Paper: Market orientation and the learning organization – Slater & Narver (1995)
Effective organizations are configurations of management practices that facilitate the development of the
knowledge that becomes the basis for competitive advantage. A market orientation, complemented by an
entrepreneurial drive, provides the cultural foundation for organizational learning. However, as important
as market orientation and entrepreneurship are, they must be complemented by an appropriate climate
to produce a ‘learning organization’.
A market orientation is valuable because it focuses the organization on (1) continuously collecting
information about target-customers’ needs and competitors’ capabilities and (2) using this information to
create continuously superior customer value. Market orientation has taken a central role in discussion
about marketing management and strategy.
A market-oriented culture can achieve maximum effectiveness only if it is complemented by a spirit of
entrepreneurship and an appropriate organizational climate, namely, structures, processes, and
incentives for operationalizing the cultural values.
The critical challenge for any business is to create the combination of culture and climate that maximizes
organizational learning on how to create superior customer value in dynamic and turbulent markets,
because the ability to learn faster than competitors may be the only source of sustainable competitive
advantage.
This research argues that though a market orientation provides strong norms for learning from customers
and competitors, it must be complemented by entrepreneurship and appropriate organizational
structures and processes for higher-order learning (double-loop vs. single-loop).
Organizational learning = the development of new knowledge or insights that have the potential to
influence behavior. Presumably, learning facilitates behavior change that leads to improved performance.
Types of organizational learning
- Adaptive learning (single-loop learning): most basic form of learning, occurs within a set of
recognized and unrecognized constraints (i.e., the learning boundary) that reflects the
organization’s assumptions about its environment and itself. The learning boundary constraints
organizational learning to the adaptive variety, which usually is sequential, incremental, and
focused on issues or opportunities that are within the traditional scope of the organization’s
activities.
- Generative learning (double-loop learning): when the organization is willing to question long-held
assumptions about its mission, customers, capabilities, or strategy. It requires the development
of a new way of looking at the world based on an understanding of the systems and relationships
that link key issues and events. Systems thinking disciplines the organization to focus on
interrelationships and dynamic processes of change rather than on linear cause-effect chains.
Frame-breaking and more likely to lead to competitive advantage than adaptive learning.
Sustained generative learning is an elusive goal. Revolutionary periods of generative learning may provide
a window of competitive advantage that can be kept open only through continuous improvement.
Eventually the window will begin to close as knowledge about the innovation diffuses to competitors.
Processes of organizational learning
Organizational learning is a three-stage process that includes information acquisition, information
dissemination, and shared interpretation.
1. Information acquisition: Information may be acquired from direct experience, indirect experience
of others, or organizational memory. Exploitation (learning from internally focused experience)
vs. Exploration (learning form externally focused experience). Exploration include the use of
large-scale demonstration projects and small-scale market experiments. Organizations must
continuously balance between learning from exploitation and exploration because too much
reliance on the former is unlikely to lead to generative learning, whereas too much reliance on
the latter is expensive and may produce too many underdeveloped concepts and ideas.
Effective organizations are configurations of management practices that facilitate the development of the
knowledge that becomes the basis for competitive advantage. A market orientation, complemented by an
entrepreneurial drive, provides the cultural foundation for organizational learning. However, as important
as market orientation and entrepreneurship are, they must be complemented by an appropriate climate
to produce a ‘learning organization’.
A market orientation is valuable because it focuses the organization on (1) continuously collecting
information about target-customers’ needs and competitors’ capabilities and (2) using this information to
create continuously superior customer value. Market orientation has taken a central role in discussion
about marketing management and strategy.
A market-oriented culture can achieve maximum effectiveness only if it is complemented by a spirit of
entrepreneurship and an appropriate organizational climate, namely, structures, processes, and
incentives for operationalizing the cultural values.
The critical challenge for any business is to create the combination of culture and climate that maximizes
organizational learning on how to create superior customer value in dynamic and turbulent markets,
because the ability to learn faster than competitors may be the only source of sustainable competitive
advantage.
This research argues that though a market orientation provides strong norms for learning from customers
and competitors, it must be complemented by entrepreneurship and appropriate organizational
structures and processes for higher-order learning (double-loop vs. single-loop).
Organizational learning = the development of new knowledge or insights that have the potential to
influence behavior. Presumably, learning facilitates behavior change that leads to improved performance.
Types of organizational learning
- Adaptive learning (single-loop learning): most basic form of learning, occurs within a set of
recognized and unrecognized constraints (i.e., the learning boundary) that reflects the
organization’s assumptions about its environment and itself. The learning boundary constraints
organizational learning to the adaptive variety, which usually is sequential, incremental, and
focused on issues or opportunities that are within the traditional scope of the organization’s
activities.
- Generative learning (double-loop learning): when the organization is willing to question long-held
assumptions about its mission, customers, capabilities, or strategy. It requires the development
of a new way of looking at the world based on an understanding of the systems and relationships
that link key issues and events. Systems thinking disciplines the organization to focus on
interrelationships and dynamic processes of change rather than on linear cause-effect chains.
Frame-breaking and more likely to lead to competitive advantage than adaptive learning.
Sustained generative learning is an elusive goal. Revolutionary periods of generative learning may provide
a window of competitive advantage that can be kept open only through continuous improvement.
Eventually the window will begin to close as knowledge about the innovation diffuses to competitors.
Processes of organizational learning
Organizational learning is a three-stage process that includes information acquisition, information
dissemination, and shared interpretation.
1. Information acquisition: Information may be acquired from direct experience, indirect experience
of others, or organizational memory. Exploitation (learning from internally focused experience)
vs. Exploration (learning form externally focused experience). Exploration include the use of
large-scale demonstration projects and small-scale market experiments. Organizations must
continuously balance between learning from exploitation and exploration because too much
reliance on the former is unlikely to lead to generative learning, whereas too much reliance on
the latter is expensive and may produce too many underdeveloped concepts and ideas.
