Ricardo: Driven by knowledge

Exploring the processes, principles and constraints influencing the sustained success of a company that depends on knowledge to survive. By Martin Ward

What follows is an (inevitably selective) insider’s view of how a company that thrives on knowledge alone – we manufacture prototypes, or at most low-volume products, and depend on consultancy for most of our income – is achieving competitive success in a sector that is permanently racked by overproduction, crises of quality and confidence, a steadfast habit of restructuring at all levels, and tight margins for all participants. We don’t exactly live on air in the motor industry, but it feels like it sometimes.

The knowledge-driven nature of Ricardo’s contribution to the industries it serves will be obvious to the reader even from the thumbnail sketch of the company that is provided in the sidebar on the next page. Ricardo’s basic aims have never varied: to acquire knowledge (input knowledge), process it and generate from it a range of knowledge products and services (output knowledge) that match or anticipate the changing needs of our clients. This article attempts to illuminate these basic aims as the company pursues them today, noting in addition the key contribution of non-knowledge-based factors that are essential to every company’s survival and success.

Sources of input knowledge

There is such a thing as new knowledge, but all knowledge advances imply development from some existing base. Every graduate who joins us has acquired formal, publicly available knowledge, in an environment largely concerned with knowledge for the sake of knowledge. Once inside Ricardo, the graduate will work with knowledge for the sake of profit. While it is unlikely that an engineer who cannot handle the fundamental issues of engineering as a discipline will make much commercial impact, such issues are no longer their main concern, even though good research and methodological skills are essential to Ricardo’s work.

Input knowledge is also obtained from testing and measuring engineering products belonging to Ricardo or its clients under various controlled conditions, and with a variety of specific knowledge outcomes in mind. While the outcomes may fulfil contractual requirements, they will also be logged in Ricardo’s own files and records. Ricardo’s long-term ambition is to integrate the engine data acquired in this way into a commercially useful system of benchmarking, although the practical difficulties involved remain unsolved so far.

Ricardo has occasionally had to set up offices on its own site to house confidential client projects from which no information is supposed to escape, but this provision cannot apply to the Ricardo engineers directly involved, and generalised forms of the results obtained have been known to find their way into common internal knowledge. The need to work for a number of companies simultaneously, between which there may be fierce competition, leads to tricky problems of site management and administrative confidentiality.

Other ways of building input knowledge include hiring experts, either temporarily as consultants or permanently as employees, and acquiring entire companies, as Ricardo has done several times in the course of constructing its global divisions. This type of knowledge is already well on its way to commercial fruitfulness, and has the momentum that is otherwise so difficult to generate in a wholly new department or project.

Other essential forms of input knowledge include general knowledge, without which neither firms nor individuals can operate, and what one might call ‘maintenance knowledge’, the common stock of legal, financial and administrative knowledge and skills that firms need if they are to remain within the law and to work efficiently. This knowledge is usually evaluated by external bodies for quality-assurance purposes, which are increasingly important in acquiring business from clients. Like every other company, Ricardo keeps a watchful eye on competitors and potential clients, as well as the often painful workings of the motor industry as a whole.

Taming input knowledge

In the most general terms, Ricardo’s engineers, in the course of their everyday work, either acquire or process input knowledge, and turn it into knowledge products and services. They then effectively sell the latter to clients. The following section discusses the ways in which input knowledge is processed.

Real, profitable knowledge has to be assimilated by individuals to the point that they can identify with it completely. This could not happen without some degree of prior grounding, reflecting the principle that knowledge always has antecedents. Not everything has to be internalised; no-one could contemplate digesting endless columns of test results. Knowledge involves a grasp of principles, while data supports this knowledge in specific forms. While human beings are highly capable of grasping broad principles of a subject, there are severe limits to their abilities to cope with data. The processing and storing of data is best left to computers, files and reference books.

If knowledge is not really knowledge until it has been assimilated, it is hard to fully accept Karl Popper’s account of “objective knowledge” being divorced from consciousness. At Ricardo, people are key to the acquisition, assimilation, transfer and use of knowledge. Individuals inevitably have their own subjective viewpoints, as well as prejudices, temperaments, preferences, susceptibilities and lopsided talents. Yet they also have insights, and things occur to them spontaneously and in ways that no machine could ever hope emulate. People’s minds often go on working on problems after hours; people can summarise their existing knowledge succinctly and swiftly; people generate innovations and create judgements that are relevant to novel circumstances.

Paradoxically, the objectivity of formal knowledge, and its commercial progeny, depends on its independence from individual circumstances and histories. Given a specific, standard technical problem, we would expect all qualified engineers to come up with a similar solution. The integrity of objective knowledge has to survive personality. It is written into the professional mind.

Achieving competitive knowledge

The aim of assimilating and processing input knowledge is what might be described as ‘competitive knowledge’, which enables the firm both to survive and to succeed in the highly competitive industry in which Ricardo operates. There are a number of roughly equivalent knowledge-based companies to which clients could turn to achieve their aims; Ricardo’s ambition is to attract as much of this work as possible.

Given this, innovation remains very much at the centre of Ricardo’s quest for competitive knowledge. The company’s R&D department clearly plays an important role here; the products it produces are often the crown jewels of the company. Every knowledge company has a lurking wish to hit on an idea so astounding that its competitors will be knocked flat, for example an engine that only needs air as fuel. Unfortunately, experience shows that, in the motor industry at least, the more spectacular the idea, the more likely it is to conflict with existing industry infrastructures. These have usually been developed painfully and at great expense over decades, and motor-industry leaders, not keen to see their investment compromised, will think very hard before buying into anything really revolutionary. The wonderful idea is thus denied commercial success. Private inventors can never understand why their brainwaves do not take the world by storm; Ricardo’s experts, often asked to assist them, usually do. Even lesser brainwaves, which initially promise to reach some long-held industry Oily Grail, have frequently fallen flat for the same reason. Radical innovation in this field equates to high risk.

The motor industry does not deal in paradigm shifts, whereby a whole generation of work is rendered obsolete overnight by a single startling announcement, as in the world of pure science. Rather, commercial innovation is usually incremental. The most productive idea for a knowledge company may be one that significantly advances an already apparent industry trend, in which everyone agrees there is a good commercial future. A prime recent example is Ricardo’s mild hybrid car the i-MoGen (Intelligent Motor Generator), which hit the spot with the industry at the time of its launch.

Successful innovation in the motor industry often comes in piecemeal form via ‘enabling’ ideas, which operate in the field of commonly recognised problems. For example, a better mousetrap is worth more to us than a wholly mechanical cat. Equally, innovation in the motor industry is often more illusion than reality. Many of the current technologies that seem so exciting, such as direct-injection gasoline engines, have in fact been around for decades, held back by a lack of enabling technologies, which in recent years have generally been provided by developments in electronics, a field that really lies outside the province of the motor industry. Many knowledge companies, particularly those in the engine-components business, have succeeded by finally realising these well established ideas.

There are few genuine dead ends when it comes to a knowledge business, and profit often flows from old discoveries. Ricardo’s archive of old company reports is one of the most heavily used sources of information. Even faintly new ideas usually come in waves of parallel developments, filling the industry with slightly different versions of the same idea, particularly in the transmissions business.

Knowledge products and services

The result of processing input knowledge is knowledge products, in essence anything a client will agree to purchase. A knowledge product can be a prototype, component or model; a semi-tangible good such as a report, a design drawing or a piece of information; a licence to use a concept protected by a patent; or, a vital piece of software. These are the kinds of knowledge products that Ricardo has thrived on for over 70 years. Nowadays, Ricardo’s Information Services Department (ISD) sells its own knowledge products, such as newsletters, copies of publicly available papers and articles, lists of references or translations.

Clients are prepared to pay, so long as they can see how far Ricardo has developed the input knowledge from its original state. The quality and speed of the company’s work are what gives us an edge over our rivals. One of Ricardo’s engineering departments that serves clients in this way is the Technical Support Service (TSS), which co-ordinates the knowledge of engineers throughout the company to answer specific technical questions from clients who subscribe to the service via a technical-support agreement.

The difference between the output of the TSS and the ISD may sometimes be hard to detect. The TSS makes heavy use of the knowledge acquired, stored and organised by ISD, and members of the TSS are not always asked to be particularly original in their answers to clients. If clients are dealing with an area of knowledge that relates to one with which they are already familiar, they will be prepared to pay for fairly generalised but conveniently packaged summaries of the state of the art in the new field.

Another essential component of commercial knowledge provision as a whole is the understanding (which may be explicit) that the client is given exclusive access to that knowledge; this would not be the case with knowledge that is easily accessible to everyone, for instance over the internet, and can only be assured by conditions of confidentiality. On the other hand, the ISD provides a great deal of publicly available knowledge, but clients are prepared to pay because of the value added by convenient and reliable presentation, which saves them hours of time.

Irrespective of the type of product on offer, though, it is important for a knowledge company to always to be on the look out for novel products, as well as new ways in which its products can be presented and communicated. The advent of the worldwide web has opened up whole new possibilities in this respect, and every new development in ICT should be seen as an opportunity to amend or extend a company’s portfolio, particularly if the development implies the obsolescence of an existing communications medium.

Knowledge services may be rather less tangible than knowledge products. They include the use of advanced testing and other facilities, including databases provided by the ISD on a subscription basis, knowledge transfer in the form of seminars, presentations and training courses (including on-site training and initiation of client employees), and secondment, recruitment and placement services. In recent years, Ricardo’s Strategic Consulting division has added to this list the provision of high-level strategic advice to major manufacturing and other companies. Every knowledge service requires an infrastructure that itself reflects the state of the art.

Much of Ricardo’s bread and butter work consists of applying engineering knowledge to the solution of problems raised by projects that the company contracts to carry out for a client. These projects may involve the design and development of new products, or the revision of existing products that are obsolete, underpowered or faulty. While none of these tasks could be done by non-engineers, the amount of new engineering knowledge, judgement and insight required varies considerably, as does the length and difficulty of each project. Not all Ricardo’s work takes place at the frontiers of knowledge.

Indeed, the provision of knowledge products and services is not the end of the story. As in any business, good relationships between Ricardo and its clients are critical, as is the reputation of the firm. At the same time, no monopoly lasts for ever. Ricardo has to be ready to replace its competitive knowledge with new, equally competitive ideas. The speed with which competitive knowledge can be generated and replaced is a key factor in the firm’s ongoing success. It is a ruthless and relentless process, but the Ricardo’s success in moulding itself as a knowledge company means it is well placed to maintain its competitive status. Having shared some of the processes, principles and constraints that go with being a knowledge company like Ricardo, our hope is that other companies will be able to derive an improved understanding of the factors that will influence and enable their own success in this field.

The analysis presented in this article is an entirely personal one, and does not reflect view of the company as a whole.

Martin White is an information specialist with Ricardo Consulting Engineers. He can be contacted at martin.ward@ricardo.com

SIDEBAR: ABOUT RICARDO

Ricardo was founded in 1917 by Sir Harry Ricardo, an eminent engineer who pioneered studies of engine combustion, fuels and octane rating, and designed and patented many combustion and other engine systems. The company has never lost its knowledge-leadership status in the motor industry, and today continues to provide clients throughout the world with innovations, consultancy and technical expertise. It works through its major divisions at Shoreham-by-Sea, Cambridge and Leamington Spa in the UK, sizeable divisions in the US and Germany, and offices in Japan, China, Korea, India and Italy. Ricardo makes a significant contribution to the flow of knowledge in the industries it serves via its world-class Information Services Department, based in Shoreham, which is a unique example of a largely self-financing information service. For more information, visit www.ricardo.com.

SIDEBAR: LESSONS LEARNT

The following points should strike a chord with readers who work for consultancies:

Take careful note of the characteristics of the industry you work in. The motor industry is a mature one, in which radically new knowledge (if it is still possible) is unlikely to thrive. Nothing that will really upset the status quo has a chance of succeeding. The most fruitful kind of competitive knowledge will have other roles than revolution – such as enablement, canny extensions of existing trends, tidying up dead ends, complementing, supporting, providing variants, repackaging, updating, standardising and so on. Be prepared to replace any innovations with others that are equally good, because no monopoly is forever;
Note Ricardo’s global spread, both knowledge-wise and geographically, which presents numerous chances for success in different areas and markets – not every division will be on top all of the time. Also, this allows for a wide spread of clients, and the ability to service them on their doorsteps. Be protean; no job is too small.

Readers who work for organisations that rely on physical products can also learn from us:

The management of anything includes the management of knowledge; in this sense, we are all knowledge managers. The recognition of the role of subjective factors (insight, originality, creativity, inventiveness) and their unwanted shadows (prejudice, resistance to change, inflexibility) must be balanced against the need to preserve objectivity, accuracy, fidelity – the qualities of knowledge for its own sake – if knowledge is to lead to profit;
Whether you are talking about strategy, management, product research and selection, product design, development and testing, product manufacture, marketing, distribution, or aftermarket service, or the complementary skills of site management, accountancy and legal services, nothing is immune from knowledge-based analysis, from the impact of knowledge or from the benefit of creativity. Striving for monopoly is the same as with a knowledge-only company, as is the certainty that the monopoly will wither; both types of company need to replace competitive knowledge, to repackage it, to communicate it in new forms, and to add variants and improvements in order to stay ahead;
All companies depend on qualities that are not directly concerned with knowledge: careful management, a positive company culture, state-of-the-art plant and facilities, and the care of clients, involving the preservation of trust and loyalty, confidentiality and value for money.