In The Coming of the New Organization Drucker argued that the traditional hierarchical model of organizational structure would change in the coming years. Flatter, specialized operations would dominate. These would bear a greater resemblance to organizations that have specialized in knowledge for centuries, such as universities and hospitals. This transition, argued Drucker, would involve shedding layers of management, as workers gained altogether different concerns and responsibilities. Drucker also argued that specialists rather than traditional departments would perform much of the work, and coordination and discipline would be the responsibility of individuals rather than management.

Drucker correctly foresaw that to remain competitive, the modern organization would have to transform itself into an information-based organization. However, he noted that as with any paradigm shift, the change towards the knowledge economy would throw up its own challenges for managers. He reasoned that the following would be particularly critical:

1. Developing rewards, recognition and career opportunities for specialists.
2. Creating a unified vision in an organization of specialists.
3. Devising the management structure for an organization of task forces and project teams.
4. Ensuring the supply, preparation, and testing of top management people.

Drucker argued that in the information-based organization, career opportunities would present themselves within specialist areas. This contrasts sharply with career paths in traditional organizations, through which individuals graduate from being specialists to general managers. He also correctly predicted a general shift towards the use of smaller business units and teams to carry out specific business tasks. These predictions have formed the basis of today’s understanding of the knowledge economy, and subsequent theoretical developments have followed these key themes and challenges. A startling number of Drucker’s predictions have been born out in organizational developments since 1988.

Microsoft and Knowledge Management: Drucker in Action

The model used by Microsoft, one of the world’s largest companies in terms of market capitalization, is based on many of the principles first espoused by Drucker. Although any KM process must be organization-specific, Microsoft has outlined three areas on which any KM initiative should aim to focus:

1. Process
2. Organizational dynamics
3. Technology

Process

Leaders must ensure that KM is aligned with existing business process. Process can be broken down into the following four elements.

1. Product and service design and development. This involves capturing data from all departments to see how best to design products to meet customer needs. An ancillary benefit of this cross-departmental work is that it will potentially foster a culture of sharing.

• Methodology: in-house surveys; competitor benchmarking; focus groups.
• Success indicators: cycle time; low design rework; product success rates.

2. Customer and issue management. This simply involves tracking levels of customer satisfaction.

• Methodology: customer attitude surveys; complaint logs; sale and return logs.
• Success indicators: customer satisfaction; breadth of service coverage.

3. Business planning. This is a measure of the access that all departments have to business data, competitive information and market demographics to support strategy and decision-making.

• Methodology: benchmarking; staff attitude surveys; IT provision; focus groups.
• Success indicators: discovering trends; crisis response times; acting on complete information; competitive awareness.

4. Employee management and development. The level of skills and competencies of staff are the single most important determinant of competitive advantage. The knowledge leader should work to identify skill gaps and strengths.

• Methodology: performance reviews; in-house training, mentoring and placements; accredited courses; external and online training.
• Success indicators: staff turnover; accreditation levels; sharing organizational culture; training participation.

Organizational Dynamics

The process must overcome barriers to knowledge sharing and foster a spirit of innovation. Drucker identifies human reluctance as the single greatest barrier to knowledge management success. It is the job of the management team to overcome cultural barriers, to foster knowledge sharing and to defeat any fear of innovation.

Drucker states that the following have been proven as the most successful means of achieving these aims:

1. Strong leadership and commitment from the top. The C-suite needs to get behind the initiative, and challenge resistance.

2. Keeping staff informed of all changes and empowering them in the decision-making process. This can be achieved through staff consultations via intranet forums, focus groups and attitude surveys

3. The funding and sponsoring of high-profile pilot projects. Supporting projects which promote knowledge sharing and innovation underlines the direction of travel.

4. Reward and incentive schemes for knowledge-sharing success stories. In some firms this involves putting knowledge-sharing into performance reviews and job descriptions. In other companies, enthusiastic participants receive status or financial bonuses

Technology

This should enable people’s knowledge-sharing activities using familiar tools. Technology is the key enabler of modern knowledge management. However, it is not a stand-alone solution or strategy. Many companies make the mistake of investing heavily in new knowledge management systems and software. Evidence from Microsoft suggests that more efficient use of existing software is often highly efficient and cheaper.

The knowledge team has to ensure that IT usage has the following characteristics:

1. Staff must learn to use existing tools better. This can be accomplished through formal training, online learning, or a mix.

2. IT systems must be mobile and accessible remotely. Systems need to serve the needs of their users, wherever they are. Very often now, that won't be at a single location.

3. IT solutions must be tailored to the unique needs of each company. There is no one-size-fits-all solution: every organization has different needs.

4. Access to KM software is irrelevant unless staff are taught and encouraged to use it. Rewards and incentive schemes for efficient usage have proved effective at Microsoft.

The Microsoft/Drucker model is a loose KM model based on the needs and characteristics of the modern organization. This is manifested through a focus on the importance of people and culture, and a pragmatic use of IT.

Drucker Today

Having foreseen the rise of the knowledge worker years before many leading companies were to appreciate the full significance of this trend, Drucker has, over subsequent decades, continued to investigate the implications of the knowledge economy for contemporary organizations. In a subsequent article for the Harvard Business Review, he returned to many of his original topics. By rearticulating the key features of the knowledge economy in the light of recent organizational trends, he has formulated a manifesto for the successful knowledge organization in the 21st century. The key points that Drucker considers pertinent to knowledge management today include:

1. Knowledge workers are a key group. Drucker states that, true to his prediction of their future increase, knowledge workers now make up two thirds of today’s workforce.

2. Developing talent is vital. Drucker contends that the development of the talent existing within an organization is ‘business’s most important task – the sine qua non of competition in a knowledge ec onomy.’ Developing and nurturing the knowledge of all those employed by the organizaion will increase competitive advantage, and retain the loyalty of notoriously mobile knowledge workers.

3. Viewing the whole organization is problematic but essential. The increase in mobile and temporary workers results in a serious problem for organizations. They are unable to gain a clear picture of all the knowledge and expertise held, as ‘no one is left to view the organization in its entirety.’ Yet Drucker warns that ‘every organization must take responsibility for all the people whose productivity and performance it relies on’.

4. Productivity is the key to competitive advantage through knowledge. Drucker warns that managing a knowledge workforce is qualitatively different from managing a less-skilled one. Once a talented workforce is assembled, it becomes difficult for an organization to increase productivity by seeking and hiring ‘better’ talent. Thus he states that ‘the only way that [the organization] can excel in a knoweldge-based economy and society is by getting more out of the same kind of people.’ The productivity of knowledge workers is a key path to success because of their new-found status as a form of capital. ‘What’s decisive in the preformance of capital is not what capital costs’, explains Drucker. Instead, ‘ what’s critical is the productivity of capital.’

5. The system must serve the worker. The importance of knowledge worker productivity means that organizations must focus their work systems on getting the best out of the workforce. Drucker notes that in the era of industrial capitalism, workers were required to be subservient to the system. This was the case in Henry Ford’s production lines, where workers were mere facilitators, completing tasks in order to pass work along the system. Drucker notes that, by contrast, today’s organizations are required to make their systems serve their valuable knowledge workers. Structures, rewards, promotions and policies must all be engineered to maximize the productivity of these workers.

6. Embracing knowledge as the dominant capital form requires a radical new outlook. Now that we find ourselves in the knowledge economy, now that Drucker has been proven right on a vast range of counts, a new approach to work and workers is necessary. Drucker maintains that the shift towards knowledge is ‘as profound a change as the switch to a machine-driven economy’. The radical nature of this shift means that organizations must adapt in an equally radical way. ‘This shift’, warns Drucker, ‘will require more than just a few new programs and a few new practices. It will require new measurements, new values, new goals, and new policies.’ [2]

Drucker’s thinking still resonates in modern work on knowledge management. He described with considerable accuracy how knowledge-based organizations would operate, what they would look like and what challenges they would face. Today, Drucker’s work continues to provide some of the clearest and most insightful thought on knowledge management.