Chapter 2 REVIEW OF RELATED LITERATURE
This part of the study shall discuss the aspects of Knowledge management and its role as an integral factor in the success of an organization. The discussions on this portion of the study are based on studies and articles inclined on advocating KM.
Knowledge Management (KM)
Knowledge management is a discipline best described as a continuing process that focuses on the creation of business performance improvements–centered on people and not technology. (Han, 2001) While technology enhances the feasibility of transferring knowledge between people, knowledge management includes creating and sharing knowledge as an organizational asset to drive the business. Moreover, The value proposition of knowledge management states that there are fundamental business reasons and expected benefits for pursuing this process approach. There are gains the organization can achieve by using knowledge management to measure results, such as creating an Intranet and knowledge repositories.
Furthermore, the concept of knowledge management concerns the creation of structures that combine the most advanced elements of technological resources and the indispensable input of human response and decision-making (Raisinghani, 2000). The notion of knowledge management is nothing new. Corporations have always had some process to synthesize their experience and integrate it with knowledge acquired from outside sources (Sarvary, 1999). However, not until recently have scholars and practitioners alike become increasingly attracted to the science of applied knowledge within organizations. This movement is unique in combining information technology theory with pioneering work on models of learning organizations (Senge, 1994).
On the other hand, Parikh (2001) posits that data are merely raw facts collected from business transactions and activities, and that data must be structured into a meaningful, composite model to become information. Once information is created from such constitution of pure data sets, it is able to filtered through a relative model of understanding. Thus, knowledge is created only as information is interpreted and evaluated from a contextual mental model. Because individuals and companies as wholes have different mental models (Senge, 1994), the knowledge gleaned from the same compilation of information can differ greatly, not only in quality but also in applicability. Knowledge management thus differs from information management because the former implies a persistent, intentional effort of extracting from available information what is critical for business success, while the latter is more concerned with making critical information available in a timely and consistent manner to end-users within the organizational structure. Knowledge management is therefore the creative mining of information from diverse sources with the purpose of business opportunities in mind. As a firm works diligently toward perusing its information assets through the multitude of perceptual filters available, high-impact, matchless gems are unearthed, which have the potential to substantially affect the bottom-line.
The distinction between tacit and explicit knowledge is critical to understanding the working mechanisms of knowledge management. Lubit (2001) observes that explicit knowledge is codified and stored in the “organizational memory” and is available to employees throughout the structure. Conversely, tacit knowledge is personal knowledge possessed by an employee that may be difficult to express or communicate to others. Because a population of employees possesses a theoretically infinite number of mental models, or ways of perceiving information, tacit knowledge is often individualized and highly specific in scope. Lubit (2001) argues that it is this knowledge that is often difficult to disseminate to others in the context of the workplace, but it is also invaluable to propagate because it is a unique asset that is very hard to copy by other firms. Hence, given this premise, it can be logically understood that tacit knowledge can form the basis for competitive advantage, but to do so it must become manifest in the real world and utilized to actualize the strategic agendas of the organization. Ideally, a firm can better manage its intellectual capital base by uncovering the tacit knowledge of its employees and turning that into explicit knowledge, available to others (Erickson & Rothberg, 2000).
Moreover, Stonehouse et al. (2001) noted that the concept of knowledge management has evolved from research on organizational learning. They argue that it is simply the next phase of an evolutionary process of strategic frameworks that seek to explain how an organization may generate superior performance relative to the competitors in its market. Earlier approaches centred on the competitive position of an organization within its industry. Subsequent attention was focused on the creative mastery of an organization’s core competencies to achieve competitive advantage. Currently, the concentration is firmly upon effectively “working” knowledge to produce the fruits of fiscal gain, as reflected in the company’s financial statements and stock price. Concurrently, Senge (1994) contends that the only construct within grasp of an organization, which will produce lasting, sustainable advantage, is the usable knowledge produced from purposeful, well-orchestrated learning by all employees within the firm. This collaborative effort toward an openness to learning and new ideas creates a culture of excitement and creativity, which forms the basis for the organization as a learning organism synergistically created by the steadfast efforts of individual employees committed to this underlying philosophy.
Most investigation into knowledge management has been concerned with capturing the knowledge embedded inside of the heads of individual employees (Nidumolu et al., 2001). This “within” approach is certainly a substantial place to begin the challenge of developing a thriving knowledge base, but appears to be less than holistic in its efforts. The vast expanse of knowledge outside the traditional boundaries of the company may prove just as useful (Gold et al., 2001). Nevertheless, the challenge of capturing functional knowledge in the midst of overwhelming information availability remains elusive (Oder, 2001). If a company is bathed in the true spirit of learning (Senge, 1994), it will develop structures and processes which create a balanced and complementary effort toward combining knowledge acquisition from inside and outside of the firm.
Knowledge Management as a Strategic Tool
The fundamental objective of any corporate Knowledge Management program is to support the achievement of strategic business objectives. In other words, the “starting-point” for KM is to understand what the organization’s business objectives are. (Hauschild et al, 2001) Many KM projects fail because they are treated as technology-projects. In order to be successful, KM must not be an end in itself, but must be a strong enabler to achieving real business results.
Moreover, consequent to understanding the basic strategic objectives, the next step is to identify key drivers including Knowledge Capabilities that are vital to achieve these business objectives. (Hauschild et al, 2001) This is followed by a Knowledge Inventory. This is characterized by an identification of what knowledge capabilities currently exist – and where or with whom. At this stage, a Knowledge Map may be prepared. This is described as a graphical representation of the business objectives, critical knowledge capabilities to achieve them and where or with whom they reside in the organization. The Knowledge Inventory and Knowledge Map enable identification of the organization’s Knowledge Assets and where & how they can be accessed, Knowledge Gaps and definition of strategies & initiatives to bridge the gaps, which could include the implementation of appropriate IT tools to support knowledge-sharing & collaboration both within the enterprise and in the extended enterprise – including customers, partners and suppliers – to help the organization make better decisions. Another is the formation of communities of practice by experts in each of the critical knowledge-capabilities identified earlier. In addition to that is the sharing of relevant best practices, case studies, lessons-learned, etc. from both internal & external sources.
Effective KM will enable the organization to become nimble and make well-informed business decisions. A key-objective of KM is to ensure that the right knowledge is available with the right person at the right time in a “consistent and systematic” manner to enable timely decision-making. (Hauschild et al, 2001) An organization’s Knowledge Map must be a living organism that is updated continuously as Knowledge Gaps are filled, new Subject Matter Experts are identified or new Knowledge Capabilities are defined.
Critical Success Factors of Knowledge Management
This part of the chapter shall be taking into account the aspects that consequently lead to the success of a KM program. One of these factors is technology. KM technology solutions provide functionality to support knowledge sharing, collaboration, workflow, document-management, to mention a few, across the enterprise and beyond into the extended enterprise. (Hahiran, 2002) These tools typically provide a secure central space where employees, customers, partners & suppliers can exchange information, share knowledge and guide each other and the organization to better decisions. The most popular form of KM technology facilitation is the knowledge-portal on the corporate intranet and extranets where customers, partners and/or suppliers are involved. Common technologies used for knowledge portals include standard Microsoft technologies or Lotus Notes databases. There are also vendors that provide specialized tools for collaboration, indexing & retrieval of content, Decision Support / Business Intelligence, Document-Management, just to mention a few. A company must choose a technology option that meets its KM objectives & investment plan. While technology is a key enabler to KM, it is important to ensure that the technology solution does not take the focus away from business issues and is user-friendly and simple to use. Many companies have made the mistake of expending a disproportionately high portion of their KM effort & resources on technology – at the cost of people-involvement or strategic commitment – resulting in zero or very limited business results. It is also important to remember that users of the KM system are subject-matter experts in their respective areas of specialization and not necessarily IT experts.
Another success factor is the KM processes. These include standard processes for knowledge-contribution, content management such as accepting content, maintaining quality, keeping content current, deleting or archiving content that is obsolete; retrieval, membership on communities of practice, implementation-projects based on knowledge-reuse, methodology & standard formats to document best-practices & case studies, etc. It is important for processes to be as clear & simple as possible and well understood by employees across the organization. (Hahiran, 2002)
Furthermore, the biggest challenge in KM is to ensure participation by employees and other members of the extended organization in the knowledge sharing, collaboration and re-use to achieve business results. In many organizations, this requires changing traditional mindsets & organizational culture from “knowledge-hoarding” to “knowledge-sharing” and creating an atmosphere of trust. This is achieved through a combination of motivation/recognition & rewards, re-alignment of performance appraisal systems, and other measurement systems. (Hahiran, 2002) A key to success in Knowledge Management is to provide people visibility, recognition and credit as “experts” in their respective areas of specialization – while leveraging their expertise for business success.
And lastly, a Knowledge Management program cold be considered successful when it has a sustained strategic commitment. Strategic management has a key role to play in promoting the desired behaviours both through example and by constant communication across the organization of the strategic importance it attaches to KM. (Hahiran, 2002) A key to success in KM is for top management to provide sustained strategic commitment to KM. KM initiatives in several organizations have failed because KM was a fad for a short while – and attention was then diverted to the “next big thing”.
While all four are critical to build a learning organization and get business results from KM, a majority of organizations worldwide implementing KM have found it relatively easier to put technology & processes in place, whereas the “people” and “sustained strategic commitment” components have posed greater challenges. (Hahiran, 2002)
In relation to the success factors of KM, a variety of measures of ROI from KM has also been proposed. Many of these measures focus on attaching a value to an organization’s intellectual capital. (Hauschild et al. 2001) However, to keep KM “implementation-oriented” and focussed on “real business results”, it is more important to have a set of measures that are directly related to achievement of business results. A combination of lagging, such as actual business outcomes, and leading measures such as performance drivers that would lead to business outcomes should be used.
It is also important to remember that effective KM is an enabler for competitive success, market-intelligence, customer-knowledge, better & quicker decision-making, etc. (Hauschild et al. 2001) All these are key to survival in business, but the exact contribution of KM to these may be difficult to measure in quantitative terms. Organizations that have successfully implemented KM for business results do not focus on theoretical measures – but use a combination of quantifiable and subjective measures to evaluate KM success.
Furthermore, Pfeffer & Sutton (2000) describe three approaches that move organizations from adopting an almost mindless reliance on things past that impede action in the present: building a novel sub organization liberated from the passive ways of being, making it difficult—sometimes by drastic means—to adhere to the old ways, and building an organization in which employees constantly question precedent. The leaders of the firm must take the reins in galvanizing and maintaining a persistent effort towards an organizational culture of purposeful activity and knowledge application. This may be done by clearing articulating new expectations for firm employees, and by socially and fiscally rewarding pro-initiative behaviour change, while penalizing lagging efforts toward organizational proactivity.
Learning from knowledge application involves post-analysis and critical process evaluation. Such evaluations lead to managerial learning regarding what knowledge initiatives actually produced tangible business results. This learning is difficult and often neglected by firms, but it is very important to maintain the wellspring of knowledge (Parikh, 2001). This cycle of knowledge implementation and critical review helps bridge the gap between the possession of theoretical knowledge and the actual application of such. In this sense, the speculative ideas regarding what will impact the bottom-line are empirically tested in the real world. This is yet another crucial steps in moving from obscure conceptualizations to refined knowledge that can impact business decisions. Knowledge management should ideally provide relevant knowledge to help knowledge workers make appropriate decisions to determine organizational actions (Parikh, 2001).
Knowledge Management as an Advantage
Among the central measure of organizational effectiveness is the creation and continuance of a measurable competitive advantage. Many broad initiatives such as efficiency, core competency advancement, actualization of customer-centric products and services, and limitation of the fixed costs of doing business can help to achieve a sustainable competitive advantage within the marketplace. Knowledge management is a targeted expertise designed to impact productivity and innovation in profound ways. It represents a new technology that is changing the competitive landscape of contemporary business (Sarvary, 1999). Knowledge management may exploit supply-side or demand-side economies of scale (Ofek & Sarvary, 2001). In the former case, the role is to reduce the operating costs of the firm, while in the latter case its role is to create added value to customers by appreciably increasing product quality. Thus, the effective management of knowledge understandably has the capacity to deeply impact the way a firm does business from the minor details of daily operations to the broadest strategic decision-making processes. There always exists better ways to transform inputs into outputs through the refinement of processes. Both academics and business practitioners alike are beginning to grasp the power of knowledge in helping to do so.
The science and art of knowledge management can be understood as a sequential framework of purposeful activity designed to produce tangible management decisions and resulting organizational activities, toward the ultimate purpose of producing gains in net income and market share. Knowledge management is a strategic process, which implies the goal of differentiation from competitors such that a sustainable competitive advantage is forged. One stage in the process may require the input of several other phases to galvanize its movement toward a usable “knowledge product”, appropriate in supporting concrete decision-making and business action. In addition, the methodologies subsumed in each phase are presented as discrete activities unique to that step in the process, but in reality often overlap considerably. (Yli-Renko et al., 2001) In this manner, the deliberate business behaviours that constitute the essence of any given stage may be strikingly similar to those of other steps, depending upon the specificity of the circumstances under which a firm operates.
Furthermore, the dissemination of salient knowledge is surmised to impact the formation of competitive advantage. The two most cited mediating factors for ensuring proper dissemination of knowledge are communication facilitation and organizational culture development. Buckman (1998) argues that one of the central purposes of knowledge management and sharing is to facilitate communication across all of the organization’s boundaries, so that the entire company works together to address given business challenges and seize covert opportunities. In this way, knowledge managers need to look at specific tools and tactics that will encourage collaborative and productive exchange between employees. Managing knowledge flow is a crucial step in moving the asset of quiescent knowledge into actualization (Fahey & Prusak, 1998). With efficient dissemination of knowledge, the company’s ability to make impacting decisions increases dramatically, because individuals throughout the firm gain access to important strategic ideas, rather than merely retaining this knowledge within the ranks of high-level management. By giving employees access to each other, rather than going through vertical channels of upper management, those with the most current knowledge can share it with those who will benefit most from it (DeTienne & Jackson, 2001). This improves the organization’s ability to make rapid decisions and execute them effectively.
On the other hand, Pfeffer & Sutton (2000) maintain that to create a culture appropriate for transforming tacit knowledge into communal, explicit knowledge fear-based approaches to management must be abandoned. Despite the burgeoning literature within the field of leadership about the need to reconceptualize the control orientation of management and replace it with one that emphasizes facilitation and coaching, management practice remains dominated by control impulses (Beech & Crane, 1999). A key in overcoming tendencies of employees to hoard knowledge or to remain cautious in sharing ideas with others is for management to take the lead in creating an environment of understanding, shared control, compassion, and learning. All ideas set forth in good faith and backed by rational analysis should be reinforced as beneficial to the company’s efforts to create a cauldron of strategic innovation, even if such shared knowledge does not immediately produce resounding results.
Synthesis
The chapter discussed the aspects of KM as a required factor for the efficient fulfillment of an organization’s goals. Moreover, the discussions above posit that knowledge movement is pervasive. Whether it is defined in terms of learning, intellectual capital, knowledge assets, intelligence, expertise, insight or wisdom, it consummates to one assertion, enhance the management of the organization or perish. Initiatives in industry, education and government are trying to tackle the same problems, issues and opportunities. Moreover, the discussions suggest that the immeasurable must be measured. Traditional financial accounting mechanisms fail to calculate/calibrate the most important resources of the firm – its intellectual capacity. Instead, current mechanisms treat people as liabilities or expenses instead of assets. The business case must be defined in order to justify necessary investment strategies in the human and social capital of the firm.
In this light, a collaborative research base must be established. There is minimal research activity for service functions or the services industry of the economy. There is minimal government funding and few consortia, which are non-industrial in mission. Enterprises are embarking upon individual R&D efforts when a collective degree of research – on a pre-competitive basis – is essential for establishing a solid foundation for the future of the industry. Likewise, initiatives must be designed as ‘middle-up-down.’ Top down leadership continues to be essential for management because traditional hierarchical structures will not disappear overnight. Grass roots activities, which are networked, can have the insight for change validated by those closest to the point-of-sale. Oftentimes, those closest to service delivery are not the people empowered in an organization. The middle-up-down approach is described as a way to balance and integrate the best of both methods.
Similarly, the discussion above suggests that in order to achieve success through KM, insight is being gleaned rapidly. For those who embrace change as reality, there is little time to be spent on barriers. The future is far more exciting to create. In each profession, those who were deemed philosophers and futurists are being sought for counsel on business operations. What was theory yesterday is fundamental to business survival tomorrow. There is a cumulative effect between and among disciplines as leaders seek to understand the principles and policies of one another. Indeed, the field has become sufficiently sophisticated to warrant the benchmarking of best practices for even further dissemination and leverage.
Nevertheless, the implementation of the KM program takes many forms. The variety of new titles and program initiatives vary company-to-company due to the uniqueness of each corporate culture. New titles range from novel verbiage to re-labeling of traditional functions. There are many ways to configure the knowledge puzzle and leadership can come from any level, function or position in the company. Furthermore, management architectures are useful, but should not be limiting. A frame of reference is essential in order to scrutinize and interconnect the variables. However, exploration of the factors leads to identification of new variables and interconnections, which are fundamental to the business. The frame provides a way to organize the discussion and fuse the diverse values within the company culture. The process must be dynamic – not static – in order to capitalize upon new business opportunities coming from unserved markets and unarticulated needs.
In addition, the discussions above also state that the nature of ‘the collective’ must be understood and harnessed. Enterprises are now defined as including multiple stakeholders: suppliers, partners, alliances, customers and – in some cases – competitors. These infrastructures are a combination of evolving, ecological systems and carefully premeditated schemes for profitable growth. The combination is what is of most value. Attention must now focus upon the definition of the whole and the interconnections of the pieces. Moreover, one could not discount the importance of technology. Technology is integral to the successful functioning of the knowledge enterprise. Similar to the misconceptions of computer-based education, artificial intelligence and the early renditions of groupware, there is confusion as to the appropriate role for the supporting technology. The ‘productivity paradox’ explains why there has not been a commensurate economic return for the investment on technology investments, but it does not provide a path forward for the ideal technical solutions. This will take some time and considerable trial-and-error.
Recent literature also states that the knowledge phenomenon must be managed and not left to providence. As incomplete as the systems might be, some influence and control is better than nothing at all. There are the inevitable unexpected forces, which cause a major shift in orientation. Management must be understood as both a science and an art in order to reap optimal advantage. The objective of KM is to support the achievement of business-objectives. Both knowledge-contributions/ sharing as well as re-use need to be encouraged and recognized at the individual employee level as well as the company level. This is best done by measuring and rewarding knowledge-performance. Sustained strategic commitment and a corporate culture that is conducive to knowledge-performance are vital for success in Knowledge Management. Measures used to evaluate success in KM must be related to business results.
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