Work in knowledge-based organizations is social. Activities include collaboration and sharing. Work products are improvisational. Success requires judgment and freedom to act. There is a heavy reliance on others. Trust is key. Knowledge creation and flow span organizational boundaries. Social networks propel excellence in knowledge-based organizations.
In contrast, transactional organizations does not have these properties. Integrated process activities produce the work product. Work is systematic and routine. There is a heavy dependence on rules and procedures. There is no discretionary activity. High degrees of automation are present. Excellence in transactional organizations depends on processes and ordered activities.
Both forms are needed and exist. A lot has been said and done to make transactional organizations run better. Scarce little has been done or offered to improve knowledge-based organizations. In fact, the naïve use of industrial and information-era practices is highly counterproductive in the knowledge-based organization.
BTW, for scholars this bifurcation is transaction cost economics (TCE) versus the knowledge-based view (KBV). Just Google them.
The most practical approach to knowledge-based organizations is a constitution. Constitutional approaches are highly successful. It is because constitutions specifically and severely limit the scope of governance. This allows people, real humans, to organize in a way that best suits prosperous outcomes.
Probably the most famous business constitution of all was The HP Way. It was conceived by Bill Hewlett and Dave Packard. It goes as follows:
- We have trust and respect for individuals.
- We focus on a high level of achievement and contribution.
- We conduct our business with uncompromising integrity.
- We achieve our common objectives through teamwork.
- We encourage flexibility and innovation.
These brief constitutional principles led the most successful firm in the history of business. Recall, from 1939 to 1989 HP had an average CAGR of 20% with no down years. Today, HP is the largest technology firm on earth.
Again, constitutional models thrive because they deliberately enable diversity, emergence, self-organization, dynamic reconfiguration and other key network properties essential to knowledge-based business. Constitutions are robust and survive for centuries because they limit the reach and interference of governance and control.
When crafting a Knowledge Constitution embrace the principle of parsimony. Among the worst possible things a knowledge-based organization can do is build rigid frameworks or confining IT architectures. Look at how all centralized, large-scale, so-called ‘enterprise architecture’ and portal efforts have failed the knowledge-based firm. Less is more, a LOT more!
“We the People” shapes the very nature of leadership. Nature depends on networks. Organizations depend on social networks. Knowledge, productivity, innovation and prosperity inhabit social network patterns and structures. It’s that simple. Really.
Bill & Dave knew this principle well. For example, when an HP division reached a population of about 200 people, a new, autonomous division was immediately spun off (in). When Bill Gates was asked for one thing he learned from HP, he cited this fact and HP’s dynamic organizational model. This wisdom held well before the Dunbar Number too. It is critical because it is a common-sense limit to maintaining stable, sharing and productive social networks.
In 1989 our team helped to remediate and repackage the HP Way for then CEO Lew Platt and the rest of the firm. We didn’t change a thing, just updated for electronic distribution and global integration. Since them we have built constitutions for a variety of knowledge-based firms. Contact the Network Singularity to develop your own Knowledge Constitution.