the relevant issues with this
study and address each of those accordingly. Although,
this is a snap-shot study yet this short-term perspective
did not hamper the reliability and dependability of the
data and information, as well as the findings.
4. Managing Knowledge for Innovation
There is a new kind of influence in the global economy –
knowledge. Many scholars have indicated the importance
of knowledge for organizational competitiveness and
sustainability. Drucker comments “We are moving to a
society in which the basic resource of economy is
knowledge, instead of capital, labo r and natural resources
[1]”. Stewart believes that “Knowledge has become the
preeminent economic resources – more important than
raw material; more important, often than money. Con-
sidered as an economic output, information and knowl-
edge are more important than automobiles, oil, steel, or
any of the products of the industrial age [2]”. It (knowl-
edge) is the most strategically important resources of the
business [3]. Knowledge is being used more in product
design and development, production and distribution.
The competitive advantage of the firms can be undercut
overnight due to the new knowledge of the competitors.
Market leadership, size, name, recognition structure no
longer guarantee the survival [4] even the skill and core
competency cannot ensure that the firms will be able to
capitalize on the new opportunity and tackle new chal-
lenges. It is a complete n ew world with new realities be-
fore the marketers.
In the knowledge era, managing knowledge can be an
opportunity in new product development, i.e. innovatio n.
There is a broad agreement in favor of using knowledge
for innovation. In many instances knowledge and infor-
mation have been used as major impetus of new product
development [5]. According to Verona, the design of
new product development work is anchored in knowl-
edge management [6]. Innovation is frequently consid-
ered as the primary purpose of knowledge management [7].
Knowledge is also considered as the key impetus for
new capability development. Knowledge strategy allows
business firm to improve its learning capability to com-
bine knowledge-based capability and make better use of
them [8]. Another strategic aspect of knowledge strategy
is the continuous interaction with the customers and
other related parties. Garcia-Murillo and Annabi opine
that customer knowledge is a part of organization
knowledge [9]. Through close interaction with the cus-
tomers, an in-depth understanding is developed which
ultimately converts into organization’s business knowl-
edge. Constant interaction increases new customer
knowledge-base.
5. Concerns in Using Knowledge for
Innovation
There are few challenges in incorporating knowledge
into the innovation process. Neither the literature of in-
novation management nor knowledge management has
focused much on the process of incorporating knowledge
in the innovation mechanism. Consequently, there is no
clear direction for imparting knowledge into the innova-
tion process; no precise knowledge strategy for innova-
1The Policy Forum on Using Knowledge for Development: a unique
policy conference jointly organized by the World Bank Institute, the
British Council and the OECD, 17 April 2001, Wilton Park, UK. Bra-
zil, China and India participated in this conference in order to share
knowled
g
e strate
g
ies. www.oecd.or
g
.
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Knowledge Innovative Organization: The Effect of Constant Organization Renewal
386
tion; no suggestion regarding knowledge infrastructure
and system.
There is a common understanding that innovation is
the result of research and development activities. This is
partially true. According to knowledge- based view, cr ea-
tivity and innovation can result from regular business
activities and distributed organizational knowledge-base
(DOKB). There is another misconception that knowledge
is fundamentally related with the new o ffer development.
But the fact is that developing new technology; building
new capability; formulating new process and system are
with in the jurisdiction of innovation.
Inherently, innovation is uncertain and thus the knowl-
edge innovation is also uncertain [7]. Innovation is per-
ceived as the single most destructive force in an industry
[10]. Any form of innovation, such as knowledge inno-
vation may devastate organizations existing capabilities,
expertise and knowledge-base.
The roots of all these challenges have institution al im-
plications and the mitigation of these challenges is also
dependant on the institutional initiatives. Success de-
pends on how efficiently an organization is managing its
knowledge resour ces. Perez and Pablos consider that it is
necessary to manage knowledge effectively in the new
economy, because the achievement of sustainable com-
petitive advantage depends on firm's capacity to develop
and deploy its knowledge-based resources [11]. Institu-
tional approach is the innate aspect in both the concepts –
knowledge and innovation.
6. Case Study: Knowledge Program of
Amber Food Limited (AFL)
Amber Food Limited is one of the promising regional
companies in Bangladesh. Currently, the business is of-
fering 55 varieties under 10 product categories. Though it
is a relatively new en trant in comparison to other players
in the market, yet it could manage a spectacular growth
in recent years, soon after its inception.
6.1 The Early Days – Business Idea and
Groundwork
The idea of establishing a food processing business was
conceived after observing the scenario of a favorable
environment for agro-based business. Traditionally,
Bangladesh is a harvest economy due to the factors like
fertile soil, good irrigation system, favorable climate,
ample water resources and so forth. In addition to these,
entrepreneurs observed a number of institutio n al supports
(e.g. soft loan from Bangladesh Krishi Bank –BKB, tax
holiday and tax rebate, and free counseling) from the
Government side for the agro-based business as well.
The critical success factor in this type of industry is un-
interrupted supply of ingredients. In ensuring a smooth
procurement of ingredients, the company decided to de-
velop a partnership with the local producers (suppliers of
the ingredients). It made a special agreement with the
farmers in their locality to buy their produce. This had
two-fold implications – the business was in a relatively
safer condition in procuring ingredients and on the other
hand, the farmers had a confirmed buyer.
The entrepreneurs spent two years for planning their
business and grooming themselves. During these two
years, they tried their best to know market and customer
preferences; acquire business exposure and identify key
success factors. In the early days, the main challenges
were acquiring processing technology, machineries,
equipment and skilled workers. They participated in a
6-month course of food processing organized by a pri-
vate agro-business development NGO (non-government
organization) in Bogra. During this course, they realized
that it is simply essential to incorporate customer prefer-
ence in new product development. Otherwise, product
would not be desirable to the customers. Side-by-side,
they were looking for skilled workers. Fund was not
much of a problem for them. They had abundant fertile
lands in their villages. They used those lands as collat-
erals to the bank. All machineries and equipment were
procured from China. By the year 1997, the venture was
all set to start their business.
6.2 Commencement of the Business,
Contemporary Market Scenario and Initial
Business Strategy
In the year 1998, Amber Food Limited was formally es-
tablished. In the late 90’s, the market was full of im-
ported products from neighboring countries like India,
China, Pakistan, Thailand and Bhutan, etc. There were
several local players (e.g. Pran, BD Food, Sezan, etc.),
too. It was noticed that none of the existing market play-
ers were serving in the markets of North Bengal. It ap-
peared to be a potential opportunity for AFL.
Being the consumers in a developing country, Bang-
ladeshis are price-sensitive. Most of the business prac-
tices are based on cost-minimization strategy. AFL
planned to pursue that along with the emphasis on dif-
ferentiation, i.e. a hybrid strategy. Economic endowment
of upper middle class in Bangladesh though was steady
but demonstrated a slow pace of progress. There was a
steady growth i n dem a nd o f d i fferentiated pr od uct s.
6.3 Business Development in AFL
The motto of the business was to provide the best value
to its customers. People were at the heart of business
development strategy. Strategic agenda of AFL were –
collecting information about customers; incorporating
customers’ requirement into the product developing
process; reaching new customers with the new range of
products and configuring internal state of the business in
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Knowledge Innovative Organization: The Effect of Constant Organization Renewal
Copyright © 2009 SciRes JSSM
387
order to support the business strategy.
AFL, on a part-time basis appointed a few students of
Rajshahi University to collect information on customers.
In collecting data, they targeted two types of respondents
– groceries and direct consumers. The part-time workers
interviewed groceries and customers in Rajshahi, Bogra,
Rangpur and Dhaka city at random. They interviewed
only those customers who were buying food products in
the market. Within three months of time, ample informa-
tion was collected. Initially, data was processed manua lly
and later on, electronically. All collected information was
categorized in terms of preference, item, price, timing,
quantity and freq uency. These data and information had a
great tactical significance. AFL not only could assess the
existing market demand but also assess the future de-
mand as well. In addition, the company could enjoy some
other benefits from its knowledge strategy – a direct
communication with customers; first-hand market infor-
mation; better understanding about the distribution
channels; new product ideas and so on. In June 1998,
AFL started its production and products were marketed
in August 1998. W ithin few months, AFL started getting
positive responses from its customers. By 2000, AFL
products were available in all major towns in North
Bengal and Dhaka city. Since it was a regional company,
that is why, it was not possible to assess the exact market
share but it definitely became to be the number one
company in North Bengal. Also, its presence in Dhaka
was strongly felt in terms of market share. Altogether,
the overall business performance was satisfactory.
Enthusiastic workers were at the heart of its internal
innovation mechanism. Management believed that a
person with the right attitude and aptitude can bring
about a great change in his/her organization. AFL gave
the full freedom to its workers in coming up with
new/improved product and process idea. It allowed its
workers to spare some time in doing experiments with
their innovative ideas. From the motivation point of
view, it was a good initiative. By doing and learning,
the workforce of AFL became a truly flexible work-
force. Employees’ performance, creative efforts and
team-based productivity were directly related with its
compensation package. There was another success in
AFL; it could develop an integrated support system with
the help of logistics and supply chain, technology and
management. (See Figure 1, Figure 2 and Table 1)
Production
New product
development/product
improvement
Sales &
distribution
Customer in formation
Customer profiling
Product
specification
Required
resources
Required
ingredients
New product
idea
Human &
intellectual
resources
Financial
resources
Physical
resources
Resource input
Information input
Figure 1. Product development process in AFL
Knowledge Innovative Organization: The Effect of Constant Organization Renewal
388
HR
practices
Corporate
culture
Team-based
work system
Performance
appraisal
Learning & capacity
development Logistics & supply
chain
Internal-organization
communication
Technology
Management
& leadership style
Figure 2. Internal enablers of AFL’s business development strategy
AFL kept a keen eye over the changing market phe-
nomena. Therefore, it not only knew what the customers
wanted but also to some extent, what the customers
might need in the near future. For example, there was an
increasing awareness about health and hygiene and in-
creasing demand for dairy products. Its new dairy prod-
ucts became very popular just after the launching. These
types of pro cessed and packag ed dairy products we re not
available in Bangladesh. Similarly, there was a growing
demand for instant cooking spices as the number of of-
fice going female population was increasing with the
increase of dual earning families. The increased em-
ployment of female workers caused a decreasing trend in
home-making service, especially, in the urban areas,
since traditional way of preparing spice is cumbersome
and time consuming. AFL’s instant spices turned into
one of the mostly demanded items, especially in the
North Bengal region. By considering the changing life-
style, it (AFL) introduced two new products – mango bar
and pickle lozenge under the ‘Snacks’ catego ry. In 2005,
two more new products—tea and energy drink were
added in its range under the ‘Tea and Beverage’ category.
Presently, AFL is actively considering expanding its
market in other major cities (e.g. Khulna, Chittagong and
Barisal) in Bangladesh within the soonest possible time.
6.4 Looking Beyond the Horizon
AFL considered that in Bangladesh, food processing
companies have a swell future since there is a strong tra-
ditional agricultural infrastructure and availability of
attractive incentives for the entrepreneurs. SAPTA,
among the SAARC countries, had opened a new horizon
for export business. ‘Pran’ (one of the key market players
in Bangladesh), had started exporting in the neighboring
countries. This phenomenon inspired AFL to do the same.
At the end of 2005, AFL decided to expand its market to
other neighboring countries like Nepal, India, Afghani-
stan, etc.
7. Facts and Findings
The case content can be perceived from two pints of
view:
To see how all internal components, particularly
human resources, technology, logistics, systems and
management style, etc. have been integrated for the pur-
pose of innovation; and
To assess critically the extent the knowledge initia-
tives along with the knowledge infrastructure were effec-
tive in making a knowledge-innovative organization.
Copyright © 2009 SciRes JSSM
Knowledge Innovative Organization: The Effect of Constant Organization Renewal389
7.1 Arrangements of Internal Components in
AFL
Internal management system of AFL was basically peo-
ple oriented. People from inside and outside were inte-
grated into its product development process. Customers
contributed in the form of data and information (mainly
product idea and preference) and internal stakeholders
contributed directly by producing products as per cus-
tomers’ requirements. Each piece of information was
used either in developing new products or product im-
provement, which also instigated new cycles of learning.
Eventually, new competencies were developed, which
was a clear indication of a learning culture in AFL.
Management relied more on its employees; direct super-
vision was less; rate of error reduced significantly and
more experiments were done on new ideas. These were
nothing but the outcomes of imparting knowledge into its
(AFL) processes and systems. These had two major
benefits - product diversity and cost minimization.
In AFL, there was a collective leadership approach.
For developing new products, work teams took the basic
initiatives and other supporting teams provided support
to the new product development initiatives. In case of
product improvement, both the product development
teams and supporting teams worked together. In coor-
dinating their (teams) activities, there was no formal
approach. It depended on the nature of the initiatives
and the situation. AFL followed functional structure.
By reducing hierarchy, introducing team-based work
system and encouraging informal communication sys-
tem, this functional structure was made dynamic. Trust,
involvement and co-operation were the basic elements
of AFL culture.
Technology was the inseparable part in AFL. Its new
product development ability was primarily based either
on adoption of new technology or customizing technol-
ogy. Products were produced, bottled and packaged by
the automatic machines. Technology enabled AFL in
attaining economies of scale and in maintaining en-
hanced product differentiation capability. In analyzing
data and information, gradually it started using modern
information technology.
Although there was no deliberate HR policy, yet
healthy HR practices were there in AFL (See Figure 3).
Training and development was replaced by continuous
learning; compensation system and performance evalua-
tion were linked with new product development and ex-
isting product improvement. There was no set rule or
policy for recruitment and selection. However, ever since
its establishment, it was recruiting and selecting enthusi-
astic workers. Therefore, experience of the new workers
was irrelevant. Management believed that if a person had
a positive attitude towards work, then he/she would be-
come a good performer. Since it was a somewhat flatter
organization; the scope of career development was com-
paratively narrow. Annual increment system could nev-
ertheless, resolve this problem to some extent. Reward
system, performance evaluation and compensation
management were interlinked. Performance parameters
in AFL were: participation, initiative, motivation,
multi-skilling, teamwork, idea generation, quality of
work and on time delivery. Being a medium scale or-
ganization, there was not much distinction between HR
and administrative functions and therefore, there was
less complicacy in one sense.
HR practices in
AFL
Recruitment &
selection
Training &
development
Compensation
management
A ppraisal & re ward
system
Figure 3. Interlinked HR func tions in AF L
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Knowledge Innovative Organization: The Effect of Constant Organization Renewal
390
Perhaps the most active enabler was its supply chain.
AFL designed its supply chain in such way so that all
required supplies and logistics were available on time.
The business was very much careful from the very be-
ginning in ensuring the availability of ingredients. Equal
emphasis was also given on the distribution of products.
Other logistical support like repairing and maintenance,
inventory management, etc. were befitting with the op-
eration system.
7.2 Critical Analysis of the Knowledge Strategy
According to Van de Van, innovation is a critical mecha-
nism by which firms secure a place in the competitive
world of the future [12]. From this point of view, innova-
tion strategy of the business was pretty successful. AFL
designed its innovation strategy with the help of knowl-
edge in order to attain competitive advantage. Its
(AFL’s) key business strategy was to incorporate
knowledge, especially, customer knowledge in new
product development and to improve existing products
by which it could secure its position in the market, and
create a competitive advantage. The success of business
was on the extent a business could understand its cus-
tomers and incorporate customer information into its
product devel opment process.
AFL had a general understanding of its customers’
taste and preference along with their buying behavior. It
used to monitor environment relentlessly. Each new
piece of knowledge was working as an impetus or a drive
for new product development or product improvement.
As a result, the firm’s product line was extending. This
not only could add value to the business but also to the
customers. Knowledge only can add value if it is linked
with actions, tasks and purposes [7]. Here in AFL,
knowledge was linked with collecting customer informa-
tion, new product development, improving existing
products, developing new competencies and satisfying
customers. While improving new product and process,
knowledge was also adding value to the business. It
(knowledge) adds value when it (knowledge) is applied
in order to improve, change, or develop specific tasks
and activities [13]. AFL improved its existing process
and modified its infrastructure whenever necessary as per
the merit of the information and knowledge. Overall, it
can be said that knowledge was adding value quite no-
ticeably in AFL.
Barton opines that there is a clear linkage in between
firm’s core capability and new product development [14].
According to Dougherty, product innovation is a primary
means of corporate renewal [15]. When AFL used to
receive any information from the market, it tried to fit
that information into the organization, to see if it was
relevant. For instance, when it noticed that the number of
working women was increasing in all major cities in
Bangladesh, it decided to launch packaged cooking spice.
Before that, the business assessed itself whether it would
be feasible. It (AFL) analyzed its existing skill, compe-
tency and technology. It was found that some new ma-
chineries, few additional skilled laborers, raw materials
and packaging materials were needed. For packaging and
printing it used its old machines; for distribution it used
the same distribution channel and therefore, the overall
cost could be minimized significantly. Besides, while
launching a new product, AFL acquired new capabilities.
Every new product enabled AFL to enhance its existing
capacity and/or acquire new capability. Every new prod-
uct idea was the function of new information on cus-
tomer and the situation. Ev entually, the firm could ren ew
itself along with maintaining its growth in the market.
Danneel argues that organizations need to renew them-
selves continuously for their survival and prosperity in
dynamic environments [16].
The most substantial advantage of KM strategy is that
it allows improvements of firm’s learning capability and
its ability to combine knowledge-based capabilities as
well as make better use of them [8]. In AFL, individual
and organization learning took place simultaneously.
Organization learns when a new body of knowledge is
imparted with its existing knowledge-base. By process-
ing customer information, noticing changes in the envi-
ronment and by acquiring new technology, the business
was learning. At the same time, employees were learning
by experimenting with new ideas, doing tasks, working
in a team, directly participating in the product develop-
ment process and so forth.
Innovation was not a sudden result or outcome rather it
was the result of systematic organizational efforts and
initiatives. In the knowledge era, ‘knowledge’ resources
and knowledge-based innovation mechanism is at the
core of creativity and innovation. Knowledge manage-
ment strategy refers to the overall change of process, a
form of organizational renewal and a focus on innovation
through the creation, transmission, and application of
new knowledge, wh ich is within the resource-based view
of the firm [17]. This holistic approach of knowl-
edge-based innovation or knowledge-driven innovation
clearly indicates about the alignment of organizational
resources. AFL’s management and leadership style was
people oriented; employees were encouraged to nurture
their creativity and innovativen ess; the key HR functions
were inter-related and integrated with its new product
development and product improvement; high emphasis
was given on team-based work; formal and informal
communication; imparting knowledge through learning
and innovation, etc. These clearly indicate an institu-
tional approach within AFL, which, at the same time
implies the alignment of resources, particularly: the in-
tellectual resources in the line of business strategy. A
dynamic knowledge infrastructure was thereby created
spontaneously. ( See Figure 2 and Table 1)
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Knowledge Innovative Organization: The Effect of Constant Organization Renewal391
Table 1: Internal enablers of knowledge strategy in AFL
Enablers Results
HR practices Overall employee satisfaction
Performance appraisal Achievement oriented workforce
Management & Leadership style Empowerment, participation and involvement
Team-based work system Decentralization and leadership development
Inter-organization communication Shared vision
Learning & capacity development Capacity development and organizational renewal
Technology Technology alignment and utilization
Supply chain and logistics Smooth procurement and effective support system
Knowledge
Innovative
Organization
[KIO]
People
participation Self-motivated
work teams
Constant change and
capacity development
Knowledge
infrastructure
Resource alignment
Autonomy and
empowerment
Figure 4. Essential elements of a knowledge innovative organization (KIO)
The most significant finding is that - knowledge strat-
egy in AFL was not deliberate. It was the result of in-
corporating customer preference into its product devel-
opment process. Initial thinking of focusing on custom-
ers’ requirements exerted a breakthrough impact over
AFL in terms of organization development, innovation,
capability development, and so forth. Knowledge strat-
egy in AFL emerged automatically. In order to sustain
the benefits, the business continued to pursue this (KM)
strategy which made it a total knowledge innovative
organization. All these practices created a total knowl-
edge oriented culture in AFL. This knowledge-based
culture was actually playing the key role in making the
organization innovative.
8. Knowledge Innovative Organization
There is a traditional view that service organizations are
primarily considered as knowledge-intensive organiza-
tion [7]. According to Alvesson [18], knowledge- inten-
sive firms are the companies where most of the works are
intellectual in nature and well-educated, and qualified
employees are the major part of the workforce. But in
making organization knowledge innovative, it is essential
to go one step ahead. Knowledge has to be put at the
heart of the organization so that it can play a role of a
catalyst in guiding business activities, create a know-
ledge infrastructure, develop knowledge capability thr-
ough human and institutional development. In AFL, it
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Knowledge Innovative Organization: The Effect of Constant Organization Renewal
392
has been observed that in due course of time, it (AFL)
could develop a knowledge infrastructure for innovation.
This infrastructure con sisted of various essential ele ments
like HR best practices, integrated performance appraisal
system, management and leadership style, team-based
work system, inter-organization communication, learning
and capacity development, technology, supply chain and
logistics. Core business processes were: autonomy (de-
centralization of authority), skill development, research
and development and socialization. From the experience
of AFL case, in general, it is possible to identify several
basic elements of a knowledge innovative organization.
These are as follows:
1) People (internal and external) integration through
socialization.
2) Organizational renewal in the form of capacity de-
velopment.
3) Alignment and utilization of knowledge resources.
4) Continuous research and development.
5) Knowledge-based infrastructure and logistic sys-
tem.
The central essence of knowledge innovative organi-
zation can be as follows (See Figure 4):
Employee participation is necessary in business de-
velopment process with a common vision of innovation.
Multidisciplinary, self-managed and motivated
teams can create diversified knowledge and skill, and
ensure the best use of those.
Successful accomplishment of knowledge strategy
mainly depends on the autonomy of the people, sociali-
zation with the consumers, flexible organization structure
in addition to research and development.
Knowledge management strategy is involved with
constant change. Here, the chan ge is not imposing, rather
its natural in the form of capacity development and over-
all organizational renewal, which is now-a-days termed
as human and institutional develop ment.
Knowledge infrastructure is simply necessary to en-
sure all logistical support towards knowledge strategy. I n
addition, there is no specific condition(s) for the suc-
cessful implementation of knowledge strategy yet or-
ganization culture and leadership have a great influence
over it.
This knowledge innovative organization has other cru-
cial connotations, too. There are several concerns in us-
ing knowledge for innovation. Earlier, it has been dis-
cussed that a totalistic institutional approach can resolve
these concerns (challenges in using knowledge for inno-
vation). It (AFL) developed its own functional definition
of knowledge management. To AFL, knowledge man-
agement is imparting customer knowledge into the inno-
vation process through internal capacity development.
9. Conclusions
AFL embraced a holistic approach of knowledge strategy.
New product development and product improvement
were not the sole jurisdictions of marketing department
rather all of its units were equally responsible. Sales and
marketing was involved in understanding customers’
requirements; production department was responsible to
produce as per requirements of the customers; human
resource was engaged in continuous people development;
resources along with logistics were aligned in suppo rting
innovation process; leadership and management was in-
spiring in fostering teamwork and creativity. AFL’s for-
mal and informal systems were playing a key supportive
role in creating a social network inside and outside the
business.
It is widely believed, since knowledge is a very con-
temporary thought, therefore, the application of this
strategy is limited within the developed countries. But
from this case, it is revealed that knowledge has no
boundary; it is applicable irrespective of the economy,
country and region. There is another conviction that a
huge investment is needed in technology, modern
equipment and process. But the fact was that, in KM,
technology is more involved in th e business develop ment
process, product development and improvement of
mechanism and systems. The central issue is the extent to
which organizations are tailoring it (knowledge) as per
their requirements. If an organization can customize
knowledge strategy according to its need, certainly it
would result into long-term competitive advantage. Ac-
cording to Liebeskind, the concept ‘knowledge’ incorpo-
rates and integrates capabilities, structured information
and application of technologies in the improvement of
products and process and thus, has become a source of
competitive advantage [19].
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