LEARNING INTERNATIONAL SERVICING- Simultaneously creating knowledge and value

List of contents

INTRODUCTION 2Central Drivers for Norwegian Businesses and Industries: Knowledge Intensity and Internationalization 2

[A] EVOLVING INTERNATIONAL STRATEGIES AND STRUCTURES 7A1 Offshoring – a Double-Edged Sword 7A2 Changes of Subsidiary Roles and Responsibilities – When Does It Matter? 8A3 Developing Global Leadership Teams is a Demanding Process 10

[B] CREATING VALUE FOR GEOGRAPHICALLY DISPERSED CLIENTS 13B1 Selling the Incredible Promise 13B2 Value is Created Through Parallel Practices 14B3 Efficient Work is not Enough 16B4 The Project as the Locus of Multiple Contributions 18B5 Projects Come to an End, Knowledge Remains 20

[C] BUILDING AND MAINTAINING A DISPERSED KNOWLEDGE BASE 23C1 The Importance of “Learning by Doing” 23C2 The Catalyst of Collective Knowledge 24C3 Global Services, but Where is the Knowledge? 27C4 Sharing of Best Practices Requires Leadership 28

REFERENCES FOR FURTHER READING 30ABOUT THE AUTHORS 32TERRELLA CONSORTIUM PARTNERS AND CONTACT INFORMATION 34GLOSSARY 35ABOUT THE TERRELLA PROJECT 36

Editors: Ragnhild Kvålshaugen and Jon Erland Lervik, BI Norwegian School of Management

Globalization and increasing knowledgeintensity are two important topics thataffect society in general and business andindustry in particular. The aim of theTerrella Research Project is to contribute toincreased insight into the way in whichthese two themes create new challenges forNorwegian service-sector enterprises withinternational ambitions.

In the 1970’s the theory of the newultramodern, post-industrial society att-racted strong attention. The consequencesof the transition from industry to serviceswere described as a general increase incompetence. According to Daniel Bell, oneof the best know post-industrialists, theresult of this would be that services wouldreplace industry in the most developedcountries, whereas industrial productionwould be left to more peripheral areas.

Contrary to such a linear view, the currentview is that the provision of servicesincludes diverse activities with greatvariation in competence requirements. Aconsiderable part the operations of theenterprises that are included in the TerrellaProject is conceived as international profes-sional service provisions (IPSFs). This grouprepresents the most knowledge-intensivepart of the service sector, and this is alsowhere we find the strongest growth over the

past decades. According to new projectionsprovided by American labour-marketstatistics the strongest increase in thenumber of employees in the USA during theperiod 2008 – 2018 is expected in the groupProfessional and Business Services, whichincludes IPSFs (http://www.bls.gov/opub/mlr/2009/11/art1full.pdf). A similardevelopment is expected in the EU.

IPSFs are regarded as particularly importantfor the dissemination, maintenance andrenewal of the competence in all businessactivity. Thus, the many similarities andclose connections between knowledge-intensive industries and the provision ofservices has become the centre of attention.Terrella’s most important ambition is tothrow light on such links with a specialfocus on how the organization of know -ledge affects the ability of innovation,cooperation and efficiency.

At enterprise level it is possible to drawsome development lines for how knowledgeintensity and internationalization affectleadership and organization:• The focus on services and the ability to

utilize and develop knowledge will becrucial to a company’s competitive power.

• International companies are moving froma structure with limited national sub-sidiaries with individual responsibility for

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INTRODUCTION

Central Drivers for Norwegian Businesses andIndustries: Knowledge Intensity andInternationalizationHelge Klitzing, Ragnhild Kvålshaugen and Sissel Myklebust

1 Described as ”the moment of truth” in Richard Normann’s book ”Service Management” from 1984, Wiley.

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results towards network structures with alarge degree of division of work in orderto, among other things, utilize cost,knowledge and market advantages.

• The search for possibilities of reuse toincrease efficiency results in the standardi -zation of work processes – a type ofindustrialization.

• The search for differentiation and localcompetitive power leads to the“serviceification” of production activities.

• The dividing lines between services andproduction become less pronounced.

This development poses new challenges formanagement, organization, human resourcedevelopment, work practices, customerservice and the use of technology. It is achallenging task to establish interactionwithin networks due to large physical dis-tances, time differences and culturaldifferences. Besides, the demands forstandardization/industrialization on the onehand, and learning, innovation and localadaptation on the other, may create conflict.A key area is cooperation and knowledgesharing with an increased need for tech-nology that support standard work processesand at the same time further interaction.

In addition to this the research that has beencarried out as part of the Terrella Project hasshown that IPSFs are complex and versatileenterprises. An important source of thiscomplexity is constituted by the services(services portfolio) these enterprises provide.One of the goals of the Terrella Project hasbeen to create a service typology for IPSFs tounderstand the connections between valuecreation and the development of these enter-prises. For IPSFs an understanding of thedistinctive characteristics of different servicedeliveries is of great importance becauseexperiences and knowledge developed inconnection with the service deliveries con -stitute important sources of innovation and

efficiency improvement (development andlearning), and also because different types of services entail different requirementsregarding organization and knowledgemanagement strategies (value creation).

Service TypologiesIn the literature on services there are twodimensions in particular that explain thevariation in service provision practices andservice concepts. The first dimension is thedegree of standardization of the serviceconcept, and the second is the degree of customer participation in the servicedelivery, i.e. to what degree the customer isinvolved in the service delivery process.Based on these two dimensions we havedeveloped a service typology for IPSFs. The degree of standardization in the serviceconcept describes to what extent services areput together, codified and to what extentthey can be provided in the same form,independent of persons and geographicallocation. Tailoring, on the other hand,implies that services are directly adapted to the customer’s needs, i.e. each servicedelivery is perceived as unique. Amongother things, the standardization of servicescontributes to making the operation moreefficient and to simplifying the qualityassurance of service deliveries, as well as the documentation of the service deliveryprocess. The global integration of servicesrequires that service concepts and servicedelivery processes be standardized becausecustomers expect the same type of servicedelivery independent of geographicallocation. Degree of customer participation is related to the degree of customer involve -ment in the service delivery process. In somecases the service is created together with thecustomer, and thus, the production andconsumption of the service go hand-in-hand(the moment of truth), whereas in otherservice delivery processes the customer isnot involved at all. 1

Based on the degree of customerparticipation in the service delivery processand the degree of standardization of theservice concept, we have developed atypology that describes four generic types ofprofessional services.

Expert-based professional services arecharacterized by a high degree of tailoring,are based on personified sharing ofknowledge and are provided in close contactwith the customer. Expert-based services areoften about understanding and finding asolution to a problem (which is not knownin advance). As a rule expert knowledgefrom a number of sources is involved in theservice delivery process without theadherence to a pre-defined process.Examples of such services in the TerrellaProject include counselling (pre-compliance),

commissioned research and overall riskmanagement.

In customer-focused professional services ahigh degree of customer participation andstandardization is involved. In the provisionof these types of services special emphasis isplaced on customer competence. This meansthat the customer values the service provider’sknowledge of the customer’s organizationand needs more highly than the provider’spotentially leading position in the relevantservice area. Examples of customer-focusedprofessional services in the Terrella Projectinclude risk-based decision support, ope-rational risk, inspection of buildings andtesting-by-manufacturer.

Specialized professional services arecharacterized by tailoring but only involve

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Figure 1: Service Typology in International Professional Service Firms (IPSFs)

Expert-based services: High customer participation,high degree of tailoringe.g. commissioned research,Counselling, technology developmentServices, concept development

Customer-focused services: High customer participation,high degree of standardizatione.g. operational safety, testing-by-manufacturer, risk-based decisionsupport, building inspection

Specialized services: Low customer particiaption,high degree of tailoringe.g. legal advice, technical analysis and simulation, technologyqualifications, calibration services

Standardized services: Low customer participation,high degree of standardizatione.g. testing electronic equipment,certification services, risk-basedverifications, offshore classification

Degree ofstandardi zationof the service concept

Degree of customer participation in the service delivery process

High

High

Low

Low

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the customer to a small degree in thedelivery of the service. This means that theservices that are provided are both uniqueand complex, but that the customer doesnot participate in the delivery of theservice(s) because the customer does notpossess the relevant competence or simplydoes not have the time (out-contracting).Examples of such services in the TerrellaProject include legal advice, technical ana-lysis and simulation, as well as technologyqualification, and calibration services.

Standardized professional services arecharacterized by codified and standardizedservice concepts and a low degree of customer participation in the servicedelivery process. These are service conceptsfocused on the product where the content,methods and service delivery process havebeen predefined. The need for coordination,however, may be substantial since there is alarge degree of interdependence between thevarious elements of the service deliveryprocess. Examples of such professionalservices in the Terrella project include ITsupport, testing, certification andverification services, as well as offshore classification.

Understanding the service portfolio andhow to organize and further develop theenterprise are closely related. An under-standing of the service portfolio also helpsIPSFs to understand what services aresuitable for global integration and whichservices have to be adapted to the localmarket. We have also observed that aservice that at a certain time appears as anexpert-based service may develop into aspecialized service or a standardized serviceover time. Moreover, we have seen that customer relations are of great importancein IPSFs as well, which means that the pos-sibility of offering a set of different servicesincreases the potential for value creation of

IPSFs (added value for the customer).Consequently, it is important for IPSFs tohave a mix of different services in their port -folio, although this creates organizationaland leadership challenges. In the TerrellaProject we have got down to tackling thesechallenges with a focus on the change ofwork processes and how to implement suchchanges through leadership, organizationand the use of technology. In this publication12 insights from this work are printed. Eachof them is unique and can be read indepen -dently of the others. We believe that all tenof them may provide a useful basis forindividuals who, from different points ofview, want to develop profitableinternational operations.

Structure of the reportThe report is structured around three keythemes: Strategy, value creation andknowledge creation. In Part [A], EvolvingInternational Strategies and structures newways of organizing international servicedelivery through off-shoring, subsidiary role changes and global management teams are discussed. In Part [B] and [C] thesimultaneous processes of value creationand knowledge creation are discussed. Thedelivery of knowledge-intensive servicesmeans value creation for clients and at the same time is a central vehicle forcompetence development, knowledgecreation and innovation2 . Part [B] CreatingValue for Geographically Dispersed Clientsdiscusses the nature of knowledge-intensiveservices, the challenge of selling intangibleservices, and the role of knowledge andinnovation in the service delivery process.Part [C] Building and Maintaining a Dispersed Knowledge Base highlights theimportance of learning through daily work, how knowledge can become anorganizational asset, and the factorsfacilitating effective knowledge exchange.

2 Løwendahl, B. R. 1997. Strategic Management of Professional Service Firms. Copenhagen: Copenhagen Business School Press.

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To save costs many companies moveactivities to locations abroad. Our researchshows that this may be a very smart choicealso for service companies, but not insituations with high reciprocal interdepen -d enc ies between activities. When productionof the service does not follow a plannedsequence, the value of the service is higherwhen activities are located together. Thismeans that companies must co-locateinterdependent activities, either at home orabroad.

Moving business activities to a foreignlocation where costs are low is attractive.This can be obtained by offshoring activitiesfrom home to a foreign location, or out-sourcing activities previously done in-houseto external low cost providers, or a combi -nation of these. Back-office activities may be performed in Lithuania, production inGermany and R&D activities in India. Thequestion is – is this always smart? When is it not so smart?

When the workflow follows a sequentialprocess, outsourcing may be a very sensiblealternative. An outsourcing option involvesstandardization of activities and theirinterface, and if each activity can be isolatedinto modules, this may be a cost efficient

solution both because it opens up for largerand more concentrated production units aswell as offers the possibility of seeking outthe most cost efficient location. If testingcan be isolated from customer contact andstandardized, it is possible to sell the servicein many countries, send the product to betested to one centralized location, anddeliver the test report back to the customer.Ideally, this can open up for large testingfacilities with economies of scale as well asimproved capacity utilization. Many smalltesting units at all locations will obviouslynot give the same benefits.

However, when activity chains are separatedby geographical distance it is difficult andinefficient to change the sequence of anactivity flow or modify what has alreadybeen defined by another activity located atanother place on the globe. If the specifi -cations given by the customer-marketingunit are insufficient or wrong, and servicespecifications need to be changed, it can besent back to the customer unit. Distancemakes this communication inconvenient anddifficult. With unique products the customeralso often needs or wants to be present inthe testing facility to handle or oversee theproduct, and distance complicates thisprocedure. Further, when the product istechnically advanced, engineers from the

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[A] EVOLVING INTERNATIONAL STRATEGIES ANDSTRUCTURES

A1 Offshoring – a Double-Edged Sword

Randi Lunnan

testing facility may join the sales team tohelp specify the order. These examples showthat the interface between the marketingand testing units can be fuzzy, non-linearand even circular. In these situations spatialproximity between these two activities is abenefit, otherwise communication and infor-mation processes are impeded. The companymust therefore balance its need betweeninteraction (benefitted by close location) andcost (benefitted by large, central units).

Our research shows that under certaincircumstances companies are advised toexercise caution against outsourcingactivities even if a simple cost analysis mayprove positive. If the workflow is complex,an offshoring alternative may not be a goodidea. This may be the case if the customerneeds are not standardized, which requiresjoint input and insight from severalactivities. This means that if the delivery ofa service fails, it should be re-specified orperhaps changed, and this process may

necessitate efforts from joint activities likesales, customer service and development. If these activities are co-located it will beeasier and faster to devise a new workflowsecuring customer value. But if one of theseactivities, for instance customer service, isoutsourced, the change process will beslower due to the increased difficulties ofcommunication resulting from a spread of locations and lack of local knowledge.Therefore, we propose that the first step inany offshoring strategy is to consider thelinkages between activities. If these arereciprocal, outsourcing and offshoring ofactivities may be less attractive alternatives.

Core learning points: • Analyze your value creation process• Co-localize activities with high

interdependencies• Activities that are sequential may be

relocated based on cost-basedconsiderations

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A2 Changes of Subsidiary Roles and Responsibilities – When Does It Matter?

Sverre Tomassen

The dynamics of markets, technologies andknowledge require organizational changesincluding reconfiguration of subsidiary rolesand responsibilities. Do the involved partsof the organization judge the role changes asfair? In global service organizations, thisquestion seems to be imperative sinceperceived fairness appears to have a constituent function if major role shiftsshould turn out to be a success.

In many cases, subsidiaries are assigned orcreate roles as knowledge hubs and premiseproviders in MNCs due to their uniquemarketing position, their knowledge stock,or strategic position within the MNC.However, over time the roles of the sub-sidiaries may shift due to changes in theenvironment, modifications in the head -quarters strategies, or changes in subsidiaryinitiatives. These transformations are oftenconfronted with major obstacles, as formercentral hubs may be reluctant to cede

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influence, which may result in power gameswith time-consuming bargaining amongplayers within the MNC. Hence, knowledgemanagement, role dynamics, conflicts – andthereby micro politics are topics that areimportant to understand better for firms tohandle the increasing number of activitiesacross national borders. Role changes createeffects on knowledge sharing via twodifferent mechanisms. One mechanism ishow motivation is driven by perceivedfairness. Hence, if the subsidiaries perceivethe role change to be fair, they will seek andgive more knowledge, but if it is theopposite, they will restrict it.

The other mechanism concerns the trans-mission channels for knowledge sharing.Based on studies within participatingcompanies, we observe that role changeswith increased interdependencies betweenthe units create a need for more inter -personal meeting places; hence more arenasto meet and exchange knowledge seem to beimportant. On the other hand, role changestoward more autonomy reduceddependencies between subsidiaries andtherefore also the need for expensive andtime-consuming global meetings. Knowledgeseeking is more focused towards immediategains and therefore more exploitative. Inaddition, the knowledge-seeking activitiesare more directed towards local, externalpartners and customers.

These two aspects concern motivation(perceived fairness) and opportunities(networks) and we argue that both these arealtering as a result of role changes.

The ideal situation would be to stimulate arole change in a manner that increases bothnetworks and motivation. For example,during important role shifts, many peopleexpress uncertainties – they do not feel thatthe strategy is well communicated, and are

often not confident about the possiblesuccess of the corresponding organizationmodel. This can be mitigated by clearerinformation and communication. In one of the companies, top management spentconsiderable effort travelling around andexplaining the model, but it was difficult to convince subsidiaries that the neworganization was acceptable and would liftthe company performance to another level.This shows that perhaps it is possible toexert more efforts into communication ofthis strategy, but it is difficult and the effectof information is probably moderated bythe perceived fairness of the organizationalchanges.

Reduced strength of network ties can becompensated for by teams, taskforces andcommittees, as well as by extensive mee-tings, training programmes and visits. Basedon our research companies that to someextent facilitate these activities, seem tobecome relatively successful in executingimportant global strategies in the company.However, we also observe that in a moredispersed organization the subsidiaries willbe more focused on their local challengesand how to increase financial results forthemselves, and that to a lesser extent theywill be concerned with other generalcorporate issues. Therefore, building aglobal organization with strong footholds in the local environment through its sub-sidiaries is challenging, and success cannotbe taken for granted – it takes considerabletime and effort by the corporation to agg-lomerate such an organization. Tosummarize: • Focus on communication and fairness for

the “losers” to ensure understanding andavoid sabotage, and

• focus on building networks to strengthencapability for the “winners”

A long meeting sequence with hightemperature, diverging opinions, some facesshowing concern, some resignation, someabsentmindedness and some showing angeris coming to an end. The matter that wasdiscussed in the meeting was the plan andresponsibility for the development of a newglobal service. The responsible leader hasjust concluded the sequence by stating howthis is to be done. Six months later the sameleadership team meets again and ack-nowledges that practically nothing hashappened.

Only well-functioning leadership teams areable to make good strategic decisions andcarry them out in an efficient way ininternational operations. Building suchteams, however, is both challenging andresource-draining. And, frequently, too low priority is given to such tasks.

A leadership team is a group of leaders whoboth have and assume a joint responsibilityfor the leadership function in the wholeorganization, whereas leaders with limitedareas of responsibility only assumeleadership responsibility for their unit.Global leadership teams focus on what isgood for the organization as a whole andnot only for their own unit. For the teamthe highest priority is given to leadershipresponsibilities at the strategic level. Tomake this possible with the necessaryamount of quality, however, requires thatthe leaders to a certain degree involve them-selves in the daily work of one another.Besides, the team has an important role insignalling the importance of knowledgesharing and cooperation across units to

the rest of the organization.

Most international enterprises will try tocreate teams of leaders that are spreadacross the network, be it top leadershipteams or leadership teams within marketing,products or professional areas. Themembers of the team must have a commonunderstanding and acceptance of the visionof the enterprise, its strategy and theattitudes it represents, as well as its moreshort-term goals. It is also important thatsuch teams are regarded as global within the enterprise and that in general they arerepresentative of the enterprise. Besides, toensure quality and efficiency in the team it isalso necessary that the members know eachother well and that they have confidence ineach other and thus communicate easilyeven though, on the whole, the physical distances between them are large.

Creating such teams poses great challengesand requires dedicated efforts over arelatively long period of time. Even so, it isa typical feature that the persons who areresponsible for an area automaticallybecome members of the team. The personsare perhaps not even asked whether they areprepared to assume the joint responsibilityof being members of such a team. And thereis no check as to whether they have reallyunderstood and accepted what it implies.Then it should come as no surprise that theresult of this is a long period of internaldamage and low decision-making quality.This will also lead to frustration in theorganization because the communicationfrom the leadership team to the rest of theorganization is inconsistent. A thoroughlyplanned process for choosing the members

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A3 Developing Global Leadership Teams is a Demanding Process

Helge Klitzing

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of the team is necessary. An enterprise withoperations in many parts of the world, thatis to function well in very different environ-ments, requires broad competencies in itsleaders. Personal characteristics such ascultural understanding, openness,adaptability, curiosity and an ability tolisten should weigh heavily in the selectionprocess. The most important thing,however, is probably that the person inquestion understands what the whole thingimplies, and that she accepts and actuallywants to contribute to the joint activitiesthrough her participation in the team.

Therefore arenas where the team can meetphysically and virtually have to beestablished. When such teams meet, it oftenhappens that most of the time is spent onspecific business matters where quickdecisions are required. However, withoutthe necessary confidence and trust and acommon understanding, real agreement willseldom be reached. And decisions for whichthere is no real acceptance will be forcedthrough. Therefore, physical meetings arenot sufficient. Ample time (particularly inthe beginning) must be allocated to building

relations and trust, and to establishing ajoint platform with respect to strategies andgoals. Virtual arenas that are establishedthrough the use of technology can be usedfor interaction during the periods betweenthe physical meetings. Here one personshould function as an organizer and makesure that activities take place and that theydo not derail.

It is also important that the incentive systemof the individual leader contains elementsthat have a positive effect whencontributions to the common good aremade. And perhaps even more important is to see to it that obvious barriers arereduced. A good example is the use ofresource persons on tasks that may reducethe profits of one unit, but that will be veryprofitable for the organization as a whole in he long term.

Core learning points• Make building such teams is an important

task in itself• Make a clear distinction between

“building teams” and ordinary problem-solving and business development

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Service deliveries often consist of promisesto deliver something not yet developed.Hence, a company may sell a process or acertificate, but the time, cost and invest-ments needed to deliver may be unknown.And the value for the client may be hard toestablish. In such a situation the salesprocess becomes crucial.

Usually, it is relatively easy to price a shoe,an apple or a computer – there is a marketout there for these products and it is relativelyeasy to position the product in the marketknowing the quality and costs. For a servicethis is more complicated. Of course, if theservice is routine, like getting a haircut, orbeing paid by the hour, a price can be easilyset. But for unique and advanced services itis difficult to know what the price shouldbe. Paying by the hour makes little sensesince the service production is largelydependent upon work procedures, methodsused and availability of the right knowledgein the production process. Furthermore, cus-tomers want security and therefore arewilling to pay more for a service from some -one they trust.

Production-oriented firms use professionals

to sell their products. These specialists aretrained in sales and marketing and knowshow to approach the customer. The challengewith respect to service deliveries arises asthe professional does not know the tech-nicalities of the service and thus cannotenter into a discussion with the customerregarding the production process. Tech-nicians can do this, but they have littleexperience with marketing, sales andquotations. Additionally, the final price ofthe service should reflect the final customervalue, which is a reflection of the unique -ness of what the firm can offer compared tocompetitors. Hence we argue for a three-step model, involving the three groups ofexpertise:

STEP 1: Cold Calls – Attention grabbing by profes-sional marketing specialists

This process involves telephone calls,seminars, presentations, visits and exhi -bitions where marketing professionalsgenerate interest from potential customers.The role of the professional is to open thedoor and get attention. When the customeris interested, the next step is to establish thecontent of the delivery.

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[B] CREATING VALUE FOR GEOGRAPHICALLYDISPERSED CLIENTS

B1 Selling the Incredible Promise

Randi Lunnan

STEP 2: Content, scope and timing of the delivery -Involving the technical expertise

In this part of the process specialists meetspecialists. They will explore the type ofneeds and suggest relevant methods andprocedures. It is vital that this meeting (orseries of meetings) generates trust, particu -larly the trust connected to enough andsufficient quality of competence andexperience.

STEP 3: Quotation - Deciding how to price the valueof the delivery

Marketing professionals generate attentionto the firm, whereas product specialistsdiscuss the type and scope of the service.There still is, however, a need for those whocan set the correct price. The price is basedon market value, not cost, which means thata simple project (for the firm) may generatea nice return, whereas more complexproducts may be only marginally profitable.

Consequently it is the customer’s willingnessto pay based on the firm’s offer comparedwith alternatives that should be considered.Usually strategic leaders possess these skillsand information, and must therefore beinvolved in this part of the process.

There are some clear advantages with thismodel. If the marketing specialists areresponsible for the entire process, theirincentive structures may push them to setthe price too low. Furthermore the deliverycan be incomplete since they lack the tech-nical expertise. In addition, the prices arenot strategically set. If production specialistsare responsible, they often give advice forfree as their focus is on the technical ratherthan on the sales side of the operation. Athree-step process, however, ensures bothquality and price based on value.

The core learning is: • Think about how to cover both marke -

ting, technical and strategic elements inthe sales process of a service delivery

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B2 Value is Created Through Parallel Practices

Karl Joachim Breunig

The production process of services is aknowledge-based process requiring closecoordination with customers and clients.When companies want to reap market-related, cost-related and geographical bene -fits, as well as benefits related to capacity orcompetence from internatio nalization, thiscreates special challenges for the close coor -dination in the service production. Theenterprises will then experience a pressuretowards stronger demands for integratedprocesses, systems and procedures and atthe same time a pressure to ensure a close

coordi nation and adaptability in relation tolocal customer requirements. This appearsas a dilemma for the management – whatdoes it take to balance in the best way pos-sible, the requirement for increased globalstandardi zation on the one hand andincreased local adaptability on the other? By attaining a better understanding of andinsight into what international servicesconsist of, and where and how they areproduced the Terrella Project is an attemptto create a framework for how such abalance can be obtained.

As part of the project we have studiedworking practices with two professionalinternational service providers. Our studyhas established that different work practicesexist parallel in the organization, and that inthe course of the implementation of aservice delivery several different workpractices are carried out. At the same timethe organi zation structure often favours onetype of work practice whilst others areundermined. We have observed three suchpractices and have chosen to label themcontinuous work practices, repetitive workpractices and unique work practices.

Continuous work practices must beavailable on a continuous basis. It is inconnection with some system error that cus-tomers or end users become aware of theirexistence. Investments are often linked totechnology and these are often priced as

subscriptions. These practices often supportthe continuous internal work on quality orare linked to communication systems. Anexample can be the operation of ICTsystems such as Agresso or Nauticus atDNV. Continuous functioning, i.e. access tothe system when needed, irrespective of timezone, is critical to daily work. Thence, thework is often organized as a relay race.

Repetitive work practices are designed tosolve the same type of repetitive problemsby offering a method. These services can bespecified and the price strategy is oftenlinked to firm prices for specified services.These services have a potential for providingbenefits of scale. An example is servicesconnected with testing services that may beperformed by different individuals inNemko’s global organization depending oncapacity and local price.

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Table 1: Parallel practices and strategic focus areas

InvestmentsContractsCost drivers

Value drivers

Increased efficiencygains from

Market focus

Continuous

TechnologySubscriptionHigh investments toautomate processes

The availability of theservice, quick andefficient responses incase of system error orproblems The use of cost-geographicalopportunities andprocess improvementsIndependent oflocation and operation,global and local sales –“mobile services”

Repetitive

MethodFirm priceInvestment focus onmethods and the use ofexperiences

Delivery of ordered anddefined services

Known experiences,learning and transfer

Independent oflocation and operation,local sales – “mobileservices”

Unique

PersonsHourly priceFocus on long-termcompetence develop -ment, resourcemanagement andexperience learningPresentation ofsolutions to theperceived problem area

Recruiting and super-vision of talentedpersons

Dependent on location,local sales to customersrather than marketfocus – mobile persons.

Transnational services involve interdependenttasks that are performed in several locationsby different experts. To support trans-national services, top management needs toendorse necessary systems and structures forthese services together with social gatheringsthat may enable personal contacts amongexperts that are performing the daily workin different places. The ability to developtransnational services lies in the practices ofmobilizing the globally dispersed knowledge.There are two distinct transnational servicepractices, namely the service delivery and theknowledge sharing.

A typical service delivery process consists ofhow a sales person takes an order from acustomer, sends the service to be performedto one expert, who in turn performs certaintasks, while sending the rest of the service to

be performed to another expert at anotherlocation. There might be several expertsinvolved at different places, while the cus-tomer perceives the service as integrated.The service delivery includes the processesand systems used and how experts interact,which leads to the delivery of services tocustomers. The service delivery can bedivided into different sets of tasks, andvarious people working across time andlocations are involved in the service delivery.

Knowledge sharing, on the other hand, ishow experts contact each other and learnand share experiences when needed. Thesepractices are also distributed in space andtime but generate situated learning andknowledge sharing, even without theexperts working together at the samelocation. The knowledge sharing occursbetween experts with the same function and

B3 Efficient Work is not Enough

Katja Maria Hydle, Ragnhild Kvålshaugen and Karl Joachim Breunig

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Unique work practices are connected withnew or unknown problems. Frequently, thedelivery may be to define what the problemis. The practice involves expertise and soundjudgement and to a large extent is connectedwith individual knowledge and experience.It is difficult to specify in what the deliveryfrom such services consist in, and thereforethey are often linked with pricing by thehour. Unique work practices involve a greatdeal of communication with customers andan ability to adapt to the customer’s need.An example is counselling projects (pre-compliance) at Nemko, where experts onstandards are problem solvers in close

dialogue with the client’s environments fordesign and innovation to identify how newservices can be adapted to the standards ofdifferent markets.

The dilemma lies in the fact that these threetypes of work practices exist parallel, andthat each individual enterprise has to definewhat are core activities and what supportservices, as well as how this entails eitherglobal integration or local adaptability. Inthe below table, showing characteristics ofthe different identified value creationpractices, we have defined some points thatmight facilitate such an assessment.

expertise across borders, while the servicedelivery is the result of the joint effortsmade by experts with different expertise andfunctions. We have identified that effectiveservice deliveries are often designed as relayraces and that efficient knowledge sharingtakes place as a form of virtual servicing.The relay races are divided into differentsets of tasks, and various people workingacross time and locations are involved in theservice delivery. A relay race is where eachleg is performed by a function and a playersomewhere locally, while the next leg mightbe performed somewhere else both in timeand place. Each leg is performed in coope-ration between experts with differentfunctions, which means that there is one leg per needed specialist function. Virtualservicing refers to the sharing of knowledgeand experiences between experts whenneeded while distributed in time, space andplace and facilitated by the use of ICT.

The service delivery (Community of Tasks)making the relay races possible is acollective process throughout theorganizations. A prerequisite for suchinternational division of work is the use ofpractices that are stable and recognizable.This stability of practices used enables theexperts to understand and further use them.In order for a practice to become globallyintegrated, we argue that the followingneeds to be in place: one common workinglanguage (often English), commonvocabulary used for the service performanceat hand, a common ICT system to facilitatecoordination, formal processes and roles,division of labour across functions andcommon incentive systems.

In order to gain efficiency, the firms need todevelop well-functioning knowledge sharingthrough virtual servicing (Communities ofLearning). Beside these relay races ofCommunity of Tasks (CoTs), which enables

distributed expertise to deliver servicesacross time and space, is the virtualservicing between experts within the samefunctions. In transnational firms the ICTsystems plays an important role in makingknowledge exchange possible. Such situatedlearning is enhanced within organizationsand among people with the same functions.Furthermore, the people taking part in CoLshave become personally acquainted throughformally initiated social gatherings. CoLsare arenas where knowledge and learningare mobilized and re-created in trans-national firms.

CoLs have an important function, butwithout the CoTs, the service offerings anddeliveries get disintegrated. By only sharingexperiences and knowledge and not tasks,the firms and their services becomemultinational and not global or trans-national, since every location becomes veryefficient for their home market. Companieswith CoLs and not well-functioning CoTsdo not get economies of scale, do notexchange best work practices, and do nothave volume since they are not sellingservices as one company. Through themanagement’s initiation of formal meetings,gatherings and formal training, CoLs havethe possibility to be formed and nurtured,which is important for executing and performing the services.

Hence, we propose that in order to developeffective and efficient service deliverypractices, the transnational firms need tohave service delivery designed as relay racesand knowledge sharing designed as virtualservicing. Firms with transnationalambitions need these two separate, butinterdependent practices for value creation;one short term for service delivery throughCommunities of Tasks and one long termfor knowledge sharing through Communitiesof Learning. The implications are as

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follows: top management needs to initiateand sustain well-working ICT systems, aswell as formal roles and processes to makethe CoTs possible, and arrange socialgatherings among experts with the samefunction to make the CoLs possible. As boththe CoTs and CoLs are distributed in spaceand time, the structural part needs to be

developed formally while the organic partstarts functioning once the experts know ofeach other, either as a consequence of workthat needs to be done as in CoTs or as aconsequence of someone needing assistanceto solve a problem as in CoLs.

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B4 The Project as the Locus of Multiple Contributions

Karl Joachim Breunig

In IPSFs project work is the prime source of multiple contributions such as revenue,innovations and individual learning.

The service delivery process is contingentupon how the project manager and theproject group perceive the problem they areset to solve. The performance of the IPSFs is based both on the ability to attract andrecruit good individuals but also on thereputation and references from otherprojects. That is, both structure and agencymatter. Structure matters because withoutthe organization the individual expertswould not have ‘landed’ the project, theywould not have been able to sell a “crediblepromise” to deliver something they werecompletely inexperienced in. On the otherhand, A project is very seldom a complete‘cut and paste’ of previous deliveries. It hasto do with utilizing previous experiencesand the incorporation of these into the new delivery. Thus, the main knowledgeproduction process in the projects takesplace at the activity level, and providescontributions both to the organizational and individual levels. Individuals gain

experience, competence, and networkingbenefits and the organization generatesservices that can be traded for money toexternal paying clients. In addition, theactive experimentation in projectscontributes to the corporate image,reference projects and a repertoire ofcollectively shared experiences. It isimportant to mention that not all activitiesare strategic per se, but aggregate activitypatterns can have strategic implications.This is because they build something that isbeneficial for the organization, or becausethey can undermine issues of collective orglobal benefit if optimized at the local level.So how can these multiple contributions be explicated, conceptualized and madestrategic to make sound management of the service portfolio possible?

In the conduct of daily project work at theactivities level we have observed howcontinuous explorations for new and novelsolutions are carefully balanced towardswhat to reuse. Thus it is important to notethat the exploration and exploitationprocesses are parallel and embedded in thesame type of production activity, the daily

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Figure 2: Contributions from projects

conduct of project work. The literaturetends to assume that these are separatedprocesses, and therefore seems to assumethat exploration mainly takes place in i.e.R&D departments. In IPSFs this appearsnot to be the case. As we have observedthere are clear explorative and exploitativeprocesses connected to the organizationallyshared resources, which occursimultaneously in the conduct of a project.Some of these experiences are only stored inindividuals, some become collectively sharedand yet others give contributions to theorganization level, such as revenue,innovations, and reputation. At the sametime we observe how individuals in projectsexploit previous experiences: the companyimage, network, competence in the conductof new projects.

We have designed a framework that iden-

tifies the four main processes linked toprojects, learning and organizationalcompetitiveness. These four are: explorationcontributing (1) to organization level and(2) to individual level and (3) exploitationutilizing elements from the organizationlevel and (4) individual level. Linked tothese four processes we are then able toidentify where elements like customer satis-faction, innovation, revenue generation orlearning belong (see figure 2).

This framework can have several practicalimplications. First, for organizational designand choice on performance measurements.If core value creation stems from projectwork, the four main mechanisms identifiedcan be important starting points to considerfor management to be able to avoid localprofit centre thinking if global collaborationis the aim. Second, organizations can benefit

Organisationallevel Corporate andglobal focus

Activity levelCustomer focusLocal and transnational

Individual levelLocal and unitfocus

Use knowledgeExploitation

Build knowledgeExploration

1.CRMTrainingReference databaseService innovationKnowledge baseNew industriesRevenue

2.Daily learningNetwork building

Corporate/Administrative

Services/Projects

Knowledge/Skills

3.BrandExisting customersFinancial muscleProceduresStandards; rulesRoutinesICT

4. ExperienceExpertiseAttitudeCoordinating skills

Individualcontribution on

project performance

Projectcontribution onindividualcompetence

Projectcontribution onorganization

Organizationalcontribution on

project performance

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In firms where services are provided indifferent places, and frequently in the formof projects, it is important to have multiplestrategies for sharing knowledge. Focusingon IT systems and formal processes is notenough to accomplish transnational coope-ration in projects. A balance betweenarrangements for personal networks and theuse of IT systems to support the sharing ofknowledge and project work across nationalborders is needed.

Codification strategies are about IT systems,processes, visualizations, databases, docu-ments and templates. Personificationstrategies are about the sharing ofknowledge based on direct contact betweenindividuals. Our focus is on whichknowledge management strategies aresuitable in national and transnationalprojects, and in particular the focus is onthe variation in the knowledge managementstrategies during different phases of suchprojects. The insight is about how access toknowledge is acquired and what knowledgeis used. By dividing a project into severalphases – initiation, planning, execution,

control and conclusion – the picturebecomes more nuanced. During the ini-tiation and planning phases, where contactwith the client, project staffing, timeschedules, budget and deliveries aredetermined, most of the tasks are related to codified knowledge, whereas the projectstaffing and contact with the client are moredependent on personal networks. Duringparts of he planning stage, most of theexecution stage and part of the control stage of projects, the experience-based and individual knowledge of the experts ismore crucial, i.e. that the use of personalnetworks for knowledge sharing is moreimportant than the application of codifiedknowledge. On the other hand, codifiedknowledge is more important in theremaining control stage of the project, aswell as the conclusion stage. These projectphases are more about administrativefollow-up where codification becomescrucial for existing and future projects. Thisindicates that it is most important to focuson codification during the beginning andconclusion stages of a project, whereaspersonification should be in focus duringthe execution stage.

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B5 Projects come to an End, Knowledge Remains

Katja Maria Hydle

from standardization and routinization ini-tiatives, but the form of these initiatives isvery important. The lesson from our studyis that they should emphasis coordinationand transparency. It is necessary to makeindividual experiences transparent so thatsearch for knowledge is made possible andimproved by ‘trails’ to the source of the

experience at the individual level. Third, the conceptual framework might enablemanagers to identify the mix between theelements that are needed to adhere to apersonalized strategy for managingknowledge (HR driven) and when to benefit from a codified strategy formanaging knowledge (ICT driven).

By finding out who the persons thatperform services are and where the servicesare carried out, we can see that there is aneed for different types of knowledgesharing depending on experience and onwhether the persons who perform theservices are located together or not. Amixture of personified and codifiedknowledge is important in projects that are carried out by employees with differentdegrees of experience or are carried out indifferent places. It turns out that seniorexperts use personal networks more thanjunior experts, whereas the latter group aredependent on collecting more codified infor-mation because they lack relevant personalnetworks. Similarly, we find that personalnetworks are more used for sharingknowledge in local projects. Contrary tothis, in transnational projects, where thework is carried out by a number of expertswho are based in different locations,personal networks are used, but the use ofcodified knowledge is more important thanin local projects.

We have looked at differences between howsenior experts and junior experts employ

knowledge, how projects are conducteddifferently depending on location andproject phases. Administrative follow-upinclude tasks that can be codified and thatare important in the initiation, planning,control and conclusion phases, whereasknowledge-based tasks such as contact withthe client and project staffing during theplanning phase, the execution phase andparts of the control phase require dialogue,and therefore a personified knowledgesharing strategy is more efficient in thesestages. Organizations, leaders and projectmanagers ought to know what strategies arenecessary for the sharing of knowledge forspecific tasks in order to arrange for accessto knowledge as required in the best pos-sible way. We have found that a mix of theknowledge management strategies isimportant. The more the strategies forsharing knowledge are accommodated tothe persons who carry out the work inrelation to their experiences, and in relationto which phase a project is in, the moresuccessful the completion of the project will be.

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In project-based organizations by far mostof the competence development takes placethrough project learning. At the same timefew enterprises arrange for day-to-daylearning in an expedient way. It seems as ifthings happen more by accident thanaccording to a plan. Developing knowledgeas to how the management can arrange forconnecting day-to-day learning more closelyto the goals of the organization may be animportant contribution to the develop mentof more competitive project organizations.

We have chosen to define day-to-daylearning as competence acquired on the basisof experiences and reflections in connectionwith the daily work in the enterprise. How -ever, the knowledge on how such competencedevelopment actually takes place, and how astrategic move to strengthen such compe -tence development can be made, is limited.Strategic competence management may beunderstood as the planning, execution andevaluation of measures intended to secure thenecessary competence for the enterprise andthe individual employee in order to reachspecific goals.

Based on our studies in the Terrella Projectwe draw the conclusion that day-to-day

learning takes place in the following ways:

• Problem and crisis-oriented search. Newknowledge is acquired when one is facedwith an unsolved problem or a crisis. Inaddition, a great deal of learning takesplace together with demanding clients.

• Local learning. Day-to-day learning takesplace locally, and very often within theunit to which one belongs. In any event,this is where on the whole, the search forthe competence that is needed to solve aproblem is started.

• Social networks constitute the main sourceof knowledge. Social networks are crucialto day-to-day learning – as a starting pointone can always ask somebody one knowsfor information. If he or she is not able tocome up with an answer he/she very oftenwill refer to someone else. Close colleagues,the project manager and the nearest leaderseem to be the most important sources ofinformation. In some cases advice is alsosought with former colleagues, frequentlyoutside one’s own organization.

In addition to studying how day-to-daylearning takes place, we tried to findexamples of ways in which leaders can

[C] BUILDING AND MAINTAINING A DISPERSED KNOWLEDGE BASE

C1 The Importance of “Learning by Doing”

Ragnhild Kvålshaugen and Karl Joachim Breunig

support day-to-day learning. We found thatperformance interviews constitute animportant tool because they both provide anopportunity for reflection on what learninghas taken place and an opportunity tocommunicate preferences regarding compe -tence development. In connection with theneed for competence development it isparticularly important to consider whichpersons are allocated (resource allocation)to what projects, since a variation in thisrespect may contribute to increasedcompetence development in the enterprise.It is also important to create arenas forknow ledge sharing. This may be donethrough weekly meetings and lunches whereboth positive and negative experiences fromprojects are shared. In order to make day-to-day learning known in the organization itis also important that there is a fair amountof openness about what activities are goingon in the organization. Since day-to-daylearning takes place in interaction betweenindividuals, it is important to create a “helpculture” in the organization, i.e. when some -body asks a question, they should get ananswer or be referred to someone else. Such

a “help culture” also contributes to main -taining and developing social networks,which are the actual “lubricant of themachinery” in connection with day-to-daylearning. Furthermore, the managementmay contribute to the development of socialnetworks by creating arenas where colleaguescan meet and get to know each other, suchas courses, coffee stations, trips and jobrotation.

On the basis of the results from the TerrellaProject, the conclusion can be drawn that itis possible to support and facilitatecompetence development that takes placethrough day-to-day learning by focusing onhow competence is shared and spread. Thismeans that he focus of the managementshould be concentrated more on arrangingfor competence development through theday-to-day work by supporting andcontributing to a good working environ -ment rather than trying to identify andcodify the existing competence in theorganization and disperse it, which is thetraditional way of thinking in connectionwith competence management.

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C2 The Catalyst of Collective Knowledge

Katja Maria Hydle, Karl Joachim Breunig and Jon Erland Lervik

Firms overemphasise individual learningand ICT systems, while neglecting how easyit can be to enhance the collectively sharedknowledge base of the organization.Learning through working on projects iscentral in international professional servicefirms. The informal structures and face-to-face interaction enhance learning.

Infrastructure for collective learning needsto be in place, but this is not sufficient. The question is how insights and solutionsfrom a project can be made part of thecollectively shared knowledge repertoire of the employees of the organization.

Technology may create transparency and

traceability in order to reach to the sourceof knowledge. We have observed how tech-nology is a prerequisite for this process, butnot sufficient in itself. The true catalyst israther linked to working, talking andreflecting together. Our findings show thatfirms need to understand and accept thatthe knowledge is distributed; the question israther how to trace it, the person, the cus-tomer involvement and what the knowledgeconsist of. Working together is necessaryfor experts to understand the expertise ofothers and its interface with own expertise.Talking together is central to developing anunderstanding of different expert fields, aswell as to the exchange of experiences.Reflecting together about own and commonpractice is necessary to further enhancelearning and to be able to create traces forothers to use in the future. As one informantput it: “you cannot transfer best practice, ifyou do not reflect upon variations inpractice together with others.”

The catalysts that contribute to developingcollectively shared knowledge are:

1. Working together: Many skills are hard-earned throughexperience, and can only be shared byworking together, as in an apprenticesystem. Several experts say that forlearning purposes it is important not onlywhich projects and which customersemployees work with; team composition isalso important. Young engineers learnfrom seniors, employees in subsidiarieswork closely together with HQ expertsand so on. Working together usingdifferent expertise at different places, or in an apprentice-like way, makes a lot ofsense for internatio nalizing services that to a large extent rely on the expertise ofindividuals.

In order to manage and share expertise

through working together, it is importantto know who-knows-what. In a small,local firm this is handled through personalnet works. As firms grow andinternationalize, they rely on formalprocesses for work sharing and to someextent knowledge mapping likecompetence matrices and processes toascertain who knows what. Mapping ofwho knows what needs a clear linkage towork to be performed, in order to avoidmapping what can be counted, instead ofwhat is of direct use. Codifying knowledgeentails some logic of knowledge reuse andeconomies of scale. All firms rely oncodified knowledge repositories to someextent, whether for technical standards,standard operating routines or bestpractices, etc. Beyond steering documen -tation and standards, we can distinguishbetween two levels of knowledge capture:project documents, which are documentswith a primary purpose towards projectcompletion and lessons learnt, and docu-ments with abstracted insights with aprimary purpose of internal disseminationof information and establishing projectreferences for further sales. Tailor-madeworkflow systems supporting some valuechain logic between different experts, orproject portals where everything related toa project is entered are special tools forcodifying contextual information regard -ing work and document managementwithin and across projects. A projectportal being related to each individualproject is there fore useful for salespurposes and case material, and to findsimilar projects and who has beeninvolved in different projects.

2. Talking together: Talking together in the hallways is animportant mode of knowledge sharingwithin each local office. The challenge isto create arenas for formal and informal

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exchange in a global organization. Firmsmay invest considerably in providingmeeting places for employees to talktogether. Some firms invest in corporate-wide gatherings, others support specialistnetworks, e.g. where technical expertswithin a domain meet physically once ayear for an internal conference, and meetvirtually through the rest of the year. It isdifficult to recreate small talk around thecoffee machine in globally dispersed ope-rations, but technology can help. Indifferent phases of a project, knowledgetransfer meetings are held to share lessonslearnt at the start up and to disseminateinsights when a project is completed.

How can firms stimulate good conver -sations and knowledge exchange when thecolleague is no longer located in the officenext door? Whereas frequent travel andphysical meetings are important, thisneeds to be complemented with virtualarenas as pressures on costs and environ -mental im pact reduce travel. The use ofSkype, phone and email are everyday toolswhen distributed experts know of eachother from before. Other useful tools thatare in use and can further be encouragedare normal social media available on theNet. As people use them both for privateand professional purposes, the use can befurther encouraged within global organi -zations for knowledge exchange.

3. Reflecting together: Reflecting on one’s own work processesand practices and on those of others is an underestimated means to createcollective learning and knowledgeexchange. Reflecting together may developinto networks between experts to furthersupport work and knowledge sharingacross borders. As a basis for reflectingtogether, talking or working together are indispensible. How can reflecting

together be supported across borders?Internal company wiki system forfacilitating formal and informal discus-sions among experts is one way when they don’t necessarily know each otherwell, but have access to the same system.An internal company wiki system is usefulwhen there is a successful match betweentop down control and bottom upparticipation. The content needs to be well structured through top downadministration, high level experts need tohave responsibilities related to the content,while bottom up participation and use isencouraged through in-depth content.Further, using a company wiki systemtogether with or as part of a discussionforum further enhances the bottom-upparticipation of distributed employees and encourages collective reflection andlearning.

We tend to think of working together,talking together and reflecting together as unmediated face-to-face interaction.However, ICT is important in order to beable to work, talk and reflect across timeand space. We have shown how technologybecomes part of the picture to managework, knowledge and learning ininternational service firms. However, theunderemphasized parts are not the ICTsystems, but arenas that enable socializationand reflection which in turn can supportcollective learning.

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When a professional service firm movesfrom one home base to distributed centresof expertise in different geographiclocations, it can reap benefits ofspecialization and local learning adapted tothe various markets it operates in. However,insights and lessons learnt often remainlocal, and subcultures with divergingpractices can develop between differentoffices. How can international professionalservice firms create a one-firm culture?

Project-based firms often take their firstforays into foreign markets by supportingtheir national clients in international ope-rations or delivering to foreign clients fromtheir home base. Depending on the natureof services or projects delivered, this caninvolve mostly in-house work with shorterfield trips to clients’ foreign sites, orextended stays abroad e.g. for the durationof a capital project.

A number of pull factors drive thedevelopment of local presence and a dis-persed knowledge base. Recruiting locally in various markets benefits from lowerlabour costs and local presence. Especiallyin natural resource industries, host countriesoften impose local content requirementsthat entail recruiting and training localemployees or using local contractors. Homecountry factors also have an influence. Therecent growth and pressure in the economymeant that skilled employees were in demandat home, and this has also triggered buildingup competence abroad.

Local presence can facilitate closer inter -action with foreign customers, benefitting

both business development and competencedevelopment. Local presence is alsoimportant to adapt to divergent nationalcontexts, standards and market preferences.However, geographically distributed centresof expertise can entail challenges and costs.Over time, local offices can developdivergent “best practices”, where lessonslearnt remain local and are not sharedglobally. Without suitable arenas andmeeting places, separate subcultures candevelop. Familiar diagnoses of the probleminclude “Not-Invented-Here” and a lack of trust and open relations. This can alsospur overt disputes over what representstrue and proven knowledge.

Interdependencies across offices can takedifferent forms. Service delivery can beorganized as a relay race, requiring coordi -nation of several experts in differentlocations, or there needs to be a consistentstandard of service delivery in differentmarkets that require company-wideknowledge sharing. Many IPSFs havegeographically distributed centres of excel-lence with global mandates. The challenge is to establish a “one-firm” culture whereexpertise is sought out globally, and wherethe professional support goes beyond localcolleagues one knows well. Firms need toinvest in establishing a shared culture orone-firm mentality, developing employees’identification and loyalty towards the firmand one’s co-workers. In the firms in thestudy we find recurrent practices that cansupport a shared outlook and mentality.

• Recruit boundary spanners. Innovativerecruitment strategies can reduce the dis-tance between home country and host

C3 Global Services, but Where is the Knowledge?

Jon Erland Lervik

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Best practices are shared to a higher extentbetween offices and subsidiaries whenmanagers inspire employees to make aneffort, when they continuously search forimprovements, and strive to be the best atwhatever the organization is doing. Resultsfrom a survey conducted among theemployees in the Terrella companies identifythat leadership is important for the sharingof best practices. The survey results suggestthat both transactional and transfor-mational leadership skills are needed inorder to facilitate the sharing of best

practices across organizational units andgeographical locations in internationalprofessional service firms (IPSFs).

Transactional leadership is understood asthe abilities to create a formal systemwhereby it is clear what is required of thefollowers and organizational units. Theformal system contains rewards and rein-forcements as well as tools and proceduresfor management-by-exception. Transfor-mational leadership, on the other hand, is

C4 Sharing of Best Practices Requires Leadership

Ragnhild Kvålshaugen

country employees. One firm looked forwestern education and ICT skills whenrecruiting native middle managers in theirAsian subsidiary.

• Initial socialization. Introduction pro-grammes can give a head start inconveying the broader picture, under-standing the company and developingnetworks.

• Meetings and networks. The higher theinter-office interdependencies, the moreimportant are international task forces,steering groups or committees which bothcoordinate international activity and areimportant learning arenas for individuals.

• Inpatriation. Whereas expatriates from the homecountry can be perceived as agents ofheadquarters, inpatriation is a more

effective mechanism for inculcating hostcountry employees. They develop net -works, learn company work practices and develop stronger attachment to thecompany.

• Management development programsconvey not only valuable knowledge andskills to participants, but are alsoimportant arenas to develop strongpersonal networks across offices beyondthe immediate task context.

These integration mechanisms demand more resources than formal coordinationmechanisms. The central insight from ourstudy is that the more international and themore interdependent firms’ activities are,the more they need to invest in informalintegration mechanisms to develop a culture of collaboration.

understood as abilities to influence changein followers’ attitudes and behaviour andinclude abilities to shape future vision andcommunicate a sense of mission, beinginspirational, intellectually stimulating, and showing individual consideration.

We had 821 useable responses concerningthe questions addressing the relationshipbetween leadership and the sharing of bestpractices in IPSFs. Based on a regressionanalysis we found that both transactionaland transformational leadership skills areimportant for sharing best practices. Withregard to transfer of best practices from oneorganizational unit to the rest of theorganization, we identified that continuoussearch for ways to improve operations,telling stories about challenges that theorganization has overcome, striving to bethe best at whatever the organization isdoing, and being able to specify internalagreements and achieve them had significantpositive effects on the transfer of bestpractices. Furthermore, integration of bestpractices adopted from other organizationalunits was particularly influenced by theextent to which the leaders encouraged foll-owers to consider tomorrow’s possibilities,created competition among units to acquireresources, encouraged continual search forways to improve operations, and thatimportant decisions were not based onprecedents.

Moreover, leadership is not just allocationof resources (transactional leadership). It is also important that the leaders mobilizeresources in the distributed knowledgesystem of IPSFs by performing transfor-mational leadership. We might even arguethat this is more important when theorganization is geographical dispersed.From the case studies we also identified thatit is not just the top management that playsthis mobilizing role in IPSFs. In particular,

project managers have crucial roles infacilitating sharing of best practices acrossorganizational units since they are involvedin local decision making in the projectswhere the choices of what practices to applyare taken. Hence, their leadership skills areimportant if it is an objective of the IPSFs toshare best practices. Further, we also iden-tified that a necessary precondition forsharing best practices is that the differentorganizational units and the employees feelthat they belong to one organization andnot many separate subsidiaries. Thus,creating a sense of organizational identity is important in order to achieve sharing ofbest practices.

Based on these results, we conclude thatleadership plays an important role in IPSFsregarding the sharing of best practicesacross organizational units and geographicallocations. Hence, sharing of best practices isfacilitated by a sense of organizationalidentity and abilities to perform bothtransactional and transformationalleadership at all leadership levels in theorganization.

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Introduction: Central Drivers for NorwegianBusinesses and Industries: Knowledge Intensityand Internationalization This insight is amongst other based on theworking paper “Innovative relationships andprocesses in knowledge intensive business services(KIBS)” by Kvålshaugen, R., Hydle, KM &Brehmer, P-O.

Suggested further readings are: Bell, D. 1973. The Coming of Post-IndustrialSociety: A Venture in Social Forcasting. NewYork: Basic Books.Byrkjeflot, Haldor & Myklebust, S. 1991. Tech-nological Change and Human Resources in theNorwegian Service Sector. Centre for Technologyand Culture, Report Series No.2.Chase, Richard B. & Apte, UM. 2007. A Historyof Research in Service Operations: What is the BigIdea? Journal of Operations Management, 25 (2).

A1 Offshoring – a Double Edged SwordThis insight is based on: Lunnan, R., Tomassen,S. og Hydle, K.M. 2009. Global managment inservice firms: The role of linkages. Paperpresented at the EIBA conference in Tallin 2008.

Suggestion for further reading: Hansen, M. T., Nohria, N. et al. 1999. What'syour strategy for managing knowledge? HarvardBusiness Review 77(2): 106-116.Lovelock, C. H. and Yip, G. S. 1996. Developingglobal strategies for service businesses. CaliforniaManagement Review 38(2): 64-86.Pyndt, J. and Pedersen, T. 2006. Managing globaloffshoring strategies: A case approach.Copenhagen, Copenhagen Business School Press.

A2 Changes of Subsidiary Roles andResponsibilities – When Does it Matter? This insight is based on: Lunnan, R. & Tomassen,S. 2009. Desperately seeking the right model, sub-sidiary role changes in a service organization.Paper presented at the EIBA conference inValencia 2009.

Suggestion for further readings: Dörrenbächer, C. & Gammelgaard, J. 2006. Sub-sidiary role development: The effect of micro-

political headquarters-subsidiary negotiations onthe product, market and value-added scope offoreign-owned subsidiaries. Journal ofInternational Management, 12(3), 266-283.Greenberg, J. 2001. Studying organizationaljustice cross-culturally: Fundamental challenges.The International Journal of ConflictManagement, 12(4), 365-375. Jensen, R. & Szulanski, G. 2004. Stickiness andthe adaptation of organizational practices incross-border knowledge transfers. Journal ofInternational Business Studies, 35(6), 508-523.

A3 Developing Global Leadership Teams is aDemanding ProcessSuggestion for further reading: Greve, P., Nielsen, S., & Ruigrok, W. 2009.Transcending borders with international topmanagement teams: A study of Europeanfinancial multinational corporations. EuropeanManagement Journal, 27(3): 213-224.

B1 Selling the Incredible PromiseSuggestion for further reading: Matanovich, T. 2003. Pricing services vs. pricingproducts. Marketing Management, Vol. 12( 4)p12-13.

B2 Value Creation Through Parallel PracticesThis insight is based on the paper: Breunig, K.J,Kvålshaugen, R. & Hydle, KM. 2009. Assessingthe opportunity for global standardization ininternational professional service firms.

Suggestions for further reading:Hansen, M. T., Nohria, N., & Tierney, T. 1999.What's your strategy for managing knowledge?Harvard Business Review, 77(2): 106-116.Pentland, B. T., & Rueter, H. H. 1994.Organizational routines as grammars of action.Administrative Science Quarterly, 39(3): 484-510.Stabell, C., & Fjellstad, Ø. 1998. Configuringvalue for competitive advantage: On chains,shops and networks. Strategic ManagementJournal, 19: 413-437.

B3 Efficient Work is not EnoughThe insight is based on the paper: Hydle, K.M.,Kvålshaugen, R., and Breunig K.J. 2007. Practices

REFERENCES FOR FURTHER READING

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for Knowledge Sharing and for Knowledge Work:Communities of Practices and Communities ofTasks for Global Professional Service Perfor-mance. Paper presented at the Academy ofManagement, Philadelphia, Aug, 2007.

Suggestion for further reading: Porter, M. E. 1996. What is Strategy? HarvardBusiness Review, 74(6): 61-78.Skjølsvik, T., Løwendahl, B. R., Kvålshaugen, R.,& Fosstenløkken, S. M. 2007. Choosing to learnand learning to choose: Strategies for client co-production and knowledge development. California Management Review, 49(3): 110-128.

B4 The Project as the Locus of MultipleContributionsThis insight is based on the paper: Breunig, K.J& Kvålshaugen, R. 2010. Autonomy or auto-mation? Understanding routine and non-routineinterplay to circumvent the rigidity paradox ofdynamic capabilities.

Suggested further readings are: Foss, N. J. 2003. Bounded rationality and tacitknowledge in the organizational capabilitiesapproach: an assessment and a re-evaluation,Industrial and Corporate Change, 12(2): 185-201.Løwendahl, B, Revang, Ø and Fosstenløkken, S.M. 2001. Knowledge and value creation inprofessional service firms: A framework for ana-lysis. Human Relations, 54(7): 911-931.Sydow, J., Lindkvist, L., & DeFillippi, R. 2004.Project-based organizations, embeddedness andrepositories of knowledge. Organization Studies,25 (9): 1475-1490.

B5 Projects come to an End, Knowledge RemainsThe insight is based on the paper: Hydle, K.M,Breunig, K.J. & Evju, B. 2009. TransnationalProfessional Service Performance: Practices ofKnowledge Management. Paper presented atQUIS 11. June 2009.

Suggestion for further reading: Hansen, Morten T., Nohria, N. and Tierney, T.1999. What's Your Strategy for ManagingKnowledge?" Harvard Business Review77(2):106-116.

C1 The Importance of “Learning-by-Doing” This insight is based on the paper: Kvålshaugen,R. & Breunig, K.J 2009. Strategisk kompetanse-styring i prosjektbaserte organisasjoner: Fra et

forbrukerperspektiv til et produsentperspektiv.Praktisk økonomi og finans, 25(3): 73-81. Suggestion for further reading: Lindkvist, L. 2005. Knowledge communities andknowledge collectivities: A typology ofknowledge work in groups. Journal ofManagement Studies, 42(6): 1189-1210.Skjølsvik, T., Løwendahl, BR., Kvålshaugen, R.og Fosstenløkken, SM. 2007. Choosing to learnand learning to choose: Strategies for client co-production and knowledge development”. California Management Review, 49(3): 110-128.

C2 The Catalyst of Collective KnowledgeThis insight is based on the paper: Hydle, K.M,Breunig, K.J. & Evju, B. 2009. TransnationalProfessional Service Performance: Practices ofKnowledge Management (paper presented atQUIS 11. June 2009) and the presentation andreport by Jon Erland Lervik, "Knowledgemanagement in multinational project-basedfirms".

Suggestion for further reading:Zollo, M. & Winter, S. G. 2002. Deliberatelearning and the evolution of dynamiccapabilities. Organization Science, 13(3): 339-351.

C3 Global Services, but Where is the Knowledge?The insight is based on the presentation and thereport “Knowledge management in multinationalproject-based firms” by Jon Erland Lervik.

Suggestion for further reading: Hansen, M. & Nohria, N. 2004. How to buildcollaborative advantage. MIT Sloan ManagementReview, 46: 22-30.Ghoshal, S. & Gratton, L. 2002. Integrating theenterprise. MIT Sloan Management Review,44(1): 31-38.Perlmutter, H. V. [1965]1969. The tortuousevolution of the multinational corporation.Colombia Journal of World Business, 4(1): 9-18.

C4 Sharing of Best Practices Require LeadershipThe insight is based on analysis of the results ofthe Terrella survey and presentations of Terrellasurvey results at DNV Energy and Nemko in2008.

Suggestion for further reading: Vera, D. & Crossan, M. 2004. StrategicLeadership and Organizational Learning.Academy of Management Review, 29(2): 222-240.

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KARL JOACHIM BREUNIG: Joachim is aSenior ResearcherScientist at SINTEFTechnology andSociety, where hehas been engaged inissues such asinternationally dis-tributed knowledgework, organizationallearning and

intellectual capital measurement over thepast 10 years. He holds a MSc degree fromLondon School of Economics and in 1998he was one of the founders and the firstchairman of the Knowledge ManagementForum in Norway. His particular researchinterest is knowledge based value creationand he has followed the two IPSFs Nemkoand DNV in both the InterPrax and Terrellaprojects. Currently utilizing this data in aPhD project, BI - Norwegian School ofManagement. karl.joachim.breunig@sintef.no

KATJA MARIA HYDLE: Katja is a SeniorResearch Scientist atSINTEF Technologyand Society. Sheholds an MA inPolitical Sciencefrom the College ofEurope, Belgium,and has over fifteenyears of experiencefrom EU and

national applied research projects within e-business, knowledge management,knowledge-intensive work, and professionalservice firms. Her current research interestsinclude transnational service performanceand service innovation. She has beenworking the last seven years in the InterPraxand the Terrella project with DNV and

Nemko following transnational service per-formance with large empirical material. Sheis currently taking a PhD at BI within thesame topic. katja.hydle@sintef.no

HELGE KLITZING: Helge is an adviserwith his owncompany. He hasextensive experiencefrom both academicemployment andmanagementpositions inNorwegian businessand research. Theemphasis has been on

knowledge-intensive and internationalservices. Being a practitioner withengineering background Helge likes to workin the border zone between business andresearch. In recent years, his main interesthas been knowledge-driven value creation,and how leadership, organization, workprocesses and technology affect results.helge.klitzing@bluezone.no

RAGNHILD KVÅLSHAUGEN: Ragnhild isassociate professorat BI NorwegianSchool ofManagement,Department ofStrategy andLogistics and holds aPh.D. from the sameschool. Her previouswork experience is

amongst others as a senior researcher atSINTEF and as dean of graduate pro-grammes at BI. Her research has primarilybeen conducted in knowledge intensiveorganizations with particular focus onleadership of these organizations and

ABOUT THE AUTHORS

32

knowledge sharing in international profes-sional service firms. Her research has beenpublished in several peer reviewed journalsand books. She is one of the project leadersof the Terrella project and has in particularworked together with DNV Energy in theTerrella project. ragnhild.kvalshaugen@bi.no

JON ERLAND LERVIK: Jon Erland is apostdoctoral scholarat at the NorwegianSchool ofManagement BI. Heteaches and conductsresearch onmanagement ofinternational ope-rations, knowledgemanagement and

change processes in multinationalcorporations. He has previously taught atLancaster University. He has his PhD degreefrom BI and has a MSc in industrialeconomics from Norwegian University ofScience and Technology. Prior to anacademic career he worked withorganization development in temporaryproject alliances in the oil and energy sector.jon.e.lervik@bi.no

RANDI LUNNAN: Randi is professor inStrategy at theNorwegian Schoolof Management BI.She has her degreefrom the NorwegianSchool of Economicsand BusinessAdministration. Shehas has beeninvolved with

businesses in several research projects aswell as through seminars and teaching. Thefocus on her research is strategic alliancesand international management, and throughher involvment in the MBA with FudanSchool of Management in Shanghai, she haslooked into how foreign firms manage their

operations in China. randi.lunnan@bi.no

SISSEL MYKLEBUST: Sissel's backgroundis in economichistory, and she holdsa position asAssociate Professor atthe Centre for Tech-nology, Innovationand Culture at theUniversity of Oslo.She is the author andco-author ofpublications on

economics and culture, the power ofknowledge, Nordic leadership, professionsand technocracy. In the early 1990s, on theauthority of the Ministry of Education andResearch and OECD/CERI, she worked onsubjects related to research policy challengesin the service sector.sissel.myklebust@tik.uio.no

SVERRE TOMASSEN: Sverre is associateprofessor at BINorwegian Schoolof Management,Department ofStrategy andLogistics and holds adoctoral degree (Dr.oecon) and a MSc inInternationalStrategy and

Marketing from the same institution. Heteaches and conduct research within thefield of strategic management andinternational strategy and management.Sverre has published his research in severalpeer reviewed international journals andbooks. sverre.tomassen@bi.no

33

Partner Contact Information

CEO Dag TørvoldP.O. Box 73, Blindern, N-0314 OsloT +47 22960330, dag.torvold@nemko.com

Project Manager Helge KlitzingM +47 90019343, helge.klitzing@bluezone.nowww.nemko.no

HR Director Jørn Lunde DNV Energy, Veritasveien 1, N-1363 HøvikM +47 97015990, jorn.lunde@dnv.comwww.dnv.no

Associate Professor Ragnhild Kvålshaugen (academic project manager)BI Norwegian School of ManagementNydalsveien 37, N-0442 OsloM +47 46410478, ragnhild.kvalshaugen@bi.nowww.bi.no

Senior Researcher Karl Joachim BreunigM +47 93087716, karl.j.breunig@sintef.no

Senior Researcher Katja Maria HydleM +47 93005848, katja.hydle@sintef.no

P.O. Box 124 Blindern, N-0314 Oslowww.sintef.no

Project Manager Bjørn Nagell Devoteam daVinci, Hoffsveien 21-23, N-0275 Oslo,M +47 97549156, bjorn.nagell@davinci.nowww.davinci.no

Consultant Director Jon Eivind ThraneComputas as, Lysaker Torg 45, Postboks 482, N-1327 Lysaker,T +47 67831000, jet@computas.com www.computas.com

Terrella Consortium Partners and contact information

34

Best practice: A best practice is a technique,method, process, activity, incentive, orreward that is believed to be more effectiveat delivering a particular outcome than anyother technique, method, process, etc. whenapplied to a particular condition or circum-stance. Best practices can also be defined asthe most efficient (least amount of effort)and effective (best results) way ofaccomplish ing a task, based on repeatableprocedures that have proven themselvesover time for large numbers of people.

Center of Excellence (CoE): A center ofexcellence is group of people that areexperts in certain areas of the businessconducted by the firm. A CoE in amultinational organization can be bothvirtual and organized as a unit at the samegeographical location.

Codification knowledge managementstrategies: Knowledge shared throughcollecting and organizing available know -ledge. Only explicit knowledge can be sharedby codification knowledge managementstrategies.

Communities of Excellence (CsoE): Acommunity of excellence is an expert groupof people sharing the responsibilities toshare and develop knowledge, high qualityof services and best practices. The responsi -bilities are divided between several people atdifferent location.

Community of Learning (CoL): A communityof experts with the same function contactingeach other and learn and share experienceswhen in need. The community may be dis-tributed in space and time, but generatesituated learning and knowledge sharing,without working together. Such knowledge

sharing can happen as virtual servicing.

Community of Tasks (CoT): A communityof experts with different functions dividingwork and tasks between them, withoutnecessarily sharing knowledge. Servicedeliveries can thus be divided into differentsets of tasks and function as a relay race,where various people working across timeand locations are involved in the servicedelivery.

Global strategy: Firms that follow a globalstrategy understand the world market asintegrated, they are driven by the need forglobal efficiency and are centralisedstrategically and operationally.

International Professional Service Firm(IPSF): A service firm that is knowledgeintensive, requires relatively low levels ofcapital to develop and run their operations,have a professionalized workforce and haveinternational operations.

International strategy: Firms that follow aninternational strategy operate in internationalmarkets from their home country meaningthat they send their home country personnelto manage and run foreign operations.

Joint venture (JV): A JV is an entity formedbetween two or more parties to undertakeeconomic activity together. The parties agreeto create a new entity by both contributingequity, and they then share in the revenues,expenses, and control of the enterprise.

Knowledge creation: Knowledge creation isthe ability to acquire and create new know -ledge (exploration).

35

GLOSSARY

Knowledge retention: Knowledge retentionis the ability to reuse knowledge developedby others or yourself (exploitation).

Knowledge hub: A knowledge hub is alocality with high internal and externalnetworking and knowledge sharingcapabilities. A knowledge hub consists ofmany different actors and organizationsfrom universities, businesses, venturecapitalists, etc. which interact in order to innovate in designated areas.

Knowledge sharing: Knowledge sharing isan activity through which knowledge (i.e.information, skills, or expertise) isexchanged among people, a community oran organization.

Knowledge transfer: Knowledge transfer isthe ability to transmit knowledge from oneunit/person to the other.

Multidomestic strategy: Firms that choose a multidomestic strategy decentralize thecontrol and ensure that the decision makingis done on a local level.

Multinational corporation (MNC): A firmthat operates in more than one country.

Network ties: Network ties describe therelationship between nodes in a socialnetwork. Network ties can be strong, weak or absent.

Offshoring: Offshoring describes therelocation by a company of a businessprocess from one country to another -typically an operational process, such asmanufacturing, or supporting processes,such as accounting.

Outsourcing: Outsourcing is subcontractingof a service, such as product design ormanufacturing, to a third-party company.

Personalization knowledge managementstrategies: Knowledge shared throughcommunicating and interacting person-to-person. Both tacit and explicit knowledgecan be shared by personalization knowledgemanagement strategies.

Social network: A social network is a socialstructure made of individuals (or organi -zations) called "nodes," which are tied(connected) by one or more specific types ofinterdependency, such as friendship, kinship,financial exchange, dislike, sexual relation -ships, or relationships of beliefs, knowledgeor prestige.

Subsidiary: A company owned by the parentcompany or holding company.

Transnational practices: Transnationalpractices are both globally standardised andlocally adapted. This means that trans-national practices both use standardised andglobal tools, language, professional normsand corporate relations, while beingadapted and localised to the customercontext, the work performance taking place,and to the tools and colleagues locallysituated.

Transnational strategy: Firms that pursue a transnational strategy try to both beinglocal responsive and globally integrated atthe same time. Thus one characteristics ofthe transnational firm is on the different -iated contributions by all its units tointegrated worldwide operations. Anothercharacteristic is that joint innovation byheadquarters and by some of the sub-sidiaries leads to the development ofrelatively standardized and yet flexibleproducts and services that can captureseveral local markets. Decision making and knowledge generation are distributedamong the units of a transnationalorganization.

36

TERRELLA – international services forglobal markets – is a research project thatran from 2006 till 2009, funded by theNorwegian Research Council and parti -cipating companies. The project focused onservice performance, organizational formsand global teams in international profes-sional service firms. The project washeaded by Nemko AS in a researchconsortium with company partner DNVEnergy, research partners NorwegianSchool of Management BI and SINTEF,and commercialization partners Devoteam daVinci and Computas.

The findings of the Terrella research project have been distilled into 12 shortinsights that are presented in this report.Supporting references and suggestions forfurther reading are provided in the appendix.These insights are based on more than 20conference papers and more than 30presentations in seminars and workshops.

The central approach of this researchproject has been to study service perfor-mance in depth and to develop the

processes of international collaborationand knowledge exchange within servicefirms, rather than focussing on firm levelstrategies and structures. This approach hascontributed to organization development incompany partners, and has also generatednew research-based knowledge on thecoordination challenges and the impli -cations for work exchange and knowledgemanagement in international service firms.

The research findings are based on datacollection including interviews, fieldworkand questionnaire surveys. More than 250interviews have been carried out, mostlywithin the partner companies but also in abroader set of international firms withinbusiness and professional and business,including Accenture, Hydro, IBM, Kongsberg Maritime, Norsk Akkreditering,Norconsult, Scandpower, SNPower, Statkraft, Statoil and Telenor. The projecthas also conducted in-depth questionnairesurveys with more than 1500 responsesfrom headquarter managers, subsidiarymanagers, subsidiary employees and customers.

About the Terrella project