Competitive Advantage

Knowledge and Teams 121 Project team strategy: A competitive advantage through knowledge creation Doctorial Student Richard L. Jayne St. Ambrose University Davenport, Iowa 29 Oct 2004Abstract In this paper, I review some of the life-span models for project teams and propose a different way to assess the long term value of the stages and phases. Gersick’s (1988) punctuated equilibrium model and Tuckman’s (1965) model of group development both discussed early periods of reduced measurable performance, i.e., Gersick’s reduced inertia during phase 1 and Tuckman’s norming stage before the performing phase. These stages and phases could be key to tacit knowledge creation and as a result key to creating a sustained competitive advantage for the firm. I propose that if a team manages these early phases from a knowledge creation frame, then the team will more likely develop products that will lead to a competitive advantage for a firm. Extensive research has been done on teams and organizational learning, but not much work has been done to bring these two concepts together. Some product development team life-span models have postulated that some earlier phases in the life- Knowledge and Teams 221 span are less productive than the later phases. Tuckman (1965) reviewed 50 articles dealing with stages of group development over time and proposed a linear model of group development which consisted of four stages; forming, storming, norming, and performing. Tuckman and Jensen (1977) updated the model and added a final phase, adjourning. Gersick (1988, 1989) studied project teams and found that instead of developing gradually over time, they progressed through an alternation of inertia and sudden change. Gersick (1988) felt that “stage” connotes hierarchical progress from one step to another and the search for stages is an effort to look for types of behavior. Gersick (1989) stated, “The difference between the temporally defined phases that emerged and the traditional activity-defined stages is somewhat analogous to the difference between seeing the structure of football as a set of time-based quarters (phases) with wide variation in the sequence of plays across games and seeing it as a sequence of different styles of play (stages) that are the same for every game” (p. 276). Therefore, she used the term phase rather than stage. When assessing the life-span phases from a knowledge creation frame of organizational learning, one may come to a different conclusion. Through initial team member socialization, tacit knowledge can be created, which possibly leads to a sustained competitive advantage for the firm. The purpose of this paper is to provide an integrated framework for exploring the relationship among the life-span of self-directed project development teams, the knowledge creation process, and sustained competitive advantage given today’s increasingly dynamic environment and movement to teams. To keep pace with the dynamic business environment, teams are becoming more widely used. Hackman (1998) concluded that, “Teams markedly outperform individuals, and self-managing (…) teams do best of all” Knowledge and Teams 321 (p.245). Knowledge has emerged as the most strategically significant resource of the firm (Grant, 1996a) and is built into the very nature of the firm (Penrose, 1959). This paper examines two life-span theories of project teams and then proposes how tacit knowledge creation during the team’s life-span can lead to creating a sustained competitive advantage. This paper concludes by discussing two propositions related to the knowledge creation process and to the life-span of self-directed project development teams. Theoretical Background Within the framework of team and knowledge creation, I restricted my review to self-directed project development teams. These teams have specific tasks to do within definite time periods; consist of cross-functional members, and disband at the end of the project (Sundstrom, 1999). Cross-functional teams consist of members from more than one functional area such as comptroller, engineering, manufacturing, or marketing. Functional diversity in product teams increases the amount and variety of information available to design products. The composition, group process, and work organization of the project team affect the knowledge and problem-solving results of the team (Brown & Eisenhardt, 1995). Davenport and Prusak (1998) define knowledge as a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. Knowledge can be viewed as divided into tacit and explicit knowledge (Polanyi, 1966). Tacit knowledge is tied to an individual and is very difficult if not impossible to articulate. As knowledge is explored, put into action, and socially justified, tacit knowledge is being made explicit through Knowledge and Teams 421 codification resulting in it being converted into messages that can be processed as information. Grant (1996b) identified tacit knowledge as the most strategic resource of firms since tacit knowledge is difficult to imitate and immobile. Thus, it can constitute the basis of competitive advantage. Knowledge is important for team performance, and by managing the knowledge creation process, a team can understand what knowledge is and how to create, transfer, and use it effectively to develop a competitive advantage. Under the knowledge-based view theory of strategy, knowledge is a resource that can be acquired, transferred, or integrated to achieve a competitive advantage. The basic assumption under knowledge-based view is that knowledge is the firm’s most important resource (Eisenhardt & Santos, 2002). Knowledge is important for sustaining a competitive advantage, and by strategically managing the knowledge creation process, one can understand what knowledge is and how to create, transfer, and use it effectively to develop and sustain a competitive advantage. A firm has sustained competitive advantage when it is implementing a value creating strategy, not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy (Barney, 1991). This definition of sustained competitive advantage does not depend upon a set calendar time when a firm enjoys a competitive advantage. A competitive advantage is sustained only if it continues to exist after efforts to duplicate that advantage have ceased. Thus, the inability of current and potential competitors to duplicate that strategy makes a competitive advantage sustained. Barney (1991) suggested that elements needed to sustain competitive advantage are rarity, value, inimitability, and non-substitutability, which are consistent with Peteraf’s (1993) four conditions. Again, tacit knowledge meets Barney’s Knowledge and Teams 521 conditions; it is rare and possesses value, it is difficult to imitate, and it is difficult to find substitutes for the “know how” that is stored in an individual’s mind. Rouse and Daellenbach (2002) argued that when sources of sustained competitive advantage remain tacit, this precludes their public disclosure via secondary data. Thus, tacit knowledge can form the basis of a sustainable competitive advantage. Kogut and Zander (1992) view the firm as a social community. One way to prevent diffusion of tacit knowledge because of employee turnover is through a firm’s social structure (Droege & Hoobler, 2003). This can be done by promoting employee interaction and collaboration, which is consistent with self-managed teams. Team Models Linear Group Development Model Groups are viewed as progressing through five developmental stages and each has its own unique pattern of behaviors (Tuckman, 1965, Tuckman & Jensen, 1977). Stage 1 is “forming”. When first entering a group, the members feel anxious and uncertain. They are usually polite and tentative but at times they can be defensive. Stage 2 is “storming”. Individual members seek to clarify their roles, coalitions form around members with similar ideas, and conflicts between coalitions with different ideas start to emerge. Stage 3 is “norming”. Trust among members increases after resolutions of the conflicts from stage 2. Communications become more open and related to the assigned task Stage 4 is “performing”. Work reaches its optimal level during this stage since norms, goals and structures were established in previous stages. Knowledge and Teams 621 Stage 5 is “adjourning”. At the end point of the project, members evaluate their work together, give feedback, and express feelings about each other and the group. Punctuated Equilibrium Model Through her research Gersick (1988) found that groups do not gradually develop over time but they experience a long period of inertia that is punctuation with a defining moment that changes the direction of the inertia. Groups go through a two-phase developmental pattern over a set calendar time. Phase 1 is the first period of inertia in which the direction is set by the end of the group’s first meeting. At the midpoint (half the allotted calendar time) of the team’s assigned project, the group undergoes a transition that resets the direction of the inertia for phase 2. Gersick (1989) defined a transition point as, “the moment when group members made fundamental changes in their conceptualization of their own work” (p. 277). The group’s progress is triggered more by members’ awareness of time and deadlines than by completion of an absolute amount of work during a stage (Gersick, 1989). The point in time when this transition occurred was the midpoint of the project. The midpoint acts as a reminder of the project deadline and thus energizes the group to increase the inertia so as to complete the project. Two ways were observed by Gersick (1989) in making this transition; (1) the team summarizing and declaring complete previous work and moving to a new subtask, or (2) the team drops the stalled phase 1 approaches and looks for new inspirational approaches that the team could crystallize around. Team and Organizational Performance through Knowledge Creation The team and organizational learning involves (Wah, 1999): (1) explicit knowledge – capturing, storing, retrieving, and distributing tangible knowledge assets Knowledge and Teams 721 (e.g., copyrights, patents); (2) tacit knowledge – gathering, organizing, and disseminating intangible knowledge (e.g., professional expertise, individual insight, and experience); (3) the creation of an interactive learning environment where organizational members are encouraged to readily transfer and share what they know, internalize it, and apply it to recreate new knowledge. Lee and Choi (2003) looked at three major factors for managing knowledge: enablers, processes, and organizational performance. Enablers are influencing factors that help foster knowledge consistently through the firm by stimulating knowledge creation, protecting knowledge, and facilitating the sharing of knowledge. Knowledge processes are knowledge management activities that help create a coordination structure that manages knowledge effectively. Thus, enablers provide the infrastructure necessary for the team to increase the efficiency of knowledge processes, and knowledge processes represent the basic operations of knowledge. Based on this research framework, Lee and Choi (2003) developed a knowledge factor model consisting of seven enablers: (1) collaboration – degree of active support and help in an organization; (2) trust – degree of reciprocal faith in others’ intentions, behaviors, and skills toward organizational goals; (3) learning – degree of opportunity, variety, satisfaction, and encouragement for learning and development in an organization; (4) centralization – degree of authority and control over decisions; (5) formalization – degree of formal rules, procedures, and standard polices; (6) T-shaped skills – degree of understanding of his or her own and other’s task areas; and (7) information technology support – degree of IT support for collative work, for communication, for searching and accessing, for simulation and prediction, and for systematic storing. The knowledge creation process includes four intertwined activities: socialization, externalization, Knowledge and Teams 821 combination, and internalization (Nonaka & Takeuchi, 1995). Socialization converts tacit knowledge into new tacit knowledge through social interactions among members. Externalization codifies tacit knowledge into explicit concepts. Combination converts explicit knowledge into more systematic sets by combining key pieces. Internalization embodies explicit knowledge into tacit knowledge. Lee and Choi (2003) found collaboration, trust, learning, and centralization are significant (.05 significance level) predictors for knowledge creation. Collaboration is positively related with socialization, externalization, and internalization and not related to combination. Trust is related to all knowledge creation modes. Learning is related to socialization and internalization. Centralization is negatively related to socialization, externalization, and internalization while not related to combination. Formalization and T-shaped skills of members are not related to knowledge creation. IT support is significantly related to knowledge combination only. Then knowledge creation is positively related to organizational creativity, which is positively related to organizational performance. Therefore, Lee and Choi’s (2003) findings confirm that an organizational group such as a self-directed project development team can achieve performance benefits through effective management of the knowledge creation process. Nonaka, Takeuchhi, and Umemoto (1996) defined the knowledge creation process as a “never-ending spiral of tacit and explicit knowledge through four modes of knowledge conversion” (p. 833); socialization, externalization, combination, and internalization. The team cannot create new knowledge without the individual and so the team needs to support individual team members and provide contexts for them as shown by Lee and Choi’s (2003) enablers for creating knowledge. A critical assumption is “that Knowledge and Teams 921 human knowledge is created and expanded through social interaction between tacit knowledge and explicit knowledge” (Nonaka, Takeuchhi, & Umemoto, 1996, p. 835). During the socialization mode, team members share experiences and mental models. During the externalization mode, team members articulate their hidden tacit knowledge using meaningful dialogue and reflections. During the combination mode, newly created knowledge and exiting knowledge from internal and external sources are crystallized into new products. During the internalization mode, learning-by-doing triggers the creation of tacit knowledge. Thus, the organizational knowledge creation process is a spiral process starting at the individual level, working through the team and ultimately crossing the boundaries of the organization (Figure 1). In this spiral process, the socialization within the team plays a critical role in creating new tacit knowledge that can lead to creating a competitive advantage. Explicit Knowledge Combination Externalization Tacit Knowledge Socialization Internalization Individual Group/Team Organization Inter-Organization Knowledge Level Figure 1. Spiral of Organizational Knowledge Creation Knowledge and Teams 1021 Reinmoeller and Chong (2002) create a framework for relating the knowledge creation process to the context of time. They propose four different time contexts that can enable different team knowledge processes (Figure 2 (modified from Reinmoeller and Chong (2002)). These linkages are: (1) creative leisure enables socialization; (2) defining moments enable externalization; (3) velocity enables combination; and (4) seasonality (rhythm) enables internalization. Creative leisure can be associated with the forming, storming, and norming stages of the linear group development model. If the external leader of the project team ensures that socialization takes place during these stages, then tacit knowledge will be created, which can lead to creating a competitive advantage for the firm. Also, creative leisure can be associated with phase 1 of the punctuated equilibrium model. Again the external leader plays a major role to ensure that socialization occurs. As Gersick (1988) concludes, the project team’s first meeting sets the level of the inertia of the team during phase 1. Thus if the external leader of the project team organizes the first meeting to increase the socialization during phase 1, then the team will have a higher inertia during phase 1 and a higher level of tacit knowledge will be created. The idea of defining moment relates in general to the transition from the norming stage to the performing stage in the linear group development model. The team moves from a stage of building trust and opening up communication to a stage of increased productivity. The transition point in the punctuated equilibrium model clearly represents a defining moment. The phase 2 inertia was always higher for all the project teams that Gersick (1988, 1989) studied. The next stage for the linear group development model is the performing stage that maps perfectly to the velocity (accelerated performance) time context. The same relates to the punctuated equilibrium model since Knowledge and Teams 1121 the inertia increases during phase 2, which relates to increased performance in the velocity time context. Tacit Socialization Tacit-to-Tacit Creative Leisure Tacit Seasonality Velocity Defining Moments Explicit Externalization Tacit-to-Explicit Internalization Explicit-to-Tacit Explicit Combination Explicit-to-Explicit Figure 2. Temporal Multiplicity: Occasions for Knowledge Conversion Linear Group Development and Punctuated Equilibrium Models Chang, Bordia, and Duck (2003) studied 25 simulated project teams to gain a better understanding of group development considering Tuckman’s group development model and Gersick’s punctuated equilibrium model. They found that 9 groups underwent a midpoint transition, and 16 groups more closely fit the group development model. However, 12 groups did undergo some transitions, most of which occurred within the first quarter of the group’s life span. Chang, Bordia, and Duck (2003) concluded, “The fact that most of the groups in the present study did show some form of transition during their life spans supported the validity of the punctuated equilibrium model” (p. 113). Chang, Bordia, and Duck (2003) found two interesting observations that relate to the Knowledge and Teams 1221 knowledge creation process. The percentages of statements related to work were steady for times1 and 2 and then increased for times 3 and 4. The percentages of statements related to pairing (reflective listening to other group members) were steady for times1 and 2 and then decreased for times 3 and 4. These observations support the concept that the team moves from socialization (tacit-to-tacit) knowledge creation process to an externalization (tacit-to-explicit) and combination (explicit-to-explicit) knowledge creation process. During the socialization phase of the knowledge creation process, team members need to listen and reflect on what the other team members say in order to create new tacit knowledge, and as the team becomes more productive (more work), more explicit knowledge is being produced. Therefore, one would expect socialization to occur early in the life-span of a group and reduce over time, and one would expect externalization and combination to increase later in the life-span of a group with more of a steady state during the beginning of the team. Integrating Concepts of Knowledge Creation and Project Team Life-Span Nonaka (1994) proposed that project teams trigger knowledge creation through two processes: (1) the team facilitates the building of mutual trust among members and accelerates creation of shared perspectives; and (2) the shared implicit perspective is conceptualized through continuous dialogue among members. These two processes can appear simultaneously or alternatively in the process of knowledge creation within a team. Socialization is a process of sharing experiences that leads to shared perspectives and thereby creates tacit knowledge such as shared mental models and technical skills (Nonaka, Takeuchhi, & Umemoto, 1996). The sharing of mental models and physical rhythm among team members serves as the driving force of socialization. In the linear Knowledge and Teams 1321 group development model, the process of socialization starts during the forming stage and continues into the norming stage. Tuckman (1965) describes these stages: (1) forming stage involves team members testing the boundaries of interpersonal and task behaviors; (2) storming stage is characterized by conflict and polarization around interpersonal issues; and (3) in the norming stage the interpersonal resistance is overcome and cohesiveness and trust developed. Thus, Tuckman’s forming, storming, and norming stages map to the socialization mode of the knowledge creation process (Figure 3). In the punctuated equilibrium model, the process of socialization starts during phase 1. Gersick (1988) describes phase 1 as the first half of a groups’ calendar time and the behaviors and themes that dominate this phase were established at the first meeting. Thus, Gersick’s phase 1 maps to the socialization mode (Figure 4). The externalization mode of knowledge conversion is typically seen in the process of concept creation and is triggered by dialogue or collective reflection (Nonaka, 1994). Externalization holds the key to knowledge creation, because it creates new, explicit concepts from tacit knowledge (Nonaka, Takeuchhi, & Umemoto, 1996). Once explicit concepts are made, they can then be models and turned into a product. In the linear group development model, the process of externalization starts later during the norming stage and continues into the performing stage. After the team develops more of an in-group feeling and becomes more cohesive, then increased dialogue and collective reflections will occur that lead to externalization. In the punctuated equilibrium model, the process of externalization starts during phase 1, but the main thrust of the creation of explicit knowledge occurs at the transition point (i.e., midpoint, defining moment) when the inertia of the team increases so as to meet the project completion date. Combination is the mode of knowledge Knowledge and Teams 1421 conversion that involves combining different bodies of explicit knowledge. In the linear group development model, the process of combination starts during the performing stage and continues throughout the stage. The team becomes flexible and team energy is channeled into the task, thus resulting in increased explicit knowledge. In the punctuated equilibrium model, the process of combination starts principally during phase 2, and is related to the increased inertia during the phase representing the increased explicit knowledge being created to meet the project objective. Finally, internalization is a process of converting explicit knowledge into tacit knowledge. When explicit knowledge is internalized, (e.g., learning by doing), into individuals’ tacit knowledge in the form of shared mental models or technical know-how, they become valuable assets (Nonaka, Takeuchhi, & Umemoto, 1996). In the linear group development model, the process of internalization starts during the performing stage and continues through the adjourning stage. In the punctuated equilibrium model, the process of internalization starts during phase 2, and as the inertia increases, team members will be increasing learning by doing and gaining more experience that leads to an increase of tacit knowledge. Figure 3 pictorially shows the proposed relationship between the knowledge conversion process and the linear group development model. Knowledge and Teams 1521 Internalization Explicit-to-Tacit Adjourning Forming Combination Explicit-to-Explicit Stages Performing Norming Storming Socialization Tacit-to-Tacit Externalization Tacit-to-Explicit Figure 3. Knowledge Creation & Linear Group Development Model Based on the mapping relationships established between the (Nonaka, Takeuchhi, & Umemoto, 1996) spiral knowledge creation process; Tuckman’s (1965) linear group development model; Grant’s (1996b) idea that tacit knowledge is the most strategic resource of the firm; and Eisenhardt and Santos’ (2002) conclusion that knowledge can result in a sustained competitive advantage, the first proposition states: P1: For a project development team, the tacit knowledge created during the forming, storming, and norming stages of the linear group development model will be positively associated with creating and sustaining a competitive advantage at the organizational level. Knowledge and Teams 1621 Figure 4 pictorially shows the proposed relationship between the knowledge conversion process and the punctuated equilibrium model. During phase1, tacit knowledge is being created through the socialization process involving the individuals assigned to the team. Gersick (1989) found that at the transition point, “they pulled in new ideas and reframed their accrued experience in ways that enabled them to jump forward” and “transitions may be at the heart of the invention process” (p. 277). Thus, the team members realize at the midpoint that the project completion date is quickly approaching and that they cannot add more time to the process. During phase 2, the explicit knowledge being created leads to meeting the goals and objectives of the project. Socialization Tacit-to-Tacit Externalization Tacit-to-Explicit Combination Explicit-to-Explicit Internalization Explicit-to-Tacit Inertia Phase 1 Transition/ Midpoint [Defining Moment] Inertia Phase 2 Figure 4. Knowledge Creation & Punctuated Equilibrium Model Based on the mapping relationships established between the (Nonaka, Takeuchhi, & Umemoto, 1996) spiral knowledge creation process; Gersick’s (1989) punctuated equilibrium model; Grant’s (1996b) idea that tacit knowledge is the most strategic Knowledge and Teams 1721 resource of the firm; and Eisenhardt and Santos’ (2002) conclusion that knowledge can result in a sustained competitive advantage, the second proposition states: P2: For a project development team, the tacit knowledge created during phase 1 of the punctuated equilibrium model will be positively associated with creating and sustaining a competitive advantage at the organizational level. Conclusion Given the increasing importance of project teams in today’s dynamically changing environment, understanding how teams change over time becomes critical for a firm to create a competitive advantage. Nonaka (1994) stated that “organizational knowledge is created through a continuous dialogue between tacit and explicit knowledge” (p.14), and that “teams play a central role in the process of organization knowledge creation” (p. 32). Fedor et al. (2003) investigated the roles of project team knowledge creation processes and input (team leadership and organizational support) variables on project success. They found; (1) internal (e.g., laboratory experimentation) methods of knowledge generation were positively associated to project success, and (2) external (e.g., industry benchmarking) methods of knowledge generation modify the association between organizational support and project success. Lee and Choi (2003) found that organizations could achieve performance benefits through effective management of the knowledge creation process, and Fedor et al. (2003) found that the knowledge creation process does specifically affect the success of project teams. Chang, Bordia, and Duck (2003) concluded that both the linear development model and the punctuated equilibrium model describe valid developmental patterns of project teams and that the two models complement one another when assessing the different aspects of the Knowledge and Teams 1821 team’s development over time. Through a team management strategy that includes a consideration of the knowledge creation process, the external team leader can significantly increase the likelihood of the project team developing a competitive advantage for the firm. Gersick (1989) concluded, “pacing and transition dynamics may be facets of creative group work that are both consequential for group effectiveness and amenable to improvement through learning” (p. 307). Thus, Gersick recognized the importance of learning and knowledge in increasing group effectiveness. Knowledge creation plays a very important role in a project team’s life-span, and in particular, tacit knowledge creation can result in achieving and sustaining a competitive advantage. Lubit (2001) stated, “Because competitive advantage is increasingly found in knowing how to do things, rather than in having special access to resources and markets, knowledge and intellectual capital have become both the primary bases of core competencies and the key to superior performance” (p. 164). Therefore, the early stages and phases of a project team’s life may not be the most productive based on tangible outputs but the early stages may be very critical in ensuring a competitive advantage for a firm in the longer term. Future Research The propositions and ideas presented in this paper need empirical testing. Future research needs to address how to quantitatively or qualitatively measure tacit creation during the stages of the linear group development model and the first phase of the punctuated equilibrium model. The tacit knowledge creation would then have to be associated with team performance and then ultimately to the firm creating a competitive advantage. Knowledge and Teams 1921 References