The two crucial challenges faced by today’s organizations in remaining competitive and thus  profitable are:

1. Cut-throat Competition: I was talking to one of my clients who is in carbide tools, mould and die business. Twenty years back there were only 3 players. (two from Sweden and one from Israel) Today there are more than 20 players.(including  those from  Korea, Japan etc.) This has brought down the average margins by almost 50%
2. Attracting and Retaining Talent: High competition leads to higher levels of attrition. It is assumed that a new executive starts contributing to the organization only after 7-8 months. Later he starts earning his salary and the real contribution starts only after 18-20 months. However in the present context, by the time the organization expects the employee contribution; the latter has already started looking out for greener pastures elsewhere.

Peter Drucker, the eminent management thinker predicted 40 years back that the future belongs to  knowledge workers and firms can have a competitive advantage only through effective knowledge management. There are three ways how firms can  remain  competitive:

1. Generate new knowledge continuously.
2. Disseminate the new knowledge across the organization in a systematic manner.
3. Apply the new knowledge to develop new technologies , products and services.

There are two types of knowledge:

1. Explicit Knowledge: Is the one which is available through systems, processes, technology, patents etc. This knowledge to a greater extent can be shared. Through technology transfer it can be acquired.
2. Tacit Knowledge: This type of knowledge is with the individual and does not reside in SOPs. It is also context-specific. This is acquired through experience. The term was coined by Michael Polanyl in 1958 who said, “we can know more than we can tell.” It can be defined as skills, ideas and experiences possessed by an individual. Quite often they are not codified, written or verbalized and hence difficult to transfer from one person to the other. Examples of tacit knowledge are playing a musical instrument, preparing a signature dish, driving car etc.

Three decades back I was working with a renowned electrical consultant called P.H. Padhye in Mumbai  who was having a consultancy assignment  ( paralleling of existing Petbow and Skoda DG sets with the MSEB supply) with Ceat Tyres.  Once the plant had tripped off and the entire production had come to a grinding halt. The maintenance head and others were struggling to solve the problem but could not succeed even after 24 hours. When we went to the plant,  Mr. Padhye told the maintenance head, “ the setting of the speed governor of your alternators are wrong and that is why the tripping has occurred.” The problem was sorted out in half an hour. This is tacit knowledge.  Mr. Padhye was a very knowledgeable person. Once after a marathon session on electrical circuit design, I asked him,” how do you know so many things?” He replied, “after 32 years of experience in the industry, I know what I don’t know.”

Many of you must have heard the apocryphal story where the boiler of a steam turbine had malfunctioned. An expert mechanic  was called . He asked for a hammer hit it at the right spot and lo behold… the boiler started working.. When the mechanic submitted the bill of Rs. 10,000 /- The finance manager was quite perplexed. When asked for the breakup of the  bill for a task which did not take more than 5 minutes,  the mechanic replied as follows:

1. 100/- for hitting the hammer
2. 9900/- for knowing where to hit and thus solving the problem.

You will observe that the former is explicit knowledge whereas the latter is  tacit knowledge.

You will appreciate the importance of tacit knowledge through this example. recognising the face of a person in  a crowd is tacit knowledge;  whereas to  recollect the other details is explicit knowledge.  Only though experience this tacit knowledge is acquired. Every evening when the employees leave the office such tacit knowledge is leaving the organization and when a talented and experienced employee leaves the organization; such tacit knowledge is lost forever.

At a number of places I see that there are no jobs available for executives who are 45+.  This shows our irrational bias towards explicit knowledge (read technology) which youngsters seem to possess. But we fail to realize that  a fast-changing technology can even make a young executive redundant equally fast. What  is important is not so much as knowing a  specific technology but the ability to learn new things and the organization having such workforce (who are willing to learn continuously)  is called as a learning organization. A number of organizations feel cost to be  the only driver to retain a competitive advantage and replace older executives.

E.F. Schumacher in his book, Small is Beautiful has something relevant on this topic. Quote:

Education can help us only if it produced ‘whole man’. A truly educated man is not the one who knows a bit of everything, not a man who knows all the details of all the subjects (if such a thing is well possible). The whole man in fact may have little detailed knowledge of facts and theories (read explicit knowledge). He may treasure the Encyclopaedia Britannica because SHE KNOWS and HE NEED NOT, but he will be truly in touch with the centre.

He will not be in doubt about his  basic convictions, about his views on the meaning and purpose of his life. He may not be able to explain these matters in words; but the conduct of his life will show a certain sureness of touch which stems from his inner clarity. (read tacit knowledge)

Unquote (italics mine)

What are the different ways the tacit knowledge can be effectively harnessed shall be looked into my next blog…

Rajan Parulekar| rajan@paradigm-info.com|www.paradigm-info.com