How Startups Use Knowledge Management to Create a Learning Organization

Kristen Craft | April 2, 2018

If you’re unfamiliar with the term learning organization, it is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights. It’s exactly the type of organization that millennials want to work in, and it’s hard to blame them.

Millenials are the most educated generation ever, and according to research by PwC, millennials now have an expectation that they will continue to learn after they enter the workplace, seeking out opportunities to take in new information and gain valuable experience. These findings suggest that 35% of millennials are attracted to employers who offer excellent training and development programs; in fact, this is the top benefit they seek from potential employers.

However, millennials might be disappointed to hear that in a recent survey of 200 senior L&D decision makers for The Open University Business School, only 20% said that their businesses deliver consistent learning programs. That’s a concerning statistic, considering that by 2020, 35% of the workforce will be millennials, and a further 24% will be Generation Z (mid 1990s – late 2000s).

Given the current desires and expectations of the millennial generation, such as flexible location, hours, and role, there is a particular type of organization that benefits significantly from embracing the culture of the prototypical learning organization: startups. Startups need to be nimble and flexible, but first, let’s explore why this stance is valuable across many types of organizations.

Why all organizations should strive to be learning organizations

We tend to see certain common traits in a learning organization. Typically, learning organizations excel in five areas:

  1. Problem solving
  2. Experimentation
  3. Learning from their own experiences
  4. Learning from the experiences of others
  5. Transferring knowledge efficiently throughout the organization

Today’s world moves faster than ever, and it shows in the turnover within Fortune 500 companies over the last two decades. Of the Fortune 500 firms on the list in 1995, only a sobering 31% of companies remain on the list two decades later in 2016.  The rate at which companies rise and fall on the list is only growing faster with time. It’s hard to keep up with the change of the modern world.

One of the reasons for such swift changes to the world’s biggest firms is the rise of startups. Because startups are so nimble, they can often pivot and innovate more quickly quicker than the existing giants; they tend to be particularly adept at fostering a repeatable process of experimentation.

One of the core principles from Eric Ries’ best-selling book, ‘The Lean Startup,’ is that “the unit of progress for lean startups is validated learning – a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty.”

Startup organizations thrive on learning and adapting to chaotic conditions. By taking the concept of validated learning, startups can not only work fast, but also quickly learn, experiment, and then transfer the knowledge gained throughout the team. This new knowledge allows startups to quickly figure out the right thing to build, based on the needs of the customer; as a consequence, the development process shrinks substantially.

Many startups display an advantage in the form of non-bureaucratic operating systems; this lack of (sometimes stifling) bureaucracy is often due to a more fluid (or even undefined) org chart. Instead of catering to politics, a startup team’s main goal is to make progress through experimentation and validated learning. They’re constantly calibrating what’s working and what’s not, based on customer feedback.

Measuring progress with validated learning

This process of experimentation and measurement is often called validated learning. You can also think about it as the “Build-Measure-Learn” loop, described by Ries. Validated learning is a useful measurement of success for startups for two key reasons according to Ries:

  1. Traditional figures like total revenue are vanity metrics. They don’t reveal how funnels are improving over time, but validated learning does, such as:
    • How profitable is it on a per-customer basis?
    • What’s the total available market?
    • What’s the ROI on acquiring new customers?
    • How do existing customers respond to our product over time?
  2. Validated learning focuses on the progress made in the minds of the people working for the company; this prioritizes learning over the assets or products the company creates, e.g, you can’t point simply to revenue, code, or other assets as progress.

The validation of a product or service comes from sources consisting of a variety of dimensions, such as high engagement rates, viral coefficient, or long-term retention rates. The important thing is that your data tells a compelling story and demonstrates that the company is built on solid foundations.

How to transform into a learning organization

If your aim is to transform an organization into a learning organization then you’ll want to draw upon the traits that we mentioned earlier. It’s worth posing some initial questions (to yourself and to others on the team):

  • What process do you use to solve problems?
  • How will your startup experiment with new ideas and knowledge?
  • How will you ensure that your startup learns from the experience of itself, and others?
  • How do you (and can you) efficiently transfer knowledge throughout the organization?

Keeping in mind the concept of validated learning, you can use a simple three step approach to begin implementing a process that allows your startup to acquire and transfer knowledge internally.

  1. Acquire knowledge: Gather information about a problem you’re trying to solve or a project you want to tackle. This can be through either your own reading or personal development, or directly via your work.
  2. Implement and experiment: Putting into practice what you learned is the best way to experiment with your newfound knowledge. It will also give you the chance to learn even more and develop your understanding of a matter further.
  3. Validate and transfer knowledge: Using your metrics to validate what you’ve learned, you can then focus on transferring what would typically be locally-held knowledge throughout your organization. This can be done through a variety of ways, for example, through reports, presentations, or a knowledge management platform that might be integrated with existing software you use like Slack.

By focusing on building knowledge, experimentation, and transferring knowledge, you’re investing in your startup’s success. You make it easier for others to double down on what works and scrap what doesn’t – without forcing them to undertake the same experiments others have conducted. And whether your company is a startup or a longstanding player, this approach helps your organization become smarter and more nimble over time.