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Building a Learning Organization

by David A. Garvin

Included with this full-text

Harvard Business Review

article:

The Idea in Brief—the core idea

The Idea in Practice—putting the idea to work

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Article Summary

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A list of related materials, with annotations to guide further

exploration of the article’s ideas and applications

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Further Reading

Beyond high philosophy and

grand themes lie the gritty

details of practice.

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page 1

The Idea in Brief The Idea in Practice

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As we all know, to stay ahead of competi-tors, companies must constantly enhance the way they do business. But more performance-improvement programs fail than succeed. That’s because many managers don’t realize that sustainable improvement requires a commitment to learning.

After all, how can organizations respond creatively to new challenges (shifts in cus-tomer preferences, market downturns) without first discovering something new—then altering the way they operate to reflect new insights? Without learning, companies repeat old practices, make cosmetic changes, and produce short-lived improvements.

To transform your company into a learning organization, Garvin recommends master-ing five activities:

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Solving problems systematically

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Experimenting with new approaches to work

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Learning from past experience

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Learning from other companies and from customers

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Transferring knowledge throughout your organization

Woven into the fabric of your company’s daily operations, these activities help your organization make enduring improvements that translate directly into measurable gains—including superior quality, better delivery, and increased market share.

Garvin offers these suggestions for mastering five organizational learning practices:

SOLVING PROBLEMS SYSTEMATICALLY

Don’t try to solve problems by relying on gut instinct or assumptions. Instead, generate hy-potheses, gather data to test your hypotheses, and use statistical tools (such as cause-and-effect diagrams) to organize data and draw inferences.

EXPERIMENTING

Systematically search for and test new knowledge. Use

small experiments

to produce incremental gains in knowledge. For instance, specialty glass manufacturer Corning experi-ments continually with diverse raw materials and new formulations to increase yields and provide better grades of glass.

Use

demonstration projects

to produce knowledge you can use for systemwide changes. General Foods experimented with self-managing teams at its Topeka plant with the aim of adopting this approach across the company later.

LEARNING FROM PAST EXPERIENCE

Review your successes and failures, identify lessons learned, and record those lessons in accessible forms.

Example:

Boeing compared the development pro-cesses of its 737 and 747 planes (models that had serious technical problems) to those of its 707 and 727 (two profitable pro-grams). It then compiled a booklet of les-sons learned. Several members of the learn-ing team were later transferred to two start-up programs—the 757 and 767. They pro-duced the most successful, error-free launches in Boeing’s history.

LEARNING FROM OTHERS

Look outside your immediate environment to gain new perspectives. Consider these sources:

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Other companies.

Identify best-practice or-ganizations (even in other industries), use site visits and interviews to study how they get work done, and generate ideas for im-proving your own practices.

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Your customers.

Meet regularly with cus-tomers to gather knowledge about prod-ucts, competitors, consumers’ preferences, and the quality of your service. Also ob-serve customers using your products, to identify problems and generate ideas for improvement.

TRANSFERRING KNOWLEDGE

New knowledge carries maximum impact when it’s shared broadly. To transfer knowl-edge quickly and efficiently throughout your organization, move experts to different parts of the company—across divisions, depart-ments, and facilities—so they can share the wealth.

Example:

Time Life’s CEO shifted the president of the company’s music division (who had orches-trated years of rapid growth and high prof-its through innovative marketing) to the book division, where profits were flat be-cause of continued reliance on traditional marketing concepts.

This document is authorized for use only in PGDM- 11/19 by Raj veer Singh from November 2012 to May 2013.


by David A. Garvin

harvard business review • july–august 1993 page 2

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D.

Beyond high philosophy and grand themes lie the gritty details of

practice.

Continuous improvement programs aresprouting up all over as organizations strive tobetter themselves and gain an edge. The topiclist is long and varied, and sometimes it seemsas though a program a month is needed just tokeep up. Unfortunately, failed programs faroutnumber successes, and improvement ratesremain distressingly low. Why? Because mostcompanies have failed to grasp a basic truth.Continuous improvement requires a commit-ment to learning.

How, after all, can an organization improvewithout first learning something new? Solvinga problem, introducing a product, and reengi-neering a process all require seeing the worldin a new light and acting accordingly. In the ab-sence of learning, companies—and individu-als—simply repeat old practices. Change re-mains cosmetic, and improvements are eitherfortuitous or short-lived.

A few farsighted executives—Ray Stata ofAnalog Devices, Gordon Forward of Chapar-ral Steel, Paul Allaire of Xerox—have recog-nized the link between learning and continu-

ous improvement and have begun to refocustheir companies around it. Scholars too havejumped on the bandwagon, beating the drumfor “learning organizations” and “knowledge-creating companies.” In rapidly changing busi-nesses like semiconductors and consumerelectronics, these ideas are fast taking hold.Yet despite the encouraging signs, the topic inlarge part remains murky, confused, and diffi-cult to penetrate.

Meaning, Management, and Measurement

Scholars are partly to blame. Their discussionsof learning organizations have often been rev-erential and utopian, filled with near mysticalterminology. Paradise, they would have youbelieve, is just around the corner. Peter Senge,who popularized learning organizations in hisbook

The Fifth Discipline,

described them asplaces “where people continually expand theircapacity to create the results they truly desire,where new and expansive patterns of thinkingare nurtured, where collective aspiration is set




free, and where people are continually learn-ing how to learn together.”

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To achieve theseends, Senge suggested the use of five “compo-nent technologies”: systems thinking, personalmastery, mental models, shared vision, andteam learning. In a similar spirit, Ikujiro Non-aka characterized knowledge-creating compa-nies as places where “inventing new knowl-edge is not a specialized activity...it is a way ofbehaving, indeed, a way of being, in which ev-eryone is a knowledge worker.”

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Nonaka sug-gested that companies use metaphors and or-ganizational redundancy to focus thinking,encourage dialogue, and make tacit, instinc-tively understood ideas explicit.

Sound idyllic? Absolutely. Desirable? With-out question. But does it provide a frameworkfor action? Hardly. The recommendations arefar too abstract, and too many questions re-main unanswered. How, for example, willmanagers know when their companies havebecome learning organizations? What con-crete changes in behavior are required? Whatpolicies and programs must be in place? Howdo you get from here to there?

Most discussions of learning organizations fi-nesse these issues. Their focus is high philoso-phy and grand themes, sweeping metaphorsrather than the gritty details of practice. Threecritical issues are left unresolved; yet each is es-sential for effective implementation. First isthe question of

meaning

. We need a plausible,well-grounded definition of learning organiza-tions; it must be actionable and easy to apply.Second is the question of

management

. Weneed clearer guidelines for practice, filled withoperational advice rather than high aspira-tions. And third is the question of

measure-ment

. We need better tools for assessing an or-ganization’s rate and level of learning toensure that gains have in fact been made.

Once these “three Ms” are addressed, man-agers will have a firmer foundation forlaunching learning organizations. Withoutthis groundwork, progress is unlikely, and forthe simplest of reasons. For learning to be-come a meaningful corporate goal, it mustfirst be understood.

What Is a Learning Organization?

Surprisingly, a clear definition of learning hasproved to be elusive over the years. Organiza-tional theorists have studied learning for along time; the accompanying quotations sug-

gest that there is still considerable disagree-ment (see the insert “Definitions of Organiza-tional Learning”). Most scholars vieworganizational learning as a process that un-folds over time and link it with knowledge ac-quisition and improved performance. But theydiffer on other important matters.

Some, for example, believe that behavioralchange is required for learning; others insistthat new ways of thinking are enough. Somecite information processing as the mechanismthrough which learning takes place; otherspropose shared insights, organizational rou-tines, even memory. And some think that orga-nizational learning is common, while othersbelieve that flawed, self-serving interpretationsare the norm.

How can we discern among this cacophonyof voices yet build on earlier insights? As a firststep, consider the following definition:

A learning organization is an organizationskilled at creating, acquiring, and transferringknowledge, and at modifying its behavior toreflect new knowledge and insights.

This definition begins with a simple truth: newideas are essential if learning is to take place.Sometimes they are created de novo, throughflashes of insight or creativity; at other timesthey arrive from outside the organization orare communicated by knowledgeable insiders.Whatever their source, these ideas are the trig-ger for organizational improvement. But theycannot by themselves create a learning organi-zation.

Without accompanying changes in theway that work gets done, only the potential for im-provement exists.

This is a surprisingly stringent test for itrules out a number of obvious candidates forlearning organizations. Many universities failto qualify, as do many consulting firms. EvenGeneral Motors, despite its recent efforts toimprove performance, is found wanting. All ofthese organizations have been effective at cre-ating or acquiring new knowledge but notablyless successful in applying that knowledge totheir own activities. Total quality manage-ment, for example, is now taught at many busi-ness schools, yet the number using it to guidetheir own decision making is very small. Orga-nizational consultants advise clients on socialdynamics and small-group behavior but are no-torious for their own infighting and factional-ism. And GM, with a few exceptions (like Sat-urn and NUMMI), has had little success in

David A. Garvin

is the Robert and Jane Cizik Professor of Business Administration at the Harvard Business School. His current research focuses on the general manager’s role and successful change processes. His last HBR article was “How the Baldrige Award Really Works” (November–December 1991).




revamping its manufacturing practices, eventhough its managers are experts on lean manu-facturing, JIT production, and the require-ments for improved quality of work life.

Organizations that do pass the definitionaltest—Honda, Corning, and General Electriccome quickly to mind—have, by contrast, be-come adept at translating new knowledge intonew ways of behaving. These companies ac-tively manage the learning process to ensurethat it occurs by design rather than by chance.Distinctive policies and practices are responsi-ble for their success; they form the buildingblocks of learning organizations.

Building Blocks

Learning organizations are skilled at five mainactivities: systematic problem solving, experi-mentation with new approaches, learningfrom their own experience and past history,learning from the experiences and best prac-tices of others, and transferring knowledgequickly and efficiently throughout the organi-zation. Each is accompanied by a distinctivemind-set, tool kit, and pattern of behavior.Many companies practice these activities to

some degree. But few are consistently success-ful because they rely largely on happenstanceand isolated examples. By creating systemsand processes that support these activities andintegrate them into the fabric of daily opera-tions, companies can manage their learningmore effectively.

1. Systematic problem solving.

This first ac-tivity rests heavily on the philosophy andmethods of the quality movement. Its underly-ing ideas, now widely accepted, include:

• Relying on the scientific method, ratherthan guesswork, for diagnosing problems (whatDeming calls the “Plan, Do, Check, Act” cycle,and others refer to as “hypothesis-generating,hypothesis-testing” techniques).

• Insisting on data, rather than assumptions,as background for decision making (what qual-ity practitioners call “fact-based management”).

• Using simple statistical tools (histograms,Pareto charts, correlations, cause-and-effect di-agrams) to organize data and draw inferences.

Most training programs focus primarily onproblem-solving techniques, using exercisesand practical examples. These tools are rela-tively straightforward and easily communi-cated; the necessary mind-set, however, ismore difficult to establish. Accuracy and preci-sion are essential for learning. Employees musttherefore become more disciplined in theirthinking and more attentive to details. Theymust continually ask, “How do we know that’strue?”, recognizing that close enough is notgood enough if real learning is to take place.They must push beyond obvious symptoms toassess underlying causes, often collecting evi-dence when conventional wisdom says it is un-necessary. Otherwise, the organization will re-main a prisoner of “gut facts” and sloppyreasoning, and learning will be stifled.

Xerox has mastered this approach on acompany-wide scale. In 1983, senior managerslaunched the company’s Leadership ThroughQuality initiative; since then, all employeeshave been trained in small-group activities andproblem-solving techniques. Today a six-stepprocess is used for virtually all decisions (seethe insert “Xerox’s Problem-Solving Process”).Employees are provided with tools in four ar-eas: generating ideas and collecting informa-tion (brainstorming, interviewing, surveying);reaching consensus (list reduction, ratingforms, weighted voting); analyzing and display-ing data (cause-and-effect diagrams, force-field

Definitions of Organizational Learning

Scholars have proposed a variety of definitions of organizational learning.

Here is a small sample:

“Organizational learning means the pro-cess of improving actions through better knowledge and understanding.” —C. Marlene Fiol and Marjorie A. Lyles, “Organizational Learning,”

Academy of

Management Review,

October 1985.

“An entity learns if, through its process-ing of information, the range of its po-tential behaviors is changed.” —George P. Huber, “Organizational Learning: The Contributing Processes and the Literatures,”

Organization

Science,

February 1991.

“Organizations are seen as learning by encoding inferences from history into routines that guide behavior.” —Barbara Levitt and James G. March, “Organizational Learning,”

American Re-

view of Sociology,

Vol. 14, 1988.

“Organizational learning is a process of detecting and correcting error.” —Chris Argyris, “Double Loop Learning in Organizations,”

Harvard Business

Review,

September–October 1977.

“Organizational learning occurs through shared insights, knowledge, and mental models...[and] builds on past knowledge and experience—that is, on memory.” —Ray Stata, “Organizational Learning—The Key to Management Innovation,”

Sloan Management Review,

Spring 1989.




analysis); and planning actions (flow charts,Gantt charts). They then practice these toolsduring training sessions that last several days.Training is presented in “family groups,” mem-bers of the same department or business-unitteam, and the tools are applied to real prob-lems facing the group. The result of this pro-cess has been a common vocabulary and a con-sistent, companywide approach to problemsolving. Once employees have been trained,they are expected to use the techniques at allmeetings, and no topic is off-limits. When ahigh-level group was formed to review Xerox’sorganizational structure and suggest alterna-tives, it employed the very same process andtools.

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2. Experimentation.

This activity involvesthe systematic searching for and testing ofnew knowledge. Using the scientific method isessential, and there are obvious parallels tosystematic problem solving. But unlike prob-lem solving, experimentation is usually moti-vated by opportunity and expanding horizons,not by current difficulties. It takes two mainforms: ongoing programs and one-of-a-kinddemonstration projects.

Ongoing programs

normally involve a con-tinuing series of small experiments, designedto produce incremental gains in knowledge.They are the mainstay of most continuous im-provement programs and are especially com-mon on the shop floor. Corning, for example,experiments continually with diverse raw ma-terials and new formulations to increase yieldsand provide better grades of glass. AlleghenyLudlum, a specialty steelmaker, regularly ex-amines new rolling methods and improvedtechnologies to raise productivity and reducecosts.

Successful ongoing programs share severalcharacteristics. First, they work hard to ensurea steady flow of new ideas, even if they must beimported from outside the organization. Chap-arral Steel sends its first-line supervisors onsabbaticals around the globe, where they visitacademic and industry leaders, develop an un-derstanding of new work practices and tech-nologies, then bring what they’ve learned backto the company and apply it to daily opera-tions. In large part as a result of these initia-tives, Chaparral is one of the five lowest coststeel plants in the world. GE’s Impact Program

Xerox’s Problem-Solving ProcessStep

1. Identify and select problem

What do we want to change?

What’s preventingus from reachingthe “desired state”?

Lots of potentialcauses identified

Key cause(s) identi-fied and verified

Key cause(s) documentedand ranked

How could we makethe change?

Lots of ideas on how tosolve the problem

Potential solutionsclarified

Solution list

What’s the best wayto do it?

Lots of criteria for evaluat-ing potential solutions

Lots of ideas on how toimplement and evaluate theselected solution

Criteria to use for evalu-ating solution agreedupon

Implementation and eval-

Plan for making and monitoring the change

Measurement criteria toevaluate solution effectiveness

Are we follow-ing the plan?

How well didit work?

Implementation of agreed-on contingency plans (if necessary)

Solution in place

Effectiveness of solutionagreed upon

Continuing problems (ifany) identified

Verification that the problem is solved, or

Agreement to address continuing problems

Lots of problemsfor consideration

One problem statement, one “desired state” agreed upon

Identification of the gap

“Desired state” describedin observable terms

2. Analyze problem

3. Generate potentialsolutions

4. Select and plan the solution

5. Implement the solution

6. Evaluate the solution

Question to Be Answered

Expansion/Divergence

Contraction/Convergence

What’s Needed to Go to the Next Step

uation plans agreed upon




originally sent manufacturing managers toJapan to study factory innovations, such asquality circles and kanban cards, and thenapply them in their own organizations; todayEurope is the destination, and productivity im-provement practices the target. The program isone reason GE has recorded productivity gainsaveraging nearly 5% over the last four years.

Successful ongoing programs also require anincentive system that favors risk taking. Em-ployees must feel that the benefits of experi-mentation exceed the costs; otherwise, theywill not participate. This creates a difficultchallenge for managers, who are trapped be-tween two perilous extremes. They must main-tain accountability and control over experi-ments without stifling creativity by undulypenalizing employees for failures. AlleghenyLudlum has perfected this juggling act: it keepsexpensive, high-impact experiments off thescorecard used to evaluate managers but re-quires prior approvals from four senior vicepresidents. The result has been a history ofproductivity improvements annually averaging7% to 8%.

Finally, ongoing programs need managersand employees who are trained in the skills re-quired to perform and evaluate experiments.These skills are seldom intuitive and must usu-ally be learned. They cover a broad sweep: sta-tistical methods, like design of experiments,that efficiently compare a large number of al-ternatives; graphical techniques, like processanalysis, that are essential for redesigningwork flows; and creativity techniques, like sto-ryboarding and role playing, that keep novelideas flowing. The most effective training pro-grams are tightly focused and feature a smallset of techniques tailored to employees’ needs.Training in design of experiments, for example,is useful for manufacturing engineers, whilecreativity techniques are well suited to devel-opment groups.

Demonstration projects

are usually larger andmore complex than ongoing experiments.They involve holistic, systemwide changes, in-troduced at a single site, and are often under-taken with the goal of developing new organi-zational capabilities. Because these projectsrepresent a sharp break from the past, they areusually designed from scratch, using a “cleanslate” approach. General Foods’s Topeka plant,one of the first high-commitment work sys-tems in this country, was a pioneering demon-

stration project initiated to introduce the ideaof self-managing teams and high levels ofworker autonomy; a more recent example, de-signed to rethink small-car development, man-ufacturing, and sales, is GM’s Saturn Division.

Demonstration projects share a number ofdistinctive characteristics:

• They are usually the first projects to em-body principles and approaches that the orga-nization hopes to adopt later on a larger scale.For this reason, they are more transitional ef-forts than endpoints and involve considerable“learning by doing.” Mid-course corrections arecommon.

• They implicitly establish policy guidelinesand decision rules for later projects. Managersmust therefore be sensitive to the precedentsthey are setting and must send strong signals ifthey expect to establish new norms.

• They often encounter severe tests of com-mitment from employees who wish to seewhether the rules have, in fact, changed.

• They are normally developed by strongmulti-functional teams reporting directly to se-nior management. (For projects targeting em-ployee involvement or quality of work life,teams should be multilevel as well.)

• They tend to have only limited impact onthe rest of the organization if they are not ac-companied by explicit strategies for transfer-ring learning.

All of these characteristics appeared in ademonstration project launched by CopelandCorporation, a highly successful compressormanufacturer, in the mid-1970s. Matt Diggs,then the new CEO, wanted to transform thecompany’s approach to manufacturing. Previ-ously, Copeland had machined and assembledall products in a single facility. Costs were high,and quality was marginal. The problem, Diggsfelt, was too much complexity.

At the outset, Diggs assigned a small, multi-functional team the task of designing a “fo-cused factory” dedicated to a narrow, newlydeveloped product line. The team reporteddirectly to Diggs and took three years to com-plete its work. Initially, the project budgetwas $10 million to $12 million; that figure wasrepeatedly revised as the team found, throughexperience and with Diggs’s prodding, that itcould achieve dramatic improvements. Thefinal investment, a total of $30 million,yielded unanticipated breakthroughs in reli-ability testing, automatic tool adjustment,

Opportunity motivates

experimentation.

Corning, for example,

continually strives to

increase yields and

provide better grades of

glass.




and programmable control. All were achievedthrough learning by doing.

The team set additional precedents duringthe plant’s start-up and early operations. To dra-matize the importance of quality, for example,the quality manager was appointed second-in-command, a significant move upward. Thesame reporting relationship was used at allsubsequent plants. In addition, Diggs urgedthe plant manager to ramp up slowly to fullproduction and resist all efforts to proliferateproducts. These instructions were unusual atCopeland, where the marketing departmentnormally ruled. Both directives were quicklytested; management held firm, and the impli-cations were felt throughout the organization.Manufacturing’s stature improved, and thecompany as a whole recognized its competitivecontribution. One observer commented, “Mar-keting had always run the company, so theycouldn’t believe it. The change was visible at

the highest levels, and it went down hard.”Once the first focused factory was running

smoothly—it seized 25% of the market in twoyears and held its edge in reliability for over adecade—Copeland built four more factories inquick succession. Diggs assigned members ofthe initial project to each factory’s design teamto ensure that early learnings were not lost;these people later rotated into operating as-signments. Today focused factories remain thecornerstone of Copeland’s manufacturingstrategy and a continuing source of its cost andquality advantages.

Whether they are demonstration projectslike Copeland’s or ongoing programs like Al-legheny Ludlum’s, all forms of experimenta-tion seek the same end: moving from superfi-cial knowledge to deep understanding. At itssimplest, the distinction is between knowinghow things are done and knowing why they oc-cur. Knowing how is partial knowledge; it isrooted in norms of behavior, standards of prac-tice, and settings of equipment. Knowing whyis more fundamental: it captures underlyingcause-and-effect relationships and accommo-dates exceptions, adaptations, and unforeseenevents. The ability to control temperatures andpressures to align grains of silicon and form sil-icon steel is an example of knowing how; un-derstanding the chemical and physical processthat produces the alignment is knowing why.

Further distinctions are possible, as the in-sert “Stages of Knowledge” suggests. Operat-ing knowledge can be arrayed in a hierarchy,moving from limited understanding and theability to make few distinctions to more com-plete understanding in which all contingen-cies are anticipated and controlled. In this con-text, experimentation and problem solvingfoster learning by pushing organizations upthe hierarchy, from lower to higher stages ofknowledge.

3. Learning from past experience.

Compa-nies must review their successes and failures,assess them systematically, and record the les-sons in a form that employees find open andaccessible. One expert has called this processthe “Santayana Review,” citing the famous phi-losopher George Santayana, who coined thephrase “Those who cannot remember the pastare condemned to repeat it.” Unfortunately,too many managers today are indifferent,even hostile, to the past, and by failing to re-flect on it, they let valuable knowledge escape.

Stages of Knowledge

Scholars have suggested that production and operating knowledge can be classified systematically by level or stage of understanding. At the lowest levels of manufactur-ing knowledge, little is known other than the characteristics of a good product. Pro-duction remains an art, and there are few clearly articulated standards or rules. An example would be Stradivarius violins. Experts agree that they produce vastly supe-rior sound, but no one can specify precisely how they were manufactured because skilled artisans were responsible. By contrast, at the highest levels of manufacturing knowledge, all aspects of production are known and understood. All materials and processing variations are articulated and accounted for, with rules and procedures for every contingency. Here an example would be a “lights out,” fully automated fac-tory that operates for many hours without any human intervention.

In total, this framework specifies eight stages of knowledge. From lowest to high-est, they are:

1. Recognizing prototypes (what is a good product?).

2. Recognizing attributes within proto-types (ability to define some conditions under which process gives good output).

3. Discriminating among attributes (which attributes are important? Experts may differ about relevance of patterns; new operators are often trained through apprenticeships).

4. Measuring attributes (some key at-tributes are measured; measures may be qualitative and relative).

5. Locally controlling attributes (repeat-

able performance; process designed by expert, but technicians can perform it).

6. Recognizing and discriminating between contingencies (production pro-cess can be mechanized and monitored manually).

7. Controlling contingencies (process can be automated).

8. Understanding procedures and con-trolling contingencies (process is com-pletely understood).

Adapted from work by RamchandranJaikumar and Roger Bohn

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A study of more than 150 new products con-cluded that “the knowledge gained from fail-ures [is] often instrumental in achieving subse-quent successes... In the simplest terms, failureis the ultimate teacher.”

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IBM’s 360 computerseries, for example, one of the most popularand profitable ever built, was based on thetechnology of the failed Stretch computer thatpreceded it. In this case, as in many others,learning occurred by chance rather than bycareful planning. A few companies, however,have established processes that require theirmanagers to periodically think about the pastand learn from their mistakes.

Boeing did so immediately after its difficul-ties with the 737 and 747 plane programs. Bothplanes were introduced with much fanfare andalso with serious problems. To ensure that theproblems were not repeated, senior managerscommissioned a high-level employee group,called Project Homework, to compare the de-velopment processes of the 737 and 747 withthose of the 707 and 727, two of the company’smost profitable planes. The group was asked todevelop a set of “lessons learned” that could beused on future projects. After working forthree years, they produced hundreds of recom-mendations and an inch-thick booklet. Severalmembers of the team were then transferred tothe 757 and 767 start-ups, and guided by experi-ence, they produced the most successful, error-free launches in Boeing’s history.

Other companies have used a similar retro-spective approach. Like Boeing, Xerox studiedits product development process, examiningthree troubled products in an effort to under-stand why the company’s new business initia-tives failed so often. Arthur D. Little, the con-sulting company, focused on its past successes.Senior management invited ADL consultantsfrom around the world to a two-day “jambo-ree,” featuring booths and presentations docu-menting a wide range of the company’s mostsuccessful practices, publications, and tech-niques. British Petroleum went even furtherand established the post-project appraisal unitto review major investment projects, write upcase studies, and derive lessons for plannersthat were then incorporated into revisions ofthe company’s planning guidelines. A five-person unit reported to the board of directorsand reviewed six projects annually. The bulk ofthe time was spent in the field interviewingmanagers.

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This type of review is now con-

ducted regularly at the project level.At the heart of this approach, one expert has

observed, “is a mind-set that...enables compa-nies to recognize the value of productive fail-ure as contrasted with unproductive success. Aproductive failure is one that leads to insight,understanding, and thus an addition to thecommonly held wisdom of the organization.An unproductive success occurs when some-thing goes well, but nobody knows how orwhy.”

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IBM’s legendary founder, Thomas Wat-son, Sr., apparently understood the distinctionwell. Company lore has it that a young man-ager, after losing $10 million in a risky venture,was called into Watson’s office. The youngman, thoroughly intimidated, began by saying,“I guess you want my resignation.” Watson re-plied, “You can’t be serious. We just spent $10million educating you.”

Fortunately, the learning process need notbe so expensive. Case studies and post-projectreviews like those of Xerox and British Petro-leum can be performed with little cost otherthan managers’ time. Companies can also en-list the help of faculty and students at local col-leges or universities; they bring fresh perspec-tives and view internships and case studies asopportunities to gain experience and increasetheir own learning. A few companies have es-tablished computerized data banks to speedup the learning process. At Paul Revere Life In-surance, management requires all problem-solving teams to complete short registrationforms describing their proposed projects ifthey hope to qualify for the company’s awardprogram. The company then enters the formsinto its computer system and can immediatelyretrieve a listing of other groups of people whohave worked or are working on the topic,along with a contact person. Relevant experi-ence is then just a telephone call away.

4. Learning from others.

Of course, not alllearning comes from reflection and self-analysis.Sometimes the most powerful insights comefrom looking outside one’s immediate envi-ronment to gain a new perspective. Enlight-ened managers know that even companies incompletely different businesses can be fertilesources of ideas and catalysts for creativethinking. At these organizations, enthusiasticborrowing is replacing the “not invented here”syndrome. Milliken calls the process SIS, for“Steal Ideas Shamelessly”; the broader termfor it is benchmarking.

Successful programs

require an incentive

system that favors risk

taking.




According to one expert, “benchmarking isan ongoing investigation and learning experi-ence that ensures that best industry practicesare uncovered, analyzed, adopted, and imple-mented.”

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The greatest benefits come fromstudying

practices,

the way that work getsdone, rather than results, and from involvingline managers in the process. Almost any-thing can be benchmarked. Xerox, the con-cept’s creator, has applied it to billing, ware-housing, and automated manufacturing.Milliken has been even more creative: in aninspired moment, it benchmarked Xerox’s ap-proach to benchmarking.

Unfortunately, there is still considerable con-fusion about the requirements for successfulbenchmarking. Benchmarking is not “industrialtourism,” a series of ad hoc visits to companiesthat have received favorable publicity or wonquality awards. Rather, it is a disciplined pro-cess that begins with a thorough search to iden-tify best-practice organizations, continues withcareful study of one’s own practices and perfor-mance, progresses through systematic site visitsand interviews, and concludes with an analysisof results, development of recommendations,and implementation. While time-consuming,the process need not be terribly expensive.AT&T’s Benchmarking Group estimates that amoderate-sized project takes four to six monthsand incurs out-of-pocket costs of $20,000(when personnel costs are included, the figureis three to four times higher).

Benchmarking is one way of gaining an out-side perspective; another, equally fertile sourceof ideas is customers. Conversations with cus-tomers invariably stimulate learning; they are,after all, experts in what they do. Customerscan provide up-to-date product information,competitive comparisons, insights into chang-ing preferences, and immediate feedbackabout service and patterns of use. And compa-nies need these insights at all levels, from theexecutive suite to the shop floor. At Motorola,members of the Operating and Policy Commit-tee, including the CEO, meet personally andon a regular basis with customers. At Wor-thington Steel, all machine operators make pe-riodic, unescorted trips to customers’ factoriesto discuss their needs.

Sometimes customers can’t articulate theirneeds or remember even the most recent prob-lems they have had with a product or service.If that’s the case, managers must observe them

in action. Xerox employs a number of anthro-pologists at its Palo Alto Research Center toobserve users of new document products intheir offices. Digital Equipment has developedan interactive process called “contextual in-quiry” that is used by software engineers to ob-serve users of new technologies as they goabout their work. Milliken has created “first-delivery teams” that accompany the first ship-ment of all products; team members follow theproduct through the customer’s productionprocess to see how it is used and then developideas for further improvement.

Whatever the source of outside ideas, learn-ing will only occur in a receptive environment.Managers can’t be defensive and must be opento criticism or bad news. This is a difficult chal-lenge, but it is essential for success. Companiesthat approach customers assuming that “wemust be right, they have to be wrong” or visitother organizations certain that “they can’tteach us anything” seldom learn very much.Learning organizations, by contrast, cultivatethe art of open, attentive listening.

5. Transferring knowledge.

For learning tobe more than a local affair, knowledge mustspread quickly and efficiently throughout theorganization. Ideas carry maximum impactwhen they are shared broadly rather than heldin a few hands. A variety of mechanisms spurthis process, including written, oral, and visualreports, site visits and tours, personnel rota-tion programs, education and training pro-grams, and standardization programs. Eachhas distinctive strengths and weaknesses.

Reports and tours are by far the most popu-lar mediums. Reports serve many purposes:they summarize findings, provide checklists ofdos and don’ts, and describe important pro-cesses and events. They cover a multitude oftopics, from benchmarking studies to account-ing conventions to newly discovered marketingtechniques. Today written reports are oftensupplemented by videotapes, which offergreater immediacy and fidelity.

Tours are an equally popular means of trans-ferring knowledge, especially for large, multidi-visional organizations with multiple sites. Themost effective tours are tailored to differentaudiences and needs. To introduce its manag-ers to the distinctive manufacturing practicesof New United Motor Manufacturing Inc.(NUMMI), its joint venture with Toyota, Gen-eral Motors developed a series of specialized

Boeing used lessons

from earlier model

development to help

produce the 757

and 767—the most

successful, error-free

launches in its history.




tours. Some were geared to upper and middlemanagers, while others were aimed at lowerranks. Each tour described the policies, prac-tices, and systems that were most relevant tothat level of management.

Despite their popularity, reports and toursare relatively cumbersome ways of transfer-ring knowledge. The gritty details that lie be-hind complex management concepts are diffi-cult to communicate secondhand. Absorbingfacts by reading them or seeing them demon-strated is one thing; experiencing them per-sonally is quite another. As a leading cogni-tive scientist has observed, “It is very difficultto become knowledgeable in a passive way.Actively experiencing something is consider-ably more valuable than having it described.”

8

For this reason, personnel rotation programsare one of the most powerful methods oftransferring knowledge.

In many organizations, expertise is held lo-cally: in a particularly skilled computer tech-nician, perhaps, a savvy global brand man-ager, or a division head with a track record ofsuccessful joint ventures. Those in daily con-tact with these experts benefit enormouslyfrom their skills, but their field of influence isrelatively narrow. Transferring them to differ-ent parts of the organization helps share thewealth. Transfers may be from division to di-vision, department to department, or facilityto facility; they may involve senior, middle, orfirst-level managers. A supervisor experi-enced in just-in-time production, for example,might move to another factory to apply themethods there, or a successful division man-ager might transfer to a lagging division to in-vigorate it with already proven ideas. TheCEO of Time Life used the latter approachwhen he shifted the president of the com-pany’s music division, who had orchestratedseveral years of rapid growth and high profitsthrough innovative marketing, to the presi-dency of the book division, where profitswere flat because of continued reliance on tra-ditional marketing concepts.

Line to staff transfers are another option.These are most effective when they allow expe-rienced managers to distill what they havelearned and diffuse it across the company inthe form of new standards, policies, or trainingprograms. Consider how PPG used just such atransfer to advance its human resource prac-tices around the concept of high-commitment

work systems. In 1986, PPG constructed a newfloat-glass plant in Chehalis, Washington; itemployed a radically new technology as well asinnovations in human resource managementthat were developed by the plant manager andhis staff. All workers were organized into small,self-managing teams with responsibility forwork assignments, scheduling, problem solvingand improvement, and peer review. After sev-eral years running the factory, the plant man-ager was promoted to director of human re-sources for the entire glass group. Drawing onhis experiences at Chehalis, he developed atraining program geared toward first-levelsupervisors that taught the behaviors neededto manage employees in a participative, self-managing environment.

As the PPG example suggests, education andtraining programs are powerful tools for trans-ferring knowledge. But for maximum effective-ness, they must be linked explicitly to imple-mentation. All too often, trainers assume thatnew knowledge will be applied without takingconcrete steps to ensure that trainees actuallyfollow through. Seldom do trainers provide op-portunities for practice, and few programs con-sciously promote the application of theirteachings after employees have returned totheir jobs.

Xerox and GTE are exceptions. As noted ear-lier, when Xerox introduced problem-solvingtechniques to its employees in the 1980s, every-one, from the top to the bottom of the organi-zation, was taught in small departmental or di-visional groups led by their immediatesuperior. After an introduction to concepts andtechniques, each group applied what theylearned to a real-life work problem. In a similarspirit, GTE’s Quality: The Competitive Edgeprogram was offered to teams of business-unitpresidents and the managers reporting tothem. At the beginning of the 3-day course,each team received a request from a companyofficer to prepare a complete quality plan fortheir unit, based on the course concepts,within 60 days. Discussion periods of two tothree hours were set aside during the programso that teams could begin working on theirplans. After the teams submitted their reports,the company officers studied them, and thenthe teams implemented them. This GTE pro-gram produced dramatic improvements inquality, including a recent semifinalist spot inthe Baldrige Awards.

Enthusiastic borrowing

is replacing the “not

invented here” syndrome.




The GTE example suggests another impor-tant guideline: knowledge is more likely to betransferred effectively when the right incen-tives are in place. If employees know that theirplans will be evaluated and implemented—inother words, that their learning will be ap-plied—progress is far more likely. At most com-panies, the status quo is well entrenched; onlyif managers and employees see new ideas asbeing in their own best interest will they ac-cept them gracefully. AT&T has developed acreative approach that combines strong incen-tives with information sharing. Called theChairman’s Quality Award (CQA), it is an inter-nal quality competition modeled on the Bald-rige prize but with an important twist: awardsare given not only for absolute performance(using the same 1,000-point scoring system asBaldrige) but also for improvements in scoringfrom the previous year. Gold, silver, andbronze Improvement Awards are given tounits that have improved their scores 200, 150,and 100 points, respectively. These awards pro-vide the incentive for change. An accompany-ing Pockets of Excellence program simplifiesknowledge transfer. Every year, it identifiesevery unit within the company that has scoredat least 60% of the possible points in eachaward category and then publicizes the namesof these units using written reports and elec-tronic mail.

Measuring Learning

Managers have long known that “if you can’tmeasure it, you can’t manage it.” This maxim isas true of learning as it is of any other corpo-rate objective. Traditionally, the solution hasbeen “learning curves” and “manufacturingprogress functions.” Both concepts date backto the discovery, during the 1920s and 1930s,that the costs of airframe manufacturing fellpredictably with increases in cumulative vol-ume. These increases were viewed as proxiesfor greater manufacturing knowledge, andmost early studies examined their impact onthe costs of direct labor. Later studies ex-panded the focus, looking at total manufactur-ing costs and the impact of experience in otherindustries, including shipbuilding, oil refining,and consumer electronics. Typically, learningrates were in the 80% to 85% range (meaningthat with a doubling of cumulative produc-tion, costs fell to 80% to 85% of their previouslevel), although there was wide variation.

Firms like the Boston Consulting Groupraised these ideas to a higher level in the 1970s.Drawing on the logic of learning curves, theyargued that industries as a whole faced “experi-ence curves,” costs and prices that fell by pre-dictable amounts as industries grew and theirtotal production increased. With this observa-tion, consultants suggested, came an iron lawof competition. To enjoy the benefits of experi-ence, companies would have to rapidly in-crease their production ahead of competitorsto lower prices and gain market share.

Both learning and experience curves arestill widely used, especially in the aerospace,defense, and electronics industries. Boeing,for instance, has established learning curvesfor every work station in its assembly plant;they assist in monitoring productivity, deter-mining work flows and staffing levels, and set-ting prices and profit margins on new air-planes. Experience curves are common insemiconductors and consumer electronics,where they are used to forecast industry costsand prices.

For companies hoping to become learningorganizations, however, these measures are in-complete. They focus on only a single measureof output (cost or price) and ignore learningthat affects other competitive variables, likequality, delivery, or new product introductions.They suggest only one possible learning driver(total production volumes) and ignore boththe possibility of learning in mature industries,where output is flat, and the possibility thatlearning might be driven by other sources,such as new technology or the challenge posedby competing products. Perhaps most impor-tant, they tell us little about the sources oflearning or the levers of change.

Another measure has emerged in responseto these concerns. Called the “half-life” curve, itwas originally developed by Analog Devices, aleading semiconductor manufacturer, as a wayof comparing internal improvement rates. Ahalf-life curve measures the time it takes toachieve a 50% improvement in a specified per-formance measure. When represented graphi-cally, the performance measure (defect rates,on-time delivery, time to market) is plotted onthe vertical axis, using a logarithmic scale, andthe time scale (days, months, years) is plottedhorizontally. Steeper slopes then representfaster learning (see the insert “The Half-LifeCurve” for an illustration).

Customers can provide

competitive comparisons

and immediate feedback

about service. And

companies need these

insights at all levels, from

the executive suite to the

shop floor.




The logic is straightforward. Companies, di-visions, or departments that take less time toimprove must be learning faster than theirpeers. In the long run, their short learning cy-cles will translate into superior performance.The 50% target is a measure of convenience; itwas derived empirically from studies of suc-cessful improvement processes at a wide rangeof companies. Half-life curves are also flexible.Unlike learning and experience curves, theywork on any output measure, and they are notconfined to costs or prices. In addition, they areeasy to operationalize, they provide a simplemeasuring stick, and they allow for ready com-parison among groups.

Yet even half-life curves have an importantweakness: they focus solely on results. Sometypes of knowledge take years to digest, withfew visible changes in performance for long pe-riods. Creating a total quality culture, for in-stance, or developing new approaches to prod-uct development are difficult systemic changes.Because of their long gestation periods, half-lifecurves or any other measures focused solely onresults are unlikely to capture any short-runlearning that has occurred. A more comprehen-sive framework is needed to track progress.

Organizational learning can usually betraced through three overlapping stages. Thefirst step is cognitive. Members of the organi-zation are exposed to new ideas, expand theirknowledge, and begin to think differently. Thesecond step is behavioral. Employees begin tointernalize new insights and alter their behav-ior. And the third step is performance improve-ment, with changes in behavior leading tomeasurable improvements in results: superiorquality, better delivery, increased marketshare, or other tangible gains. Because cogni-tive and behavioral changes typically precedeimprovements in performance, a completelearning audit must include all three.

Surveys, questionnaires, and interviews areuseful for this purpose. At the cognitive level,they would focus on attitudes and depth of un-derstanding. Have employees truly understoodthe meaning of self-direction and teamwork,or are the terms still unclear? At PPG, a teamof human resource experts periodically auditsevery manufacturing plant, including exten-sive interviews with shop-floor employees, toensure that the concepts are well understood.Have new approaches to customer servicebeen fully accepted? At its 1989 Worldwide

The Half-Life Curve

Analog Devices has used half-life curves to comparethe performance of its divisions. Here monthly dataon customer service are graphed for seven divisions.Division C is the clear winner: even though it startedwith a high proportion of late deliveries, its rapid

learning rate led eventually to the best absolute per-formance. Divisions D, E, and G have been far lesssuccessful, with little or no improvement in on-timeservice over the period.

Source: Ray Stata, “Organizational Learning – The Key to Management Innovation,” Sloan Management Review, Spring 1989, p. 72.

Half-Life in Months (time required to reduce late shipments by one-half )

Perc

enta

ge o

f Lin

es L

ate

On-Time Customer Service Performance – Monthly Data (August 1987- July 1988)

Divisions

10

100

19 15 4 60+ 12 60+ 13

A B C D E F G Total

No improvement




Marketing Managers’ Meeting, Ford presentedparticipants with a series of hypothetical situa-tions in which customer complaints were inconflict with short-term dealer or companyprofit goals and asked how they would re-spond. Surveys like these are the first step to-ward identifying changed attitudes and newways of thinking.

To assess behavioral changes, surveys andquestionnaires must be supplemented by di-rect observation. Here the proof is in the do-ing, and there is no substitute for seeing em-ployees in action. Domino’s Pizza uses“mystery shoppers” to assess managers’ com-mitment to customer service at its individualstores; L.L. Bean places telephone orders withits own operators to assess service levels. Othercompanies invite outside consultants to visit,attend meetings, observe employees in action,and then report what they have learned. Inmany ways, this approach mirrors that of ex-aminers for the Baldrige Award, who makeseveral-day site visits to semifinalists to seewhether the companies’ deeds match thewords on their applications.

Finally, a comprehensive learning audit alsomeasures performance. Half-life curves orother performance measures are essential forensuring that cognitive and behavioralchanges have actually produced results. With-out them, companies would lack a rationalefor investing in learning and the assurance thatlearning was serving the organization’s ends.

First Steps

Learning organizations are not built over-night. Most successful examples are the prod-ucts of carefully cultivated attitudes, commit-ments, and management processes that haveaccrued slowly and steadily over time. Still,some changes can be made immediately. Anycompany that wishes to become a learning or-ganization can begin by taking a few simplesteps.

The first step is to foster an environmentthat is conducive to learning. There must betime for reflection and analysis, to think aboutstrategic plans, dissect customer needs, assesscurrent work systems, and invent new prod-ucts. Learning is difficult when employees areharried or rushed; it tends to be driven out bythe pressures of the moment. Only if top man-agement explicitly frees up employees’ timefor the purpose does learning occur with any

frequency. That time will be doubly productiveif employees possess the skills to use it wisely.Training in brainstorming, problem solving,evaluating experiments, and other core learn-ing skills is therefore essential.

Another powerful lever is to open up bound-aries and stimulate the exchange of ideas.Boundaries inhibit the flow of information;they keep individuals and groups isolated andreinforce preconceptions. Opening up bound-aries, with conferences, meetings, and projectteams, which either cross organizational levelsor link the company and its customers and sup-pliers, ensures a fresh flow of ideas and thechance to consider competing perspectives.General Electric CEO Jack Welch considers thisto be such a powerful stimulant of change thathe has made “boundarylessness” a cornerstoneof the company’s strategy for the 1990s.

Once managers have established a more sup-portive, open environment, they can createlearning forums. These are programs or eventsdesigned with explicit learning goals in mind,and they can take a variety of forms: strategicreviews, which examine the changing competi-tive environment and the company’s productportfolio, technology, and market positioning;systems audits, which review the health oflarge, cross-functional processes and deliverysystems; internal benchmarking reports, whichidentify and compare best-in-class activitieswithin the organization; study missions, whichare dispatched to leading organizations aroundthe world to better understand their perfor-mance and distinctive skills; and jamborees orsymposiums, which bring together customers,suppliers, outside experts, or internal groups toshare ideas and learn from one another. Eachof these activities fosters learning by requiringemployees to wrestle with new knowledge andconsider its implications. Each can also be tai-lored to business needs. A consumer goodscompany, for example, might sponsor a studymission to Europe to learn more about distri-bution methods within the newly unified Com-mon Market, while a high-technology com-pany might launch a systems audit to reviewits new product development process.

Together these efforts help to eliminatebarriers that impede learning and begin tomove learning higher on the organizationalagenda. They also suggest a subtle shift in fo-cus, away from continuous improvement andtoward a commitment to learning. Coupled

Learning organizations

cultivate the art of open,

attentive listening.

Managers must be open

to criticism.




with a better understanding of the “three Ms,”the meaning, management, and measurementof learning, this shift provides a solid founda-tion for building learning organizations.

References

1. Peter M. Senge,

The Fifth Discipline

(NewYork: Doubleday, 1990), p. 1.2. Ikujiro Nonaka, “The Knowledge-CreatingCompany,”

Harvard Business Review,

Novem-ber–December 1991, p. 97.3. Robert Howard, “The CEO as OrganizationalArchitect: An Interview with Xerox’s Paul Allaire,”


September–October1992, p. 106.4. Modesto A. Maidique and Billie Jo Zirger, “TheNew Product Learning Cycle,”

Research Policy,

Vol. 14, No. 6 (1985), pp. 299, 309.5. Frank R. Gulliver, “Post-Project AppraisalsPay,”


March–April

1987, p. 128.6. David Nadler, “Even Failures Can Be Produc-tive,”

New York Times,

April 23, 1989, Sec. 3, p. 3.7. Robert C. Camp,

Benchmarking: The Searchfor Industry Best Practices that Lead to Supe-rior Performance

(Milwaukee: ASQC QualityPress, 1989), p. 12.8. Roger Schank, with Peter Childers,

The Cre-ative Attitude

(New York: Macmillan, 1988), p. 9.9. Ramchandran Jaikumar and Roger Bohn, “TheDevelopment of Intelligent Systems for IndustrialUse: A Conceptual Framework,”

Research onTechnological Innovation, Management andPolicy,

Vol. 3 (1986), pp. 182–188.

Reprint 93402

To order, see the next pageor call 800-988-0886 or 617-783-7500or go to www.hbr.org

GTE proved knowledge is

more likely to be

transferred effectively

when the right incentives

are in place.



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page 15

Further Reading

A R T I C L E S

Is Yours a Learning Organization?

by David A. Garvin, Amy C. Edmondson, and Francesca Gino


March 2008Product no. R0803H

The authors expand on Garvin’s initial insights about how to build a learning organization. In this new selection, they describe the three building blocks required for creating learning organizations: 1) a supportive environment (where employees feel safe taking risks and exploring the unknown), 2) formal learning processes for activities such as gathering, in-terpreting, and disseminating information, and 3) leadership that reinforces learning by modeling behaviors such as asking questions and listening. The authors then provide a di-agnostic tool, the

Learning Organization Sur-vey

, that enables you to determine how well your team, department, or entire company is performing with each building block. By as-sessing performance on each building block, you pinpoint areas needing improvement, moving your company that much closer to the learning organization ideal.

Teaching Smart People How to Learn

by Chris Argyris


February 2000Product no. 4304

To build a learning organization, you need people who can learn. But sometimes your best and brightest are the hardest to teach. Why? They haven’t had the opportunities for introspection that failure affords, and they dread feeling incompetent or vulnerable. When they do fail, they become defensive rather than open to learning from mistakes. To help talented employees develop more learning-oriented responses, demonstrate your willingness to examine and change unproductive assumptions, such as “I must never make mistakes.” And teach employees

to apply the same kind of “tough reasoning” to their own assumptions that they apply to on-the-job problems—such as using objective data and asking others to verify their conclusions.

B O O K

Learning in Action: A Guide to Putting the Learning Organization to Work

David A. Garvin

Harvard Business Press

2003Product no. 1903

In this book, Garvin offers a complete over-view of learning organization concepts. He in-troduces three modes of learning—intelli-gence gathering, experience, and experimentation—and shows how each mode is most effectively deployed. These ap-proaches are brought to life in richly detailed case studies of learning in action at organiza-tions such as Xerox, L.L. Bean, the U.S. Army, and GE. The book concludes with a discussion of the leadership role that senior executives must play to make learning a day-to-day real-ity in their organizations.


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http://harvardbusinessonline.hbsp.harvard.edu/relay.jhtml?name=itemdetail&referral=4320&id=R0803H



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