**THE RISE OF THE KNOWLEDGE ORGANIZATION**

# by David and Alex Bennet

The progress of humanity over the past 30,000 years has been
predominantly due to the effectiveness of the organizations used to
achieve human goals. For example, religious goals have been achieved
through organizational structures developed by the world's major
religions. Economic progress throughout history has been driven by
commerce and business organizations. Political organizations have both
provided stability and been the catalyst for change.

Organizational systems have internal structures that mediate roles and
relationships among people working toward some identifiable objective.
These internal structures, together with cultural, leadership, and
management characteristics, provide the ability to effectively interact
with their environment and achieve desired goals.

Organizations have a much longer history than is usually understood.
While a study of evolution demonstrates the ubiquitous role of
interactions and relationships among all life, the beginnings of
structure, function, and dedicated efforts to meet objectives through
intention, planned action, and individual roles had to wait until homo
sapiens reached the hunter gatherer/agriculture transition.

Since the early hunter gatherer, circa 35,000 B.C., the success of small
bands of humans gathering berries, leaves, and grubs and occasionally
hunting larger animals is clear from the world-wide distribution of
archeological sites where human colonies lived. Environmental forces
demanded specific actions for survival, leading to the development of
culture via the need and propensity to cooperate. Thus began the first
attempts at structure and organization, driven by the same forces that
drive organizations 37,000 years later: threats and opportunities in the
environment and a strong desire to survive and achieve goals.

As demonstrated in this early human activity, organizations usually
existed through a successful balance between the forces in their
environment and their own creativity and adaptivity. The boundary
between the organization and its environment is almost always porous,
flexible, and foggy. This frequently unpredictable external environment
is driven by physical, political, sociological, economic, natural, and
technological forces.

Organizations, a product of homo sapiens' superb cognitive and
linguistic capabilities, have always made use of knowledge and one of
its offspring, technology, to survive during their hour on the stage of
history. An early example of this occurs during the eighteenth through
twenieth Egyptian dynasties (1550 to 1069 B.C.). The Overseer of All the
King's Works -- a man of science, an architect, and the authority figure
-- directed the massive labor force required to build a pyramid. "His
palette and papyrus scrolls were the symbols of the authority of
knowledge, and bureaucratic lists and registers were the tools of
political and economic power."^1^ Knowledge, demonstrated by writing,
provided the authority, and the use of technology (in the form of
pulleys, levers and wheels) provided the means.

The success of the Taizong dynasty (626-49 A.D.) was a direct result of
Taizong's strong leadership and management approaches built on a solid
cultural and military base. While building and stocking the latest
instruments of war, Taizong used literature to spread manners and guide
customs. He instituted a system of state schools and colleges (one
reserved for children of the Imperial family) and gave the highest
positions in the government to those who passed literary exams. Thus,
Taizong not only recognized the value of learning and knowledge, but
used it to expand the Imperial family's influence throughout the empire.

Throughout history, the environment has become increasingly complex,
dynamic, and technologically sophisticated. In response, organizations
have become more complex, more flexible, and more egalitarian, with
success very much dependent on making optimum use of all available
information, experience and insight.

The technology revolution of the late 1700s began with the invention of
the steam engine and ultimately brought about factories and mass
production. With the emergence of the tycoons of oil, railroads, steel,
and automobiles came the rise of the modern bureaucracy and the great
test of its precepts of specialists and rigid rules. While economically
successful, it took a large toll on human freedom. Specialization,
limited learning and initiative, and assembly lines made mechanical
robots out of workers. As new technology was developed, it was
frequently misunderstood or misapplied and ended up restricting
employees rather than liberating their potential.

**THE BUREAUCRATIC ORGANIZATION**

Max Weber (1864-1920) developed the formal theory recognized today as
the bureaucratic model. Weber, a lawyer familiar with power politics,
economics, and religion, migrated to sociology through his attempt to
understand how capitalism came into existence. His world of ideas was
multidimensional.

The bureaucratic framework created by Max Weber in the late 1800s called
for a hierarchical structure, clear division of labor, rule and process
orientation, impersonal administration, rewards based on merit,
decisions and rules in writing, and management separated from ownership.
The bureaucratic model was built on management power over workers in
what Weber called "imperative control." The key success factors of
Weber's bureaucracy rested on authority and its acceptance by workers,
and on the design and management of processes and rigid rules and
procedures.

Weber linked knowledge with power. He believed that "Every bureaucracy
seeks to increase the superiority of the professionally informed by
keeping their knowledge and intentions secret."^2^ Because the pure
interest of the bureaucracy is power, secrecy would grow with the
increase of bureaucracy. We still live with the legacy of this intent.

With the rise of large corporations in the early twentieth century came
a strong interest in research in fields such as leadership, management,
organizational theory, and capitalism. Frederick Taylor, Henri Fayol,
Mary Parker Follet, Chester Bernard, Adam Smith, Herbert Simon, Abraham
Maslow, etc. (the list goes on and on), all contributed to the
foundational research and set of organizational concepts of the early
twentieth century. This era created the formal foundation of management
and organizational theory. Although the origins lay in Weber's
bureaucracy, church and state autocracy and military leadership, these
were all modified by the social, political, and capitalistic drives in
the free world after World War II. The new theories and concepts such as
Theory X, Theory Y, Theory Z, Charismatic and Transformational
Leadership, General Systems Theory, and Organizational Linking Pins,
became popular and a noticeable shift occurred from bureaucracy toward a
more benign and malleable organizational structure. Tools such as
Management by Exception, Span of Control, Kurt Lewin's Force Field
Analysis, and Taichi Ohno's Toyota Production Line techniques helped
both managers and workers implement change throughout their
organizations. While some changes occurred, most organizations continued
to be hierarchical. Knowledge and information were held close by
supervisors and managers and protected as knowledge and information
represented personal power and authority. Economic progress was
relatively steady and, until the 1970s, fairly predictable. During this
post-bureaucratic era, the key factors were a combination of Tayloristic
time and motion management and participative management, slowly bringing
some of the workforce into the arena of worker responsibility and
empowerment.

As the affluence, mobility, and expectations of the workforce in
developed countries continued to rise, coupled with the explosive growth
of information and communication technologies, and the creation of
knowledge, organizations found themselves in situations of restructure
or collapse. The old mechanical metaphor would no longer serve in the
nonlinear, dynamic, complex global web of the mid 1990s. Many
organizations failed, some were acquired, and the best set about seeking
the popular vision of the "world-class" corporation. The stage was now
set for the rise of information and knowledge organizations, with the
information organizations taking the lead via computers and
communications technology in the early 1980s and 1990s and the knowledge
organizations, currently in their embryonic form, focusing on networking
and knowledge creation, sharing, and application.

Because we will use three terms extensively in describing the current
and future organization, it is important to communicate what we mean by
data, information, and knowledge. Data are discrete, objective facts
about events, including numbers, letters, and images without context.
Information is data with some level of meaning. It is usually presented
to describe a situation or condition and, therefore, has added value
over data. Knowledge is built on data and information and created within
the individual. Knowledge of course has many levels and is usually
related to a given domain of interest. In its strongest form, knowledge
represents understanding of the context, insights into the relationships
within a system, and the ability to identify leverage points and
weaknesses and to understand future implications of actions taken to
resolve problems. Thus knowledge represents a richer and more meaningful
awareness and understanding that resonates with how the "knower" views
the world. Knowledge is frequently considered actionable.

### **ORGANIZATIONS OF THE YEAR 2000**

Time accelerates. Distance shrinks. Networks expand. Interdependencies
grow geometrically. Uncertainty dominates. Complexity overwhelms. Such
is the environment and the context within which current organizations
must survive and thrive.

This situation is a result of many years of evolution driven by a number
of major factors. Of significance is the increasing economic affluence
of the worker in the developed countries coupled with their increased
education level, resulting in a strong demand by workers to be
recognized, respected, and allowed to participate and have determination
in their work. Economics and technology provide both the means and
pressures for mobility, thereby giving workers the freedom to leave
their jobs for other, more challenging positions. While the last 50
years have seen many ups and downs in terms of employment, productivity,
interest rates, investments, etc., the recent decades have provided
increasing wealth and economic success.

Consistent with this history, every organization lives at the pleasure
of its environment -- economic, sociological, scientific, technological,
and political. For example, state charters legitimize corporations,
Occupational Safety and Health Administration (OSHA) and the Department
of Labor mandate tight restrictions on both safety and personnel
regulations, the Environmental Protection Agency (EPA) regulates
organizational behavior relative to environmental impact, and the
business media heavily influence corporate stock values depending upon
local and temporal events. Technology plays a dominant role in
determining both the landscape of competition and the cultural and
educational needs of the workforce. It is arguably true that technology
has played the strongest role in creating the present environment within
which organizations must adapt and learn how to excel compared to their
competitors. For example, tremendous increases in processing speed,
communication bandwidth, miniaturization of technology (nanotechnology),
and the development of complex algorithms and application programs have
spawned the rapidly changing pace of society and the increasing need and
capability for communication, collaboration, and networking, both
virtual and real. The phenomenal rise of the Internet, coupled with the
spin-offs of intranets, extranets, and portals, has created a networking
potential that drives all of society and corporations in terms of speed,
interdependencies, global markets, and the creation and spread of memes
instantaneously throughout the world. Memes are ideas that become a part
of the culture. Those organizations that have found ways to compete
successfully within this nonlinear, complex, and dynamic environment may
dominate their competitors by as much as twenty-five percent in growth
rate and profitability relative to the average in their industry.

Specific characteristics of these "world class" organizations are key to
their success. Consider the distribution of all organizations within the
United States versus their normalized performance (i.e., the number of
organizations having a specific level of performance plotted along the
vertical axis and performance along the horizontal axis). This graph
would likely be represented by the commonly known bell curve, with the
high performing organizations represented at the far right of that bell
curve. While most of today's organizations are far from this world class
region, many are working hard to improve their performance, that is,
efficiency, effectiveness and sustained competitive advantage, in order
to improve their competitive status and in some cases prevent being
acquired or going into bankruptcy.

Often the tools, methods, structures, and principles that the best
organizations have found to drive high performance are neither new nor,
in many cases, unique. For example, many of the ideas that Toyota
created in the late 1940s and early 1950s relative to lean manufacturing
in the automobile industry (although refined and improved) are still
considered world class, and, in fact, Toyota is considered by many to be
the leader throughout the world in automobile manufacturing.^3^ Taichi
Ohno created the Toyota production system just after World War II as a
response to potential bankruptcy and changing consumer demands.^4^ The
system eventually included just-in-time supply parts delivery, floor
workers in the factory taking responsibility for product quality and
having authority to stop the production line, and teams of workers
solving problems on the factory floor and learning cross-functional jobs
to insure continuous production line flows. Recognize that it took
Toyota more than twenty years to create its present system, and it is
still being improved. Approximately fifty years later many of these
early ideas are still considered best practices and used by
manufacturing organizations worldwide. They represent a significant
departure from the bureaucratic hierarchy chain of command and minimum
freedom of the worker.

In *Built to Last*, Collins and Porras did a six-year study of eighteen
companies that had outstanding performance over time periods between
fifty and two hundred years. Reviewing their results, together with
other research on long-lived world-class companies, we offer the
following factors as representative of long-term, highly successful
organizations:

-   Continuous striving to improve themselves and doing better tomorrow
    than what they did today, always remaining sensitive to their
    customers and their environment.

-   Not focusing on profitability alone, but balancing their efforts to
    include employee quality of life, community relations, environmental
    concerns, customer satisfaction and stakeholder return.

-   A willingness to take risks with an insistence that they be prudent
    and have an overall balanced risk portfolio. In general, they were
    financially conservative.

-   A strong feeling about their core ideology, changing it seldom, if
    ever. Their core values form a solid foundation and, while each
    company's individual values were unique, once created, they were not
    allowed to drift with the fashions of the day. This core value
    molded their culture, and created a strong sense of identity.

-   Relative to their employees, these companies demanded a strong "fit"
    with their culture and their standards. Thus, employees either felt
    the organization was a great place to work and flourished or they
    were likely short-term. At the same time, they were tolerant of
    individuals on the margins who experimented and tested for
    possibilities.

Many current top organizations have made significant changes in the way
they do business in the past decade and have been able to create
performance through change management and deliberately develop the
fundamental characteristics needed for success. These characteristics
must provide those responses necessary to excel in today's environment.
For example, time to market or the ability to quickly develop new
products is a key factor in many industries because of the decreased
production time created through technology, concurrent engineering, and
agile manufacturing techniques. The use of simulation, integrated
product teams, and world-wide subject matter experts operating virtually
have been instrumental in bringing new knowledge and ideas together to
rapidly produce products desired by a sophisticated and demanding
market. Examples of this capability are: (1) mass customization where
economic order quantities of one are being pursued and (2) agility, the
ability of an organization to move rapidly in response to changing and
unique customer needs. Creativity and innovation have come to the
forefront as key success factors with organizations striving to develop
and unleash these capacities throughout their workforce, using a
combination of management, workers, customers, and the ability to pull
collaborative teams together as a situation or problem dictates.

Employee involvement has now been accepted and understood by world class
organizations and many "hope to be's." Examples are Wal-Mart,
Hewlett-Packard, IBM, Texas Instruments, Motorola, and the Chaparral
Steel Company. These world-class organizational structures have moved
significantly away from bureaucratic decision- making, and have modified
their hierarchies to include team-based organizations and horizontal
structures with minimum "white space." These firms encourage
cross-communication by all employees, supported by technology such as
e-Mail and groupware,^5^ and reward employees who play a strong role in
influencing organizational direction and decision-making.

These same organizations, working predominantly in the fast-moving world
of information and knowledge application, recognize the value of
decisions made at the lowest qualified level and the payoff from smart
workers who know their jobs. However, for employees at all levels to use
their knowledge to make effective decisions, they must understand the
context within which those decisions are made. This context is provided
through shared vision, clear values, and strong organizational direction
and purpose, combined with open communication. As described by Peter
Senge in the *Fifth Discipline*, smart companies put significant effort
into transferring their vision, purpose, and goals to all employees.
Good employee decision-making stems from understanding their work in
terms of its impact on adjacent areas of the organization, as well as
its direct impact on the customer. This requires effective empowerment
and systems thinking, and comes from customer orientation and focus.^6^
Note how far we have departed from Weber's description of bureaucracy
and its relative impotency in the current world context.

Nurtured by Total Quality Management (TQM) and Total Quality Leadership,
the transfer of better business practices has recently become a hallmark
of high-performing organizations. Many tools are continuing to be
developed to help organizations create environments that make maximum
use of employee knowledge and creativity. These practices include
benchmarking, business process reengineering, lean production, value
chain analysis, agility, integrated product teams, balanced score card,
and, most recently, knowledge management.

The birth of knowledge management (KM), occurring in the early 1990s,
grew from a recognition of the difficulty of dealing with complexity and
with ever increasing competition spurred by technology and the demands
of sophisticated customers. First came an awareness of the importance of
information and knowledge, followed by a constant search for ways to
create, store, integrate, tailor, share, and make available the right
knowledge to the right people at the right time. Fundamental to this
picture was a growing appreciation for the knowledge level of the
employees. Although still in its infancy, as indicated by the large
number of meanings and uses of the words knowledge and KM, the field has
pushed many organizations far from the classical Weberian bureaucracy.
For example:

-   The knowledge organization's focus on flexibility and customer
    response compared to bureaucracy's focus on organizational stability
    and the accuracy and repetitiveness of internal processes.

-   Current practices that emphasize using the ideas and capabilities of
    employees to improve decision-making and organizational
    effectiveness. Bureaucracies utilize autocratic decision making by
    senior leadership with unquestioned execution by the workforce.

-   Current efforts to bring technology into the organization to support
    and liberate employee involvement and effectiveness. Classical
    bureaucracies use technology to improve efficiency and expect
    employees to adapt.

-   Current actions to eliminate waste and unnecessary processes while
    maximizing value added. Bureaucracy seeks to establish fixed
    processes to ensure precision and stability with little concern for
    value.

-   Current organizational emphasis on the use of teams to achieve
    better and more balanced decision-making and to share knowledge and
    learning. The axiom is "knowledge shared is power." Bureaucracies
    minimize the use of teams to maintain strong control and ensure
    knowledge is kept at the managerial and senior levels. The axiom is
    "personal knowledge is power."

As valuable as the above ideas are, their implementation continues to be
a challenge to all organizations. Although many of these tools were
originally touted as silver bullets, after they become popular, and as
companies try them without fully understanding the difficulties of their
implementation, they frequently achieve less than anticipated results.
Michael Hammer, co-creator of Business Process Reengineering, has
defined business process reengineering (BPR) as "the fundamental
rethinking and radical redesign of business processes to achieve
dramatic improvements in critical contemporary measures of
performance."^7^ We find that ten years later, BPR is just now being
understood well enough to provide a good chance of success, if applied
to the right situation by experienced professionals. The unproven
perception was that as many as seventy percent of BPR implementations
failed to meet expectations. Many feel TQM suffered the same
difficulties. As time progresses and more organizations learn how to
successfully implement these tools, they are becoming more and more
useful and contributing significantly to organizational improvement.

From the authors' personal experience, major reasons for the difficulty
in applying these tools comes more from the lack of infrastructure
support, and the inability to change culture than it does from the
individual workforce and leadership. Research has indicated that the
resistance from cultural inertia causes great difficulty in transferring
the knowledge to effectively implement better business practices.^8^
Thus, we expect the road to a highly effective and efficient knowledge
organization to be filled with bumps and potholes. Every change in the
basic beliefs of the workforce, or of "the way the work gets done" is
slow, erratic and painful. The move to a knowledge organization is no
exception. But the move is occurring and will continue. There appears to
be no other viable alternative.

For any new ideas to provide long-term value, they must be better
understood and continuously improved through a process of ongoing
learning. As our environment changes, our organizations must be molded,
and sometimes even reinvented, into something that better fulfils an
important need. Thus we see that in today's environment, no solutions
can be independent of either time or context. This also applies to
organizational structures. To the extent that this is true, there is not
-- and likely may never be -- any single form of organizational
structure that provides maximum overall effectiveness or that can even
be offered as a model for reference. However, they all must be able to
move quickly and make knowledgeable decisions coupled with effective
follow through.

A significant challenge continuously facing the modern knowledge
organization is how to harness the benefits of information technology.
While the rapid growth and widespread influence of information
technology has resulted in huge investments by many corporations, there
has been some disillusionment with its hoped for increase in
productivity. However, those companies that have recognized the close
relationship between information technology and culture, using
technology to support people in achieving corporate objectives, have
found information technology highly effective in creating a competitive
advantage. To achieve this not only requires selecting and adapting
technology to an individual organization's needs, but also a carefully
designed process that brings technology into the culture in a manner
that the workforce finds acceptable and motivates them to make the
necessary cultural changes to successfully imbed workflow adaptations.

In addition to the aforementioned challenges in applying information
technology and the requisite culture change, there are a number of
fundamental barriers that "to-be" knowledge organizations face as they
attempt to become world class and to develop and maintain continuous
competitive advantage. It is widely known that change management is a
broad and challenging field that offers many theories and processes to
consider, but no guaranteed solutions. Fundamentally, the process of
change is highly situational and dependent not only on the environment,
goals, and objectives of the organization, but on its specific history,
culture and leadership. Each year finds a number of new books and
journal articles offering the latest and greatest solutions to
implementing change. To the authors' knowledge, there is no "solution"
to implementing change because each situation offers its own set of
unique challenges, pitfalls, and potentially successful tactics.

A major source of opposition to creating a knowledge organization is
likely to come from middle management's unwillingness to give up its
prerogatives of decision-making and authority. Because most of the
workforce gets their direct information from, and usually develops trust
in, their immediate supervisors, they are heavily influenced by the
attitudes and actions of these middle managers. This barrier has
occasionally been overcome when senior management has circumvented the
mid-level and worked directly with the workforce.^9^

Although communication is essential in stable times, it becomes critical
and extremely important during times of change and uncertainty. Rumors,
informal networks, official organizational policies, and rules, as well
as personalities and fear of job loss or power changes, all heavily
influence the accuracy, noise level and usefulness of communication. The
classic solution seems to be to communicate as much as possible, as
accurately as possible and as often as possible, keeping all of the
workforce informed on events and changes in the organization. Although
theoretically sound and occasionally successful, this practice may be
difficult under conditions where major changes are needed, but the
rationale for these changes is difficult for employees to understand and
accept. Thus, building a knowledge organization under conditions less
than life threatening is challenging at best.

Before the workforce will accept new practices, they must be willing to
recognize and admit that their current efforts are inadequate. This
usually requires a paradigm shift and a willingness to adapt new
assumptions in terms of how the business works and what must be done.
The resistance to this paradigm shift is usually high and often
unrecognized by management. The historic paradigm that produced past
success is so ingrained in the belief systems of most middle and upper
managers, and the risk of adapting totally new assumptions about the
business is so large, that the "double loop" learning required, as
discovered and explained so eloquently by Argyris and Schon^10^ in their
book *Organizational Learning: A Theory of Action Perspective*, is a
major challenge.

Still another challenge faced by leadership is the willingness to give
up some of its own authority and decision-making and to empower the
workforce (including teams) to make decisions based upon local
circumstances. This diffusion of information and knowledge from upper
and middle management throughout the workforce means that they give up
authority while maintaining responsibility -- something very few people
want to do. Yet, to successfully release the worker's knowledge and
experience for organizational improvement, the context, direction, and
authority to make local decisions must be made available to all
personnel, and those same personnel must be qualified to accept the
challenge of empowerment.

A knowledge organization must, of necessity, become a learning
organization so that the entire firm will learn while it works and be
able to adapt quickly to market changes and other environmental
perturbations. Except for a few professional firms, most workers are not
in the habit of continuous learning as part of their job. Unfortunately,
many supervisors and managers believe that learning on the job is not
appropriate. It is no surprise then that individuals who have worked for
years without learning or even the expectation of having to learn on the
job find it highly challenging and difficult to "learn how to learn" and
to continuously keep updated in their area of expertise. Creating the
emergent characteristic represented by a learning organization will take
much more effort than simply offering courses and training to the
workforce.

Another challenging final barrier particularly relevant to those firms
seeking to become knowledge organizations is that of creating a culture
in which knowledge and knowledge sharing are valued and encouraged. As
discussed earlier, many workers consider knowledge as power and job
security, and are frequently unwilling to share ideas and experience
with their colleagues. The solution to this barrier is an area of
current research and ideas are being offered and tested. As always, they
are situation dependent and represent another step toward complexity.

The evolution of organizations has passed from cooperative hunting bands
to farming groups to towns/cities to bureaucracies. These changes took
almost ten thousand years, or about five hundred generations.^11^ Yet
during the past fifty years (two generations), organizations have moved
from enlightened bureaucracies to employee-centered, team-based,
networked, information, and knowledge intense structures struggling to
keep pace with change. Recall that we are speaking primarily of those
firms at the right side of our bell curve. In one sense, we are moving
back to small bands of people working together to solve their common and
immediate problems. In another, everyone lives, works, and relates in a
totally new and strange world.

At the forefront of organizational performance are the knowledge-based
organizations that have successfully adopted several or many of the
practices discussed above while concomitantly taking advantage of the
new technological advances such as knowledge portals, intelligent search
engines and agents, and knowledge repositories. These organizations have
achieved high levels of efficiency and effectiveness, sustained
competitive advantage and, above all, achieved an effective balance that
satisfies stakeholders, customers, the workforce, the environment, and
local community needs. While there is still much experimentation with
organizational design and trial and error is on the daily menu, general
patterns of success seem to be emerging. These patterns are creating new
metaphors for organizations such as: agile production systems, living
organisms, complex adaptive systems, self-organizing systems, virtual
organizations, the spiritual workplace, and of course, the knowledge
organization. Which of these metaphors, or new ones to be generated in
the future, will become the successes of the year, fifteen to twenty
years ahead, cannot be predicted. In all likelihood, the future
organization will contain parts of all of them. One can certainly be
confident that information, knowledge, and their intelligent application
will be an essential factor in future success. However, speculation may
be useful in describing potential/probable visions of what the future
knowledge-based organizations will look like. A lighthouse in the
darkness serves a mariner well, even if his course is not directly in
line with it.

**THE KNOWLEDGE ORGANIZATION**

As in all forecasting, we must first identify our approach and our
assumptions. Our approach will be to consider the most probable
world-class organization circa 2020 A.D. Recognizing the distinction
between probable, preferable, and possible, we concentrate on the
most-likely characteristics of the leading organizations (i.e., what we
believe to be the most probable). Even to do this, however, requires a
number of assumptions relative to the environment and external forces.
For example, we assume there exists relative stability and peace,
historically represented by about twenty-five percent of all nations in
conflict at any one time, throughout the world,^12^ and that information
technology continues to advance at its current "Moore's Law" rate:
doubling in processing power and speed about every eighteen months,
while reducing size at the same rate. However, we recognize that
bioengineering and the rapid improvement of nanotechnology may well
accelerate processing ability and the impact of technology on
organizations much faster than Moore's Law. While artificial
intelligence will greatly improve the application of logic and
processing to narrow, well-bounded problems, it will not compete with
human cognition and consciousness in understanding, situational
awareness and learning. Thus we believe deep knowledge, broad scope of
interests and high adaptability are unique to homo sapiens. While the
Internet represents a network that may potentially shrink the world, it
may well take another track, with the Internet becoming saturated and
chaotic. Thus, while the best organizations will almost certainly have
become porous systems with multiple connections beyond their immediate
organizational boundaries, they may do so through private networks
versus the Internet, but they will do so!

The Information Age is intensifying interactions among processes
previously isolated from each other in time or space. "Information can
be understood as a mediator of interaction. Decreasing the costs of its
propagation and storage inherently increases possibilities for
interaction effects. An Information Revolution is therefore likely to
beget a complexity revolution. " ^13^

The metaphor we choose to use for the future knowledge-based
organization is best given as an intelligent complex adaptive system
(ICAS). By complex is meant an organization that can take on a very
large number of states. A complex system is made of a "large number of
individual, intelligent agents," each with their own ability to make
decisions and strive for certain goals. These agents (workers) have
multiple relationships within the system and externally through its
boundaries, and these relationships can become highly complex and
dynamic. Groups of these agents may work together to form typically what
are considered components of the system, and these components together
may form the whole system or organization under consideration. The word
"adaptive" implies that the entire system is capable of studying and
analyzing its environment and taking actions that adapt itself to forces
in the environment in fulfilling its overall (organization) goals.
Intelligent complex adaptive systems may be highly unpredictable or
superbly self-organized, depending on their precise internal structure
and relation to their environment. They will exhibit a unity of purpose
and a coherence of action, while being highly selective in their
sensitivity to external threats and opportunities. They will be able to
bring diverse knowledge located anywhere in the organization (or beyond)
together to solve problems and take advantage of opportunities. They
will possess a number of emergent characteristics noted above that
permit them to survive and successfully compete in the future world.

Our view of the world-class organization of 2020 would encompass an
intelligent complex adaptive system consisting of a combination of
hierarchical management and individual, quasi-self-organizing agents who
can be cross-coupled to each other as needed. The balance achieved
between these two components of the system will depend upon the specific
environment, mission, and leadership of the organization. This
organization may operate reasonably close to what is known as the "edge
of chaos. "^14^ The advantages of operating near this edge are that the
opportunity for creativity and innovation are maximized through the
motivation and freedom of individual agents or components.
Unfortunately, this edge is narrow, and there is always a danger that
the organization may become chaotic with its agents and components going
in locally divergent directions, yielding little overall benefit to the
organization, and perhaps exacting a heavy cost. Innovation and
creativity are essential to provide the large number of potential
actions and ideas necessary to adapt to an environment that is most
likely much more uncertain, dynamic, and dangerous than that encountered
today. This "edge of chaos" will be obtained by much more emphasis on
individual worker competency and freedom in terms of learning, making
decisions, and taking actions in their area of responsibility coupled
with multiple and effective networks that provide sources of knowledge,
experience, and insights from others.

These dynamic networks will represent the main infrastructure of the new
knowledge-based organization. Made available by increased bandwidth and
processing power of both silicon and biotechnology, they offer the
opportunity for a virtual information and knowledge support system that
will connect data, information, knowledge, and people through virtual
communities, knowledge repositories, and knowledge portals. The
foundation and grounding of these future firms will be strengthened
through a common set of strong, stable values held by all employees.
Such values not only provide guidance that enhances empowerment but also
motivates and strengthens the self-confidence of the workforce, thereby
magnifying the effectiveness of the self-organized teams within the
intelligent complex adaptive system.

Learning and knowledge will have become two of the three most important
emergent characteristics of the future world-class organization.
Learning will be continuous and widespread, utilizing mentoring,
classroom, and distance learning and will likely be self managed with
strong infrastructure support. The creation, storage, transfer, and
application of knowledge (and perhaps wisdom) will have been refined and
developed such that it becomes a major resource of the organization as
it satisfies customers and adapts to environmental competitive forces
and opportunities. The last ten years have been called the decade of the
brain, one in which neuroscience research has made large gains in our
understanding of the mind-brain problem and, in particular, the role of
consciousness in how we learn, perceive, and sense our environment.

The third characteristic of knowledge-based organizations will be that
of organizational intelligence. Karl Wiig, in his seminal book
*Knowledge Management Methods*, describes intelligent behavior as: "Be
well prepared, provide excellent outcome oriented thinking, choose
appropriate postures, and make outstanding decisions."^15^

"Be well prepared" includes acquiring knowledge continuously from all
available resources and building it into an integrated picture, bringing
together seemingly unrelated information to create new and unusual
perspectives and to understand the surrounding world.

"Provide excellent outcome oriented thinking" is to be continuously
innovative and creative and use all relevant knowledge. It also includes
reframing problems and utilizing different perspectives for their
solutions, understanding situations beyond their appearances, and
discriminating and characterizing as an aid to problem solving.

"Choose appropriate postures" includes adopting suitable behavior in a
given situation and anticipating future changes, putting effort in
proportion to the situation's importance, and coordinating all relevant
parties to build consensus.

"Make outstanding decisions" consists of identifying objectives,
considering alternatives and consequences, setting priorities, and
selecting the best alternative. Intelligent behavior of subsystems
within a knowledge-based organization can best be seen in the effective
use of teams. Bennet has identified four fundamental processes that
high-performance teams have mastered that lead to successful outcomes.
They are innovation, problem solving, decision-making, and
implementation of team decision. Guidelines are provided for maximizing
the effectiveness of each process, thereby creating intelligent
behaviors. For example, under decision quality, nine factors are
considered as necessary for a good decision: shared vision, efficiency,
risk, timing, balance, impact on product value, political consequences,
decision scope, and worst case scenario.^14^

For an organization to behave intelligently as a complex adaptive
system, it must achieve continuous, interdependent collaboration and
interplay among all levels of the system. This means balancing the
knowledge and actions of its agents to achieve both the lowest-level
tasks and highest-level vision of the organization, creating a
distributed intelligence throughout all levels of the system. This is
done by using teams and communities to amplify local intelligence
levels, accelerate quality decision-making, and foster innovation and
creativity. However, this "future world class" organization will have
overall direction and goals and have developed measures of performance
that serve to cull out inadequate ideas, decisions, and actions.
Selection of the best ideas and actions is as difficult as
implementation of that selection. Evolution has taught us that complex
organizations evolve through a process of the random generation of ideas
and individuals, which are then modified by chance encounters and
eliminated by others more fit to survive. The ICAS is a knowledge-based
organization that learns from evolution by building in the equivalent
characteristics that include: survival of the fittest (a threshold of
performance); trial and error by mutations and genetics (brainstorming,
innovation, and analysis and problem solving); and recombining by sexual
reproduction and combination (systems thinking, collaborative
decision-making, and implementation). These three will be replicated in
future organizations by teams combining new ideas, employees coming in
to offer new and different ideas and actions, and the system as a whole
creating performance thresholds, which filter out the bad ideas and
decisions.

This capability highlights the importance of both internal and external
networks as they heavily influence the relationships and amplify
knowledge diffusion among agents, components, and external systems. As
these networks increase, the organization becomes more complex, harder
to manage, and potentially capable of handling more complexity in its
environment.

An effective ICAS will have a permeable boundary and optimize its
results through partnering, alliances, and close relationships with
customers and stakeholders. Thus, where in a bureaucracy, policy, rules
and power are dominant, in the knowledge-based organization of the
future, learning, knowledge, networking, and relationships will be
dominant.

The knowledge-based organization of the future (what we propose as ICAS)
clearly breaks away from the bureaucratic model described by Weber. The
future world where knowledge shared becomes power and the entire
organization behaves as an intelligent, self-selecting, self-adapting
system continually integrating and processing incoming data and
information to determine its actions, is clearly idealistic -- but not
beyond the possible. The present recognition and popularity of the
importance of knowledge to organizational success is merely the
beginning of creation of the truly intelligent organization.

As we move into the twenty-first century, the goal of an organization
has rightfully moved away from the oppressive working conditions of the
early 20^th^ century. The ultimate challenge of the future is to
liberate and amplify the knowledge and creativity of all organizational
members. For in them alone lives the source and power of intelligence
and wisdom, which will enable the rise of the knowledge organization.

**NOTES**

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2\. Gerth, H. H. and C.W. Mills, C. W. (Ed. and Trans.). (1946). From
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3\. Womack, J. P.; D.T. Jones; and D. Roos. *Machine That Changed The
World*. New York: McMillan Publishing Co., 1990.

4\. Shingo, S. *A Study of the Toyota Production System*. Cambridge:
Productivity Press, 1989.

5\. Coleman, D. (1997). Groupware: *Collaborative Strategies for
Corporate LANs and Intranets*. New Jersey: Prentice Hall, 1997.

6\. Senge, P. M. The Fifth Discipline: *The Art & Practice of The
Learning Organization*. New York: Doubleday, 1990.

7\. Hammer, M. and J. Champy. *Reengineering the Corporation*. New York:
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8\. Brown, J. S. "Conversation." *Knowledge Directions: The Journal of
the Institute for Knowledge Management*, Volume 1, spring, 1999.

9\. Carlzon, J. *Moments of Truth*. Cambridge: Ballinger Publishing Co.,
1987.

10\. Argyris, C. and D.A. Schon, D. A. *Organizational Learning: A
Theory of Action Perspective*. Philippines: Addison-Wesley Publishing
Co., 1978.

11\. Berger, L. *In the Footsteps of Eve: The Mystery of Human Origins*.
Washington, D.C.: National Geographic, 2000.

12\. Durant, W. A. *The Lessons of History*. New York: Simon and
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13\. Axelrod, R. *The Complexity of Cooperation*. Princeton: Princeton
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14\. Bennet, D. *IPT Learning Campus: Gaining Acquisition Results
through IPTs*. Alexandria: Bellwether Learning Center, 1997.

15\. Wiig, K.M. *Knowledge Management Foundations.* Arlington, TX:
Schema Press, 1993.

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This paper appears as a chapter in "Knowledge Management: The Catalyst
for Electronic\
Government", May 2001.