In a blog I wrote in November last year entitled “Moving-towards-a-more-distributed-innovation-model”( http://bit.ly/b38ixv) I outlined some thoughts on the flow of knowledge in a distributed innovation model and discussed the Absorptive Capacities more from an internal organizational perspective.
Increasingly we are looking outside for new knowledge that needs internally managing.
As organizations seek increasingly outside their own walls, the appreciation of how they are managing knowledge, learning and interpretating this is becoming a critical aspect of open innovation to be successful. There is a growing need to absorb, integrate and apply this in new and novel ways for accelerating the innovation performance. The more we seek, the more the knowledge increases in complexity as markets are rapidly changing. The more we are relying on knowledge flowing into the organization the more we have to strength our inter-dependence and collaboration efforts to extract the knowledge we are acquiring for it potential value. Are organizations recognizing the value of structuring their knowledge flows? Do they have the right learning mechanisms to accelerate and exploit new potentials from this knowledge?
Organizations tend to be set up for incremental learning.
Often the markets we operate within are volatile and suddenly change. Our capacity to change is often governed by the new knowledge we are provided. To make a change beyond incremental learning we need a different path of learning, we need often new capabilities to learn. We all tend to place what is being said to us as highly situational and we often interpretive it in the way that we know, we reject alternatives to see things differently and as such we do not spot the innovation opportunity that was actually in front of us. We look for what we know. This is sometimes called being locked within your own ‘competency trap’. To move away from this risk we need stronger learning mechanisms, a change in the path of learning.
Understanding Absorptive Capacity and how it works
“Absorptive capacity” is a term introduced through some academic research by Cohen & Levinthal, back in 1990 to describe an organizations “ability to recognize the value of new, external information (knowledge), assimilate it, and apply it to commercial ends”. Since then there has been significant academic contributions for exploring and validating this, in order to improve innovation performance and competitive advantage yet it is still not well integrated into our innovation process.
What we do need is to improve our HR management systems to build a more efficient transfer of knowledge throughout the organization to leverage it. This is part of applying the principles of absorptive capacity as we increasingly use more networks, external partners and collaborate with others we are accessing wider skills, inputs and competencies and we need to learn what this provide to aid the innovation process. The theory goes that the more we understand, the more the innovative behaviour and capability goes up in potential, then the more we have in richer innovation choice .
The Model of Absorptive Capacity explores potential and realized knowledge.
The need for a distributed organization innovation knowledge system
In some studies by Van den Bosch et all (2003) they suggested the need for three combined capabilities to manage and absorb the flow of knowledge coming into the organization
- System capabilities that are used to integrate explicit knowledge
- Co-ordination capabilities that build upon teams that establish the routines for structuring communications
- Socialization capabilities that begin to share a ‘certain’ ideology, understand the potential of new paradigms and work towards interpretating tacit information for the good of the community.
When organizations are acquiring new insights, new knowledge that is not as closely related to their existing knowledge base there needs to be a very active set of efforts to manage this new incoming flow so as to extract all its potential value, to absorb it and disseminate it across the relevant parties within the organization. Having the three capability parts structured clear helps establish different areas of capability focus and embed it more fully.
Can you imagine the need for rapid learning of leading-edge knowledge that is required to be absorbed within the company, these require dedicated structured learning, and these cannot be left to individuals or ad hoc measures. When you are learning anew you are searching for cognitive structure, managing implicit, often un-codified knowledge (tacit) that is difficult to transfer and also increased complexity, where you need to absorb a greater range of ‘components’ and apply new‘ architectural’ knowledge. The difficulties multiply if you do not recognize the needs to structure knowledge but to explore it in more open unbiased ways.
The ability to use external knowledge has three sequential processes.
A) Exploratory Learning– recognizing and understanding the potential value of the new knowledge that lies outside the organization
B) Transformative learning– dispersing and assimilating the valuable new knowledge
C) Exploitative learning– using the assimilated knowledge to create something different in knowledge or product and seek to exploit this in commercial ways.
The more open Absorptive Capacity Process leading to understanding and outcomes
The call for managing the effective use of knowledge
One of the central drivers of the competitiveness of organizations is its effective use of knowledge. It is the generation, acquisition, integration and application of (new) knowledge needs managers to manage learning. Knowledge underpins innovation, the more it changes, the more it becomes complex to discover, the more we have of this real need to upgrade how we experience, experiment and absorb learning. This needs structuring. As we absorb more external knowledge from our collaborators the need is to organise this well. Absorptive capacity needs to go beyond good theories into increased application. Absorptive capacity is an integral part of an organizations innovation capabilities and its healthy development is a real significant dimension of innovation management that we all need to consider well.