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 are different. 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, information-era and manufacturing 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 effective approach to leadership of knowledge-based organizations is a constitution. Constitutional approaches are highly successful. It is because constitutions specifically and severely limit the scope of management. This allows people, real humans, to organize in a way that best suits prosperous outcomes. The focus of the knowledge-based organizations is on leadership and distributed phronesis.
- Absolute trust and respect for individuals.
- Focus on a high level of achievement and contribution.
- Conduct business with uncompromising integrity.
- Achieve common objectives through teamwork.
- 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 or layoffs. Today, HP is the largest technology firm on earth.
Again, constitutional models thrive because they deliberately enable interaction, emergence, self-organization, dynamic reconfiguration and other key network properties. They are essential to knowledge-based business. Constitutions are robust and survive for centuries because they limit the reach and interference of governance, management and control.
Inexperienced managers think codifying their rigid rules is culture. Not so.Culture is not led. Culture is only served. Authentic leaders reveal and ascribe the benefits of emergent culture. They lead by example not mandate.
When crafting a Knowledge Constitution embrace the principle of parsimony. Among the worst possible things a knowledge-based organization can do is build PowerPoints and binders of rigid practices, confining methods or specious culture claims. Look at how all centralized, large-scale, so-called ‘enterprise policies and procedures,’ efforts and codified culture have utterly failed the knowledge-based firm. Less is more, a LOT more!
“We the People” shapes the very nature of leadership in The Social Enterprise. 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.
Colabria helps to reveal Culture and refine Constitutions for the world’s largest firms. We have built (and ratified!) constitutions for a variety of knowledge-based firms. Strive to develop your own Knowledge Constitution. It the first step to attain a prosperous Social Enterprise.