Knowledge Diffusion through “Strategic Communities”

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Several years ago, Chase Manhattan Bank embarked on an ambitious plan to develop a common back-office processing system for its overseas branches.1 The bank established at headquarters a cross-functional team of information systems, finance, and operations professionals to develop the design and lay out the implementation approach. Later, the bank added branch operations managers to meet “local” requirements. These managers retained their reporting relationships within their country organization structure, yet headquarters staff managed and evaluated their work on the project team. Conflicts were inevitable. After months of frequently fractious meetings, the headquarters staff prevailed, and a small group of branch managers reluctantly agreed to support implementing the new system on a pilot basis. Because the team concentrated on reconciling differences rather than on understanding similarities, the project was extended over several years. Ultimately, the bank achieved its objective of operating on a common infrastructure, but at high political, human, and competitive costs.

When facing a similar need, a large Korean chaebol took a different approach.2 To achieve its objective of global expansion, during the past decade the company focused on building production and marketing capabilities in many diverse geographies. Developing management control and reporting systems was lower priority and was principally the responsibility of local staff in each country. Under pressure to improve the timeliness and accuracy of financial reporting, the small corporate staff asked the functional managers in each country to make additional investments in the infrastructure of their management control systems. General guidelines were communicated at occasional meetings in Korea. Although the local managers discussed the generic applicability of these guidelines, they did not have a formal mechanism to identify substantive changes and elaborate on requirements. Local managers exercised substantial latitude in system specifications and implementation approach. Thus, although the reporting systems improved, concerns remained about the reliability and consistency of information across countries.

These two efforts are examples of infrastructure transitions, complex undertakings that require the cooperation of broad swaths of organizational resources. Not only is the economic justification for such efforts frequently unclear, but the legacy infrastructure also must remain operational during the transition. In managing these transitions, most global organizations establish teams drawn from headquarters staff and line business units, as did Chase and the Korean firm. Typically, such teams operate in a matrix structure. The way they function follows one of two patterns.



1. This anecdote is based on the experience of the first author as a former officer of the bank.

2. This anecdote is based on discussions with a former employee of the Korean company.

3. See, for example:

J.S. Brown and P. Duguid, “Organizational Learning and Communities-of-Practice: Toward a Unified View of Working, Learning and Innovation,” Organization Science, volume 2, February 1991, pp. 40–7.

4. The Malcolm Baldridge National Quality Improvement Act of 1987 established an annual U.S. National Quality Award, which promotes performance excellence, improved competitiveness, and information sharing about successful performance strategies.

5. E. Wenger, Communities of Practice: Learning, Meaning and Identity (Cambridge, United Kingdom: Cambridge University Press, 1998).

6. For examples of groups performing work by using e-mail and other communication technologies, see:

L. Sproull and S. Kiesler, Connections: New Ways of Working in the Networked Organization (Cambridge, Massachusetts: MIT Press, 1991).

7. Brown and Duguid (1991), p. 49.

8. I. Nonaka and H. Takeuchi, The Knowledge Creating Company (New York: Oxford University Press, 1995), p. 63.

9. J.R. Hackman, ed., Groups That Work (and Those That Don’t) (San Francisco: Jossey-Bass, 1990).

10. J.A. Raelin, “A Model of Work-Based Learning,” Organization Science, volume 8, November–ecember 1997, pp. 563–78.

11. Nonaka and Takeuchi (1995), p. 59.

12. J.B. Quinn, Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry (New York: Free Press, 1992).

13. For a review of the factors that promoted success in a variety of organizations, see:

T.H. Davenport, D.W. DeLong, and M.C. Beers, “Successful Knowledge Management Projects,” Sloan Management Review, volume 39, Winter 1998, pp. 43–7.

14. We appreciate the cooperation of Mary Anne Shew of Xerox for making available a working paper, in which she discussed the impact of these programs.

15. R.E. Walton, “From Control to Commitment in the Workplace,” Harvard Business Review, volume 63, March–pril 1985, pp. 4–2.


Professors John Henderson of Boston University and Lee Sproull of New York University helped us characterize the nature and importance of a strategic community of practice.

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