# Knowledge Management as a Catalyst for Innovation within Organizations: A Qualitative Study

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## Knowledge Management as a Catalyst for Innovation within Organizations: A Qualitative Study

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The need for organizations to innovate and furthermore to ceaselessly innovate is stressed throughout the modern management literature on innovation. This need comes from increasing competition and customer demands and new market areas. Closely linked, but not synonymous, with innovation is the body of knowledge referred to collectively as knowledge management. Within this discourse knowledge is considered as a potential key competitive advantage, by helping to increase innovation within the organization. This paper focuses on the role of knowledge management in sustaining and enhancing innovation in organizations. In particular the paper seeks to establish a knowledge management model within which the principles of innovation can be incorporated. First,......

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1. Knowledge and Process Management Volume 7 Number 4 pp 233±241 (2000) & Research Article Knowledge Management as a Catalyst for Innovation within Organizations: A Qualitative Study Rodney McAdam* University of Ulster, UK The need for organizations to innovate and furthermore to ceaselessly innovate is stressed throughout the modern management literature on innovation. This need comes from increasing competition and customer demands and new market areas. Closely linked, but not synonymous, with innovation is the body of knowledge referred to collectively as knowledge management. Within this discourse knowledge is considered as a potential key competitive advantage, by helping to increase innovation within the organization. This paper focuses on the role of knowledge management in sustaining and enhancing innovation in organizations. In particular the paper seeks to establish a knowledge management model within which the principles of innovation can be incorporated. First, there is a brief review of the innovation and knowledge management literature and their respective synergies. From this literature a possible knowledge management model which incorporates innovation is suggested. Second, a research study is discussed which seeks to further examine and develop the model using an inductive grounded theory approach. The study involved socially constructed workshops representing 25 organizations, each of which constructed meanings in regard to innovation and the key areas of knowledge management as outlined in the model. Overall it was found that effective systematic knowledge management can incorporate innovation drivers in key areas which will result in both increased business and employee bene®ts. Copyright # 2000 John Wiley & Sons, Ltd. INTRODUCTION (1997) points out that: those [organizations] which use innovation to differentiate their products are on The continuously increasing pressure of competi- average twice as pro®table as other organizations' tion and global markets is forcing organizations to There are three broad categories of innovation become more innovative, with a view to increasing identi®ed in the literature: overall competitiveness (Tidd, 1997). Tidd et al. $Strategic innovative management to assist the organization in the challenges faced by its Dr McAdam is a Senior Lecturer and MBA course director at the School of Management, University of Ulster. He has a large environment (e.g. Pitt, 1998) number of publications in the area of business improvement,$ Management of innovative change initiatives process management and knowledge management and is a (e.g. Davenport et al., 1996) regular conference speaker. He has extensive consulting experience and worked in the aerospace industry before joining $Innovation through knowledge creation and the university. application (e.g. Demerest, 1997). Within each of these categories, innovation can be *Correspondence to: Rodney McAdam, School of Management, University of Ulster, Newtownabbey, Belfast BT370, UK. ranked from incremental to breakthrough (Tush- E-mail: r.mcadam@ulst.nc.uk man et al., 1997). This paper will inquire the third Copyright # 2000 John Wiley & Sons, Ltd. 2. RESEARCH ARTICLE Knowledge and Process Management category of innovation: how innovation relates to Knowledge construction and innovation knowledge. The ®rst two categories are vitally Knowledge construction includes the creation and important. However, large bodies of knowledge recognition of knowledge that is socially con- already exist in these areas, while the third area is structed as well as that which is scienti®c in relatively emergent as a discourse. character. Organizations which take this approach are innovative as they allow new types of knowledge to become recognized and applied throughout the organization. Nonaka and Takeu- KNOWLEDGE MANAGEMENT AND chi (1995) and Boisot (1989) see this innovative INNOVATION recognition and use of knowledge coming from social interaction, where employees are seen as Concurrently with the developments in the ®eld of actively constructing knowledge. Amidon (1998) innovation, there is the hegemony of knowledge considers this type of knowledge to be the key management as a key element in improving input for the process of innovation within organi- organizational competitiveness (Hedlund, 1994). zations. This taxonomy of knowledge allows Knowledge management includes new knowledge practical and experiential learning processes to be construction, knowledge embodiment, knowledge acknowledged as sources or constructs of innova- dissemination and knowledge use/bene®t (Demer- tive knowledge (Marshall and Reason, 1993). est, 1997). Quintas et al. (1997) state Knowledge Hence interaction between employees can be seen management is the process of critically managing as knowledge creation. Furthermore, within these knowledge to meet existing needs, to... exploit learning processes critical re¯ection and re¯exivity existing knowledge...and to develop new opportu- within employees must be encouraged so that nities'. These de®nitions indicate that knowledge taken for granteds' are questioned and hence the management has the potential to be a catalyst for maximum potential of new knowledge is con- innovation within organizations. structed (Alvesson and Willmott, 1996; Demerest, The aim of this paper is to investigate the 1997). McCartney (1998) views this process as possible use of knowledge management within making nuggets [of knowledge] from where the organizations as a catalyst or vehicle for increasing organization has done things'. innovation, and hence competitiveness. Existing By accepting socially constructed knowledge models of KM fall into three broad categories: organizations are not restricted to knowledge intellectual capital models (Edvinnson, 1997), being generated by management but can obtain knowledge category models (Nonaka and Takeu- knowledge from all levels in the organization and chi, 1995) and social constructionist models from outside the organization (e.g. customers, (Demerest, 1997). The model chosen for the current suppliers). Nonaka and Takeuchi (1995) describe study is a modi®ed version of Demerest's model this innovation as boundary spanning knowledge as it is more holistic than the mechanistic intellec- construction'. Thus, knowledge construction tual capital models and the reductionist know- (Figure 1) is seen as the gateway to innovation ledge category models. The model (Figure 1) within the organisation. Unless knowledge is essentially consists of a highly recursive ¯ow constructed on both a social and a scienti®c basis involving four key areas of knowledge. the process of innovation will not become embo- First, there is the area of knowledge construction died and disseminated within organizations. This where the construction is not limited to that of failure will ultimately result in a lack of embodied scienti®c inputs but includes the social construc- knowledge within new products (Madhaven, tion of knowledge. Second, the constructed know- 1998). ledge is embodied within the organization through a process of social interchange. Third, the em- bodied knowledge is disseminated throughout Knowledge embodiment and innovation the organization. Fourth, the use/bene®ts of KM considers both business and employee emancipa- If organizations can ensure the process of innova- tory bene®ts. In effect, as seen in Figure1, there is tion commences with new knowledge construction no speci®c routing of knowledge around these then such knowledge must be embodied (Figure 1) four key areas, but rather a highly recursive within the organization. The embodiment of new dynamic is produced. The contribution of this knowledge will enable innovation to become an view of KM towards the development of innova- essential part of the organization (Hedlund and tion is considered as follows, based on the four key Nonaka, 1993). McCartney (1998) states that the areas of the model shown in Figure 1. activities that give rise to innovation are basically 234 R. McAdam 3. Knowledge and Process Management RESEARCH ARTICLE Figure 1 Knowledge management model (modi®ed version of Demerest's model) the management of knowledge ¯ows'. Polanyi progress the process of innovation by embodying (1962) sees embodiment essential, as in most new knowledge within the organization, then the organizations the rule: we know more than we culture of the organization must be addressed. 3M can tell' applies. consider the tacit knowledge culture to be essential Attempts to embody the new knowledge should for innovation (Brand, 1998). Handy (1989) states lead to innovative organizational structures that the organization must become open' and (Nonaka and Takeuchi, 1995; Handy, 1989). Orga- receptive to knowledge workers ideas rather than nizations no longer need to guard scienti®c' closed. Pitt (1998) states the need for openness knowledge in the apex of pyramidal structures and freedom to encourage group interaction and but instead can form learning networks which sharing. Millar (1998) describes this as open- span geographic location and organizational mindedness' in which a blame-free experimental boundaries. Drath and Paulus (1994) describe approach can be accepted and adopted. In this such structures as proactive learning networks'. innovative environment mistakes must be toler- Instead of a them and us' approach, a collegiate' ated (Brand, 1998). The culture is one of openness, pattern develops (Peters, 1992). Boot et al. (1994) learning and collaboration'. view this approach as leading to more agility Knowledge workers also increase innovation by and responsiveness to innovation'. This agility turning tacit knowledge into explicit knowledge will become increasingly important as markets and by passing tacit knowledge onto others become increasingly fragmented (i.e. niche rather (Nonaka and Takeuchi, 1995; Hedlund, 1994). than segment driven) and organizations are forced Wetlaufer (1999) sees this process as involving to have ceaseless innovation' (Demerest, 1997). endless small-group discussions between employ- Innovation is not a one act drama...but an ongoing ees in an open and conducive environment. Brand process' (Nonaka and Takeuchi, 1995). (1998) considers that this willingness to share' Innovative organizational structure alone is not must permeate the entire ®bre of the organistion'. suf®cient for the embodiment of new knowledge. The chief executive of Ford (Wetlaufer, 1999) There must be concurrent innovative develop- describes the process as telling stories' about ments within the role of the organization's experiences. Madhaven (1998) states that teams people. Peters (1992) states that employees should involves in embodying this new knowledge must be considered as brokers of knowledge' rather develop and use new mental models which than simply as task orientated. Zuboff (1988) support innovation. To encourage this process describes such employees as knowledge workers'. of knowledge embodiment some organizations If these knowledge workers are to thrive and encourage job rotation and send employees to Knowledge Management as a Catalyst for Innovation 235 4. RESEARCH ARTICLE Knowledge and Process Management work in different parts of the organization. Also, beyond the organizational boundaries, leading to some organizations (e.g. 3M and Caterpillar) set increased innovative partnerships and alliances aside speci®ed time periods each week where (Nonaka and Takeuchi, 1995). employees can develop their own innovative If organizations are to systematically dissemi- ideas in small teams). nate new knowledge to achieve increased innova- In summary, knowledge embodiment can build tion, as suggested by Pitt (1998), the key processes on new knowledge construction and enable the will need to be identi®ed throughout the organiza- process of innovation to be further incorporated tion, its customers and suppliers (Davenport et al., within the organization. 1996). These common processes will act as rapid carrier vehicles for the increased dissemination of Knowledge dissemination and innovation new knowledge. For example, Nonaka and Takeu- chi (1995) single out the new product development Innovation includes not only the construction and process as entraining and disseminating new embodiment of new knowledge, but also the knowledge in all areas of the organization. dissemination (Figure 1) of proven new knowledge McCartney (1998) states that these process are across the organization and its environs (including essential for the management of knowledge ¯ow' customers and suppliers) (Demerest, 1997). Only or dissemination throughout the organization. through this dissemination process can Polanyi's Thus, if organizations are to effectively deploy (1962) observation (see above) be addressed. Peters innovation they must ensure that new knowledge, (1992) emphasizes the role of organizational struc- which has been effectively embodied, must also be ture in disseminating new knowledge which leads disseminated throughout the organization if a to innovation. He sees learning networks or process of ceaseless innovation' (Nonaka and spider's web' type structures as being able to Takeuchi, 1995) is to become effective. rapidly spread new knowledge which will lead to increased knowledge embodiment in the form of new products and services throughout the organization. Knowledge use/bene®t and innovation Knowledge dissemination should not be adhoc Organizations which are noted for being innova- but, as pointed by Pitt (1998), exemplar organiza- tive usually have an effective knowledge manage- tions are systematic at making intuitive experien- ment system (i.e. construction, embodiment and tial knowledge explicit and in diffusing it more dissemination of knowledge). For example, 3M's widely in the enterprise'. Gurteen (1998) sees this key mission is to become the most innovative happening through dynamic interaction among company in the world and it sees effective learning networks (Robertson et al., 1996) which knowledge management as the way to achieve are free from the encumbrances of functional this goal. 3M requires each one of its businesses to hierarchies. Roberts et al. (1998) point out that it have at least 30% of its sales from products not in should not be assumed that knowledge ¯ows from the corporate centre but may now be based in the the line four years ago (Brand, 1998). The organi- peripheries of the organization. Thus, innovation sation is a good example of organisation's which, is no longer the domain of senior management but in the words of Nonaka and Takeuchi (1995), can arise anywhere and at any level in the ceaselessly innovate'. These characteristics are organization. Nonaka and Takeuchi (1995) see increasingly important in organizations as tradi- this new knowledge dissemination as leading to tional predictable markets become ever more innovation that is systematic and continuous'. fragmented and volatile. To thrive on chaos' Knowledge workers have a key role in achieving (Peters, 1992), organizations must ceaselessly inno- increased innovation through knowledge dissemi- vate or decline. nation. Acting in cross-geographical boundaries Also, with innovation resulting from effective these knowledge workers can sift and re®ne and knowledge management there is an opportunity implement' (Gurteen, 1998) ideas from across the to square the circle' of business bene®t and organization. Sometimes this process is achieved employee emancipation. The business bene®ts of by moving members from successful past teams increased growth through innovative new pro- into new teams in other areas, by job rotation and ducts and services can be paralleled with con- by using experienced mentors for teams (Mad- current increases in employee creativity and haven, 1998). As interaction with customers and empowerment (e.g. Caterpillar allow employees suppliers increase, the knowledge worker will to spend 10% of their time developing their own disseminate and embody new knowledge far ideas in small teams). 236 R. McAdam 5. Knowledge and Process Management RESEARCH ARTICLE RESEARCH METHODOLOGY FOR THE shops were run by asking the participants to CURRENT STUDY discuss each of four generic areas of the KM process shown in Figure 2. In total there were ®ve To further develop and investigate knowledge workshops run which represented 25 different management and innovation a qualitative research organizations from all sectors. study was carried out. The research method is illustrated in Figure 2. WORKSHOP FINDINGS: KNOWLEDGE CONSTRUCTION AND INNOVATION Research survey The quantitative element of the research method- The entire area of knowledge construction is akin ology involved using a questionnaire to survey the to innovation in that new knowledge is being scope of KM in regard to key trends. The survey created which can them be incorporated within the data was not used to establish reasons and mean- organization (Nonaka and Takeuchi, 1995). This ings. The survey ®ndings are fully discussed in view was summed up by a participant: McAdam and McCreedy (1999). We are working in the realms of creativity here [workshop discussion on knowledge construction] rather than simply discussing Participative workshops knowledge.' The survey data showed who was willing to Effective knowledge construction was seen as participate in the workshops, based on the level opening up the gateway to innovation: of their organization's involvement in knowledge management. Thus, those participating in the I have these facts and ®gures but how do I workshops were interested and involved in the use them creatively?' area of knowledge management and agreed to Knowledge is...how to open up possibilities, participate further. how to open up other options?' The main purpose of the research was to Gurteen (1998) describes this as the ability to think inductively build theory using grounded theory in an abundance of new ways' which will open (Glauser and Strauss, 1967). In this case the up the road to innovation within organizations. grounded approach was that of social construc- The participants quickly concluded that know- tionist workshops (Easterby-Smith and Thorpe, ledge leading to increased innovation would have 1997) involving managers from organizations to be much wider than the paradigm of scienti®c involved in knowledge management. In these knowledge construction: workshops the groups of managers negotiated meaning in relation to a topic (knowledge manage- It is much wider...for example meeting here, we ment and innovation in this case). could be meeting on the shop¯oor somewhere This approach is consistent with the overall idea having a chat, or an of®ce, there is an argument of constructing knowledge socially. The work- that we are constructing knowledge [in these situations].' Thus, it was realized that knowledge construction leading to increased innovation depended on socially constructed knowledge as well as scienti- ®cally constructed knowledge (Alvesson and Will- mott, 1996). This socially constructed knowledge was considered to be tacit in addition to explicit knowledge: The tacit knowledge is the in¯uential know- ledge that will make...dynamic organizations.' Such a view is similar to that of Boisot (1989) and Hedlund and Nonaka (1993). When the participants had constructed their wider views on knowledge construction they seemed to recognize the possibilities that were Figure 2 Research methodolgy opened up for increased innovation: Knowledge Management as a Catalyst for Innovation 237 6. RESEARCH ARTICLE Knowledge and Process Management The knowledge is already in the organization WORKSHOP FINDINGS: KNOWLEDGE ...if we started using it we could make massive EMBODIMENT AND INNOVATION developments.' It is learning how to use what you know and If newly constructed knowledge is to lead to identifying what you don't know.' innovation then such knowledge must be em- bodied or incorporated within the organization This recognition was coupled with the need for (Quintas et al., 1997). The need for embodiment personal responsibility to create the new know- was echoed by the participants: ledge: How do I take it [new knowledge] within my That's where we have to contribute from our organization to do something creative with it, I perceptions.' bring to bear my experience, my insight, con- Furthermore, the potential resources for innova- tacts etc.' tion were now grasped: Thus, knowledge embodiment was seen as essential Maybe up to now there has been a resource or to resulting innovation within the organization. asset sitting there that hasn't been valued within Participants considered innovation resulting the organization.' from knowledge embodiment as being re¯ected There is an awful lot of knowledge within the in the organization's structure. In agreement with organization that people do not realize the value Handy, Peters and Bessant (1997) they preferred for.' open, ¯at dialogue-based structures to closed hierarchical and top-down structures: As the participants continued to construct mean- ings from their discussions the importance of It's a mixture of bottom up and top down...you socially constructed knowledge through people can set up depositories of knowledge which became ever more important. They recognized people can access...faster decision making.' the need to develop the source of new knowledge The role of a supporting open and participative and encourage it: culture (Brand, 1998) was seen as vital to enable You need to build people's con®dences in innovation through knowledge embodiment: themselves.' We [management] try to limit them [employees] We need to talk to one another and from that and hence lose a lot of knowledge.' interact and we [then] create new knowledge Knowledge is power, there also is fear...it is a and better ways of doing things.' cultural problem.' Linked to this view was the realization that Fear of giving up knowledge. Will it affect my innovated thinking could be dangerous from a usefulness?' personal career standpoint: The culture was seem as accepting mistakes as There is a danger in stepping outside estab- part of the innovation process: lished wisdom because you have to keep your It is dif®cult to get people to impart knowledge back covered.' about mistakes...very important knowledge.' This view contrasted with another participant's Coupled to removing fear of mistakes was the idea experience of lack of innovation because: of trust: We are not used to having discussions and Part of the discussion must be about trust...if I letting knowledge emerge out of that, it is put another 5% of my knowledge in here and I usually a one-way ¯ow [top-down].' don't get paid anymore, then...' One of the participants quoted his experience of A no-blame culture...trust is also important.' BP where a complex drilling problem was solved In some organizations the last thing you would not by technical experts or senior managers but by do is to admit a mistake.' bringing together a group of people who had a lot Thus, participants recognized the need to of tacit knowledge of drilling. This tacit know- address employees' needs as well as the business ledge, through discussion and interaction, was needs from increased innovation through know- embodied into a solution for the drilling problem. ledge embodiment (Burgoyne and Reynolds, 1997): Thus, employees at all levels can contribute to innovation through knowledge construction How do we tap into their aspirations? What do (Demerest, 1997). they want to do?' 238 R. McAdam 7. Knowledge and Process Management RESEARCH ARTICLE Make the conditions right that the person can Empowered knowledge workers who could pick up the knowledge.' network throughout the organization were seen as vital for disseminating innovation in the form of The participants believed that the role of the knowledge throughout the organization. This net- knowledge worker (Zuboff, 1989; Peters, 1992; work must be enabled by a systematic approach Davenport et al., 1996) was key to knowledge rather than a process of osmosis: embodiment and hence innovation: The best way of disseminating knowledge is to How can they [employees] apply their experi- have a good strategy for knowledge capture...it ence to information?' might be information for someone elsewhere to Everybody in an organization has useful know- use as knowledge.' ledge, it is up to the organization to tap into that knowledge, you are back to culture again.' The frustrations associated with lack of innovation because of poor knowledge dissemination were Throughout, the embodiment process was seen also expressed: as closely linked to converting tacit knowledge into embodied knowledge through the social The information is there and available to every- interaction of knowledge workers (Boisot, 1989; one but it is not being transferred, absorbed and Nonaka and Takeuchi, 1995): accepted.' How prepared are people to convey the Another problem with disseminating innovation knowledge they hold in their heads? It is by was the not invented here syndrome': exchanging thoughts.' How do you get over the I didn't invent it? Our It was also reasoned that knowledge from without MD came across an innovation in hair care in the organization must be embodied to increase Italy, the hair brush package was designed open innovation: so that you could feel the bristles before purchase. Back at base nothing happened as People have this huge amount of experience our marketing department hadn't thought of it.' outside work which they tend not to bring in with them, a good organization is good at using that.' WORKSHOP FINDINGS: KNOWLEDGE USE/BENEFITS AND INNOVATION WORKSHOP FINDINGS: KNOWLEDGE DISSEMINATION AND INNOVATION Ultimately knowledge which is constructed, embo- died and disseminated must be put into effective If knowledge is constructed and embodied within use for the organization (Demerest, 1997). Bene®ts the organization, leading to increased innovation, or uses can include increased business ef®ciency then these knowledge-based innovations must be (Peters, 1992), but a key bene®t is increased spread or disseminated across the organisation innovation (Leonard, 1997). This view was reiter- (Demerest, 1997): ated by the participants: Knowing whether the knowledge disseminated If I know something in the marketplace that no- is going to be useful.' one else knows, I can use that and exploit that to What can be done with this knowledge else- get into a very strong position.' where [in the organisation].' Take catering, a new menu in California is in Organizations who had good knowledge man- the best restaurants in Paris a fortnight later agement systems were seen as very reliant on new because you have chefs who travel the world.' product development processes', like 3M as dis- cussed earlier. This process of new product Collaboration was seen as important for innova- development was seen as similar to that of 3M in tion through knowledge dissemination. The orga- that innovation comes through new perspectives nization's perimeter fence was not seen as a barrier due to new knowledge: to innovation in a two-way ¯ow of knowledge dissemination (Nonaka and Takeuchi, 1995): Knowledge can lead to innovation as a new way of looking at things, questioning assump- Those involved with customers...we haven't tions...' tapped into yet.' Maybe the knowledge is knowing who else can Furthermore, effective knowledge management collaborate with you.' was seen as the gatekeeper to innovation: Knowledge Management as a Catalyst for Innovation 239 8. RESEARCH ARTICLE Knowledge and Process Management Knowledge management really is a necessary CONCLUSIONS AND condition before you can innovate.' RECOMMENDATIONS The participants reckoned that business and The review of the literature has shown there is a employee bene®ts due to knowledge manage- clear link between the emerging body of knowledge ment-based innovation were inseparably equally referred to as knowledge management and that of essential: innovation. This link offers both organizations and It is creating power...you can be motivated those who work in them an opportunity to towards trust, loyalty of the company or improve both the business and the work satisfac- self-af®rmation or con®dence and therefore tion through increased innovation in products, innovation.' services and methods and conditions of work. The research ®ndings were based on a suitable model for linking knowledge management with innovation and were derived based on the princi- DEVELOPMENT OF A KNOWLEDGE ple that knowledge leading to innovation is MANAGEMENT AND INNOVATION socially constructed as well as scienti®c in nature. MODEL This opens up the possibility of organizations embodying new knowledge and innovation As a means of summary, the different aspects of within the culture of the organization from a innovation in regard to knowledge management, wide range of new sources. Furthermore, these as discussed in the literature and the research, can sources of innovation can come from without the be shown in an enhanced version of the earlier organization (boundary spanning). The dissemina- knowledge management model (Figure 1). For tion of constructed and embodied knowledge was each of the four key areas of knowledge manage- found to be essential if organizations are to spread ment±construction, embodiment, dissemination an innovative culture throughout all their envir- and use/bene®ts±the drivers of innovation are ons, usually geographically. The use/bene®t of listed in Figure 3. knowledge management leading to innovation Figure 3 Innovation drivers within knowledge management (KC=knowledge construction, KE=knowledge embodiment, KD=knowledge dissemination, KU=knowledge use) 240 R. McAdam 9. Knowledge and Process Management RESEARCH ARTICLE was found to be increased new product and Hedlund G. 1994. A model of knowledge management service development supported by an innovative and the N-form corporation. Strategic Management Journal 15: 73±90. culture and an effective knowledge management Hedlund G, Nonaka I. 1993. Models of Knowledge system. These bene®ts were found to lead to both Management in the West and Japan. In Implementing increased business and employee bene®ts. strategic processes, change, learning and cooperation. Finally a further enhancement to the model of Lomange, B (ed.), 117±144, Macmillan: London. Figure 1 was added (Figure 3). This model illus- Leonard D. 1997. Mining knowledge assets for innova- tion. 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