Companies lose critical knowledge all the time. And, in many cases, it is knowledge they never really realised they had. Experienced workers get promoted into new positions, move on to new companies or retire. They may pass on the technical expertise required to perform their functions, but rarely do they have the opportunity to impart the full meaning of their experience – that greater wherewithal they have culled from years on a job.

"Pose problems in the form of scenarios or cases for the experts and the relatively less experienced individuals to independently tackle, then compare the two responses and see where the differences – the gaps – lie"

Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom, by Dorothy Leonard and Walter Swap

Sometimes the ramifications of this lost expertise can be subtle – a slight loss in quality, the reason for which no one can quite understand. Other times, the consequences can be much more profound.
Consider what came to pass when Ken Sracaro, a manager in an oil refinery, got promoted. One of his core responsibilities had been overseeing the maintenance of 12 to 15 different units. As part of the transition, he was able to teach his replacement all the steps required to shut down a unit for periodic repairs and modification. But there was not enough time to impart the judgment and skill required to make expert decisions about how long to keep a unit offline.

For several years after Sracaro was promoted, the shutdown manager’s position was a revolving door, with no one staying long enough to acquire the experience necessary to do the job well. During this time, the senior management team kept getting incorrect estimates for how long a unit would be down. It could not forecast production volume accurately and delivery to customers was thrown into disarray.

This problem, which had serious bottom-line repercussions, stemmed directly from the refinery’s failure to cultivate, acquire, and transfer a deeper organisational expertise in how to manage shutdowns – or what authors Dorothy Leonard and Walter Swap call “deep smarts”.

Develop deep smarts

To possess deep smarts is to have the ability to step back and take a whole view of a situation while also being able to pinpoint on a specific problem that others have not been able to detect.

Deep smarts constitute “knowledge that provides a distinct advantage, both for organisations and for managers,” Leonard and Swap write in their recent book, Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom.

Few companies manage this asset well, which is why the impending retirement of so many baby boomers strikes fear into the hearts of HR directors. But even if the coming retirement wave of baby boomers were not about to crest, the situation would still be urgent. For 21st-century business, the development of deep smarts throughout an organisation is critical to sustaining competitive advantage. For these efforts to succeed, companies must not only improve their ability to transfer deep smarts within the organisation, but bring it in from the outside as well.

The problem is, much of deep smarts is tacit knowledge that cannot be wrapped up into a neat package or easily duplicated.But Leonard and Swap insist tacit knowledge can be replicated and recreated. To do that, any company involved in knowledge work must put greater emphasis on learning opportunities that promote the acquisition of real-world experience under the watchful eye of a knowledgeable guide.

Raw brainpower, emotional intelligence and intuition are often part of the mix, but the essence of deep smarts is a knack for combining big-picture thinking with technical or managerial knowledge. This ability, which usually takes seven to 10 years to acquire, say Leonard and Swap, sets experts apart from those who are simply competent.

Unfortunately, most companies’ efforts to help employees develop and pass on deep smarts fall short. In many situations, companies take a sink-or-swim approach. When the learner is a quick study with good adaptive skills and few preconceived notions about how the job should be done, such a strategy can work. But it’s usually both time-consuming and ineffective.

To recreate the most valuable part of deep smarts – the tacit know-how and ‘know-who’ that a person accumulates over years of experience – active participation of workers in the learning process is required. Moreover, knowledge that has many tacit dimensions cannot simply be transplanted into the learner’s brain.

Drive learning

Leonard and Swap say it has to be relearned or even recreated by the person being trained and absorbed into their experience base, rather than merely received in a package.

The mode of transfer the authors call ‘guided experience’ represents the most effective option for recreating the knowledge that companies need to create sustainable competitive advantage.

There are several types of guided experience:

Guided practice. This is familiar to anyone who has had expert instruction in a sport or musical instrument. The novice’s performance is observed by the coach, who provides feedback.

Guided observation. This type of guided experience can take two forms. In direct observation, the novice watches the expert perform a task – say, closing a sale – then tries to do it himself, with the expert offering advice afterwards.

Mind stretching is an example of the second form of guided observation. Its goal is to expand one’s frame of reference. Brad Anderson, CEO of US electronics retailer, Best Buy, had this in mind when he brought in coaches from Chicago-based consulting firm Strategos to help impart the company’s approach to innovation to 35 Best Buy managers.

The managers were divided into teams and sent into the field so their assumptions about how to use technology to attract Best Buy’s typical customers (males with a penchant for electronics) would be challenged. One team member visited the doll company store American Girl Place, as well as Mexico City, Seoul and then the Amish countryside in Indiana, to stimulate new thinking about communal behaviour focused on a product or technological platform.

This guided observation led to the creation of a prototype called PCBang, an entertainment concept aimed at teenagers and twenty-somethings – a younger demographic group than Best Buy’s typical customers. The idea involved creating video game centres where customers could play the latest network-based video games for a fee, and also socialise and buy refreshments.

"Much of deep smarts is tacit knowledge that can’t be wrapped up in a neat package or easily duplicated

Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom, by Dorothy Leonard and Walter Swap.

Guided problem solving. In guided problem solving, the expert and novice tackle actual problems facing the company, with the expert sharing perspectives and thought processes along the way.

Guided experimentation. Strategos’ collaboration with home appliance manufacturer, Whirlpool, serves as an example. Strategos helped Whirlpool set up customised appliance kiosks in retail stores in Philadelphia and Dallas. The unexpected finding: customers built in US$70 more in added features per refrigerator when given the option of configuring their own.

Useful as it was, this customer information by no means constituted the most valuable part of the collaboration. “The real lesson here had to do with the process of experimentation itself,” says Swap. “Whirlpool learned how to conduct experiments with real customers in real markets that didn’t have to cost an arm and a leg. It took what it had learned about how to experiment and applied it to another division.”

How do you decide whether exploiting the tacit knowledge of the experts in your company is worth the investment? And how do you begin recreating deep smarts throughout the organisation?

Calibrate the knowledge gap. Precisely what is the difference between competence and expertise in your company? Is the competence that exists enough? Alternatively, is the expertise outdated? What do the junior managers not know that the senior leaders do?

Getting started

Getting a handle on such questions typically requires more than having the senior experts lecture on technical topics or recount “critical incidents” from their careers.

“In order to uncover the deep smarts of the expert and determine the important differences from those of the less experienced, one has to provide context for the calibration of the gap,” write Leonard and Swap.

“Pose problems in the form of scenarios or cases for the experts and the relatively less experienced individuals to independently tackle, then compare the two responses and see where the differences – the gaps – lie.”

For example, how does the experts’ analytical approach differ from the less experienced individuals’? What distinguishes the experts’ use of resources and exploitation of professional networks?

Create dual-purpose projects. If you are concerned about the resources required to cultivate deep smarts, establish twin objectives for most of your projects: achieve the desired outcome and learn at the same time. Leonard and Swap claim the additional attention and resources required are minimal. Also, establish dual objectives for your experienced managers: perform your job well and guide the experience of others.

John Michailidis, business director of the anaemia franchise at Hoffmann-La Roche, has given the six experts in his group who are essential to the drug-development process, the task of providing guided experience to a group of backups.

Creating this overlap of knowledge both prevents work from coming to a standstill if an expert leaves; and it frees up experts from work requiring technical competence, but not deep smarts.

Help managers become knowledge coaches. “Speed is anathema to the transfer of deep smarts,” write Leonard and Swap, because tacit knowledge must be grown organically and through experience.

Even so, the involvement of a knowledge coach can make this process of creating tacit knowledge more effective and efficient. Leonard and Swap make a distinction between the role of a knowledge coach and that of both a mentor, who focuses on “personal counselling and socialisation in a profession or organisation”, and a process facilitator, who focuses exclusively on the means by which knowledge is transferred.While virtually all managers can become proficient knowledge coaches, “knowing how to perform well in a given environment is the only necessary first qualification for a coach”, write Leonard and Swap.

Many experts need coaching themselves in how to transfer knowledge. For example, most managers are socialised to “correct” problems, not to reinforce what is already working, according to the authors.

Leonard says a coach who never lets his charge know that his performance is appreciated, or who fails to provide feedback about what is being done well, can damage their morale and motivation irreparably. But flip that around, and you can work wonders.