Introduction

Why a Book About Buying Knowledge?

The twentieth century may, in retrospect, be viewed as the century of exponential growth of knowledge. It was the century when mankind conquered the air, space, the deep ocean; when the human genome was unravelled and entire new industries were developed – the film industry, electronics, radio, telecommunications. It was the century in which medicine developed from the pre-penicillin era, when amputation was often the only solution for surgical complications, to the era of keyhole surgery and magnetic resonance imaging. Education for the masses – in the Western world at any rate (and for many of these, a good education up to tertiary levels) became a reality. Knowledge of history, geography and the sciences became available to a majority of people in the industrially developed world, and the electronic computer became ubiquitous.

From the second half of the twentieth century science and technology advanced with ever greater momentum. Towards the end of the century, in business, government and all large organizations, those who led these organizations – managers by whatever title they were known – were required to be familiar with an ever-increasing and often incomprehensible array of information. Social advance brought ever greater regulatory control. The digital age brought with it vast quantities of data in a bewildering array of guises. Every element of organizational management became 'professionalized'.

No longer could managers – or indeed employees – work and think in professional silos. Instead, cross-functional working became the norm. Employee flexibility, no less than organizational flexibility, became essential to survival, let alone success. Organizations increasingly became required to manage a vast array of data inputs in order to develop usable information. Power and responsibility were delegated ever lower in organizations, as senior managers found they could no longer micro-manage every aspect of their organization. Decisions increasingly became based on information and knowledge – rather than hunch and precedent. Managers were required to manage more and more, in ever decreasing timescales. Resources were often reduced as organizations 'right-sized'.

For many managers and employees, there came an added responsibility to spend (or invest) their organization's revenue to obtain usable knowledge. Organizations were subject to increasing need to acquire and utilize new knowledge.

For some within the professions, experts in their own right, identifying knowledge gaps and diligently searching out knowledge in usable, dependable forms, became a normal part of their working life. But stories of mismanagement and failed projects suggested that organizations were all too often unable to identify knowledge needs/gaps, or to manage that knowledge effectively when it became available. Was this a failure of basic business nous? Of management? Was this a failure of the (relatively new) profession of 'purchasing'?

In the twenty-first century, it seems likely that knowledge will continue to grow steadily. Organizations will need to remain abreast of technical, social and legal developments. To do this, some knowledge will be developed within the organization, whilst the rest will be sourced externally – and from this emerges the concept of buying knowledge. It is not simply another aspect of purchasing, or something that can be left to a buyer and a good old-fashioned competitive tender. The process of buying knowledge is a team-based activity as organizations determine what new knowledge is needed and then how to access, acquire, transfer and finally internalize that knowledge.

It seems likely that most managers at some point in their career will assume responsibility for a project to buy new knowledge – or less commonly, to buy old knowledge in a new form – and projects using external resources will increasingly involve some element of knowledge creation, capture and internal transfer. The purpose of this book is to set out some basic building blocks which organizations can use to recognize when a project is primarily about knowledge creation, and accordingly plan projects in such a way that the knowledge transfer element is given due importance.

This is the author's second business book. The first, also published by Gower, was The Outsourcing R&D Toolkit, published in August 2000 ('R&D' refers to scientific or technological research and development). That book emerged from the author's work in the field of commercial contracts in R&D-intensive industries. It focused on the processes, procedures and pitfalls organizations encounter when buying technological R&D services and contained a 'toolbox' of commercial materials that organizations could consider using to support their external R&D sourcing.

This book tackles a related subject. Buying knowledge-based services, whether by 'outsourcing' or other commercial mechanisms, is a more generic activity than buying technological R&D. The author presently works for a global financial services firm, involved in the acquisition of professional and other services. These services often involve the creation of new knowledge, which has been created at the expense of the client organization, and to the requirements of the client organization. Sometimes the knowledge is unique, and would not have been developed except at the instigation of the client. Why is it, then, that the client often concludes that it has not realized value for money in the receipt of the services? Or that although the services themselves are satisfactory, the client never really acquires true ownership of them? And why is it that all too often the organization finds itself having to buy in the same or similar services in the future? It is as if the organization has failed to learn from its past experience.

Why Managers Get It Wrong

This book aims to help managers avoid traps in spending their organization's money with external suppliers of knowledge. Managers of course need to take responsibility for the execution of projects and (yes, yet again) to keep abreast of information about why projects go wrong and managers fail. In a cautionary article in Harvard Business Review titled 'The harder they fall'¹ Roderick Kramer builds the case that a disproportionate number of leaders in politics, business, the media and even religion, display remarkable adeptness and shrewdness whilst working their way up the career ladder, only to fall prey to what the author calls 'bouts of folly' once they achieve very senior positions. Roderick Kramer believes there is something in the process of becoming leader that changes behaviours in individuals in quite profound ways. The systems through which leaders are identified, groomed and exposed to career development opportunities, require managers to sacrifice the attitudes essential to survival once they have reached the top. Society at large has come to the view that risk-taking and rule bending are markers of good leadership. As a result, senior managers lack the caution and modesty needed to cope with the trappings of power, believing that normal rules do not apply to them and that they are entitled to seize all the rewards that power makes available to them.

A fascinating article, and one well worth reading by anyone determined to scale the slippery pole to the heights of professional success. Although not directly relevant to the subject of why organizations that acquire knowledge-based services often seem unable to break free from the influence of external service providers, it seems anecdotally true that when in senior positions, where big decisions are made and large sums of money spent, managers begin to feel that they are invulnerable, or that they are just too astute to make bad decisions. Sadly they are wrong. It is a useful life skill, as well as a business or professional skill, to be able to learn how to buy knowledge effectively, and to ensure that knowledge, once bought, is transferred and utilized to the benefit of the organization. In short, to ensure that value for money is delivered.

It is hoped that this book will go some way to assist organizations to successfully 'buy knowledge'. The book is divided into a number of related subjects, all with the unifying theme of buying knowledge. We look at the knowledge economy, to set the scene on the manager's growing responsibility to buy in knowledge for their organization. We look at intellectual property rights and how they are created, transferred and protected. We set out some alternative strategies to buying knowledge. Working with universities, contract research organizations and consultancy firms is also explored. The most neglected area of all – knowledge transfer from 'supplier' to 'buyer', is given an exhaustive treatment.

This book is meant to encourage a review of your present methods, so you can benefit quickly by working through the text and apply learning points in your own context.

Throughout this book we refer to the 'buyer' of knowledge as the client, or client organization. This is to draw out a distinction between the buying function, which often places an order or a contract, and the internal customer who needs – and probably pays for – the service to be delivered by the knowledge 'seller'. We further refer to the client's 'organization' rather than 'company', in recognition that many buyers of knowledge do not work in industry or commerce, or even in the private sector. Client organizations that are involved in buying knowledge cover every aspect of business life. The lessons in this book, therefore, are universally applicable.