Knowledge and value: A new perspective on corporate transformation: Solveig Wikstrom and Richard Norman, Routledge (1994), 149 pp., £10.99

Abstract

This is an intriguing book, which weaves together ideas from organization theory, strategic management and marketing to explore the implications of viewing the company as a knowledge processing system. In developing this perspective, the authors describe different types of knowledge and knowledge processes, using their classification to elucidate processes for value creation, organizing for knowledge, and the company as a knowledge system. They argue that much knowledge-and thus value-inheres and accumulates in the complex web of relationships between suppliers and customers. Such a view highlights the significance of durable relations in extended networks as an important route to value creation. The authors describe organizations as knowledge-producing systems and divide the concept of knowledge into categories of 1.information, 2.skill or know-how, 3.explanation, and 4.understanding. The knowledge-creating process is described in terms of: generative processes, creating new knowledge productive processes that form the basis for offerings and commitments to customers, and representative processes that transmit these offerings to customers, often in an interactive mode of joint value-creation. The message dovetails with Richard Normann's writings (with Rafael Ramirez) in the early 90s on the shift from value chains (Porter) to value constellations (value stars) and combines the concepts of competence, customer base, and offerings into an evolutionary model of business growth. The authors delineate a model of the interactive enterprise-an organization where interaction and the forming of relationships are core activities in developing markets, developing products, and shaping and stabilizing partnerships. The value constellation (Normann and Ramirez) is a good illustration of this perspective. Organizations combine their own and their partners' customer bases and competencies into offerings to customers. And customers are invited to share in the value-creation process. A well-functioning value constellation is indeed a learning organization. Central to the organizational learning process is the notion of the client-driven organization and the interactive process of value-creation with the customer. Also the other end of the organizational domain, the production system, is seen as a partnering system with the overriding goal to excel in value-creation. The authors describe the four elements of the industrial system; centralization, standardization, mechanization, and division of labor. They then continue to discuss how current developments change this formation and lead up to the four corresponding elements of information technology production, decentralization, multiplicity, information technology, and integration. The transition from one to the other is not an easy one. It is, however, necessary for those companies that want to survive in turbulent markets and in ever more complex economies. They simply have to exploit the potentials of information technology. They have to develop their core systems into knowledge-creating enterprises. The collapsed model combines the notion of value constellation which integrates partners in the production system and value constellations in the interaction with the final customer and places the three organizational knowledge-creating processes (generative, productive, and representative) as mediators between the two value centers. The value constellations thus serve as complex interfaces between the company and its supply and demand markets. On the one side is purchasing. On the other side is marketing, or perhaps rather market communication. And in between is the knowledge-creating company. The frame of reference pronounces evolutionary growth and the industrial setting and point of reference is first of all service-producing companies. The handling of discontinuities, turnarounds, and the acquisition of new customers, or new competencies, are not in the authors' focus.