Turning knowledge into action: innovation expert Robert Sutton reveals the mind-set and strategies needed to go from theory to practice. (Cover Story).

How do smart companies turn knowledge into action -- and what stops them? Over the years, I've met countless executives, managers, and engineers who were smart and hardworking, but who were unable to turn their ideas about improving performance into organizational action. Again and again, it appeared that while many knew what they ought to do, actually implementing a program within their organization was another story.

I began researching the question, collecting data and scouting the literature, and endeavored to turn my own knowledge into action -- in the form of a book, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action (coauthored with Jeffrey Pfeffer, Harvard Business School Press, 2000).

There is an enormous and efficient market for valid business knowledge. More than 2,000 business books are written every year. Many of them repeat the same lessons, and some authors, even the famous Peter Drucker, convey similar ideas in each book. But such repetition does not mean these management thinkers are giving bad advice. In fact, the breadth and depth of rigorous research evidence supporting Drucker's ideas get stronger every year. The puzzle addressed in The Knowing-Doing Gap is that even though managers hear and know the same valid lessons over and over, they don't turn this knowledge into organizational practices, services, and business models.

Knowing What to Do

Books aren't the only medium through which managers learn valid lessons that they then fail to turn into organizational action. U.S. corporations spend more than $60 billion on training each year, along with more than $45 billion on management consultants. Most management consultants don't give bad advice. Rather, the problem usually is that consultants tell executives what they ought to do, but rarely stay around to make sure that they follow their advice. The United States produces more than 80,000 business school graduates every year; another 20,000 or so are produced in other countries. So there are many managers trained each year in the latest business knowledge. Presumably, all these leaders know what management practices and business models their companies should follow.

Every year sees an enormous amount of rigorous research, done mostly by university researchers, about which business practices and models are better and worse, both within specific industries and across diverse industries. Some of the most important of these studies were funded by the Sloan Foundation in the 1980s and '90s. We have longitudinal, large-scale studies of the textile industry, steel mini-mills, computer hardware companies, computer software companies, automobile plants, and many others. As a result, most leaders in these industries know which business models, practices, and technologies are used by their competitors. The problem is that, despite such knowledge, many of these same leaders don't apply it in their companies.

For example, every automobile executive knows about John Paul McDuffey's research and a book called The Machine that Changed the World, which show in absolutely convincing fashion (because McDuffey has been following every automobile plant in the world for over a decade) that to the extent an automobile plant looks like the Toyota production system, Toyota produces higher quality cars at a lower cost. Despite such knowledge, executives in most other automobile companies cannot coax or cajole their plants to implement these methods as effectively as Toyota does. In a speech to a group of Stanford University students in 1993, Ford Motor Company CEO Donald Peterson admitted, "I wish we had the best manufacturing system in the world but we don't--Toyota does."

In The Knowing-Doing Gap, we assert that such failure at implementation does not happen because such leaders lack intelligence or persistence; rather, it is because they lead organizations that make these changes hard to implement.

Another example comes from the so-called "war for talent." McKinsey Consulting surveyed the corporate officers of 77 corporations. There is a great deal of evidence that companies will attract better employees, who will also stay longer and be happier with their jobs, when line managers are involved in recruiting people for positions. Recruiting newcomers isn't something that is best just handed over to human resources. McKinsey's research showed that 78 percent of the corporate officers surveyed believed that line managers should be held accountable for the quality of their people, but only 7 percent reported that their companies actually used this practice.

An Action Advantaqe

As these and many other examples in The Knowing-Doing a Gap show, the point is that there is no knowledge advantage unless it leads to an action advantage. Or, as Starbucks President Howard Behar put it, "A learning organization is useless unless it's also a doing organization."

We discerned three overarching lessons from our research about how organizations can go from theory into practice:

1. Philosophy matters. Our research revealed, as have many of the Sloan Foundation studies, that those firms that consistently turn knowledge into action have concise and widely followed philosophies or general beliefs that are used to guide action across a range of situations. Consider Honda's guiding philosophy for training suppliers: Actual part, actual place, actual situation. If you are a Honda supplier, this simple statement provides precise guidance about whether you are doing things right or wrong -- no detailed or convoluted book of rules is required.

IDEO Product Development is a firm I've worked with extensively. Its core philosophy is "Enlightened Trial and Error Outperforms the Planning of Flawless Intellects." For them, if an engineer is not producing prototypes, if he or she just keeps talking about the product concept rather than actually developing it, that engineer is doing something wrong. For IDEO, doing is producing prototypes. IDEO has designed everything--about 3,000 products, from the first Apple mouse to the Palm V.

So that's the first major lesson, that philosophy matters. But it must be a philosophy where you walk the talk. It can't be hollow rhetoric, or the result will be cynicism and inaction.

2. Know by doing. The second lesson is, If you know by doing, there is no gap between what you know and what you do. This may seem obvious until you look at how management education and business consulting are actually done most of the time. Many executives in contemporary organizations have been to business school, and those who don't have MBAs often attend executive education programs. Talk is the essence of management education, the business school experience, as it is practiced at leading institutions in the United States and throughout the world. Students learn how to sound smart in case discussions, or to write smart things (talk turned into writing) on essay examinations.

The policy of grading on class participation makes pedagogical sense. These grading practices encourage students to come to class prepared. By being more actively involved in the class, students are more engaged in the learning process. Grading on class participation invariably encourages more frequent, enthusiastic, and thoughtful student comments, which creates more energy in the classroom. These are all desirable goals. But how is class participation evaluated? By sounding smart, by making insightful, intelligent, facile, and relevant comments on the issue under discussion. Not by necessarily being able to do anything about the situation or being able to actually implement the recommendations and insights that emerge in the conversation. So, from the very beginning of their training, and then in continuing education experiences, businesspeople learn that what matters is sounding clever in front of your peers and your boss (the professor).

Certainly, there are many times in business when it is important to give a glib 20-second answer, but there are many other aspects of management that have nothing to do with giving smart answers. It is instructive to compare management education to training in occupations where, when mistakes are made, people can be hurt or killed, like flying airplanes and doing surgery. In such occupations, people learn by doing and are only allowed to practice their craft if they have shown they can do the smart thing, rather than just give the smart answer.

3. Forgive and remember failure. After doing the research for our book, we believe that the best single diagnostic question for determining if a firm will turn knowledge into action is: What happens when people fall? There are only two ways that I know to avoid making mistakes. The first is to have perfectly trained people use a proven process. The second is to do nothing (assuming that doing nothing isn't seen as a mistake). If you want innovation, learning, or both, however, failure is inevitable and, since it is necessary for both innovation and learning, it is also desirable.

A couple years ago, I had a long conversation with an executive who wanted some ideas about sparking innovation m a multibillion-dollar corporation in a mature industry. Profits were falling, and so was the stock price. Wall Street analysts were complaining that the company wasn't innovative enough. This executive was exasperated because her company, especially the CEO, "hates raking risks," and she believed that other senior managers wouldn't back any program that might fail or distract people in the core businesses. She especially emphasized that any program that might further reduce quarterly profits would be unacceptable, even if it had long-term benefits. The CEO and other executives were convinced that the business practices they were using to do the company's routine work, the things they did to make money right now, could somehow generate profitable new products and business models.

They were dreaming an impossible dream. To build a company where innovation is a way of life, rather than a rare accident that can't be explained or replicated, risk and failure must be tolerated and viewed as a source of lessons for the future.

It is also important to emphasize that organizations that routinely learn from failures don't "forgive and forget" when people make mistakes; they "forgive and remember." Forgiveness is crucial when people fail because it enables them to maintain their self-esteem and to continue as useful and respected members of the group, rather than to be ostracized for the error.

As John Lilly, co-founder of Reactivity, a successful software firm, puts it, "We've learned that when we don't stop to think and talk about our mistakes, we keep making the same ones over and over. But when we do, we usually make them over a couple times before we learn nor to do it again. I wish we could learn after the first time, but at least we are learning."

Robert Sutton is Professor of Management Science and Engineering at Stanford, where he is co-director of the Center for Work, Technology, and Organization. He has spent nearly 20 years studying innovation, and consults to such companies as Guidant, Hewlett-Packard, McDonald's, Novartis, Handspring, 3M, and Siemens. In addition to The Knowing-Doing Gap, Sutton is the author of Weird Ideas That Work: 11 1/2 Practices for Promoting, Managing, and Sustaining Innovation (Free Press, 2001), named one of the Top 10 Business Books of 2001 by the Harvard Business Review. He can be reached at [e-mail].