859 Authors name

Knowledge Development through Client

Interaction: A Comparative Study
Siw M. Fosstenløkken, Bente R. Løwendahl and Øivind Revang

Abstract

Siw M. The present article extends a previously published framework for the analysis of
Fosstenløkken knowledge development in professional service firms by looking deeper into the
Norwegian School underlying dynamics of the components and processes described in the framework.
of Management
BI, Norway This extension is based on an in-depth comparative case study of knowledge
development in two professional service firms from two very different industries,
Bente R. namely, engineering design and communication consulting. Despite the major
Løwendahl differences between the firms and the industries, we found some remarkable
Norwegian School similarities in terms of how professionals perceive knowledge development at work,
of Management in particular, the emphasis on the role of sophisticated and knowledgeable clients. In
BI, Norway
this article, we elaborate on this aspect. As a result of these findings, the framework
Øivind Revang is further refined, as the areas where clients play a major role in the knowledge-
Norwegian School development processes of professional service firms are highlighted.
of Management
BI, Norway Keywords: professional service firms, knowledge development, client interaction

Introduction

In an earlier article, we proposed a framework for the analysis and develop-

ment of knowledge- and value-creation processes in professional service firms
(PSFs) (Løwendahl et al. 2001). This framework includes three fundamental
components for analysis: domain choices, service delivery, and the resource
base of the firm. The framework suggests that knowledge-development
processes (KDPs) in PSFs may take place within each of these three
components, but that important KDPs are also likely to be found in the
relationships between the three components of the framework.
In this article, we apply the framework in a comparative study of
knowledge development in two PSFs from two different industries: communi-
cation consulting and engineering design. The study was designed as an in-
depth comparative case study (Yin 1984), where the overall research question
Organization was: How do professionals in PSFs perceive knowledge development at
Studies
24(6): 859–879 work? The structure of the article is as follows. First, we present the
Copyright © 2003 theoretical background, in particular in terms of our view of the two key terms
SAGE Publications for this special issue: knowledge and professional organizations. Then we
(London,
Thousand Oaks, briefly present the framework. In section three, we describe the research
CA & New Delhi) methods and present some background information about the two firms

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860 Organization Studies 24(6)

involved. Subsequently, we apply the framework for the structuring of the

empirical findings from the two firms, as well as applying a comparative
analysis. Based on the empirical data, we put particular emphasis on the
findings regarding the role of clients in PSF knowledge development. We
then propose a refinement of the framework as well as some implications for
further research on knowledge development in the professional service sector.

Theoretical Background

This study was designed from a strategic management perspective, as we are

particularly concerned with how PSFs can improve their KDPs and thereby
improve value creation. Let us start by clarifying what we mean by this.
For the purposes of the present article, we start with the simplified
assumption that firms, managers, and employees jointly attempt to increase
value creation, and that the value created will be fairly distributed. We do
acknowledge that market power, intra-firm power, the relationship between
owners and employees, and many other problems make such an assumption
rather naive and unrealistic. However, since the purpose of this article is to
study knowledge development, we have decided to leave out the important
questions of how knowledge development leads to improved value creation,
as well as how improved value gets distributed among the relevant actors.
Even given such a simplistic assumption about firms, the reasons for
attempts to manage knowledge development for improved value creation are
still quite diverse. Some firms attempt to manage knowledge in order to gain
control over a resource which management fears may walk out of the firm at
any time, that is, to increase firm-level property rights to knowledge (Morris
2001). Other firms attempt to improve the quality of the knowledge per se,
or its application in value creation. The underlying assumption is still that if
you ‘manage’ knowledge, you can create and appropriate more value. Such
an assumption frequently also carries with it the assumption of knowledge as
a resource which can be specified independently of context and independently
of actors as ‘knowers’. ‘In general, however, it is decidedly problematic
whether the realities denoted by such terms as knowledge, competence, skills,
know-how, or capability are the sorts of things that can be adequately
discussed as items of property’ (Winter 1987: 160, emphasis in the original).
Both the notion of an asset as an ‘item’, discrete and possible to discern from
its context, and the notion of firm ‘property’, are highly problematic when it
comes to knowledge.
Despite acknowledging these difficulties, we start out with a theoretical
anchoring in the resource-based view (RBV) of firms and value creation. This
is not unproblematic, since many of the resource-based contributions take the
traditional management perspective, and assume that the more the firm is able
to direct and control its resources (read ‘knowledge’), the more the firm will
be able to appropriate above-average rents from its unique resources (read
‘knowledge’). However, many ‘cornerstones’ of the RBV as well as related
theoretical contributions are particularly concerned with the dynamic

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Fosstenløkken et al.: Knowledge Development Through Client Interaction 861

development of knowledge or capabilities as sources of value creation (for

example, Penrose 1959; Winter 1987; Teece et al. 1997; Prahalad and Hamel
1990; Kogut and Zander 1992; Amit and Schoemaker 1993; Conner and
Prahalad 1996; Hedlund and Nonaka 1993; Nonaka and Takeuchi 1995;
Nonaka and Konno 1998; Nonaka et al. 2000; Von Krogh et al. 2000). Our
research follows this tradition, and emphasizes the application of resources
in value-creating activities (for example, Penrose 1959).
According to Empson (2001), most research on knowledge in PSFs is either
functionalistic or interpretative in nature. We assume that even though our
epistemological starting point is that knowledge is socially constructed
(Berger and Luckmann 1966) and impossible to define objectively, it may
still be possible to design or influence the knowledge-creation, development,
and application processes in such a way that value creation is improved.
Strategic management of KDPs is not about allocation and control, as with
tangible resource investments, but rather requires more interactive and
dynamic approaches. You cannot manage and control knowledge per se, but
you can manage people and processes whereby they interact and create new
knowledge. Hence, when we say that our starting point is a strategic
management perspective, we mean to emphasize our interest in the processes
whereby firms (through their managers) may improve value creation through
the application and development of knowledge. We do not suggest an
emphasis on top-down directives, linear planning, and the like, but we do
suggest that whoever is in charge (maybe a temporary group of managing
partners) has the potential to influence, guide, and support professional
decision-making in such a way that the firm’s overall ability to reach its
strategic priorities is improved.
We have chosen a broad definition of knowledge, as is now common in
much of the literature on knowledge development (for example, Polanyi 1966;
Kogut and Zander 1992; Hedlund and Nonaka 1993; Nonaka and Takeuchi
1995; Baumard 1999; Grant 1996; Spender 1996; Lam 2000). Hence, we
include both the tacit and explicit aspects of knowledge, and we are interested
in knowledge development both at the individual and the collective level. We
deliberately refer to ‘collective knowledge’ as opposed to ‘organizational
knowledge’, thereby allowing us to discuss knowledge shared by smaller
groups than the entire organization. We do recognize that attempts clearly to
define knowledge are problematic and debated. In this article, we refer to
knowledge development as interpreted by the respondents. When asked, for
example, to describe the situations where they feel their own personal
knowledge is best enhanced, respondents consistently referred to a number
of different aspects of knowledge, such as technical knowledge, social skills,
communication skills, and so on.
As regards the strategic development of knowledge, we have chosen to
base our analysis on the work of Hansen et al. (1999), who propose that
management consulting firms (and presumably also other PSFs) have to
choose between a ‘codification’ strategy for knowledge management, based
on what they call ‘reuse economics’, and a ‘personalization’ strategy, which
supports what they call ‘expert economics’.

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862 Organization Studies 24(6)

We also adopt a broad definition of what a professional organization is,

building on the work of Løwendahl (1992, 1997) and Maister (1993).
Løwendahl (1997: 18–23) proposes a pragmatic definition, which is intuitively
meaningful to people within professional service industries. She chose to
classify PSFs based on the types of services they deliver, rather than the
characteristics of their employees. According to Løwendahl (1997: 20),
professional services:

 ‘are highly knowledge intensive, delivered by people with higher

education, and frequently closely linked to scientific knowledge
development within the relevant area of expertise’
 ‘involve a high degree of customization’
 ‘involve a high degree of discretionary effort and personal judgement by
the expert(s) delivering the service’
 ‘typically require substantial interaction with the client firm represen-
tatives involved’, and
 ‘[are] delivered within the constraints of professional norms of conduct,
including setting client needs higher than the profits and respecting the
limits of professional expertise’.

This pragmatic definition of what characterizes PSFs means that firms such
as management consulting companies, investment banks, insurance brokers,
advertising agencies, and marketing and PR service companies are included
in a list of PSFs, in addition to obvious candidates such as law firms, auditing
firms, and engineering design firms (Løwendahl 1997: 20). A more narrow
definition would be to require that a majority of the employees must be
members of a profession, or even more narrowly, that the firms should belong
to the P2 category (Greenwood et al. 1990), that is, that the majority of the
members should be members of a profession and that the firm’s ownership
should be a partnership in form. Rather than adopt the narrow point of view,
we have chosen to include as a variable the extent to which the employees
are members of a profession. We decided to maximize firm differences along
this dimension, with the hope of generating similarities and differences
regarding the knowledge-development dimension.
In the following section, we introduce the framework we are going to apply
in our analysis, before we turn to the empirical data.

Introducing the Framework

As part of the foundation for this empirical study, we developed a framework

for the analysis of knowledge- and value-creation in PSFs (Løwendahl et al.
2001). The framework, illustrated in Figure 1, consists of the strategy or
domain choice and the resource base (top and bottom of the figure), the core
processes involved in service delivery (centre of the figure), and a set of
processes which may improve or reduce the resource base, in particular,
knowledge (the arrows in the figure).

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 Fosstenløkken et al.: Knowledge Development Through Client Interaction 863

Figure 1
The VCPs of PSFs
framework STRATEGY/DOMAIN CHOICE:
Prioritizing customers and projects

WHO AND WHAT IS DEMANDED?

2. Establishing service
delivery ‘technology’.
delivery technologies
Improving service-

What is possible?
Learning 2:
WHAT, WHERE
TO WHOM, AND
HOW TO DELIVER?

CONSTRAINTS:
ENABLERS:

SERVICE DELIVERY:
Activities – Tasks – Interdependences
i.e. ‘Technology’

What is possible?
knowledge base

competence(s).
Improving the

1. Mobilizing
Learning 1:

WHO PARTICIPATES
WHAT DO WE WANT?

IN THE DELIVERY?

RESOURCES:
Collective knowledge
(knowledge flow)

Individual knowledge
+ tangibles

Value-creation processes (VCPs) include both service-delivery processes

(SDPs), which create value directly for clients, and knowledge-development
processes (KDPs), which are indirectly value creating, in that they enhance
the value-creation potential of the firm, and thereby also the value of the firm
itself to owners and other stakeholders. We have labelled the framework ‘The
VCPs of PSFs framework’, and the logic is as follows. At any given point in
time, a firm has made its domain choice (Levine and White 1961), and,
therefore, has a set of client relationships and a project portfolio to be
completed. Similarly, the firm has recruited professionals who possess a
certain knowledge base. This knowledge exists both as individual expertise
and skills, and as collectively developed routines, procedures, and ways of
doing work together. We have termed these contextual components, because
in a short-term perspective they set limits for what kinds of VCPs the firm
can carry out. On the one hand, they constrain what the firm can credibly sell
to clients, which clients are likely to be convinced by a project proposal, and
what kind of projects and service deliveries the firm can successfully
complete. On the other hand, the firm’s reputation, client relationships, and
expertise enable the firm to win advanced projects within their areas of
specialization. The outer arrows in Figure 1 illustrate these effects.
The firm’s KDPs (the inner arrows of Figure 1) are dynamically enhanced
by successful projects, as individuals learn from their project experience.

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864 Organization Studies 24(6)

SDPs may also be improved through systematic development. In the short

run, these changes are typically limited to the scope of the existing domain
and the established resource base. In a long-term perspective, all of these
components can change. ‘Invisible assets’ may be altered as the result of both
direct investments in these assets and indirect enhancements as by-products
of service delivery (Itami 1987). This is especially true for knowledge and
reputation. For this reason, we have found that a strategic management
perspective on KDPs in PSFs is particularly fruitful, as the priorities set for
both — which types of client project are prioritized and what kind of
knowledgeable professionals are recruited — are critical factors which both
constrain and enable knowledge development. A clear, consistent strategy
(that is, a consistent set of priorities) may support the dynamic processes of
knowledge development and ensure that they contribute to positive feedback
loops.
In the following section, we present the research design and methodology,
before we apply the framework to the analysis of the data from the two case
firms.

Research Design

The purpose of this study is to understand relationships, and a qualitative

research design was well suited to this. We emphasized data ‘collection’ (or
rather construction) and the analysis of multiple types of data (Yin 1984), in
order to provide rich descriptions of the phenomena so as to make it possible
to identify relationships and to provide a contextual and holistic understanding
(Goode and Hatt 1952; Van Maanen 1979; Pettigrew 1990). Hence, a case-
study approach (Eisenhardt 1989; Becker 1992; Yin 1984), applying an
exploratory design (Yin 1984), was appropriate. We follow Glaser and
Strauss’s (1967) recommendation in terms of choosing cases that can help
generate many properties of the initial categories, and which in turn may help
identify relationships between these. The cases were selected in accordance
with a most-different approach (Yin 1984), as maximizing differences among
comparison groups increases the probability of collecting different and varied
data bearing on a category (Glaser and Strauss 1967: 56). Differences were
maximized both at the firm and at the individual level. At the firm level, two
dimensions were particularly emphasized, namely, employees’ membership
in a profession and the degree of customization involved in an average project.
The firms were also very different in terms of size and age. Differences at the
individual level were maximized in terms of targeting respondents with
different ages, tenure, seniority or position, educational backgrounds, special-
ization, and so on. The unit of analysis was the individual professional’s
personal experiences with knowledge development related to their work
situation in each firm. Individual responses were compared both at the intra-
and inter-firm levels.
We started out by choosing two very different industries, namely,
communication consulting and engineering design. Engineering design is an

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 Fosstenløkken et al.: Knowledge Development Through Client Interaction 865

old and well-established consulting industry, with highly recognized, science-

based education programmes as well as professional organizations. Firm size
varies from a handful of experts to several hundred, and competition for large
projects can be highly international. Clients also vary substantially in terms
of their own level of professional expertise, from those seeking advice to
clients who are experts themselves. Projects range from small projects
involving a single professional for less than a day to huge national or
international projects involving multiple engineering firms and hundreds of
professionals for several years. Inputs are primarily engineering expertise in
terms of highly skilled professionals supported by computer technology and
well-established project-management routines, and even though no two
projects are the same, a typical project involves a number of clearly defined
procedures. The engineering design firm chosen (hereafter called ENGG) is
recognized as being one of the best in Norway, in terms of its professional
knowledge and experience, and is considered to be able to recruit the best
candidates and to be well connected to the academic community.
Communication consulting, on the other hand, is a rather new industry with
many small firms and no established educational standards. As in manage-
ment consulting, there is no professional organization where individual
consultants are certified and become members, and consultants are recruited
from a variety of backgrounds. Communication consulting firms are primarily
hired for their experience and their knowledge of how to handle communi-
cation projects — a kind of ‘non-scientific’ expertise. Firms in this industry
fall into two broad categories, as they focus on internal or external
communication. Firms focused on internal communication strategies need to
possess a good track record with successful clients and the right combination
of experience and expertise in-house, whereas PR-advisory firms are also
hired for their network of connections to the media. The degree of innovation
involved may vary from project to project. Inputs are experienced and well-
connected professionals who communicate well with clients as well as
external contacts. The communication consulting firm chosen for the present
analysis (hereafter called COMM) was newly reorganized and constantly
reinventing its processes in its attempts to establish a sustainable position in
this underdeveloped industry. COMM’s service focus has shifted from

Figure 2 Membership of profession

Firm and Industry
Differences NO YES

COMM
High
Degree of
customization of
services and
methodologies ENGG
Low

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866 Organization Studies 24(6)

advertising and internal communication to internal communication and

development of corporate culture. The firm is small, but successful, and
enjoys a good reputation in its particular niche.
Figure 2 illustrates how these firms were ‘most different’ on the two
dimensions of professional affiliation and degree of customization. More
information about the firms is presented in the following section, where we
apply the framework.

Data Collection

In order to enhance descriptive validity, data collection was based on

triangulation between semi-structured interviews, analyses of written
materials, and observations within real-work practice. The primary source
of data was semi-structured interviews conducted with all 11 employees
in COMM and 9 in ENGG. The latter represented six different sections
within five different divisions, and the informants selected were from
all levels in the organization, of different sex and ages, with different
educational backgrounds, and with different experiences. Since the majority
of interviewees in ENGG were male (8 of 9), we have chosen to refer to all
interviewees in ENGG as ‘he’ in order not to compromise the confidentiality
of the female employee. In COMM, the majority were female (8 of 11) and,
therefore, we have chosen to refer to all interviewees in COMM as ‘she’.
Most people were interviewed once, a few twice, and the interviews lasted
between 60 and 90 minutes. The questions were based on an interview guide
developed in a pilot study covering firms from a number of different PSF
industries.
Interpretative validity has been strengthened by returning the written
interview transcript to each participant, giving them the opportunity to adjust,
comment, and correct their statements. Transcripts were based on tape
recordings of all interviews, with the consent of the interviewees. Given the
difficulty involved in efforts to verbalize experiences of knowledge develop-
ment, additions and corrections to transcripts were often highly informative.
Documents and archival records were used in order to build up a
background of each company, and to corroborate and augment the data
collected through interviews and observations. In addition, company accounts
and industry descriptions helped to increase understanding of the context
of each firm, for instance the competitive environment. Strategy plans,
descriptions of client projects, working tools, project handbooks, bulletins,
and annual reports were analysed, as well as information available on the
firms’ intranets. As a supplement, observations in real-work practice were
also included, to identify potential discrepancies between what people
described and what was actually taking place in the firms studied (Pettigrew
1990). The observations included in this study took place within actual project
work, including meetings with clients and client seminars, and were
conducted in different phases of project work. During the observations,
‘memos’ (defined as ‘the researcher’s record of analysis, thoughts, interpret-
ations, questions, and directions for further data collection’ (Strauss and

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Fosstenløkken et al.: Knowledge Development Through Client Interaction 867

Corbin 1998: 110)) were frequently used. Another useful arena for gaining
further understanding of the respondents, their personalities, beliefs and
interpretations was active participation in the social environment of the firm,
such as in informal lunches.
In the following section, we apply the framework to the analysis of the case
firms.

A Comparison of Two Professional Service Firms

Domain Choice, Service Delivery and Resource Base

The two firms were different concerning all three components of the frame-
work. In terms of their domain choice, COMM limits its market to large
companies with headquarters in the area around Oslo. It targets relatively large
projects, which allows for a substantial degree of innovation. Projects involve
close interaction with a number of client-firm representatives, and typically
concern intra-firm communication of new strategic initiatives to employees.
Its domain choice, in particular as regards the types of services delivered, is
relatively unique, and it has no competitors who offer the same combination
of services. However, large advertising firms as well as other communication
consulting firms are trying to establish practices in this particular area, so far
without the same success. ENGG has chosen a much wider domain, and
competes in most major areas of civil engineering. The firm offers services
within a number of different market areas, covering all phases of a project
cycle, from the earliest feasibility studies, through project implementation, to
the actual operations and maintenance phase. ENGG has 10 different divisions,
based on professional specialization, and competes for both small and large
projects nationally as well as internationally. Projects range from less than
US$1,000 to several million, and from one to two days to many years. The
firm has a long-standing reputation from foreign aid projects in developing
countries and newly industrialized countries worldwide. Clients are often
public, but also include large industrial and construction companies.
The resource bases of the firms are also quite different, not only because
of the differences in size, but also because of the composition of their
workforces. COMM employs senior people who already have an established
reputation and who bring with them a set of relationships with potential clients
as well as external sources of learning and new ideas. Each employee has an
educational and practical background that is clearly distinguishable from that
of other colleagues, for example a psychologist, an actress, and an employee
with a graduate degree in economics. Creativity, exploration, and curiosity
appear as central elements of the knowledge required to do a good job for
clients. In terms of the strategies for knowledge management suggested by
Hansen et al. (1999), COMM represents a clear case of a ‘personalization’
strategy. ENGG hires both juniors straight out of technical university and
senior employees with substantial experience, but most of the hiring is of
juniors. Most senior employees have either been with the firm for many years
or have come into the firm through a number of mergers and acquisitions.

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868 Organization Studies 24(6)

The professionals cover a wide variety of civil engineering disciplines. At the

firm level, ENGG is involved in some development projects in collaboration
with a technical university, partly financed by the national research council,
and they maintain a close relationship with the technical university for
recruiting purposes. In terms of the strategies for knowledge management put
forward by Hansen et al. (1999), ENGG largely employs a ‘codification
strategy’ and relies to a great extent on the reuse of knowledge. It is important
to note that the extent of reuse of knowledge is seen relative to other types of
PSFs, not to the entire population of business firms. Compared to a traditional
manufacturing firm or a standardized service firm such as McDonald’s,
ENGG would be classified as relying relatively little on knowledge reuse.
COMM and ENGG are also different when it comes to their service-delivery
processes or how they deliver services to their clients. COMM is highly
selective in terms of projects, and consciously avoids projects which involve
‘exploitation’ of existing knowledge, as opposed to the development of new,
innovative approaches, that is, ‘exploration’ (March 1991). Target projects are
preferably large, multidisciplinary, and involve members of the client’s top
management team. ENGG competes in an industry where most projects are
awarded after bidding processes and tough negotiations. They have less
opportunities to say no to projects they do not want, and in some cases take
on small and unprofitable projects as necessary investments in access to future
bidding processes. Preferred projects still involve new development and
professional challenges, large multidisciplinary teams, and a substantial
amount of time, but many actual projects depend more on the ‘exploitation’
of existing techniques and established project-management routines.

Knowledge-Development Processes

Despite the above firm-level differences, responses from professionals to

questions about knowledge development were remarkably similar. According
to Hansen et al. (1999), firms relying on a ‘reuse economics’ knowledge-
management strategy should be particularly concerned about developing
computer support systems, databases, and routines, whereas firms relying on
an ‘expert economics’ or ‘personalization strategy’ should be expected to
invest heavily in individual professionals as well as team building and
communication. Our two case firms, however, were surprisingly similar in
terms of their knowledge-development emphasis.
Every professional interviewed, be they a young, newly hired employee or
a senior partner, said that learning through project work was by far the most
important source of knowledge development. For example:
‘It is in active project work most of the knowledge development takes place. Because
then you are continuously confronted with issues you typically haven’t been in contact
with previously.’ (Junior in ENGG)

The professionals in both firms highlighted not only the importance of

project work, but also the importance of interacting with the right kind of
clients. The following quote from COMM illustrates this:

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Fosstenløkken et al.: Knowledge Development Through Client Interaction 869

‘It is in the meeting between the market and all the things going on there and the
knowledge that we possess that new knowledge develops with us. The moment we
loose our market sensitivity, I suppose we will begin to replicate ourselves, and then
we will loose the grip.... We are dependent on creating new things in projects for
demanding clients with varied sets of tasks to be solved.’ (Professional in COMM)
One of the junior professionals in ENGG described how he learns from the
way he needs to revise his solutions as well as his way of reporting them, as
he learns to see things from the clients’ perspective:
‘In my work day I find myself between two worlds, the world of the architect and the
world of the entrepreneur. Those two often think in highly different ways. You learn
to adjust to both these clients, to their way of thinking when you come out and meet
with them.... Likewise, they have to listen to what I perceive as important. It is an
interplay. If you only work in-house you get very isolated. You become blinded by
your own work and less capable of seeing what other people’s worlds look like.’
(Junior in ENGG)
First-hand learning from clients requires interaction, and most consultants
say that meetings with clients are important. ‘What is really useful is to attend
client meetings together with my colleagues, because such situations always
add extra pressure. You have to give more than if you just sit in internal
meetings,’ one of the professionals in COMM explained. Meeting the client
face to face also allows for a more immediate visualization of how different
types of knowledge may combine to make a complete picture:
‘A couple of weeks ago, we were in a meeting with the top managers in Firm X. We
are very concerned that each of us has a positive role in meetings, so that everyone
has something to contribute. Our CEO [chief executive officer], A, B, and myself
were present. It was great fun to be that many out at the same time, because then you
realize how the knowledge of each individual may contribute to a whole to a totally
different degree than if we first sit together, and then somebody goes out and presents
the results.... I am a seeing is believing type of person. Tell me and I don’t understand,
but show me and I get it. If I am in a meeting listening to the client’s own words, that
produces a totally different understanding than hearing one of the seniors telling the
story afterwards.’ (Professional in COMM)
Direct access to clients may also be linked to the level people work at in
the organization, as highlighted by a COMM employee:
‘How much you learn varies according to the level you work on. Typically, it [the
learning] is higher for the consultants than the graphic designers, and particularly for
the consultants working closest to the top managers in the client firm, and then to
lesser extents the further you move beyond.’ (Professional in COMM)
Another factor frequently highlighted, was the level of competence of the
client. According to one of the professionals of COMM:
‘The big difference is the level of competence in the client organization. It may be
difficult to predict that level, and sometimes we miscalculate on the budget. We expect
to find that a firm of a certain size holds a certain level of competence, meaning that
they should have knowledge about a lot of things. If we meet people with low
competence, it may create a problem. [There] is no doubt in my mind that it is ten
times more exciting and valuable in terms of learning, to work with highly competent
clients that constantly challenge you professionally, versus the ones that you have to

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870 Organization Studies 24(6)

push and lift. Probably I am a bit selfish, but clearly, it is much more fun to work with
the clever clients.’
Professionals in both firms also emphasized multidisciplinary teams as a
source of learning. They claimed that learning was enhanced through
interaction with colleagues from different backgrounds. Here, however, there
was a difference in terms of how the firms were using the term
‘multidisciplinary’. In COMM, a multidisciplinary team would consist of
people from very different backgrounds, such as the theatre, business, and
sociology. At ENGG, multidisciplinary primarily meant teams with engineers
from different engineering specialities, such as construction, electrical
engineering, and traffic planning.
Client questions may also trigger intra-firm discussions which further
enhance learning:
‘As soon as you are uncertain about anything, you just go to those down the hall who
are dealing with similar things. Ask what they think. It is important to talk to others,
because that gives you another angle to the problem or challenge. In those situations
you learn a lot, because you start to think differently.’ (Junior professional in ENGG)
Such interactions may be between individual professionals, or involve a
group of people gathering to develop a new approach or solve a client
problem. Meetings may be planned or spontaneous, as illustrated in the
following quote:
‘After the seminar yesterday, we sat down quite exhausted all of us. As we sat there,
we developed a very exciting working process related to the sales meeting I am doing
tomorrow. We really let loose, and managed to think differently. I could feel how we
used each other. We are all very different, in terms of period of employment, and
level of knowledge. But the effective ways in which we utilized each other’s
competences brought so much fun. Previous knowledge developed into new things,
and allowed us to expand further than what we initially thought was possible.’
(Professional in COMM)
Professionals in both firms focused almost exclusively on interpersonal
aspects of knowledge development. We had expected this to be the case in
COMM, where the knowledge-management strategy was clearly one of
‘personalization’. However, contrary to the predictions of Hansen et al.
(1999), both juniors and seniors in ENGG also focused primarily on aspects
of knowledge such as communication skills, a holistic understanding of the
projects, a deep understanding of different clients’ needs, and experience from
international projects. As one of the managers said:
‘The “stuff” on the surface is easy to formalize through computer systems and tools,
etc. But there are a large number of interactions across here, which are impossible to
formalize. I sometimes wonder ... wouldn’t [we] be better off with more coffee
makers, rather than more computer software?’ (Manager in ENGG)

There was also consensus on the importance of individually driven

initiatives to update personal knowledge. Knowledge development was seen
primarily as an individual responsibility, and this was common for both
seniors and juniors. The CEO of COMM went so far as to say that ‘unless

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Fosstenløkken et al.: Knowledge Development Through Client Interaction 871

people are personally driven by curiosity and interest, and try to develop their
own knowledge, a small firm like ours cannot afford to hire them’. One of
the junior professionals of ENGG was equally clear:
‘Those who complain about lack of personal development typically haven’t done
anything themselves to get what they want. I nag a lot, and now I think I will get it
my way. [He was talking about training for an international assignment.] We joke
that it is to get rid of me, to stop the nagging.’
Professionals in both firms report that explicit investments in knowledge
development, such as formal training programmes, access to external courses,
and individual budgets for professional updates of expertise, were little
emphasized. However, here there was a discrepancy between what seniors in
managerial positions believed about access to external learning arenas and
what juniors felt they would be allowed to do. For example, when asked about
ENGG’s willingness to invest in course work, a junior was highly sceptical.
‘What would it take for you to be allowed to go to an external course, then?’
asked the interviewer. ‘Oh, then I would have to beg very hard,’ he replied,
indicating that such permission was extremely difficult to get. The managers
were of a different opinion, as in this quote:
‘Of course we will allow people to attend the courses they want. Such requests don’t
come up very often, maybe once every year-and-a-half, so it is no big problem. The
challenge is to find time. In our division we have quite a big budget allocated to
courses and knowledge development, but as a matter of fact, we find it difficult to
spend all the money.’ (Manager in ENGG)
The challenge of finding time to update the knowledge base was also
presented by all interviewees. Client projects can always be improved a little
bit more, and operational activities tend to crowd out more long-term
development projects. Professionals in both firms also emphasized internal
development projects, and herein may lie one explanation of why these firms
seem to spend surprisingly few resources on knowledge development such
as formal training and so on. At COMM, a small number of hours were
frequently set aside which could otherwise have been allocated to service
delivery, and in these ‘development projects’, internal experts devoted time
to the training and development of their colleagues. One example is an
employee who is an actress, who has been training colleagues in drama
techniques. These techniques are then used later, in client projects related to
organizational culture and change. A junior professional in ENGG also
provided an example of an internal development project. He suddenly
remembered that when he said the firm spent very little on training and course
work, he had completely forgotten that he had been given a budget and a
number of hours to train his colleagues in a particular type of simulation
technique in which he was an expert. It had been quite successful, but as it
was completed about half a year ago, the interviewee did not spontaneously
think of this as an investment in knowledge development. Since many such
training and knowledge-development initiatives are small and never show up
as specified items or budgets, there seems to be a substantial risk of
underreporting knowledge-development investments in PSFs.

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872 Organization Studies 24(6)

Table 1
Similarities and Similarities
Differences in
Knowledge On-the-job learning in projects was the most important factor in knowledge development.
Development Internal knowledge sharing and ad hoc opportunities, such as personal initiatives, play
Across the Two crucial roles.
Firms
Strong preferences for knowledgeable clients.
Professionals in both firms emphasize multidisciplinary teams as a source of knowledge
development.
Short-term client deliverables are prioritized above and beyond long-term knowledge
development.
Tacit knowledge, such as interpersonal communication skills and the ability to understand
different types of client expectations, was emphasized by all professionals, juniors as well
as seniors.

Differences

COMM highlighted learning from people with very different backgrounds, whereas ENGG
emphasized learning from peer experts (yet also with different engineering specializations).
ENGG emphasized multidisciplinarity in terms of multiple engineering specialties. In
COMM, multidisciplinarity meant training and educational backgrounds from fields as
different as economics, sociology, and drama.
ENGG preferred clients with specified requirements, whereas COMM chose clients with
underspecified requirements.

In Table 1, we summarize some of the main similarities and differences in

terms of knowledge development highlighted here.
The frequent mention of interaction with clients as a driver of knowledge
development led to a need to refine our framework. This refinement is the
focus of the following section.

The Role of Clients in KDPs: The Framework Refined

The finding in both firms that client interaction was considered to be crucial
for knowledge development led to a need to add more detail to our original
framework. The clients are clearly part of the domain choice, and at the same
time, they are key actors in interactive SDPs. But in our study, they were also
pointed out as being crucial to the KDPs (the arrows in Figure 1). Hence, for
the purpose of an in-depth analysis of knowledge development in PSFs, it
seemed inadequate to keep the clients as one of the underlying factors within
the components of the figure. We therefore decided that we needed to refine
the framework. This refinement does not in any sense alter the framework —
it is more like putting a magnifying glass to the overall components in order
to identify the more detailed factors underlying these components. And for
the purpose of the present analysis, the magnifying glass is put to the factors
related to client interaction.
In Figure 3, we have redrawn the components from the original framework
of Figure 1, highlighting clients as a central factor in strategy and domain

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 Fosstenløkken et al.: Knowledge Development Through Client Interaction 873

choice, and professionals as a central factor of the resource base. The

challenge of the PSF, as pointed out by Maister (1993), is to match the needs
of clients and professionals such that value creation is maximized for both
parties. This match takes place in the SDPs, where clients and professionals
interact. This is not to say that the other factors of the domain (what is
delivered, where, and how) are not central — we only mean to highlight the
factors particularly emphasized by the professionals participating in this
study, relative to questions about how they develop knowledge at work.
Similarly, we do not mean to say that other resources, such as collective
knowledge and reputation, are unimportant. We are simply focusing on a
subsection of each of the components.
By highlighting the clients, SDPs, and professionals, we have identified
seven different types of KDPs. Four of these relate to knowledge development
in PSFs, and are mentioned frequently in our data. The other three relate to
knowledge development external to the PSF — learning by the client firm
and by other actors. In Figure 3, these seven KDPs are illustrated.
The first process in Figure 3 (1) involves professionals learning from their
colleagues within the firm. This includes internal development projects,
learning from colleagues who respond when you turn to them with a new
problem, and learning with colleagues in planned or spontaneous knowledge-
development activities. The second process (2) involves the development of
improved SDPs. This requires the professionals to set aside time to develop
better concepts, better tools, better routines, and so on. One example of such
a process is the spontaneous meeting in COMM referred to above. If service
delivery involves substantial reuse of knowledge, computer systems may be

Figure 3
Learning Through
Client Interaction 6 Clients learning
Clients from external sources
from professionals
4 Clients learning

7 External actors
learning from clients

5 Clients learning from service delivery

Service delivery
processes
learning from clients

(SDPs)
3 Professionals

2 Improvement of SDPs

Professionals 6 Professionals learning

from external sources
1 Professionals learning
from each other 7 External actors learning
from professionals

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874 Organization Studies 24(6)

of great assistance in the development of service-delivery methodologies.

However, none of the respondents highlighted codified knowledge and
computer assistance as primary sources of knowledge development. The third
process (3) involves the professionals learning from their clients. This was
also frequently mentioned, and is a particularly interesting aspect of PSF
knowledge development. Sophisticated, knowledgeable clients were con-
sidered a key factor in knowledge development, both because professionals
may learn directly from client representatives (3), and because learning from
the client can trigger the other two internal processes: (1) learning from peers
by coming back from the client with new, unanswered questions and (2)
development of collective knowledge through improved SDPs.
Knowledge development in client-professional interaction may also take
place in the client firm. Many PSF clients are particularly concerned about
their own learning processes, and in some cases, clients may want to learn so
much from the PSF that they can internalize the services for the future. In
such cases, the client may become a competitor of the PSF. Service delivery
may also include the training of client employees, as is often the case in
engineering projects linked to the delivery of production equipment, plants,
and so on. The fourth process (4) involves clients learning directly from the
professionals, whereas the fifth process (5) involves clients learning through
the interaction in the SDPs. Since the role of the client was an emergent
dimension in our study, the study was not designed to explore knowledge
development as seen from the client firm’s perspective. Therefore, we do not
have data on these two processes.
Two additional processes related to the client-professional interaction can
be identified. These processes involve other external actors. First, both
professionals and client-firm representatives may learn from others, such as
when external experts are called in, when professionals read the printed results
of research and development, and so on. This is illustrated as the sixth process
(6) in Figure 3. Professionals in both ENGG and COMM talked about how
they could turn to outsiders for solutions or ideas. In ENGG, the relationship
to the technical university and the research community was particularly
highlighted. In COMM, several meeting places for professionals, clients, and
external experts were organized, in order for ideas as well as knowledge to
be exchanged. Lastly, (7) knowledge development may also take place
outside of the client-professional interaction, such as when a professional
gives a speech, writes a report, or in other ways transfers knowledge to
external actors. This process was mentioned in some of the interviews, but
was not a focus of this study.
The imaginary magnifying glass allowed us to refine and spell out in further
detail a set of seven different KDPs which were bundled in two of the inner
arrows of our original framework in Figure 1. In the following and final
section, we discuss the implications of these findings, for research as well as
for management in PSFs.

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Fosstenløkken et al.: Knowledge Development Through Client Interaction 875

Discussion and Implications

The present study started out at the strategic management level, and our
original framework was developed for analysis of knowledge development
at firm level. However, as we investigated KDPs in further detail, we found
that we had to turn to the microlevel of individual professionals and how they
perceive the way KDPs take place in their firms in order to understand how
these processes can be supported and enhanced. Based on data from two very
different firms, we are not ready to draw any conclusions at the firm level,
except that it seems clear that the choice of the right types of clients (whenever
the firm is in a position to choose between two clients and projects) is of
utmost importance, not only for profitability and short-term value creation,
but also for knowledge development.
Our analysis was primarily related to knowledge development as seen from
the individual level, hence, our data and findings do not give us any clear
guidelines as to implications at the strategic, managerial or firm level. Based
on data from 20 professionals in two firms, we cannot draw any clear
conclusions, but we can speculate. Our impression, from analysing the
discrepancies in responses between managerial-level professionals and
juniors, is that individual knowledge development is less accessible than PSF
managers might think. When formal training programmes and access to KDPs
depends primarily on the individual, maybe a bit on the mentor (if he or she
exists), and quite a bit on luck and time available, knowledge development
in PSFs may become an issue of being at the right place at the right time and
being seen by the right person. When the workload is plentiful, prices are
high, projects are varied and involve a large amount of ‘exploration’, and
colleagues and clients are knowledgeable and insightful, the PSF may be
much like a ‘land of milk and honey’, where knowledge development is
abundant for everyone. When competition is tough, margins are squeezed,
and PSFs seek to reuse and modularize knowledge as well as solutions,
internal competition for access to the best arenas for knowledge development
may also become extremely tough.
Access to clients, face to face, was seen as very important for each
individual professional. In most firms, managers and other senior pro-
fessionals take on a role as ‘gatekeepers’ vis-a-vis the clients, and may,
therefore, both enhance and prevent the knowledge development of their
colleagues. Managers are the linking-pins between firm-level policies and
individual knowledge development. Some managers are likely to be highly
conscious of their role as mentors and peers, and will make every effort to
bring colleagues into client meetings. Others may be more concerned with
their own career development and their own relationships with client
representatives. At the firm level, it seems important to develop policies which
enhance individual access to KDPs, individual incentives to create such
processes and, for example, to share knowledge with colleagues, and efforts
to transform individual knowledge into collective knowledge whenever that
makes sense for future knowledge utilization and development.
Our study suggests that individual professionals may be wise to develop

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876 Organization Studies 24(6)

their own personal knowledge-development strategies and to be proactive

about how they want to develop their own knowledge base. When individual
and firm-level knowledge-development needs match, chances are that both
the individual and the firm-level strategies can be realized without unnecess-
ary extra costs. That is the ideal situation for firms as well as for individuals.
However, most firms and most individuals are likely to have to compromise
on some dimensions. Still, if the firm is able to win the right projects for the
right clients most of the time, value creation, knowledge development and
client satisfaction may actually be achievable simultaneously. Hence,
managerial attention to project and client selection is likely to be crucial for
knowledge development.
The present study has made it clear that we need to look further into the
role of the client in PSF knowledge development. In the service management
literature, it has been known for decades that services are produced in
interaction with clients. That is true for airlines, hotels, schools, and
hamburger chains. What is new is that the client is also brought into the KDPs
of the PSFs, as so much of their knowledge development comes about as a
by-product of operational activities, where the client plays a crucial role. It
is not obvious that the clients who are ‘right’ from an operational or profit-
maximization point of view, are always the same as the clients who are ‘right’
from a knowledge-development point of view. Hence, in future research it
will be important to examine further which client characteristics enhance or
constrain PSF knowledge development.
Our findings also call for a further refinement of the framework of Hansen
et al. (1999), which proposed two alternative strategies for knowledge
management in consulting firms. Neither COMM nor ENGG fit into the
categories suggested, but rather seem to prefer some kind of ‘mixed mode’.
COMM deliberately seeks projects which require cross-disciplinary team
collaboration, leading to the development of new solutions and ‘tools’ which
are then further refined in later projects. Hence, it does not only focus on
individual networks and the enhancement of individual knowledge (termed
‘personalization’ by Hansen et al.), but rather spends substantial amounts of
time and resources targeting the appropriate projects in which collective
solutions can be developed and improved. Similarly, ENGG invests a lot in
IT support systems and methodologies, but does not only follow a ‘reuse
economics’ strategy. On the contrary, they target projects where collaboration
with highly educated and sophisticated clients may lead to learning for both
parties.
Further investigation into the nature of client relationships and the role
which clients may play in the knowledge development of individuals as well
as PSFs is clearly needed. Questions which remain to be answered are, for
instance: What is the nature of the ‘ideal’ client and the ‘ideal’ type of client
interaction? How do individual professionals get access to the ‘right kinds’
of projects, at the right time and at the right level, in order to improve their
own knowledge development? And, how do firms manage the balancing
of individual knowledge-development needs with the overall needs of the
firm?

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 Fosstenløkken et al.: Knowledge Development Through Client Interaction 877

Note We thank The Research Council of Norway for funding the research project as part of the
‘Competence, Education, and Value Creation’ Research Programme. We also thank the guest
editors, Laura Empson, two anonymous reviewers, and Anne Grete Stykket for very helpful
comments during the process of developing this article.

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 Fosstenløkken et al.: Knowledge Development Through Client Interaction 879

Siw M. Siw M. Fosstenløkken is a doctoral candidate in Strategy at the Norwegian School

Fosstenløkken of Management BI. Her research interests are primarily in individual and organiz-
ational learning processes, with particular emphasis on professional service firms.
She is currently about to finish her doctoral dissertation investigating competence
development in four professional service firms.
Address: Department of Strategy, Norwegian School of Management BI, Box 580,
1302 Sandvika, Norway.
E-mail: [email protected]

Bente R. Bente R. Løwendahl is Professor of Organizational Culture and Management at the

Løwendahl Norwegian School of Management BI. Her research interests include knowledge-
intensive firms, professional service firms, knowledge as a strategic resource, and
post-industrial value creation. Her publications have included articles in Strategic
Management Journal, Scandinavian Journal of Management, and Global Focus. She
is an active member of the Academy of Management (BPS) and the Strategic
Management Society, and teaches primarily in the MBA, MSc, PhD, and executive
programmes.
Address: Department of Strategy, Norwegian School of Management BI, Box 580,
1302 Sandvika, Norway.
E-mail: [email protected]

Øivind Øivind Revang holds an Ekonomie Dr. from Linköping University. He is Professor
Revang of Change Management and currently head of the Department of Strategy at the
Norwegian School of Management BI. His primary research interests are strategies
of organizational change, new organizational forms and the management of
professionals. He teaches extensively in graduate and executive programmes, and has
published articles in a number of journals, including Strategic Management Journal,
Human Relations, and International Journal of Information Management.
Address: Department of Strategy, Norwegian School of Management BI, Box 580,
1302 Sandvika, Norway.
E-mail: [email protected]

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