European manufacturers have long recognised that, much like their service industry peers, they find themselves competing in a knowledge economy. Companies both large and small possess vast amounts of knowledge spread across countless structured and unstructured sources, and the pace of acquisition is growing exponentially as technology facilitates the rapid exchange of information.

The ability to improve processes and bring new products to the market faster and more cheaply depends on identifying, making available and applying this knowledge. Moreover, sources of key knowledge no longer necessarily reside within the four walls of the company. As companies become more geographically dispersed and engage with a growing number of suppliers, partners and customers, vital information about processes or potential new products is just as likely to lie outside the organisation itself in the broader supply chain.

The development of this complex web of relationships has made it more important than ever to establish efficient mechanisms to share knowledge and, indeed, for companies to become more aware of the extent of the information they hold. In this report we look at the difficulties that senior executives from manufacturing industries say they experience in identifying and using institutional knowledge. We also explore some of the mechanisms—both technological and organisational—for capturing and sharing knowledge and highlight examples of best practice among companies that have successfully established a culture of knowledge exchange.

Key findings from this research include the following:

Companies find it difficult to capture and make use of knowledge from external partners. Respondents to the survey have made and expect to make significant use of outsourcing and offshoring for both design and manufacturing. While this approach has increased overall competitive advantage, kept costs down and helped companies to maintain flexibility of capacity, it has not necessarily led to better products, new intellectual property or process innovation. The approach has also brought new risks to bear on the organisation. The findings suggest that many companies find it difficult to share and capture knowledge from their external partners, and have not yet discovered how to turn the use of external partners to their advantage in terms of process and product innovation.

Lack of communication and a hoarding of knowledge continue to hamper internal communications. Common internal barriers to knowledge transfer include a lack of communication between functions in the company, the fact that knowledge frequently resides in unstructured sources (eg email, notebooks), and the tendency for some individuals to hoard knowledge. To remedy some of these problems, respondents recommend courses of action including the creation of cross-functional teams and the standardisation of processes and practices.

Many companies do not know the extent of their IP but are gradually starting to look to external partners as potential sources. External partners have not yet become important sources of IP for many organisations, although most respondents expect the proportion of IP derived from external partners to increase. Suppliers are seen as the most likely source. Around half of respondents say that they do not know the true extent of IP in their organisation, suggesting that more needs to be done to realise the full value of this asset.

An important goal of knowledge management is seen to be the sharing of best practice. The main benefits of improved flow of knowledge through the organisation are perceived to be the sharing of best practice around business processes and the ability to respond more effectively to customer demands.

Companies must think carefully about the communication channels that best serve their objectives. Respondents to our survey confirm that face-to-face meetings remain by far the most effective channel for communicating knowledge and information. Other channels, such as intranets, conference calls and e-mail are perceived as being considerably less effective. With many companies now collaborating across multiple teams and time zones, careful thought needs to be given to the best ways of sharing information and knowledge, especially when face-to-face meetings may not be possible.