IK cover feature: Knowledge management and innovation in the Latin American region

Latin American countries are aware that financial capital has been replaced by human capital and they have plenty of it. They are deliberately latching onto the knowledge advantage from Mexico to Venezuela. This report begins a series of reports in this issue of Inside Knowledge magazine.

By Olimpia Salas

In today’s world, knowledge has displaced financial capital as the key to organisational success. Instead of being a cost item, human capital – people – has become the key asset for long-lasting business success.
Leaders have had to change their priorities: instead of optimising physical capital, they have to optimise people and their intellectual capital. Communities of people need to be created and maintained, instead of running and maintaining a ‘money machine’. The new demands and opportunities of an interdependent global knowledge economy need to be understood, along with the implications for private and public decision-making by enterprises or society, whether on a local, national, regional or global level.
Leaders must also learn that the new knowledge dynamic surpasses the industrial paradigm of bureaucracy, centralised organisations and rigid communication. Business has moved towards new organisations that require flexibility, decentralisation and emphasis on collaborative networking
The most valuable knowledge is very human: tacit knowledge, intuition, personal experience; they reside in people’s minds. Before technology can enable that knowledge and even before culture can nurture it – knowledge management must begin with understanding why people don’t communicate and share.
The globe today is experiencing unprecedented change in the application of knowledge and in order to successfully compete. The Latin American and Caribbean region (LAC) needs to understand the global dynamics and trends and understand specific regional issues. Successful development will be through acquiring more knowledge and innovation in order to process natural resources for the rest of the world and by taking advantage of short term opportunities while preparing for the long haul.

LAC KM approaches in the past
By the middle of the ’90s, the KM programs introduced in LAC were influenced primarily by multinational companies, large enterprises and consulting firms in the region that were implementing KM programs as a corporate strategy. Initially much emphasis was put on information technology but high costs for IT infrastructure caused barriers for the implementation of KM programs. Additionally, some cultural issues evolved. Local managers demonstrated a lack of interest in KM strategies, with a perception of KM being just another fad, while local executives felt KM programs could be used for a competitive advantage.
Additional issues evolved relating to middle managers and supervisors. In the beginning, KM was rejected. Workers were reluctant to embrace the new managerial strategy. Feeling threatened by loss of authority, concerned about having their competencies and capabilities tested, and terrified of losing power, these workers hoarded their knowledge.
The cultural struggle is a lesson important to be shared and kept to be analysed for future use, especially in diverse cultural enterprises. The learning process at the earlier stages is important for dispelling any misconceptions. Offering learning experiences, both conceptual and practical, are recommended to decrease the level of uncertainty – workshops, conferences. Exchange of internal and external experiences start to build trust.
KM advocates from overseas played a remarkable role in disseminating new techniques and methodologies through releasing publications, books and articles. Interest spread quickly, influencing the top LAC companies, with KM and innovation included in most of the executive board agendas. Additionally, many executive conferences in Europe and the US covered knowledge management, organisational learning and innovation.
In a short time these conferences were replicated in LAC countries of Mexico, Colombia, Chile, Argentina and Venezuela. Indeed in Caracas, there have been five meetings of the International Forum on KM, innovation and intellectual capital, featuring well-known global practitioners from the five continents.
Those approaches helped bring an awareness of the knowledge value proposition and added to the implementation of KM and IC strategies. And also, LAC universities started to pay attention.
Knowledge management in Latin America has become a reality.

Companies now embracing KM
Oil and gas sector
Most oil and gas companies have embarked on KM to improve organisational capability, creating new work environments where knowledge and experiences can be easily shared.
The community of practice has evolved as the most useful approach. The communities enhance networking and collaboration through data, information and experience sharing, even long distance. There is easy access to experts worldwide for financial information, teamwork with customers and partners in search of near-term efficiency, productivity, and service quality improvements through knowledge reuse. The communities provide many tools and processes to link people to information, expertise and best practice. Technology, ongoing training and support have been developed to gain long-term benefits, with benefits of improving employee motivation, faster learning and increased innovation.

The oil and gas companies in LAC
PDVSA, the Venezuelan oil and gas company, was a pioneer in KM. In 1998, while ranked as the second largest oil and gas company in the world, the pressure of competition caused the firm to look at adopting another approach to business. A benchmarking study at that time identified companies implementing KM programs – BP, Shell, Schlumberger, Chevron and others.
A program was implemented in 1998 when some of PDVSA’s business units started a KM initiative from the grassroots level, eventually expanding the program across the whole organisation. A corporate knowledge management team was created from a group of advocates in the different business units who were interested in getting a synergy going from the different efforts that were developing independently within PDVSA, such as technological intelligence, knowledge centers, a center of excellence and communities of practice, with the knowledge communities becoming the center for business process management.
This concept permeated all divisions and businesses units, generating experiences, practices and methodologies and promoting concrete results. There were over 140 communities of knowledge that became the KM Corporate Network with more than 20,000 out of 45,000 employees connected to share knowledge and experiences. Unfortunately, during the national strikes more than 22,000 employees were fired and the KM initiative stopped. There have been some attempts to reorganise the KM program; however, today’s PDVSA is an enterprise with another strategy in mind with its main goal is to be a social enterprise.
ECOPETROL – Colombian oil and gas company launched a KM program in 2004 with the emphasis on developing CoP initiatives.
PETROBRASS – Brasil Oil Company has implemented some KM initiatives.
Details on these two firms are sketchy because no public documentation is available.

Universities, science and technology
Universities in LAC have developed a knowledge culture.
The rapidly expanding use of technology in teaching, along with learning about the new knowledge economy, forced LAC universities to transform the ways in which knowledge was managed.
In general, the universities in LAC have helped the expansion of knowledge management in Latin America by offering graduate courses, research and thesis programs. Additionally, intensive IT software development has been increasing. But, in spite of advances, there are few internal KM programs developed to foster KM and innovation dynamics. LAC universities are being called on to develop accelerated programs and encourage knowledge management and innovation cultures.
During the last two decades a proliferation of technology parks took place. And with that came the reality that much knowledge movement is actually borne out of practice, not academic theory or consulting models. In new learning strategies there needs to be a balance between the traditional academic approaches and the practical “real-time” application of learning.
And so, recently some LAC countries – Mexico, Panama, Brazil and Chile – have shifted from technology parks to knowledge cities. This shift has created infrastructures to support the development of science and technology, which enhances a dynamic culture of entrepreneurship and industrial incubators to generate some spin-offs for SMEs and the innovation process.
Different names have been given to those institutions, such as K metropolis, ideaopolis, K cities. These are institutions that will play a central role in the growth of useful knowledge itself.

Multilateral organisations
The multilateral economic and social development agencies such as the Inter-American Development, the World Bank, Central American Federation (CAF) and the International Development Research Centre/Creating Inhabitable Cities (IDRC/CIID) have been creating KM and innovation programs.
Amongst those organisations, the World Bank was the first to be engaged in the KM strategy, announcing in 1996 that it was becoming a ‘knowledge bank’; in a short period the World Bank engaged in a knowledge-sharing program emphasising communities of practice. The KM program suffered some ups and downs but recently there are initiatives towards revitalising the KM and innovation programs. However, the cultural elements have been embedded and KM methodologies such as lessons learnt and best practices have been required in social and technological loans programs developed in LAC.
The other multilateral organisation that influenced LAC is the IDAB which by 2007 launched a knowledge management and learning strategy that promoted knowledge-based decision-making organisations; enhanced its knowledge partnership with member countries; and used integrated knowledge through all its activities.
The MIF (Multilateral Investment Funds) is implementing the Knowledge to Practice program that aims to create and share knowledge for development using the practical experience of local partners based on an information repository, communities of practice and lessons learnt. No doubt all initiatives will create new cultural patterns through well-designed programs needed for competing in the knowledge economy.
Sharing knowledge in the rural and agricultural area has been done in Peru, Guatemala, Ecuador, Brasil and Argentina, using basic techniques such a story telling, after action review, and use of information and technology facilities (ITC). However, the potential of using KM for rural development is even greater, with the World Bank serving as the facilitator of welfare and environmental stewardship which will help to innovate and deal with problems of nutrition, epidemics and inclusion.

ITC strategy in the LAC region
Through information and technology facilities, sharing knowledge in the rural, agricultural villages has been encouraged.
Gone is the mislabeling of information technology as knowledge management and in its place is the overlapping of ITC with KM and innovation strategy, with ITC supporting e-government, a process that has been sponsored by some multilateral organisations and social foundations. And KM practitioners and leaders today understand more about the role technology can legitimately play in helping companies and communities better manage their knowledge assets.
Leaders and practitioners should take advantage of the ITC systems for networking purposes and anticipate requirements of the local government and leaders. Leveraging the strategy of KM, innovation, and knowledge sharing should be included, especially where some excluded populations live – for instance, the rural area and agriculture zones which in some places have no electricity.
It is important to point out that the cost of IT tools is not as prohibitive for small and medium size enterprises as it was two decades ago, allowing implementation of a knowledge-sharing culture. The advance of information technology and Web 2.0 applications has created sharing spaces such a blogs, content information management, teaching tools, video, papers, storytelling, best practices and lessons learnt which improve the learning process in real time. It is helping improve the life quality and bring more prosperity to the rural areas.

KM and innovation is flourishing
The initial proliferation of KM initiatives in LAC in the ’90s appears to have slowed down in recent times, according to some peer consultants in the region. Even so, knowledge management has gone from a business fad to the normal way of doing business, with enterprises that implemented KM a decade ago continuing the path but needing less external training and instead more hands-on experiences. Knowledge management has become a way of life.
In a study done by Gartner, ‘KM Scenario: Global Trends and Perspective’, an analysis of why KM is not yet obsolete found that the interest in KM is growing again basically for two reasons: 1) information technology is more effective and easier to use, and 2) separate projects have continuously shown value to enterprise.
KM successes justify talking in general terms again, and successful implementations show pragmatic, results-oriented focus. There are significant changes happening. Through 2007, three-quarters of enterprise productivity gains were attributable to KM. Also, other knowledge work enhancements (0.8 probabilities). Organisational maturity included managing IC; more than one-half of the market value of the average global company is IC. Therefore, tacit knowledge is critical to the future workforce.
Innovation is growing in importance. Effective use of technologies is more important than the technologies themselves. Focus on business processes is increasing and innovation will continue in KM practices and supporting technology. And the study reinforces that KM success is focused on the mission of supporting the strategy and direction of an enterprise or country.
In this regard, KM and innovation leaders should understand the new challenges of today’s knowledge economy, start performing systematic assessments of innovation capability to map a viable path for future goals.
“The benefits of KM will come when the perspectives of information management, human learning and innovation processes, and supporting technologies are fully integrated,” says Debra Amidon, Entovation International, Wilmington, Massachusets, US. “We must also add that the performance measurement of intellectual capital can and should be added to the enterprise system architecture.” A new performance measure has emerged in the form of the Entovation Triple Knowledge Lens (TKL) —a Knowledge-based Economy, a Knowledge-based Society and a Knowledge-based Infrastructure.

KM and innovation challenges to LAC
Improving intellectual wealth will help reduce poverty levels in the region. And intellectual indicators have been developed that can help to draw a region or a country’s knowledge assets map to explicitly lead the way. Embracing knowledge and innovation management can definitely help develop intellectual capital assets in a sustainable way.
Additionally, innovation, science and technology policies clearly can attract and involve foreign resources and technologies that will help combine enterprises, universities, foundations, local governments and the public as a team to establish the basis of knowledge and innovation for the future.

Reflections...

Definitely LAC needs to call the attention of the world to the region, by creating more opportunities for face-to-face knowledge flows and creating awareness of the importance of collaboration for competitive advantage;
Collaboration is the future … the shift in orientation becomes one of sharing and leveraging one another for mutual success. In national and global terms, it is described as creating the common good from which all benefit;
In developing an innovation culture there needs to be promotion of world activities that leverage the tremendous knowledge and innovation potential; the push to development must be generated with more commitment, ethics and truly social responsibility;
The high indices of poverty and exclusion must be fought with knowledge and innovation, wealth that every one of us can provide for more prosperity in the world.

Olimpia Salas is founder of the Knowledge Management Team at PDVSA (Petróleos de Venezuela, S.A., Caracas-Venezuela) – the quasi-governmental oil conglomerate and largest employer for the country. E-mail: olimpia.salas@gmail.com