Nobody Knows As Much as Everyone Presentation copyright © 2000 by Barry Brownstein

Prologue “ Our ignorance is sobering and boundless. Indeed, it is precisely the staggering progress of the natural sciences which constantly opens our eyes anew to our ignorance…With each step forward, with each new problem which we solve, we not only discover new and unsolved problems, but we also discover that where we believed that we were standing on firm and safe ground, all things are insecure and in a state of flux.”- Karl Popper

Barriers To Creating Knowledge: A Belief in Final Answers l “There are no ultimate sources of knowledge. Every source, every suggestion is welcome; and every source, every suggestion is open to critical examination.” l “Our knowledge can only be finite, while our ignorance must necessarily be infinite” l ‘What are the best sources of our knowledge- the most reliable ones, those which will not lead us into error” are authoritarian questions. Knowledge is not made legitimate by its pedigree. l Ask instead: “How can we hope to detect error?”

“The (knowledge)... problem...is a problem of the utilization of knowledge which is not given to anyone in its totality.” What Is The Knowledge Problem?

Knowledge Is Dispersed l “...the knowledge of the circumstances of which we must make use never exists in concentrated or integrated forms but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

Kinds of Knowledge l Scientific Knowledge (explicit knowledge ) l ‘The unorganized knowledge… of the particular circumstances of time and place.” l “Tacit” knowledge is inarticulable- “we know a great deal that we cannot tell.” –highly personal, hard to formalize and share –examples-riding a bicycle, grammatical rules –“highly subjective insights, intuitions, and hunches are an integral part of knowledge.” l Self-Knowledge

Hierarchical Controls Vs. Decentralization l “Which system “ is likely to be more efficient depends mainly on the question under which of them we can expect the fuller use be made of the existing knowledge.” l “If a problem of society one of “rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances…”

Using Dispersed Knowledge l Too often the long and narrow management channel in command firms leads to new ideas being cut off before they reach board level. Moreover in these organizations independent thinking is discouraged in favor of conformance to organizational rules and procedures. Competitive advantage depends upon information and knowledge and, as Hayek and others pointed out earlier this century, planners inevitably lack the information and knowledge to allocate resources efficiently. In short, today organizations need to self-organize and adapt to mimic markets in discovering and mobilizing dispersed knowledge."- Cowen and Parker

‘Knowledge Management’- Fad or Trend? l Information is simply facts, knowledge involves conceptual understanding and is frequently tacit l As the price of information falls utilizing dispersed knowledge is increasingly important to society and to a firm l ‘(Knowledge Management is) An oxymoron if there ever was one…Don’t be fooled: You can manage information but not knowledge.’- Wall Street Journal January 1998

Barriers: A Belief That Knowledge Can Be Managed l “The subjective and intuitive nature of tacit knowledge makes it difficult to process or transmit the acquired knowledge in any systematic or logical way.” l “The most basic, vital fact of knowledge: it cannot be controlled or compiled.” l “Instructing someone how to apply his knowledge in an organization eliminates the special value of his knowledge.” l “Learning is fundamentally a social activity.”

Planning Vs. ‘Markets’ in the Firm l Decisions made at the top l Communication goes through ‘proper channels’ l resistance to new ideas l Decisions made by those with ‘best’ local knowledge l new ideas welcomed and filtered l responsibilities and incentives to generate new knowledge l new knowledge may invalidate current beliefs and practices

Creating New Knowledge l “ Much of your knowledge is the fruit of our own purposeful endeavors in dealing with the world.” l “Theory can be learned only by practicing its application: its true knowledge lies in our ability to use it.” l “ Once the importance of tacit knowledge is realized, then one begins to think about innovation in a whole new way. It is not just about putting together diverse bits of data and information. It is a highly individual process of personal and organizational self-renewal.”

More on Creating New Knowledge l “The personal commitment of the employees and their identify with the company and its mission become indispensable. In this respect, the creation of new knowledge is as much about ideals as it is about ideas…the essence of innovation is to re-create the world according to a particular ideal or vision.” l Needed: “A shared understanding of what the company stands for, where it is going…” l “To create knowledge, the learning that takes place from others and the skills shared with others needs to be internalized.”

The Case of Bruegger’s Bagels l Vermont based Bruegger’s had the nations’ largest market share of bagels l Purchased by Quality Dining, an operator of Burger Kings, in 1996 for $142 million l In less than year lost $203 million or 35cents a bagel and sold the company back for $50 million –Quality had transferred Bruegger’s execs to Indiana providing no phones and little office space