Organizational Learning: Why Firms Learn?
Authored by: Kedisa Johnson May 30, 2010
Organizational learning “is the process by which an organization acquires the knowledge necessary to survive and compete in its environment.”1Learning, in this regard, include the “ways firms build, supplement and organize knowledge and routines around their activities and within their cultures, and adapt and develop organizational efficiency by improving the use of the broad skills of their workforces”(Dodgson, 1993, p.377). Furthermore, a learning organization is “a firm that purposefully constructs structures and strategies so as to enhance and maximize organizational learning”( p.377).
An overwhelming amount of scholarly research, literature and discourse have been attributed to the topic of organizational learning. Among them are Argyris and Schön (1978), Dodgson (1993) and Senge (1992). Argyris and Schön (1978) define organizational learning as the "detection and correction of errors." 2 Their model for organizational learning encompasses three styles: single-loop learning (occurs when errors are detected and corrected and firms carry on with their current policies and goals)3, double-loop learning (occurs when, in addition to detection and correction of errors, the organization is involved in the questioning and modification of existing norms)4 and deutero-learning (how to carry out single and double loop learning)5. Dodgson (1993) views organizational learning as a “metaphor for individual learning” (p.377) and argues that “individuals are the primary learning entity in firms, and it is individuals which create organizational forms that enables learning in ways which facilitate organizational transformation”(p.377). Senge (1992) in his book, “The Fifth Discipline” describes five disciplines important in creating a learning organization: personal mastery, mental models, building shared vision, team learning and systems thinking (p. 12). Personal mastery is “learning to culti1 Mountain Quest Institute. (2010). Individual and Organizational Learning. Retrieved from
http://www.mountainquestinstitute.com/learning.htm 2Argyris,
C, & Schön, D. 1978. Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley
3
Organizational learning. (2010, March 29). Retrieved from http://www.valuebasedmanagement.net/methods_organizational_learning.html 4
Organizational learning. (2010, March 29). Retrieved from http://www.valuebasedmanagement.net/methods_organizational_learning.html 5
Organizational learning. (2010, March 29). Retrieved from http://www.valuebasedmanagement.net/methods_organizational_learning.html
vate the tension between vision and reality” ("The Five disciplines,") which can expand “people's capacity to make better choices, and to achieve more of the results that they have chosen” ("The Five disciplines,"). Mental modes is the intermingling of reflection and inquiry whereby “people can gain more capability in governing their actions and decisions” ("The Five disciplines,"). Shared vision, which can be seen as collectivistic in principle, establishes a “sense of commitment in a group or organization by developing shared images of the future they seek to create” ("The Five disciplines,"). Team learning, emphasizes “group interaction” ("The Five disciplines,")and systems thinking “is based upon a growing body of theory about the behavior of feedback and complexity-the innate tendencies of a system that lead to growth or stability over time. Tools and techniques such as systems archetypes and various types of learning labs and simulations help people see how to change systems more effectively, and how to act more in tune with the larger processes of the natural and economic world” ("The Five disciplines,"). The complexity of the theories for and in support of both organizational learning and the learning organization can be examined with the question, what is the goal of organizational learning? Dodgson (1993) explains that before the goal(s) of organizational learning can be explored, the question of “why do firms learn?” (p. 378) must first be answered. Competitive advantage, knowledge management, and strategic planning are three topics that give some insight into why firms learn. Levinthal and March (1993) suggests that there are two features of learning that are important to competitive advantage. First, “learning generally increases average performance” (Levinthal and March, 1993, p. 106) and it “generally increases reliability” (p. 106). The focus is on the trained and experienced individual who adds value to the organization by producing fewer risks, a key component that arguably increases a firm’s profitability. Dodgson (1993) ‘s theory of the individual being the ultimate driving force toward organizational transformation is supported by Levinthal and March (1993) as they suggest “organizations accumulate experience across individuals” (p. 106).
Another area of competitive advantage that explains why firms learn, can be seen through the lens of innovation, research, and development as “learning is seen as a purposive quest to retain and improve competitiveness, productivity, and innovativeness in uncertain technological and market circumstances” (Dodgson, 1993, p. 376). Dodgson (1993) ‘s thoughts are confirmed by Senge (1992) when he states that “the ability to learn faster than your competitors may be the only sustainable competitive advantage” (Senge, 1992, p. 4). Take Intel, for example, best known for producing the chips that deliver increased computing power, who in 2007 developed a breakthrough in the materials used to construct the transistors (computer chips are essentially collections of transistors,) making them smaller, all while generating less heat. “Intel has been working to make these transistors smaller so that more of them could be fitted onto the same area of silicon, making the chips more powerful.”6 Intel has started to use this new material for its latest generation of processors, which are made from transistors only 45 nanometers in size. Such an innovation can be accredited to the vast amount of monies Intel allocates to research and development. However, the company also does something unique--it combines product innovation with a market-based approach, enabling it to tap into and meet the demands of customer requirements. Additionally, the company leverages it manufacturing capability which means it “can increase production to bring product to market in large volumes,”7 quickly. These processes make Intel highly successful in maintaing a competitive advantage and “makes it is difficult for rival companies to match Intel.” 8 Dodgson (1993) makes the case that “learning is a key feature in the process by which firms accumulate technology in order to compete” (p. 379). Dodgson (1993) also references the ideology of Cohen and Levinthal (1989) who viewed learning within the realm of research and development as a “firm’s ability to identify,
6 The Times 100. (2010) Case Studies, Edition 13 Study. Using Innovation to create competitive advantage. (n.d.).
Retrieved from http://www.thetimes100.co.uk/case-study--using-innovation-to-create-competitive-advantage--85-331-1.php 7 The Times 100. (2010) Case Studies, Edition 13 Study. Using Innovation to create competitive advantage. (n.d.).
Retrieved from http://www.thetimes100.co.uk/case-study--using-innovation-to-create-competitive-advantage--85-331-1.php
8 The Times 100. (2010) Case Studies, Edition 13 Study. Using Innovation to create competitive advantage. (n.d.).
Retrieved from http://www.thetimes100.co.uk/case-study--using-innovation-to-create-competitive-advantage--85-331-1.php
assimilate, and exploit knowledge from the environment...a firm’s “learning” or “absorptive” capacity’ (Dodgson, 1993, p. 379). Other pressing and compelling reasons for firm’s to learn can be explored within the context of knowledge management and global strategy. Knowledge management is “ the practices that organizations and their managers use for the identification, creation, acquisition, development, dispersion, and exploitation of competitively valuable knowledge.” (Ball, Geringer, Minor, & McNett, 2010, p. 371). Strategic planning is “the process by which an organization determines where it is going in the future, how it will get there, and how it will assess whether and what to extent it has achieved its goals.” (Ball et al., 2010, p. 367). The two, arguably go hand in hand and many of Senge (1992) ‘s five disciplines such as team learning and systems thinking, are apparent in each. Ball (2010) suggests that knowledge is managed effectively when “companies encourage individuals to share their ideas” (p. 370), an expression of Senge (1992) ‘s team learning. The transition of knowledge from one individual to another poses difficulties as “much valuable knowledge is tacit, which means it is known by the individual but is difficult to express verbally or to document in text and figures” (Ball et al., 2010, p.371). To overcome this issue, tacit knowledge must be transformed to explicit or “codified knowledge” (p. 371), hence, creating a system that makes “knowledge accessible quickly and effectively to other employees who need it” (p. 371). Strategic planning, in its old approach, used a top down system, where only top management executives participated in the process. Firms today, however, are moving away from that approach and are “assigning strategic planning to teams of line and staff managers from different business, geographic, and functional areas” (p. 384). This new process further echoes Senge (1992) ‘s team learning where “teams transform their collective thinking, learning to mobilize their energies and ability greater than the sum of individual members' talents.”9 Strategic planning, from this perspective, cannot occur without knowledge management and the two, rely heavily on the interdependency of organizational learning and the learn9 The Five disciplines of organizational learning as published in the dance of change.. (n.d.). Retrieved
from http://www.solonline.org/organizational_overview/
ing organization. A May 2010 McKinsey Quarterly article titled “Putting organizational complexity in its place” (Birkinshaw and Heywood, 2010), examines this interdependency. The article discuses the experience of a multinational consumer goods manufacturer dealing with the issues of organizational complexity versus individual complexity in boosting revenue as well as organizational effectiveness. A quick summary of the article is helpful: Executives at the manufacturer knew they had a problem with complexity. Rapid growth in the company’s Australasia region was requiring significant management attention and travel time and, consequently, was making it difficult for the senior team to manage effectively there and across the company’s two other regions (Europe and the United States). For most employees, however, such institutional complexity didn’t matter. They struggled instead with forms of individual complexity—for example, processes that had initially been effective but over time had become increasingly bureaucratic. Many employees, for instance, were frustrated both with how long it took for decisions to filter through to the front line and the amount of work required to implement them (new-product development, for example, took more than a year and required numerous consultations across the company). Duplicated roles (the regions replicated activities performed by the corporate center) and unclear role definitions, which left several groups accountable for sales forecasting and other key activities, only exacerbated the problems. The result was too much time spent on managing internal processes and not enough on understanding customers’ needs.10 The manufacturer, in addressing the aforemetioned issues, decided to two things--first, “remove complexity that doesn’t add value” (Birkinshaw and Heywood, 2010) and second, channel “what’s left to employees who can either handle it naturally or be trained to cope with it” (Birkinshaw and Heywood, 2010). Complexity was removed by clarifying roles and responsibilities of the employees across functions, after survey data showed that the manufacturer’s systems and processes were misaligned. Additionally, team based strategic planning was implemented to improve sales and forecasting processes. Finding the source of ineffective organizational systems and practices are key to the effective “learning” of a firm. It can be argued that the manufacturer, in identifying and altering strategies, incorporated Argyris and Schön (1978)‘s double-loop learning, as it detected and corrected organizational errors, and modified existing company norms.
10 (Birkinshaw and Heywood, 2010)
In conclusion, the goals of organizational learning are complex in theory. Vera and Crossan (2004) in referencing (Crossan et al., 1999) states that “organizational learning is more than formalization of practices into routines. Repositories of learning need to be aligned with one another in a coherent way so that the culture, systems, structures, and procedures support the strategic orientation of the firm, given the competitive environment� (Vera and Crossan, 2004, p. 231).
References Argyris, C, & SchÜn, D. 1978. Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley Ball, D. A., Geringer, M. J., Minor, M. S., & McNett, J. M. (2010). International Business: The Challenge of Global Competition (12th Edition ed.). New York: McGraw-Hill Irwin. Birkinshaw, J, & Heywood, S. (2010, May). Putting organizational complexity in its place. McKinsey Quarterly, Retrieved from https://www.mckinseyquarterly.com/Putting_organizational_complexity_in_its_place_2580 Crossan, M.f Lane, H., & White, R. (1999). An organizational learning framework: From intuition to institution. Academy of Review, 24, 522-538. Crossan, M. & Vera, D. (2004). Strategic Leadership and Organizational Learning. The Academy of Management Review, 29 (2) , 222-240. Dodgson, M. (1993). Organizational learning: a review of some literatures. Organization Studies, 14(3), 375-394. Levinthal, D.A. & March, J.G. (1993). The Myopia of Learning. Strategic Management Journal, 14, 95-112. Senge, P. M. (1992). The Fifth Discipline – The Art & Practice of The Learning Organization. (1st ed. 1990, New York, NY: Currency/Doubleday). London: Century Business The Five disciplines of organizational learning as published in the dance of change.. (n.d.). Retrieved from http://www.solonline.org/organizational_overview/ Photo and Image Credits: Image retrieved from personal istockphoto library