Manage for Innovation

Why is it that some public organizatons, like hospitals or universities, are far more effective than the rest in the same industry? Why are some private corporations, such as IBM, Siemens, ICL, General Electric or Hewlett-Packard the most successful companies among all their rivals, year after year? Why do many of the industrialised countries flourish in spite of a twenty or thirty times more expensive work force than in the Third World countries?

How is it possible to produce Mercedes-Benz cars in Germany, a country renowned for having one of the highest cost levels in the world? Or how is Nokia able to make mobile phones in Finland? Unanswered dilemmas? Not at all – all these organizations and corporations have one important thing in common: they apply the principles of Knowledge Management. As a matter of fact, Knowledge Management seems to be today the most powerful secret weapon of all successful organizations worldwide.

The New Theory of Growth

Modern Knowledge and Innovation Management are based on the early 1990’s findings of Paul Romer. As many other researchers he had been bothered by the fact that a phenomenon called the Solow Residual seemed to grow in economic models. The GNP continued to grow in Western economies in spite of the weekly working hour cuts and all other inputs remaining the same. Paul Romer was able to solve this enigma by observing that the engine of the economy are not the government actions but internationally competitive corporations. And secondly, the corporations stay competitive only by steadily renewing themselves throughout all levels of the organization. These improvements are called innovations.

These findings are called The New Theory of Growth that has split traditional economic science into two schools of thoughts, theoretical and practical economics. It has also laid a firm foundation to a set of methods, practies and concepts called Knowledge Management (KM).

The Scandinavian School of KM

In the American tradition the Knowledge Management is sometimes confused with Information Management, e.g. data mining, corporate intelligence or information portfolio management. However, Knowledge Management has the emphasis on the human being and her creative ability.

The roots of modern KM are deeply in the Scandinavian soil and Leif Edvinsson is one of its Founding Fathers. Edvinsson was one of the first to introduce the notion of Intellectual Capital and to show its impact on the competitiveness of a firm.

The Dynamics of Innovation

Innovation doesn’t emerge in a vacuum but requires an active exchange of knowledge and interactivity with the environment. Great ideas don’t anymore sparkle in the researchers’ cells but in dynamic environments where people with a wide variety of competencies meet and exchange ideas.

People meet each other in human networks. The mechanism of these networks have so far been researched very little.Recently, Albert-László Barabási has made some trailblazing research that had shed light on the topic.

From KM to Innovation Management

It has been said that “one cannot manage knowledge – one can only manage the systems hat contain knowledge”. Nobody becomes innovative by command and the spirit of innovation can be easily lost. We can only create environments that support and nurture innovation. Eventually this leads to a multi-dimensional approach of business management that combines e.g. future studies with psychology or sociology to a coherent new concept of the 21st Century - Innovation Management.