People-focused knowledge management

Prospecting
& Pre-
Conceptual
Design
Sales
& field
Representatives
Sales,
Proposal,
&
Negotiation
Proposal
Team,
Marketing
& Sales
Directions,
Legal &
financial
Services
R & D
New
Products
Management
&
Administration
Interactions
Product
Creation
Development
& Testing
Installation
&
Start-Up
Development
&
Field Reps
Products
& Svcs
Knowledge of
fielded system
Upgrading
&
Modification
Development
&
field Reps
System
Design &
Development
Contract
Completion
&
Order Entry
Contracting
&
Project
Management
Specification of
contracted products & services
“Factory-completed”
products & services
Subcontractors
Customers
Preliminary specifications
of contracted prods & services
Figure 6-4
LearnSys, Inc.’s model of its “understanding flow” and value process. 
Copyright © 1996 Knowledge Research Institute, Inc. and Karl M. Wiig.
Reproduced with permission.
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New In-House Technology Makes 
Significant Cost Reductions Possible
Potter Industries was a leading commodity producer in a
highly competitive industry. It had remained successful by devel-
oping and applying sophisticated technologies better than its
competitors. However, other producers were catching up fast.
For its size, Potter had a comparatively small but very effec-
tive Research and Development Center that had been the
nucleus for technology development. But R&D did not act
alone. Plant process engineers and production teams experi-
mented and assisted R&D in improving processes. R&D per-
sonnel visited the plants on regular rotation to work closely with
plant employees for one or two weeks. As a result, the plant
operators and engineers became conversant in technological
matters, making it possible to implement equipment and prac-
tices that required extensive competence to operate. Plant engi-
neers and union operators also rotated into the R&D Center
but for longer periods of three to six months. This gave the
R&D projects a practical direction that made it possible to
implement many of them directly, without the need for R&D
pilot plant operation.
However, most of the R&D effort had been focused on per-
fecting operations and making the present second-generation
technology more efficient. Keith Esquivel, the company’s
thoughtful and broadminded R&D vice president, was not sat-
isfied. Potter already operated the present technology close to its
theoretical limit, and future improvements would be costly and
not bring great improvements. Keith decided it was time to
rethink the production process to introduce, if possible, new tech-
nology that either existed elsewhere or that Potter had to invent.
After considerable research at the R&D Center and in the
plants, research that was both costly and risky, Potter was able
to devise a new patentable third-generation process, which in
pilot plant operation showed great promise for yield improve-
ment and cost reductions. Thanks to the involvement of plant
people in the initial research, pilot plant design, and operation,
the scaling up to full production size occurred with only minimal
problems. The anticipated economic gains were achieved.
Comments: By building an ongoing Innovation Capability,
Potter was able to create a proprietary third-generation 
Enterprise Situation-Handling
185
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technology solution, which by its improved yield introduced 
significantly lower production costs, as indicated in Figure 6-5.