Key Concept

It is a universal challenge for large organizations: the larger and more segmented the company, the harder it is to match its people to its problem. This Idea looks at how internal ‘knowledge markets’ can facilitate information sharing within large organizations; helping employees locate expertise and matching knowledge seekers with knowledge sources.

Idea Summary

Truly democratizing knowledge requires an open organization where employees can deliberate, argue, compete and collaborate horizontally across fields of expertise. One possible solution to this end is the internal knowledge market. An internal knowledge market is a protected environment where users trade their knowledge via price mechanisms. Though such markets have existed in different forms for years, their use to facilitate knowledge transfer inside organizations is relatively new.

The internal knowledge market can be a forum within an organization that matches knowledge seekers with knowledge sources (for example, branch offices and headquarters, or novices and experts). They aren’t for everyone, especially organizations with insufficient scale. As a business grows, however, working knowledge gets distributed across branch offices and divisions, and the flow of information stagnates. These markets can open the flow of knowledge back up.

The research cited here took place in four phases, interviewing more than 30 companies and studying five in-depth (IBM, Cisco Systems, HP, Protiviti and Siemens). Also under review were the sources of internal knowledge market failures, in order to propose design strategies for resolving them, develop benchmarks, and build an internal knowledge market prototype.

By learning from what has worked well (and what has not) in existing internal knowledge markets, managers can develop an effective knowledge market design to suit their own organization.

Business Application

To design and maintain an effective internal knowledge market, take the following three-fold framework:

• Internal knowledge market design and launch: Best practices include: Use material and social incentives, but let prices float. If a company tries to set prices in an internal knowledge market, the price chosen may be either too high or too low. Markets let prices float and produce accurate value assessments. Also companies designing internal knowledge markets can seed the platform with valuable expert information (i.e. autonomous, distributed contributors) addressing leading business questions. Also consider offering points for improving information quality; to overcome shyness, provide protected spaces; to reduce hoarding, balance competition with collaboration; and, protect strategic information.
• Market development: when setting up internal knowledge markets, executive leadership should function less like a central planner and more like a Federal Reserve. This means setting policy for growth areas of the company’s internal knowledge economy and ensuring maximal use of company resources. It also means encouraging local initiative and relying less on top-down direction. In addition, organizations can design the internal knowledge market to foster pro-social behaviour. Design features can explicitly encourage norms such as helping, sharing and cooperation. Finally, failures can occur when participants manipulate markets to their own ends.
• Evolution: consider the proper balance between competition and collaboration. Furthermore, internal knowledge markets have the potential to provide executives and academic researchers with two instruments to help solve the problem of measuring knowledge value. First, prices in the knowledge market give managers a sense of the relative value of certain types of information to employees. Second, an internal knowledge market provides instruments to observe the effects of having access to new information. Data gleaned from knowledge market transactions should provide new ways to put a price on knowledge.

Well-designed internal knowledge markets can provide a powerful set of tools to help large companies address the problems they face in accessing the wealth of dispersed information and talent. However, introducing an internal market opens a company to new forms of governance and creates completely new roles for those who would manage expertise. Executives must not only change their tools and how their people interact, but also change themselves. The true test of internal market adoption will be whether companies begin to use them for critical issues, not just fringe areas.