing the wheel'. Today, there is recognition that there is a need to store a reasonable percentage of this knowledge in a codified form for the future, because of the much greater turnover of staff and the loss of tacit knowledge. Total quality management introduced much more recording of production and product quality information. Now improved information systems make it much easier to store and retrieve knowledge of formulations and processing differences.

Product formulation is an area where there have been attempts to develop recording systems which can be used in later product development. For example using case-based systems, the records of previous formulations - both successful and unsuccessful - are used as a knowledge source with the product properties and their specifications, which can be retrieved to find a possible formulation for a new product (Rowe, 2000). Over the years, this becomes a valuable source of company explicit knowledge, which can lead also to fundamental knowledge in the specific area of the company. This is taking the tacit knowledge learned by experience and building it into generally available explicit knowledge.

Management needs to ensure that there is the needed knowledge in the company for their product development plans to be carried out. But there is always the question of how much money should be spent on knowledge in the company both in people's minds and in recorded knowledge - how much on people and how much on an information technology system? Then how should this be split between the different stages of the product development project?

If one looks at the stages of the product development project and the expenditure of money and man-days (Cooper and Kleinschmidt, 1988) in Fig. 4.3, then we could say that the knowledge created is related to the man-days expended in gaining it.

Fig. 4.3 Man-days (MD) and mean expenditures spent in PD Process (Source: Adapted from Cooper and Kleinschmidt, 1988).

Figure 4.3 shows how the expenditure increases as the project goes to commercialisation, but the proportion of man-days spent was greatest in the product design and testing stage. There is a large capital expenditure in the later stages of the PD Process at the latest stages, but it is interesting that in Cooper and Kleinschmidt's study there was not a related increase in knowledge as epitomised in the time spent by people in the project. Management needs to study the pattern of knowledge creation by people in product development and decide if it is optimal. Management has also to ensure there is sufficient communication in the company to make full use of the present knowledge in the company.

There is always a need to identify the knowledge needed in the future, both short term and in the long term; there may be a need to create new knowledge in the present product development project. In the incremental innovation strategy, this is building a bank of knowledge for future projects. But when innovation is more discontinuous, maybe to a new product platform or a new processing technology, then there is need for a new knowledge base. This can be a difficult and indeed impossible task if management has not been planning ahead. It may be impossible from the present knowledge level in the company, and therefore food companies often fall back on capital investment, buying equipment and knowledge from the equipment manufacturing company.

The management needs a strategic knowledge policy for the company that identifies the knowledge areas and also the dissemination of the knowledge within the company. The communications policy must ensure that the knowledge is not embedded in departments, but can be made available and integrated by the product development team. This again emphasises the need for product development to be integrated throughout the functional areas in the company. The basis for all knowledge is people, and management has to see that people with the necessary knowledge, skills and capabilities are in the product development team, and that they are able to create knowledge in the project as it is needed and communicate this knowledge for future projects. Is management transmitting this to the human resources group and is it prepared to employ people with the necessary skills, and reward them for their skills?

Tissen (1999) suggested that these creative, innovative people need to be thought of as highly as soccer players, with high transfer fees and high salaries. Management also needs to provide the information system that selects, collects, integrates and analyses information and also has an interface with the product developers that leads to efficient recovery of the specific information. This is far beyond the information system in many food companies at the present time, but companies should be aiming for it. It is a significant factor that can make product development more effective and efficient.

Another factor that management needs to consider is the direction for the company's knowledge. This grows from the base of present knowledge, which may lead to skewed directions in building up the future knowledge. For example the company can be directed by:

     craftsmen and rely on tacit craft knowledge, knowledge which is based
        on doing and remembering;

     accountants and rely on financial knowledge;

     engineers and rely on scientifically analysed practical knowledge;

     marketers and rely on social/personal interactions in a marketing situation;

     scientists and rely on scientific logic and method.

There are always several forms of knowledge in the company, but the dominant knowledge gives the direction to the company, and the other knowledge follows it and often is at a much lower level. This is seldom realised by the directors who sit on Boards of companies and give the knowledge direction that is followed by the executive directors and then the rest of the company. It is important that a wider knowledge direction is recognised and set for the company. The company needs to develop a knowledge strategy as shown in Box 4.1.

Box 4.1 Formation of a product strategy 1. Develop sophisticated scenarios for the competitive environment of today and the future. 2. For each of the scenarios, describe the ideal successful companies within the scenario and their attributes, in particular the advantaged and base knowledge incorporated in their products/services and throughout their value chains (advantaged knowledge - knowledge that does or can provide competitive advantage; base knowledge - knowledge internal to a business that may provide short-term advantage, e.g. best practices). Also decide on the depth of each knowledge that is needed. 3. Determine who are the current and potential future knowledge leaders in developing and applying the advantaged and base knowledge elements identified. For your company, identify the specific internal individuals who possess the knowledge. Outside the company, it is best to specify institutions/companies and even individuals who possess the knowledge. 4. Decide where the ideal company should source its knowledge, both internal and external to the company. Decide on the depth of a particular knowledge that should be inside the company and the source for the extra knowledge needed. 5. Choose the ideal company to model your company upon, and develop the business strategy and routes to reach that ideal. Plan how you are going to acquire and maintain people with the necessary knowledge. 6. Establish the effects on shareholder value of the particular area of advantaged knowledge. Source: From Clarke, 1998, by permission of Research Technology Management.

Think Break Select four food companies, two manufacturing consumer foods and two processing food ingredients for food manufacturers, with which you are familiar. 1. Decide what are the overall directions for the companies, and then     decide what are the major and minor knowledge areas in the company. 2. What are the companies' most important innovations during the last     five years? 3. How do these innovations relate to their knowledge areas? 4. Now looking at your own company, identify the different knowledge     areas and discuss firstly the importance of each and then the use of     them. Scale the importance and use on the following scales: Not important --------------------------------------------- Very important Seldom used --------------------------------------------- Always used 5. Identify the future innovation directions of the company and decide what     knowledge will be needed for these future innovations.