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By David Maister

Much of what professional firms do in the name of strategic planning is a complete waste of time, no more effective than individuals making New Year’s resolutions.

The reasons are the same in both situations. Personally and professionally, we already know what we should do: lose weight, give up smoking, exercise more. In business, strategic plans are also stuffed with familiar goals: build client relationships, act like team players, provide fulfilling, motivating careers.

We want the benefits of these things. We know what to do, we know why we should do it and we know how to do it. Yet we don’t change, most of us, as individuals or as businesses.

The problem is that many change efforts are based on the assumption that all you have to do is to explain to people that their life could be better, be convincing that the goals are worth going for and show them how to do it.

This is patently false. If this were true, there would be no drug addicts in the world, no alco-holics, no bad marriages: “Oh, I see, it’s not good for me? Ah, well then, I’ll stop, of course!” What nonsense!

And yet strategic plans and annual speeches by CEOs, managing partners, management consultants and others continue to have this same useless structure: “Look at how fabulous it would be if you were a fit, non-smoking exerciser, David!” My usual response? “True, but please shut up and go away.”

And that’s the response of most audiences to the manager’s or consultant’s latest vision or strategy. “We knew all this a long time ago. Why don’t you ask us why we don’t do it?”

Now there’s an interesting question!

Why We Don’t Do It

The primary reason we do not work at areas in which we know we need to improve is that the rewards (and pleasures) are in the future; the disruption, discomfort and discipline needed to get there are immediate.

To reach our goals, we must first change our lifestyle, our daily habits, now. Then we have to have the courage to keep up the new habits and not yield to all the old familiar temptations. Then, and only then, we get the benefits.

As human beings, we are not good at such decisions. We start self-improvement programs with good intentions, but if they don’t pay off immediately, or if a temptation to depart from the program arises, we abandon our efforts completely—until the next time we pretend to be on the program.

That’s our pattern. Try a little, succumb to temptation, give up. Repeat until totally frustrated. Unfortunately, there is rarely, if ever, a benefit from dabbling or trying a little of a new strategy.

You can’t get half the benefits of a better marriage by cutting out half your affairs; you don’t cure half the problems of alcoholism by cutting out half the drinks; and you don’t much reduce the risks of lung cancer by cutting out half the cigarettes.

So it is with business strategy: you can’t achieve a competitive differentiation through things you do “reasonably well, most of the time.” Not only can you not dabble, but you also cannot have short-term strategies (an oxymoron, if ever there was one). The pursuit of short-term goals is inherently anti-strategic and self-defeating.

As Jean Nidetch (the founder of Weight Watchers) believed, the pursuit of quick weight loss is always self-defeating and ill-advised. If you don’t understand from the beginning that you have to change your lifestyle, now and forever, then you are wasting your time. Any initial weight you lose will be put right back on.

What’s more, repeated, short-lived efforts at weight loss are actually detrimental to long-run success since, among other reasons, they breed cynicism and the attitude of “We can’t do this. We’ve tried and failed before.”

Millions of people and countless businesses have proved her insight exactly correct. You are either seriously on the program, really living what you have chosen, or you are wasting your time.

Strategy Is the Diet, Not the Goal

Debating which goals to pursue (whether you wish to choose losing weight, giving up smok-ing, ceasing to drink or starting to exercise) is a nonsensical process if you lack the discipline to stick with the (different) diet and exercise programs that each of these requires. The only meaningful debate is which diet you are really ready to get on.

Giving up smoking may be better for you (or a better competitive strategy), but if you’re not willing to make the changes that that specific goal requires, its relative importance is irrelevant.

It’s the same in business. Discussing “strengths, weaknesses, opportunities and threats” (to take only the oldest and most familiar of the strategic planning exercises) is fun, but gets nowhere near the real questions.

Improving the quality of the analysis is not where the problem lies. The necessary outcome of strategic planning is not analytical insight but resolve.

The essential questions of strategy are these: “Which of our habits are we really prepared to change, permanently and forever? Which lifestyle changes are we really prepared to make? What issues are we really ready to tackle?”

Now that’s a different tone of conversation and discussion (and the reason the real debate is so often avoided). Discussing goals is stimulating, inspiring and energizing. Discussing what disciplines you are prepared to accept to get to a goal feels tough, awkward, annoying, frightening and completely unpleasant.

An Illustration

As an example, consider the familiar strategic topic of aiming for competitive differentia-tion through excellence in client service. Here are three real-world examples of programs to achieve this goal:

Once a quarter, an email is sent by the CEO to all active clients (without consultation with the lead people serving those clients), asking them to click on one of three buttons in the email: green if they are satisfied with the way their work is being handled, amber if they have some concerns, and red if they are unhappy.

The CEO personally reviews all the email replies, every day, following up on every single one that is not a green. Every quarter, the group averages on this score are published for each operating unit within the firm (every office, every discipline area) and distributed to everyone in the organization. Even the mail room clerks can see each quarter how well the senior vice presidents in each group are doing on client satisfaction.

At compensation-setting time, the relevant senior management group conducts a phone or face-to-face interview with every client that partner has served in the last year (or a scientifi-cally chosen random sample if the numbers are too high to be practical).

These client assessments carry a significant (40 to 60 percent) weighting in pay. You can’t get paid for selling or doing more volume unless it is more volume of highly satisfied clients. There is no reward for more volume of only moderately satisfied clients.

The organization adopts and publicizes an unconditional satisfaction guarantee, allowing clients to pay only what they thought the work was worth if they were disappointed.

These are just three examples of how to enforce the same strategic idea. Other ideas may be superior. The debate you would need to have in your firm, if you really want to pursue this or any other strategic goal, would be a series of questions:

Which diet, if integrated into our normal running of the firm, would actually get us to perform at a higher level, enough to achieve the benefits we seek?

Which would we be prepared to adopt as a central part of our regular lifestyle?

If we don’t like any of these diets, can anyone think of another that will have as much force as these, but that we could live with more easily?

Substitutes are allowed. No one diet idea is without flaw, and there are drawbacks to every program. If asked what the best way to lose weight is, the only sensible answer is: “Whatever diet you will stick to!”

However, if there is no specific diet that all your people can agree to follow, then you must conclude that you are not really willing or able to pursue that strategic goal.

Which is no shame. Life offers many opportunities to do quite well being competent. You don’t have to strive for excellence. It’s just that if you are not willing to do what it takes to achieve excellence, you should probably just shut up about it (internally and externally) and stop pretending!

There is no business benefit in claiming to pursue a goal that everyone can tell you don’t have the guts to pursue. It not only makes you look foolish to clients, staff and colleagues, but it also deeply demoralizes people and breeds cynicism. Declaring your commitment to strategies that you don’t follow will lower your organization’s energy and its profits.

What Gets People on the Diet?

If all business improvement is like curing a fat smoker or helping an alcoholic recover, what, then, actually gets people and organizations to change?

We all know the main thing that works: a major crisis! If revenues drop off sharply, it’s amazing how quickly businesses can act to deal with known inefficiencies and bad habits they could have tackled years ago.

And when the first heart attack comes, it’s amazing how many people suddenly find the self discipline to start living right.

That’s close to what happened to me. Until March 2005, I was a fat smoker. I had been over-weight for most of my life and smoked a pack a day for 37 years. I don’t say that as a confession. I never pretended that getting fit was my strategy.

Then, a variety of medical conditions put me into the hospital with a kidney malfunction. In the five months that followed, I stopped smoking, started exercising and lost 30 pounds.

This was all wonderful news for me and an amazing and welcome surprise to my family and friends, but a depressing conclusion for any theory of change.

Do people and institutions really have to wait until something very serious happens to them to fix things they have known about for years? Isn’t there any hope of a better way?

We know only a few things about getting people to change before the heart attack comes, but here are some.

1. It’s About a Permanent Change in Lifestyle

A major source of failure in implementing sensible business strategies is that we underesti-mate how much effort is truly required to bring about significant improvement.

A major reason that only a small proportion of those who try to implement strategic pro-grams (or stick to diets) ever obtain the benefits they seek is that too many individuals and businesses think of improvement (and strategy) as a distinct schedule of activities, separate (and sometimes separately accounted for) from regular business activities. In other words, there’s real life, and then there’s the diet.

Viewed that way, all improvement programs are doomed to failure. As I discuss in the “Natural Manager” episode of my Masterclass on Business podcast series, my trainer Jerry (Dyelry) Labbate points out that you don’t really get the sustained benefits of being an exerciser until it has become as natural and permanent a part of your life as brushing your teeth and taking a shower each day. Anything less than that will put in jeopardy any short-term gains you might obtain with bursts of activity. It’s about routines, not special events.

2. You Must Change the Core Scorecards

Strategy, if is to be lived and achieved, is about modifying the very rules of daily living and scorekeeping. You must scheme carefully about how new tracking measures of the strate-gies you pursue are published and disseminated.

If you are trying to lose weight, you must get on the scale regularly. If you do not, it is too easy to let yourself go and fool yourself as to how you are doing. But if you are the only one to see what the measurement says, the force for change will be minimal.

We all forgive ourselves too easily. We all find it quite easy to live with guilt. Even high lev-els of guilt don’t change people. Embarrassment, even in small doses, is far more effective.

How much more forceful it would be if you let your spouse see, each time, what you weigh!

Or better yet, what about letting your children monitor your progress?

So it is in professional life. When I was a teacher at the Harvard Business School, every course taught there was evaluated by the students at the end of every semester, and the results were published to everyone on campus. There was no doubt at that institution as to what the strategy was!

3. Leadership: Get Serious, or Get Out of the Way

Organizations often rush to figure out how the troops need to change to live the new standards. However, this is not the first task. Perhaps the single biggest difficulty in getting an organization to stick to the diet is convincing them that top management really wants them to.

For example, if a group within the firm faces a trade-off between a lesser volume of high-quality work and a greater volume of “acceptable-quality” work, it is critical that they understand without ambiguity what choice firm leaders wish them to make. If they believe that management, when push comes to shove, wants the second alternative, they will never stretch to engage in strategic behaviors themselves.

If the leadership of the organization wants the people in it to believe that a new strategy is being followed, they must figure out a way for it to be credible that they, top management, have actually changed their thinking and are prepared to change the way they act, measure and reward.

I have countless examples of failure to do this. I was asked by one firm to run a program for their middle managers on how to be more effective as managers, but my instructions included this: “Please don’t raise the topic of how well we ourselves manage these middle managers. We know we do that terribly, but we’re not ready to discuss that. Keep their at-tention on what they could do better. We want them to change first.”

Can you imaging a process less likely to get the people in the organization to actually live to higher standards?

A similar event happened when I was asked to moderate a discussion in a firm that wanted the people in its different regions to work for the good of the institution, not just their own region. Unfortunately, as I ran this discussion, the CEO at the back of the room became more and more agitated.

I later found out that he had turned to his second in command and said, “This guy keeps talking about what we in management need to change to become a one-firm firm. We wanted him to talk about what the people out in the field need to do.” Not surprisingly, they never achieved collaboration, and I was never invited back to that firm!

This illustrates, by the way, the fatal flaw in using all outside speakers and consultants.

Whether or not they are convincing, educational or inspirational, the question on the audience’s mind is, “Do our leaders believe this and are they actually going to run the firm that way?”

All too often, the audience is given no evidence of the firm’s leadership commitment to the ideas, and the whole exercise becomes a waste of money and time. I have been told more times than I care to remember that the reaction to one of my presentations has been, “This all makes terrific sense, but there’s no way we’ll ever do these things around here.”

If people are to make the right strategic decision in every location of the firm, in every operating group and at every level, then they must absolutely trust that management will back them up and reward them (or at least not punish them) for acting in accordance with the declared strategy. A large part of really bringing about strategic change is designing some action or new system that visibly, inescapably and irreversibly commits top management to the strategy.

I have sometimes asked firm leaders whether they are willing to announce to their people, right up front, that they will resign their roles if measurable progress is not made on the strategic plans they advocate. Such a commitment has had a dramatic impact where it has been made.

4. Principles Are More Effective Than Tactics

Since successful implementation of a strategy requires both sustained commitment over time and broad participation across the whole organization, strategies in business, like diets and alcohol recovery, are implemented much better when the ideas are presented as matters of principle, not just as matters of expediency.

If strategic rules are justified only in terms of outcomes (“exercise daily in order to look good”), the diet will always be seen as a punishment on the way to an uncertain and pos-sibly unattainable reward. Accordingly, it will always be resented.

If, however, diet achieves the force of moral principle (such as “treating clients and employees with respect is a value around here, not just a tactic”), the odds are significantly higher that successful implementation will be achieved.

As I reported in True Professionalism and Practice What You Preach, managers who get things done are people who are seen to have an ideology—their people believe that they believe in something.

This is because buy-in and excellent implementation result from a sense of not wanting to let people down. My physical trainer reports that some of his clients tell him that they keep up their exercise programs between meetings because they “don’t want to disappoint him.”

5. People Must Volunteer

Even though it is the leader’s job to offer an ideology around which people can rally, it is by itself only a necessary, but not sufficient, first step.

Among the most powerful revelations of any successful recovery or self-improvement program, perhaps the most important is this: it only works when the individual is doing it for himself or herself and has made a personal choice to do it.

It doesn’t work if the person is doing it only for their spouse, or for his or her children, or to gain the good opinion of others. To sustain the effort, an individual has got to make a personal choice that the change is being made for him- or herself.

The motivation must be intrinsic. Since the essence of successful strategic change is not technique, but will. If you prefer, you can call it determination, commitment or resolve.

To achieve any goal, you must really want the goal. The common questions presented when discussing strategies and strategic change are these: “Do we have to do this? Why, when things are going so well, do we need to accept more discipline into our lives?”

The answer, of course, is that you don’t have to do anything you don’t want to do. Strategy in a professional business is a choice that each individual has to make about whether he or she wants to put more effort into his or her life and career in order to get somewhere new.

In professional firms, it is dangerous to assume that every person, or every partner, does. That’s why most firms (and most individuals) don’t pull off their strategies: not everyone in the firm actually wants to try that hard. They will say they want to be the clear market leader in their field; they are just not willing to do what that takes.

It’s valid for them to make this choice. After all, I was a fat smoker for 37 years and felt I had the right to remain so. For me and for others, the single biggest barrier to making change is the feeling that “it’s OK so far.” People don’t disagree that the future state of be-ing a non-smoker would be beneficial, but they resist when they are told that they have to do it.

Brad Robitaille, a Canadian lawyer, points out that while execution of a strategic plan is hard work, it must be hard work that a person loves to do, because only passion creates the determination to continue. He also notes that “no one can instill passion in anyone else’s heart.” It must come from within. If the hard work inherent in executing the disciplines of strategy is merely a by-product of duty and obligation, then the battle is lost before it has even begun.

One of a leader’s roles is to act as a coach, drawing people’s attention to what is not perfect about the status quo (i.e., creating dissatisfaction), whether things could actually be better, and whether the desired change is both achievable and desirable. But it’s subtle stuff—the leader must be skilled in not only knowing the answers to these questions, but also in the process of helping others think it through to a personal conclusion.

6. People Must Get On or Off the Bus

Every individual can, and must, make a personal choice. But then the organization must decide how to respond to those individual choices. For an organization, strategy cannot be what “most of us, most of the time” do. You’ll never be good enough as a firm if participation in your firm’s definition of excellence is optional.

If a number of top people have clearly not signed up for the journey or are clearly not true believers, no number of systems or amount of inspired speech making will get the organization there. Strategy making in professional firms is as often about getting some senior people to leave as it is about bringing new people in.

Jim Collins in Good to Great called this “getting the right people on and off the bus” and identified it as the first step in all programs for strategic greatness.

Everyone in the organization has to decide if they want to try hard enough to sacrifice some of the present to achieve a better tomorrow. They may do so if they believe the effort is serious. They definitely will not if they think those at the top are undecided or are divided.

Professional firms are afraid of this conclusion. They try to work around the skeptics, the non-believers and the non-participants in their senior ranks, preferring to hold on to revenue volume rather than achieve a senior team who all want to go to the same place and have the same resolve to get there. That’s fine, but you can’t call it strategy.

As all married couples who try dieting know, it’s hard enough to stay the course and resist temptation when you are both attempting to do the right thing. It’s nigh impossible if those around you continue to indulge and there are temptations (food, alcohol, etc.) all around. You either pull this off together, or you will lose the resolve and you will fail.

Notice, it’s absolutely not about how we can force people to do what we want. It’s about how we can make sure that people have opted in and that those who do not wish to be on the program have opted out—of the firm!

People absolutely need the mutual support (and social structure) that comes from doing this together, in common cause. People need to help each other through the tough times (“Come on, one last repetition of the training circuit”) instead of being part of a forgiving culture that keeps discouraging extra effort. (“Oh, that’s OK, you can skip exercise today. You deserve a break.”)

Again, that’s why other researchers and I keep discovering that the most successful organizations have an ideology. There is a McKinsey way, a Goldman Sachs approach and a Bain philosophy, to take only three examples of firms with strong ideologies, clear strategies and the financial success to match.

At these firms, if you don’t subscribe to the ideology, you don’t stay and argue or act as a silent dissenter. You walk. Or, eventually, you’re asked to walk.

Managing the Process of Change

None of this is meant to say that firms must change overnight. It truly is, like alcoholic recovery, a process of “first make a lifetime commitment, then take it one day at time.”

Once we know what the agreed-upon diet is, there is a need for skilled coaching in leading individuals and teams through the struggle to attain the goals they have committed to.

I have described this process elsewhere: my article “A Great Coach in Action” and my book, First Among Equals, both explore this topic in depth. But it is worth reviewing the highlights of what we know about diet and exercise program management here.

The key is to manage with a philosophy of “It’s OK to stumble; it’s only a sin if you don’t get back on the program.” The primary goal of the beginning stage of a change program is to get people to believe that it is doable and that all we are asking is that they try. This means early successes.

All that wise leaders (and good trainers) talk about is the next small step. And they celebrate like crazy each small accomplishment. They focus on requiring improvement, not on requiring excellence. “As long as you are improving, you’re with the program, and one of us!”

Managing a weight loss program often means you stop talking about the ultimate goal. If you keep reminding me that I need to lose 50 pounds, it is as likely to backfire and make me give up as it is to energize me.

But what if someone says to me, “Let’s just focus on losing one pound in a week, David. Do you think you can do that? That doesn’t sound impossible, does it?” My reaction to that will be a lot different. Yet, of course, one pound a week is 50 pounds in a year. An alcoholic is daunted by a lifetime of abstinence, but he or she can manage to not drink just for today.

Michael Webb, a sales consultant, points out that short-term goals (“Lose a pound a week”) only take on value in the context of principles, which are long-term. First, one establishes what is important; then, you get people to do a little of it, a little more and so on. It is commitment to a process of continuous improvement on things that matter.

In my article “The Courage to Have a Strategy,” I described this as an attitude of “Rome wasn’t built in a day, but we are building Rome.” It can be described as a managerial style of insistent patience.

Encouragement is an essential ingredient in the recipe. When I began exercising, it was so-bering to realize how much I needed my trainer’s words (“Good, good, David”) when I had just been able to complete an exercise for the first time.

At one level, I knew I was pathetically bad, but it really did help to hear his constant encouragement: “You’re doing much better, David. You might not be able to feel it, but as a trainer I can see it.”

I don’t know how much of it was him being falsely optimistic, and I am sure it was all a well-practiced mind game.

But, as every good trainer knows, that’s the point. We all need to play mind games with ourselves when we struggle to build new achievements and habits into our lives. (“If I can just finish this first one, I’ll reward myself with a break. Let me just get this first one done!”)

It also means making a game of strategic programs. Educated professionals may scoff, but it’s profoundly rooted in the human psyche that if you can make a game of something, it helps to sustain strenuous effort.

Hence all the hoopla of various strategic initiatives such as “Six Sigma,” “quality is free” and similar fads; business jargon; and prizes, rewards and “black belt” recognition programs.

There’s a reason such things work, even among cynical people. They help to make a “mind game” of the whole thing, creating a framework on which we hang the mind-distracting habits. (“If I can just do this one thing, I can make it. If I change the way I do that, I will be better able to stick to things.)

Good trainers know that life-changing improvement can and does fail by rushing to either of the two extremes: establishing improvement goals that are too ambitious or take too long to achieve, thus leading to frustration and abandonment of the program, or failing to establish any pressure to improve, allowing people to pretend that they plan to get on the program, but just not today.

The good news in all of this is that, in the world at large, there is experience in helping people make significant improvement in their lives. There are well-documented methodologies; they are just not the ones we usually associate with the business world.

If we are prepared to rethink how we view strategy and business life, then people can achieve things they never thought possible. If I can become a fit, non-smoking exerciser, there’s truly no limit!

When executives talk about “knowledge management” today, the conversation usually turns very quickly to the challenge of big data and analytics. That’s hardly surprising: Extraordinary amounts of rich, complicated data about customers, operations, and employees are now available to most managers, but that data is proving difficult to translate into useful knowledge. Surely, the thinking goes, if the right experts and the right tools are set loose on those megabytes, brilliant strategic insights will emerge.

Tantalizing as the promise of big data is, an undue focus on it may cause companies to neglect something even more important—the proper management of all their strategic knowledge assets: core competencies, areas of expertise, intellectual property, and deep pools of talent. We contend that in the absence of a clear understanding of the knowledge drivers of an organization’s success, the real value of big data will never materialize.

Yet few companies think explicitly about what knowledge they possess, which parts of it are key to future success, how critical knowledge assets should be managed, and which spheres of knowledge can usefully be combined. In this article we’ll describe in detail how to manage this process.

Map Your Knowledge Assets

The first step is to put boundaries around what you’re trying to do. Even if you tried to collect and inventory all the knowledge floating around your company—the classic knowledge-management approach—you wouldn’t get anything useful from the exercise (and you’d suffer badly from cognitive overload). Our goal is to help you understand which knowledge assets—alone or in new combinations—are key to your future growth. We would bet heavily that if your company has a knowledge-management system, it doesn’t adequately parse out your mission-critical knowledge.

Identifying and mapping strategic knowledge is iterative. In our work with organizations we generally start by assembling a multifunctional team—at the organizational, divisional, or business unit level—to articulate what the members consider to be key dimensions of the company’s competitive performance and the knowledge that underpins them. It can be useful to shape this conversation by giving individuals assignments in advance. Senior managers might be asked to outline the business model and high-level critical knowledge, such as areas of advanced expertise, intellectual property, and the relationships with customers, suppliers, and distributors that make that model successful. Market researchers and sales managers might be asked to delineate the attributes of new products and services that customers will need in the near future. Technical and operations managers might describe organizational routines that support needed areas of expertise. And so on. (The right mix of people will depend on the business context and how clearly the senior team has thought through its future strategy.)

This step alone can be quite challenging the first time around. When we worked with a group of decision makers at ATLAS, the major particle physics experiment at the European Organization for Nuclear Research (CERN), we interviewed many stakeholders to get a holistic view of the knowledge underpinning its success and then surveyed nearly 200 other members of the organization. Ultimately we mapped only a portion of the ATLAS knowledge base, but in the process we whittled down a list of 26 knowledge domains to the eight that were deemed most important to organizational outcomes.

Your list of key assets should ultimately include some that are “hard,” such as technical proficiency, and some that are “soft,” such as a culture that supports intelligent risk taking. You may also have identified knowledge that you should possess but don’t or that you suspect needs shoring up. This, too, should be captured.

The next step is to map your assets on a simple grid along two dimensions: tacit versus explicit (unstructured versus structured) and proprietary versus widespread (undiffused versus diffused). The exhibit “What Kind of Knowledge Is This?” which includes a mapping grid, will help you figure out where to place your knowledge assets on your own map. (We owe a debt to Sidney G. Winter, Ikujiro Nonaka, and the late Max Boisot for their work on these dimensions. Had he lived, Boisot would have been a coauthor on this article.)

What Kind of Knowledge Is This?
You can plot your mission-critical knowledge on a map like the one below.

Use these categories to help place your assets along the y axis from bottom to top:

• An expert can use the knowledge to perform tasks but cannot articulate it in a way that allows others to perform them.

• Experts can perform tasks and discuss the knowledge involved with one another.

• People can perform tasks by trial and error.

• People can perform tasks using rules of thumb, but causal relationships aren’t clear.

• It’s possible to identify and describe the relationship between variables involved in doing a task so that general principles become clear.

• The relations among variables are so well known that the outcome of actions can be calculated and reliably delivered with precision. (Knowledge assets covered under patents or other forms of copyright protection generally fit here.)

Use these categories to help place your assets along the x axis from left to right:

• Only one person in the organization has this knowledge.

• A few people in the organization have this knowledge.

• Many people in one part of the organization have this knowledge.

• People throughout the organization have this knowledge.

• Many people in the industry have this knowledge.

• Many people both inside and outside the industry have this knowledge.

 

Unstructured versus structured.

Unstructured (tacit) knowledge involves deep, almost intuitive understanding that is hard to articulate; it’s generally rooted in great expertise. World-class, highly experienced engineers may intuit how to solve technical problems that nobody else can (and may be unable to explain their intuition). Rainmakers in a strategy consulting firm know in their bones how to steer a conversation or a discussion, develop a relationship, and close a deal, but they would have trouble telling colleagues why they made a particular move at a particular moment.

Structured (explicit or codified) knowledge is easier to communicate: A company that’s expert in the use of discovery-driven planning, for example, can bring people up to speed on that methodology quickly because it has given them recourse to a common language, rules of thumb, and conceptual frameworks. Some knowledge is so fully structured that it can be captured in patents, software, or other intellectual property.

Undiffused versus diffused.

To what extent is the knowledge spread through—or outside—the company? One division may have expertise in negotiating with officials of the Chinese government, for example, which another division totally lacks. That knowledge is obviously undiffused. But most companies have certain broadly shared competencies: Those in the consumer packaged goods industry tend to have companywide strength in developing and marketing new brands; and many employees in the defense industry know a lot about bidding on government contracts. Some knowledge, of course, is diffused far beyond the boundaries of the organization.

Interpret the Map

Simply mapping your knowledge assets and then discussing the map with your senior team can uncover important insights and ideas for value creation, as our experience with decision makers at Boeing and ATLAS demonstrate.

Global sourcing at Boeing.

Sourcing managers at Boeing were aware that their relationships with internationally dispersed customers, suppliers, and partners were changing. The whole ecosystem was sharing in the creation of new aircraft technologies and services and in the associated risks. Future success would depend on learning to manage this interdependence.

With that insight in mind, the managers mapped the critical knowledge assets in their global sourcing activities, which ultimately resulted in a research paper that one of us (Martin Ihrig) coauthored with Sherry Kennedy-Reid of Boeing. They saw that cost-related knowledge—performance metrics, IP strategy, and supply-base management—was well structured and widely diffused. However, knowledge about supplier capabilities, although codified, had not spread throughout the Boeing sourcing community. And other knowledge that was important to future value creation—how to leverage Boeing’s potent and technically sophisticated culture for effective communication and negotiation, determine Boeing’s business needs and global sourcing strategy, and, most important, assess the geopolitical influences on global sourcing decisions—was neither codified nor widely shared.

Taken together, these observations suggested that Boeing was placing greater emphasis on technical efficiencies, such as improving processes and productivity, than on strategic growth, such as creating research initiatives with suppliers or building a shared innovation platform. As Boeing’s business became progressively more intertwined with that of its ecosystem partners, the development of knowledge assets would need to change.

Insights from this mapping exercise enabled the team to recommend several initiatives aimed at developing and disseminating tacit knowledge, such as a program to help employees who had a deeper understanding of geopolitical influences to put some structure around their knowledge and pass it on to others in the company, and a program to identify the capabilities of key suppliers and determine how Boeing could work more strategically with them.

Advanced physics at CERN.

The experimental work done at ATLAS is carried out by thousands of visiting scientists from 177 organizations in 38 countries, working without a traditional top-down hierarchy. This extraordinary operation has had spectacular results, including the discovery of the Higgs boson, for which Peter Higgs and François Englert were awarded a Nobel Prize in 2013. Our mapping of ATLAS’s knowledge base was done in a research partnership with Agustí Canals, Markus Nordberg, and Max Boisot.

Our team had a surprising insight when a study of that map revealed that “overview of the ATLAS experiment” was one of the top eight knowledge domains. We hadn’t given much thought to that domain, but we quickly realized how central it was to a knowledge-development program like ATLAS. Changes in the overall direction of a project can’t easily be codified when the project is so complex. The direction is continually evolving, and not necessarily in a linear fashion, as the technical and scientific work advances; but individual researchers can’t adapt their work accordingly when they don’t know what that direction is. ATLAS requires that huge numbers of people, from many countries and cultures, understand what others are learning and how it affects the overall technical direction.

Without the knowledge map, the leadership team at ATLAS would have predicted that scientific and technical knowledge were regarded as mission critical—indeed, most existing resources went to helping those domains make progress. But we found it extraordinary that the soft domains of project management and communication skills also emerged as central to ATLAS’s performance. Retrospectively, that made sense: A consensus on overall direction depends on the successful sharing of knowledge among specializations and between scientists as they cycle back to their home organizations and new people take their place. These important soft domains were much less developed and not well diffused; clearly, they needed more resources and attention.

Identify New Opportunities

Mapping knowledge assets and discussing their implications often leads directly to strategic insights, as it did at Boeing and ATLAS. But we also find it helpful to systematically explore what would happen if knowledge were moved around on the map or different spheres of it were combined. Here are some examples:

Selectively structure tacit knowledge (move it up on your map’s Y axis).

The proprietary knowledge assets in the lower left corner of your map are often the most important knowledge your company has—the deep-seated source of future strategic advantage. You need to think about which of them can and should become more structured so that (for example) your basic research will lead to the creation of bona fide intellectual property that can be developed into new products, licensed, or otherwise monetized. Structuring tacit knowledge often involves capturing expert employees’ insights with the ultimate goal of disseminating them to many more people in the company. In general, speeding up codification will increase the value of knowledge. But making the tacit explicit can also be dangerous. The more codified the knowledge is, the more easily it may be diffused and copied externally.

When you’re trying to decide what to structure further and what to keep tacit, it can be useful to distinguish between product and process. Suppose you’ve decided that your expertise in some technical domain can be codified into intellectual property. You may want to capture some of your process knowledge—whether it’s an engineer’s know-how or the conversational routines your marketing people use to tease out emerging customer needs—only informally. That way, even if a patent expires or codified knowledge is leaked, essential experience stays within the company.

Disseminate knowledge within the company (move it to the right on your map’s X axis).

Purposefully deciding which knowledge to diffuse internally can pay huge dividends. Very often one division is wrestling with a problem that another division has solved, and close study of the map will reveal the potential for productive sharing—as it would with the exemplary business unit’s expertise in negotiating with the Chinese. Productive sharing can also be done between functions: Korean chaebols (conglomerates) expend considerable money and effort to ensure that knowledge is transferred from company to company as well as from headquarters to subsidiaries.

The ease of knowledge sharing is directly proportional to the degree of knowledge codification, of course: A written document or spreadsheet is easier to share than tacit experience accumulated over many years. Some tacit knowledge can’t be codified but can be shared. One powerful way to do so internally is to run workshops that bring together people who have subject matter expertise with people facing a particular problem for which that expertise is relevant. Apprenticeship programs, too, have long been an effective way to transfer difficult-to-codify tacit knowledge.

Diffuse knowledge outside the company (move it farther right on your map’s X axis).

The most straightforward way to create value through knowledge dissemination is to sell or license your intellectual property. DuPont, for example, commercializes only a small fraction of the hundreds of patents it owns; the rest can be licensed, sold, or shared with other companies. Even companies without patents can often identify new markets for existing IP. This magazine is an example: Reprints of HBR articles have been sold to MBA and corporate learning programs for decades. A few years ago someone had the idea of collecting the best of those articles in “Must Read” collections for individual buyers, and a profitable business was born.

Many companies are experimenting with less familiar ways of sharing knowledge across organizational boundaries. If suppliers, customers, and even competitors that work together on projects are creating value within your ecosystem, as at Boeing, this is worth considering. But you should keep in mind what knowledge must be protected; your map of assets will help you make those judgment calls.

Some companies even give away knowledge, ultimately making more money than they would if they kept it proprietary. In the early 1990s Adobe Systems saw an opportunity to develop a file-sharing format that would retain the text, fonts, images, and other graphics in a document no matter what operating system, hardware, or software was used to send and view it. Adobe was among the first to develop the idea behind the PDF. It then structured that knowledge in the form of the Adobe Acrobat PDF Writer and Adobe Reader. It shared the Reader on the internet, thereby creating demand for the Writer (at $300 and up), which was free from competition for years and remains one of Adobe’s leading products. Similarly, McKinsey shares selected insights through McKinsey Quarterly, generating demand for its proprietary problem-solving skills.

The recent decision of the business magnate and inventor Elon Musk to share Tesla Motors patents with anyone who wants to use them was also very astute. Clearly, Musk believes that Tesla (like Adobe) will make more money if more people build on the platform he has provided. His decision also recognizes that in order to thrive, Tesla (like Boeing) needs to create a strong ecosystem. It’s a vote of confidence in the company’s capacity to protect enough tacit knowledge to stay ahead of the competition. (Musk told a reporter for Bloomberg Businessweek, “You want to be innovating so fast that you invalidate your prior patents, in terms of what really matters. It’s the velocity of innovation that matters.”) This is one of the most interesting examples of open innovation that we’ve seen: Musk is betting not just that he can pull more partners into the world of electric cars but that he can pull the mainstream automobile industry into a more responsible position with respect to climate change.

Contextualize knowledge (move it down on your map’s Y axis).

Codified knowledge can be applied in less structured spaces in a variety of ways. Sometimes it’s a matter of taking well-established routines and applying them to new businesses. This approach is central to the growth strategies of many companies. Procter & Gamble, for instance, uses world-class brand-building competencies when it moves into new markets and develops new products. Similarly, Goldman Sachs rapidly generates new investment banking offerings by applying its analytics capabilities to changes in financial market conditions.

Contextualization can also come from combining structured and unstructured knowledge. The people who originally tried to build knowledge-management systems for consulting firms quickly discovered that most consultants used codified information as a networking tool: They would notice who wrote an article on sourcing from Indonesia (for example) and then talk with that person directly, picking her brain for more-tacit insights. Indeed, many companies build competitive advantage on just such combinations.

To be applied in a new setting, codified knowledge must generally be contextualized. If Boeing USA comes up with a new production process and then ships the related knowledge to China in the form of supporting documents, Chinese engineers have to assimilate the knowledge and adapt it to their context.

Discover new knowledge (move it to the left on your map’s X axis).

The most challenging—and highest-potential—opportunities often come from spotting connections between disparate areas of expertise (sometimes inside the company, sometimes outside it). The analytic techniques that can turn big data into big knowledge are used partly in hopes of finding such unexpected connections.

In the pursuit of innovation, flashes of insight can come from many sources. Sometimes a new technology embedded in an existing product makes it possible to change your value proposition. That happened when Rolls-Royce’s jet engine sensors provided the company with new performance data, which in turn made it more profitable to sell power by the hour than to sell engines outright. Thinking about someone else’s business model can lead to strategic insights as well. After managers at CEMEX studied how FedEx, Domino’s, and ambulance squads operate, they decided to charge for delivering truckloads of ready-mix concrete within a specified time window rather than for cubic meters of the product. Changes in the external environment can create new opportunities. Subway went from an also-ran to a high-growth fast-food business when it capitalized on consumers’ growing interest in tasty, more-nutritious, low-calorie food. Your company may have developed valuable process expertise that you could sell through consulting to other companies even outside your industry. IBM has done that many times over.

It’s not easy to systematize this part of the knowledge-development process, which arises to some extent from intuition, tacit knowledge, and time spent studying the map. The ATLAS team’s insight about the importance of soft skills is an example. So is Boeing’s insight that becoming part of an interdependent ecosystem had major implications for what kinds of knowledge would have to be developed. A small publishing industry that is devoted to helping companies make innovative connections of this kind includes the book MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth, which one of us (Ian MacMillan) wrote with Rita McGrath; William Duggan’s Strategic Intuition: The Creative Spark in Human Achievement; and Frans Johansson’s The Medici Effect: What Elephants and Epidemics Can Teach Us About Innovation.

One thing we can assure you: Your competitors will have access to the same kinds of data and general industry knowledge that you do. So your future success depends on developing a new kind of expertise: the ability to leverage your proprietary knowledge strategically and to make useful connections between seemingly unrelated knowledge assets or tap fallow, undeveloped knowledge.

Companies invest tens of millions of dollars to develop knowledge but pay scant attention to whether it contributes to future competitive advantage. The process we’ve outlined here is meant to prevent that lapse. Once you’ve mapped your mission-critical knowledge assets, the challenge is to be disciplined about which of them to develop and exploit, keeping future growth front and center. (Remember, strategy always includes deciding what not to do.) If your company thoughtfully manages its knowledge portfolio, it will achieve a distinct competitive advantage.