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The Evolving Organization 225 There are significant differences between the leadership roles and behaviors required in the industrial era and those demanded in the knowledge era. You need to understand the leadership characteristics that can deliver the relationships you want with your customers, the brand you wish to create, and the culture and core values you wish to nurture in the organization. Consider how prevalent these leadership characteristics are within your organization and how you can close any gaps.     How does our organization define leadership? Do we view leadership as a capability that should be developed and exercised in all employees? How would we rate the levels of capabilities for: detecting patterns, responding with speed, generating capabilities, creating partnerships, and infusing meaning? Is leadership devolved throughout our organization? Can we describe several best practice examples? What are their common characteristics? How will we ensure that leadership skills and responsibilities devolve deep within the organization? 18. What are the key ways that knowledge exchange will be facilitated within your organization? Facilitating the free flow of tacit knowledge is critical in a highly conductive organization.     What processes are in place to support knowledge flow in our organization? What approaches enable the delivery of high-quality knowledge? Do communities of practice exist in our organization? Are there strategic communities that we should develop? Is there a climate of trust in our organization that encourages knowledge exchange? Do we consider knowledge to be power? 226    The Conductive Organization Do we have a technology infrastructure that could support knowledge access and exchange processes? If so, are these processes accessible by all employees? Do customers also have access? Have we mapped expertise networks? If so, what patterns have we noticed? How could expertise network maps drive improvements at the employee, organizational, and customer levels? 19. How will you leverage explicit knowledge within the organization? Creating processes and leveraging technology to capture, codify, and store explicit knowledge and building systems that access, retrieve, and disseminate knowledge are critical to conductivity. Leveraging explicit knowledge as a strategic resource requires a comprehensive technology infrastructure to bring real-time learning to all employees’ desktops.   Does our organization view capturing explicit knowledge as a strategic imperative? If not, how will we create this urgency at the highest levels? What technology infrastructure can we leverage for accessing knowledge across the organization? 20. How will you reconfigure learning for the knowledge era? Traditional approaches to training are no longer appropriate in the knowledge era. Industrial-era push-mode classroom-based models struggle to deliver the real-time, just-in-time, just-enough, and justin-case learning requirements to the desktop. Learning needs to be delivered through pull-mode e-learning mechanisms. Think about how to create an environment in which e-learning is the organization’s preferred approach to developing capabilities. The Evolving Organization       227 What’s the predominant approach to learning in our organization? Is it classroom based or available via a variety of channels? Is it an event or integrated into everyday work routines? Do employees know how to learn online? Has our organization built the generative capability to learn and collaborate at the employees’ desktops? Does our organization provide a wide range of learning materials? Encourage mentoring and coaching? Have a variety of collaborative tools? Would employees accept the notion that work is learning? That the two go hand in hand? How will we shape a culture in which learning at the desktop is encouraged? Can customers access our learning resources? 21. Who will be the custodians of conductivity within your organization? Industrial-era organizational structures are incompatible with requirements for rapid dissemination of knowledge and for teambased approaches. New configurations are needed to facilitate knowledge flow across the organization and between the customer and employees. Transformation to a highly conductive organization is everyone’s responsibility, but it needs champions and stewards to ensure success. Who will be the custodians of conductivity in your organization?      Does our present functional configuration limit our ability to become more conductive? How might we restructure our organization to enable conductivity? Who will be the champions of the transformation? Who will provide the vision? Who will implement the organizational capabilities required? 228  The Conductive Organization How will we involve our customers in shaping the future organizational structure? From Conductive to Highly Conductive All organizations can be described as conductive to a certain extent. There’s some level of information flow in every organization—that is, unless their organizational ECG registers a flatline! At the other end of the scale, the notion of superconductivity is equally unhealthy. It suggests a state of zero resistance, where knowledge would simply flow in one ear and out the other. We’ve introduced a number of new ideas about how to achieve breakthrough performance in the knowledge era. We’ve suggested a new language for talking about new concepts. We’ve also proposed the Knowledge Capital Model as an overarching framework for visualizing how value is created today. These ideas, language, models, and frameworks have evolved through our practical experience of leading corporations in today’s evolving knowledge economy. The approaches we offer have worked for us, but we’re certainly not presenting them as the final word on knowledge-era organizational configurations. This book is intended as a vehicle to share ideas for further experimentation, alongside other ideas that are emerging in the literature, at conferences, and in conversations between colleagues. We expect that there’ll be questions about the validity or robustness of what we propose. If we’ve initiated discussion about our work, then we’ll have achieved what we originally set out to do—to begin a conversation about how the dynamics of successful 21stcentury organizations can evolve. Organizations that achieve breakthrough performance will be those that systematically work to expand their level of conductivity by generating new organizational capabilities. Conductivity itself functions through the quality and preparedness of the organization’s generative capabilities, a term we use to describe an organization’s ability to create new capabilities at the speed at which their cus- The Evolving Organization 229 tomers require them. Generative capabilities are the outcome of a carefully orchestrated strategy to leverage the individual (attributes, competencies, mindset) and organizational (strategy, structure, systems, culture, leadership) capabilities of the organization. A knowledgeable person recognizes that the more knowledge he or she amasses, the more there is to learn. The same is true of the conductive organization. We can see no limit to the value that being highly conductive brings to the customer, the employees, the organization, and its stakeholders. Breakthrough performance is within the reach of organizations that calibrate their strategy, culture, structures, and systems to the customer. Working in full strength of its capabilities, striving for coherence, and calibrating to the customer, the highly conductive organization elevates the trajectory of its possibilities and narrows the variability of its financial performance. This organization surpasses itself. It’s constantly stretching, relying on its strategy-making capabilities to break through current levels of performance, finding its aspirations achievable. This page intentionally left blank Glossary Capabilities: a collection of cross-functional elements that come together to create the potential for taking effective action. These elements include: attributes, skills, knowledge, systems, and structures. Capabilities represent tangible and intangible components that are needed to enable performance. Capabilities are the link between strategy and performance. Communities of practice: groups of self-governing people whose practice is aligned with strategic imperatives and who are challenged to create shareholder value by generating knowledge and increasing capabilities. We shaped this definition to illustrate self-initiation (selfgoverning) and clearly describe the strategic nature of such communities. Conductive organization: An organization that continuously generates and renews capabilities to achieve breakthrough performance by enhancing the quality and the flow of knowledge and by its strategy, culture, structure, and systems calibrating to the needs of its customers and the marketplace. Conductivity: the capability to effectively transmit high-quality knowledge throughout the organization: from the customer interface across all functions, business groups, and project teams. Culture: the sum of the individual opinions, shared mindsets, values, and norms within an organization. 231 232 The Conductive Organization Customer capital: the sum of all customer relationships, defined as the depth (penetration or share of wallet), breadth (coverage or share of market), sustainability (durability), and profitability of the organization’s relationships with all of its customers. While customer capital includes all external relationships, we focus on customers and suppliers—not all stakeholders. Our goal is to focus on people directly involved in value creation for the customer and the organization. Customer facing: people who or functions that interact directly with the customer through a variety of contact points or media. Customer interface: the dynamics that take place between the customer and the organization—the touchpoints through which the organization and the customer interact. Explicit knowledge: knowledge that has been articulated or codified in words or numbers, such as tools, procedures, and templates. Generalized reciprocity: a state in which all parties (e.g., suppliers, customers, partners, employees) contribute something of value to the relationship and all parties also derive value from that relationship commensurate with their level of investment. A mutual interest is identified, and a commitment to continue the relationship is made. Generative capabilities: capabilities that enable the continuous generation of other capabilities. Human capital: the attributes, competencies, and mindsets of the individuals who make up an organization. The individual capabilities of an organization serve to build organizational capabilities and create value for customers. Individual capabilities: the attributes, competencies, mindsets, and values of an individual within an organization. A combination of the observable employee-applied knowledge, skills, and behavior in the workplace and the attitudes and values that guide that behavior. Knowledge: the capability to take effective action. Glossary 233 Knowledge architecture: the blueprint that outlines the approaches for placing the collective knowledge of the organization at the disposal of everyone. Knowledge strategy: the strategy embedded in the organization, customer, and business strategies to build knowledge flow across the organization in a systematic way. The knowledge strategy outlines how an organization will make knowledge accessible, provide channels of access and exchange across the organization, and increase its level of conductivity. Leadership: the manner in which individuals choose to exercise their responsibilities. We purposely use individuals and not managers because we see leadership as a capability that must be encouraged and nurtured within all employees, not just the few who sit at the top of the organizational chart. Learning: the process of turning information into knowledge to take effective action. Organizational capabilities: the strategies, systems, structures, culture, and leadership that make up an organization. Organizational capabilities refer to the know how of the organization—the frameworks and platforms that support the ability of individuals to work effectively to make the organization a successful enterprise. Strategic capabilities: capabilities that are elevated to a strategic level because they are needed to meet objectives as outlined by the overarching business strategy. Strategy: the amalgamation of an organization’s objectives, including the broader goals and the actions necessary to accomplish them. Strategy making: the constant renewal of strategy to align and keep pace with the evolution of customer and marketplace needs. An organizational capacity to develop and implement strategies that expand the organization’s strategic horizon—its opportunities to provide solutions that respond to customer needs. 234 The Conductive Organization Structural capital: the strategies, structures, processes, culture, and leadership that translate into specific core competencies of the organization (e.g., the ability to develop solutions, manage risk, engineer processes, understand markets). Organizational capabilities leverage individual capabilities in creating value for customers. Tacit knowledge: the intuitions, perspectives, beliefs, and values that result from the experience of individual employees and of the organization as a whole. Values: the ideals that help individuals set priorities and guide behavior. Values are held by individuals or organizations. When held in common, they’re called core values.