Knowledge management

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Knowledge ManagementKnowledge Management

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Knowledge Management:

Introduction to KMI. KM: When:

1. The globalized world in which we are living 2. Megatrends that are shaping future world 3. Knowledge Society and Knowledge-Based Economy

II. KM: Why:1. Focus on Knowledge2. Knowledge Work3. Collective Knowledge4. Knowledge workers

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Knowledge Management:

III. KM: What: 1. Knowledge is (Data, Information, knowledge): 2. Explicit knowledge, tacit knowledge; 3. Knowledge management is: definition; 4. Collecting and connecting, 5. People, Process, Technology6. Historical Perspective

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Knowledge Management: Continued

IV. KM: Where: I. Learning Organization

V. KM: Who: I. Knowledge Worker;

VI. KM: How: 1. Knowledge Management Frameworks:

a) Dalkir’s Frameworkb) European Frameworkc) Holistic KM Framework

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2. Approaches to Knowledge Management: Three Schools:a) The Economic School:

1. Intellectual Capital Accounting2. Intellectual Capital Management3. Knowledge Market Framework.

b) The Organizational School:1. Managing Common Knowledge2. Nonaka’s Model: SECI Model3. Managing Knowledge Workers

c) Strategic School :1. Stock Strategy2. Flow Strategy3. Growth Strategy

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3. Critical Success Factors:- Leadership- Culture- Strategy- Information Technology- Measurement

VII. Concluding Remarks.

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The core message of the course:

The core message of this course is that the only sustainable advantage of a firm comes from: 1) What it collectively knows, 2) how efficiently it uses what it knows, and 3) how readily it acquires and uses new knowledge.

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Knowledge Management:When?

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The globalized world in which we are living

THREE GREAT ERAS OF GLOBALIZATION:

• Globalization 1.0: 1492 - 1800

• Globalization 2.0: 1800 - 2000

• Globalization 3.0: 2000 - Present

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GLOBALIZATION I.0• Columbus, a navigator, colonizer, and explorer, found

that the world is round.• The main theme: trade. Opening trade between the Old

World and the New World.• In globalization I.0 the world shrank from large to medium.• It was about countries and muscle.

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GLOBALIZATION I.0• “Your Highnesses, as Catholic Christians, and princes who

love and promote the holy Christian faith, and are enemies of the doctrine of Mahomet, and of all idolatry and heresy, determined to send me, Christopher Columbus, to the above-mentioned countries of India, to see the said princes, people, and territories, and to learn their disposition and the proper method of converting them to our holy faith; and furthermore directed that I should not proceed by land to the East, as is customary, but by a Westerly route, in which direction we have hitherto no certain evidence that anyone has gone.”

Entry from the journal of Christopher Columbus on his voyage of 1492

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GLOBALIZATION 1.0 CONTINUED…..

• The dynamic force driving the process of global integration was how much muscle, how much horsepower, wind power, or later steam power your country had and how creatively you could deploy it.

• Countries and governments inspired by religion and colonialism joined in breaking down the walls.

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IN GLOBALIZATION 1.0 THE PRIMARY QUESTIONS WERE:

• Globalization I: Where does my country fit into global competition and opportunities?

• How can I go global and collaborate with others through my country?

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GLOBALIZATION 2.0• Globalization 2.0 that began at the dawn of the 19th

century was interrupted by the Great Depression and World Wars I and II.

• In this era the world shrank from medium to small. • The dynamic force driving global integration was

multinational companies.• The multinationals went global for markets and

labour.

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GLOBALIZATION 2.0 CONTINUED…

• In this era we saw the birth of a global economy by movement of goods and information from continent to continent.

• In the first half of this era, global integration was powered by falling transportation costs, thanks to the steam engine and the railroad, and in the second half by falling telecommunication costs thanks to the diffusion of the telegraph, telephone, the PC, satellites, fiber-optic cable, and the early version of the World Wide Web.

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IN GLOBALIZATION 2.0 THE PRIMARY QUESTIONS WERE:

• Where does my company fit into the global economy?

• How does it take advantage of the opportunities?

• How can I go global and collaborate with others through my company?

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GLOBALIZATION 3.0

• Globalization 3.0 shrank the world from small to tiny. • Globalization 3.0 is flattening the playing field.• The dynamic force in globalization 3.0 is the new

power of individuals to collaborate and compete globally.

• The phenomenon that is enabling, empowering, and enjoying individuals and small groups to go global so easily may be called the flat-world platform.

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• The flat world platform is the product of a convergence of the personal computer (which allowed every individual suddenly to become the author of his or her own content in digital form) with fiber-optic cable (which allowed all individuals to digital contents around the world for next to nothing) with the rise of workflow software (which enabled individuals all over the world to collaborate on the same digital content form anywhere).

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• While Globalization 1.0 and 2.0 were driven by Europeans and Americans, Globalization 3.0 is going to be more and more driven not only by individuals but also by a much more divers non-Western, non-White group of individuals.

• While the empowerment of individuals to act globally is the most important new feature of Globalization 3.0, companies will be newly empowered in this era as well.

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IN GLOBALIZATION 3.0 THE PRIMARY QUESTIONS ARE:

• Where do I, as an individual, fit into the global competition and global collaboration?

• How can I, on my own, interact and collaborate with others globally?

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Megatrends that are shaping the future world

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FIVE MEGATRENDS

• More from Less: A world of Limited Resources • A Personal Touch: Personalisation of services • On the Move: Urbanisation and increased mobility • Divergent Demographics: Older, hungry and more demanding • i World: Digital and natural convergence

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MEGATREND: MORE FROM LESS

• More from less. This relates to the world’s depleting natural resources and increasing demand for those resources through economic and population growth. Coming decades will see a focus on resource use efficiency.

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MEGATREND: A PERSONAL TOUCH

• A personal touch. Growth of the services sector of global economy is being followed by a second wave of innovation aimed at tailoring and targeting services suited to personal needs and want.

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MEGATREND: DIVERGENT DEMOGRAPHICS

• Divergent demographics. The populations of OECD countries are ageing and experiencing lifestyle and diet related health problems. At the same time there are high fertility rates and problems of not enough food for millions in poor countries.

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MEGATREND: ON THE MOVE

• On the move. People are changing jobs and careers more often, moving house more often, commuting further to work and travelling around the world more often.

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MEGATREND: I WORLD

• i World. Everything in the natural world will have a digital counterpart. Computing power and memory storage are improving rapidly. Many more devices are getting connected to the internet.

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Freedom of expressionFreedom of expression

This exercise requires strict observance of rights at two levels:

•Social levelSocial level•Individual levelIndividual level

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Knowledge Societyand

Knowledge-Based Economy

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Knowledge Society:A society with freedom at social and individual level.

Knowledge Based Economy:

An economy characterized by the recognition of knowledge as a source of competitiveness, the increasing importance of science, research, technology and innovation in knowledge creation, and the use of computers and the Internet to generate, share and apply knowledge.

Knowledge-based economies are economies which are directly based on the production, distribution and use of knowledge and information. 3131

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Knowledge Assessment Methodology (KAM):

To identify the challenges and opportunities faced by countriesin making the transition to the knowledge-based economy. (World Bank Institute)

Four Knowledge Economy pillars:

1. Economic incentive and institutional regime,

2. Education,

3. Innovation,

4. Information and Communication Technologies (ICTs) 3232

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Pillar 1: The Economic Incentive and Institutional Regime

The country’s economic and institutional regime must provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship.

Tariff & Nontariff Barriers

Regulatory Quality

Rule of Law

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Pillar 2: Education and Human Resources

The country’s people need education and skills that enable them to create and share, and to use it well.

Adult Literacy Rate

Secondary Enrollment

Tertiary Enrollment

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Pillar 3: The Innovation System

The country’s innovation system—firms, research centers, universities, think tanks, consultants, and other organizations—mustbe capable of tapping the growing stock of global knowledge, assimilating and adapting it to local needs, and creating new technology.

Researchers in R&D

Patent Applications Granted by the US Patent and Trademark Office

Scientific and Technical Journal Articles

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Pillar 4: Information and Communication Technology (ICT)

A dynamic information infrastructure is needed to facilitate the effective communication, dissemination, and processing of information..

Telephones per 1,000 people

Computers per 1,000 people

Internet Users per 10,000 people

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Knowledge Management:Why?

WHY IS KM IMPORTANT TODAY• The major business drivers behind today’s increased interest in and

application of KM lie in four key areas:• 1. Globalization of business. Organizations today are more global—

multisite, multilingual, and multicultural in nature.• 2. Leaner organizations. We are doing more and we are doing it faster, but

we also need to work smarter as knowledge workers, adopting an increased pace and workload.

• 3. “Corporate amnesia.” We are more mobile as a workforce, which creates problems of knowledge continuity for the organization and places continuous learning demands on the knowledge worker. ion.

• 4. Technological advances. We are more connected. Advances in information technology not only have made connectivity ubiquitous but have radically changed expectations. We are expected to be “on” at all times.

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WHY IS KM IMPORTANT TODAY• Knowledge management represents one response to the challenge

of trying to manage this complex, information-overloaded work environment.

• One of the largest contributors to the complexity is that information overload represents only the tip of the iceberg—only that information that has been rendered explicit. KM also must deal with the yet to be articulated or tacit knowledge.


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Knowledge Management:What?

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Knowledge and

Knowledge Management

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Knowledge in nor data nor information; it is related to both.

Data is a set of discrete, objective facts about events. In an organizational context, data is most usefully described as structured records of transactions.

Information is a message, usually in the form of a document or an audible or visible communication. As with any message, it has a sender and a receiver. Information is meant to change the way the receiver perceives something, to have an impact on his judgment and behaviour. It must inform: it’s data that makes a difference. Unlike data, information has meaning, relevance and purpose.4242

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Transforming data into information: 5C methods:

Contextualized: We know for what purpose the data was gathered;

Categorized: we know the units of analysis or key components of the data,

Calculated: the data may have been analyzed mathematically or statistically,

Corrected: errors have been removed from data,

Condensed: the data may have been summarized in a more concise form.

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Knowledge: A working and pragmatic definition of knowledge:

Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knower.

In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms.

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Transformation of information into knowledge: Four C method:

Comparison: How does information about this situation compare to the other situations we have known?Consequences: What implications does the information have for decisions and actions?Connections: How does this bit of information relate to others?Conversation: What do other people think about this information?

While data is found in records and transactions, or information in messages, we obtain knowledge from individuals or group of knowers, or sometimes in organizational routines. It is delivered through structured media such as books and documents, and person to person contacts ranging from conversation to apprenticeships.

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Some of key components of knowledge:

- Experience: Experience refers to what we have done and what has happened to us in the past. Experience and expert are two related words. Experts – people with deep knowledge of a subject – have been tested and trained by experience. Experience provides historical perspective from which to view and understand new situations and events. When firms hire experts they are buying experience-based insights.

- Truth: Knowledge has ground truth, on the ground, rather than from the heights of theory or generalization. The difference between what is taught and what happens in practice.

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Judgment: Unlike data and information knowledge contains judgment. When knowledge stops evolving, it turns into opinion and dogma.

Rules of thumb: Knowledge works through rules of thumb: flexible guides to action that developed through trial and error and over long experience and observation.

Values: People’s values and beliefs have a powerful impact on organizational knowledge.

De-knowleding: Dealing with excess knowledge.

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Types of knowledge: Explicit and TacitKnowledge in organizations is often classified into two types:explicit and tacit.

1.Explicit knowledge is knowledge that can be captured and written down in documents or databases. Examples of explicit knowledge include instruction manuals, written procedures, best practices, lessons learned and research findings. Explicit knowledge can be categorized as either structured or unstructured. Documents, databases, and spreadsheets are examples of structured knowledge, because the data or information in them is organized in a particular way for future retrieval. In contrast, e-mails, images, training courses, and audio and video selections are examples of unstructured knowledge because the information they contain is not referenced for retrieval.

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Types of knowledge: Explicit and TacitKnowledge in organizations is often classified into two types: explicit and tacit.

2. Tacit knowledge is the knowledge that people carry in their heads. It is much less concrete than explicit knowledge. It is more of an “unspoken understanding” about something, knowledge that is more difficult to write down in a document or a database. An example might be, knowing how to ride a bicycle – you know how to do it, you can do it again and again, but could you write down instructions for someone to learn to ride a bicycle? Tacit knowledge can be difficult to access, as it is often not known to others. In fact, most people are not aware of the knowledge they themselves possess or of its value to others. Tacit knowledge is considered more valuable because it provides context for people, places, ideas and experiences. It generally requires extensive personal contact and trust to share effectively. 4949

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Types of knowledge: Old and NewTypes of knowledge: old and newMost knowledge management strategies generally have one (or sometimes both) of two thrusts. The first is to make better use of the knowledge that already exists within the organization, and the second is to create new knowledge.Making better use of the knowledge that already exists within an organization (”old” knowledge) often begins with “knowing what you know”. Very often leading managers comment: “if only we knew what we knew”. Too frequently, people in one part of the organization reinvent the wheel or fail to solve a problem because the knowledge they need is elsewhere in the organization but not known or accessible to them. Hence the first knowledge management initiative of many companies is that of finding out what they know, and taking steps to make that knowledge accessible throughout the organization. Specific approaches might include conducting a knowledge audit, mapping the organization’s knowledge resources and flows, making tacit knowledge more explicit. 5050

MANAGING KNOWLEDGE: COLLECTING AND CONNECTING

• Knowledge management tends to have a “collecting” and a “connecting” dimension.

• The collecting dimension involves linking people with information.

• It relates to the capturing and disseminating of explicit knowledge through information and communication technologies aimed at codifying, storing and retrieving content.

• Through such collections of content, what is learned is made readily accessible to future users.

• Examples include various intranets, database, library, and many more.

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MANAGING KNOWLEDGE: COLLECTING AND CONNECTING• The connecting dimension involves linking people with people and

enhancing tacit knowledge flow through human interaction, so that knowledge is diffused around the organization.

• Connecting is necessary because knowledge is embodied in people, and in the relationships within and between organizations.

• Examples of connecting initiatives include skills directories and expert directories – searchable online staff directories that give much more detail about who does what and who knows what, collaborative working, communities of practice – networks of people with a common interest, and various “socialisation” activities designed to support knowledge flows.

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MANAGING KNOWLEDGE: PEOPLE, PROCESSES, TECHNOLOGY

• One widely-used approach is to think of knowledge management in terms of three components, namely people, processes and technology:

• People: Getting an organization's culture “right” for knowledge management is typically the most important challenge.

• Knowledge management is first and foremost a people issue. • Main questions: Does the culture of organization support ongoing

learning and knowledge sharing? Are people motivated and rewarded for creating, sharing and using knowledge? Is there a culture of openness and mutual respect and support? Do people feel inspired to innovate and learn from mistakes, or is there a strong “blame and shame” culture?

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MANAGING KNOWLEDGE: PEOPLE, PROCESSES, TECHNOLOGY

• Processes: In order to improve knowledge sharing, organizations often need to make changes to the way their internal processes are structured, and sometimes even the organizational structure itself.

• For example, if an organization is structured in such a way that different parts of it are competing for resources, then this will most likely be a barrier to knowledge sharing.

• Looking at the many aspects of “how things are done around here” in organization, which processes constitute either barriers to, or enablers of, knowledge management? How can these processes be adapted, or what new processes can be introduced, to support people in creating, sharing and using knowledge?

• >

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WAYS WITH KNOWLEDGE: PEOPLE, PROCESSES, TECHNOLOGY

• Technology : A common misconception is that knowledge management is mainly about technology – getting an intranet, linking people by e-mail, compiling information databases etc.

• Technology is often a crucial enabler of knowledge management – it can help connect people with information, and people with each other, but it is not the solution.

• And it is vital that any technology used “fits” the organization's people and processes – otherwise it will simply not be used.

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WAYS WITH KNOWLEDGE: PEOPLE, PROCESSES, TECHNOLOGY

• The three components - people, process and technology - are often compared to the legs of a three-legged stool – if one is missing, then the stool will collapse.

• However, one leg is viewed as being more important than the others – people.

• An organization's primary focus should be on developing a knowledge-friendly culture and knowledge-friendly behaviours among its people, which should be supported by the appropriate processes, and which may be enabled through technology.

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Knowledge Management: Historical perspectives

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The Three Stages of Knowledge Management:

Stage I: By the Internet out of intellectual capital:- Information technology- Intellectual capital- The Internet.

Stage II: The human relations stage:- Communities of practice- Organizational culture- The learning organization- Tacit knowledge.

Stage III: The content and irretrievability stage:- Content management- Taxonomies.

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Stage I: By the Internet out of intellectual capital:

- Driven primarily by IT.- Initiated first in the large international consulting firms.- Reason for initiation: the left hand had no idea what the right hand knew. - Sharing knowledge could avoid reinventing the wheel. - Intranet as a tool to accomplish knowledge coordination and sharing.- The focus became how to deploy new technology to accomplish knowledge goals.- Next step was to share knowledge with customers who had the same problem.- The new product was labeled: Knowledge Management.- If Texas Instrument knew what Texas Instrument knew. 5959

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Stage II: The human relations stage:

- This stage added recognition of the human and cultural dimensions. - Not recognizing the importance of human actors leads the organization to a failure.

- Two major themes: learning organization and tacit knowledge. - Knowledge creation as well as knowledge sharing and communication.

- Emerging communities of practice.

- In this stage the work extended from information technology people to people in the human resources departments. 6060

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Stage III: The content and retrieveability stage:

- Awareness of the importance of content. - Awareness of the importance of retrieveability and therefore of the importance of the arrangement, description, and structure of that content.

- It’s no good if they try to use it but cannot find it.

- Enterprise content management.

- Taxonomy.

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Knowledge management:Where?

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Learning Organization:A pre-requisite for KM in organizations

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Learning Organization:

The core of learning organizations work is based upon five learning disciplines:

1. Personal mastery: Learning to expand our personal capacity to create the results we most desire, and creating an organizational environment which encourages all its members to develop themselves toward the goals and purposes they choose.

2. Mental models: Reflecting upon, continually clarifying, and improving our internal pictures of the world, and seeing how they shape our actions and decisions.

3. Shared vision: Building a sense of commitment in a group, by developing shared images of the future we seek to create, and the principles and guiding practices by which we hope to get there.

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Learning Organization: continued…..

4. Team learning: Transforming conversational and collective thinking skills, so that groups of people can reliably develop intelligence and ability greater than the sum of individual members’ talents.

5. Systems thinking: A way of thinking about, and a language for describing and understanding, the forces and interrelationship that shape the behaiour of systems. This discipline helps us see how to change systems more effectively, and to act more in tune with the larger processes of the natural and economic world.

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Knowledge management:Who?

Knowledge Workers

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MANAGING KNOWLEDGE WORKER

• Knowledge workers have high degree of expertise, education, or experience, and the primary purpose of their jobs involve, the creation, distribution, or application of knowledge.

• Thomas Davenport

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MANAGING KNOWLEDGE WORKERS

Davenport suggests the following about knowledge work and knowledge workers: .

1. Knowledge workers like autonomy. 2. Knowledge workers don’t like to see their jobs reduced to a

series of boxes and arrows. 3. Understanding knowledge work is best achieved through

observation. 4, Mental and emotional commitment to work. 5. Knowledge workers value their knowledge and don’t share it

easily.

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Integration ModelSystematic, repeatable work.Highly dependent on formal processes, methodologies or standards.Dependent on tight integration across functional boundaries.

Collaboration ModelImprovisional work.Highly reliant on deep expertise across multiple functions.Dependent on fluid deployment of flexible teams.

Transaction ModelRoutine workHighly reliant on formal rule, procedures and training.Dependent on low discretion workforce or automation.

Expert ModalJudgment-oriented work. Highly dependent on individual expertise and experience.Dependent on star performers.

Segmentation of Knowledge Workers

Routine Complexity of work Judgment

CollaborativeGroups

Level ofInterdependence

IndividualActors

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Knowledge Management:How?

Knowledge Management Frameworks

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AN INTEGRATED KM CYCLE



• On the basis of the study of some major approaches to KM cycles, Dalkir distills an integrated KM cycle. The three major stages are:

• 1. Knowledge capture and/or creation.• 2. Knowledge sharing and dissemination.• 3. Knowledge acquisition and application.• In the transition from knowledge capture/creation to knowledge

sharing and dissemination, knowledge content is assessed. Knowledge is then contextualized in order to be understood (“acquisition”) and used (“application”). This stage then feeds back into the first one in order to update the knowledge content.



• Knowledge capture refers to the identification and subsequent codification of existing (usually previously unnoticed) internal knowledge and know-how within the organization and/or external knowledge from the environment.

• Knowledge creation is the development of new knowledge and know-how— innovations that did not have a previous existence within the company. When

• knowledge is inventoried in this manner, the next critical step is to present an assessment against selection criteria that will follow closely the organizational goals. Is this content valid? Is it new or better? That is, is it of sufficient value to the organization such that it should be added to the store of intellectual capital?


AN INTEGRATED KM CYCLE• Once it has been decided that the new identified content is of sufficient

value, the next step is to contextualize this content, by maintaining a link between the knowledge and those knowledgeable about that content: the author or originator of the idea and subject matter experts, as well as those who have garnered experience in making use of this content. Contextualization also implies identifying the key attributes of the content in order to better match to a variety of users—for example, personalization to translate the content into one preferred by the end user or creation of a short executive summary to better accommodate the time constraints of a senior manager. Finally, contextualization will often succeed when the new content is firmly, yet seamlessly, embedded in the business processes of the organization. The integrated cycle subsumes most of the steps involved in the KM cycles discussed previously.


DALKIR’S KNOWLEDGE MANAGEMENT FRAMEWORK

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European Knowledge Management Framework

The Framework should be considered as a starting point for developing an organization-specific framework that serves best the needs of a particular organization’s KM approach.

The KM Framework considers three layers as most important for KM:

Business Focus

Core Knowledge Activities

Enablers

818181Business Focus

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Knowledge Management Framework

The business focus should be in the centre of any KM initiative and represents the value-adding processes of an organization, which may typicallyinclude strategy development, product/service innovation and development, Manufacturing and service delivery, sales and customer support. These processes represent the organizational context in which critical knowledge, such as knowledge about products and services, customers or technology is created and applied. Furthermore, these processes are now becoming more and more inter-organizational, as organizations operate in business networks with suppliers, partners and clients.

838383Core Knowledge Activities

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Knowledge Management Framework

Five core knowledge activities have been identified as most widely used by organizations: identify, create, store, share and use.

These represent the second layer of the framework by forming an integrated process. These activities are typically performed in support of the wider business processes. Their integration and performance within an organization have to be supported by the right KM methods and tools.

858585Enablers

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Knowledge Management FrameworkThe enablers represent the third layer and comprise two main categories, called personal and organizational knowledge capabilities, which complement each other. These capabilities should be seen as the enablers for the knowledge activities outlined above.Personal knowledge includes those capabilities such as ambition, skills, behaviour, experience, tools and time management which have to be developed at the personal and group level in order to generate improvements from knowledge handling.Organizational knowledge capabilities are those that leaders have to establish in order to facilitate effective knowledge handling within the value-adding processes, by both internal stakeholders (such as managers and employees) and external partners (such as suppliers and clients). These capabilities include the mission, vision and strategy, the design of processes and organizational structures, measurement, understanding of the culture, the use of technology and infrastructure, as well as the development of the collectively available knowledge of an organization – i.e. its so-called “knowledge assets”.

878787Knowledge Management Framework

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Knowledge Products

Business ProcessesKnowledge Processes

Business Processes

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Use Knowledge Create/Capture Knowledge

Share Knowledge Store Knowledge

Core Knowledge Activities

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Culture

Technology

StrategyMeasure

Knowledge Management Enablers

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Knowledge Society

Knowledge Economy

Knowledge Management Environment Enablers

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Holistic Knowledge Management Framework

Knowledge Society

Knowledge Economy

Culture

Technology

StrategyMeasure

Create Knowledge

Share Knowledge

Use Knowledge

Store Knowledge

Business Processes

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Approaches to knowledge management

Three Schools of Knowledge Management

• Earl (2001) developed taxonomy for knowledge management that he labeled schools of knowledge management. Each school was proposed as an ideal type. No claims were made that any one school outperforms others. Each represents a particular orientation or perspective. The schools are not mutually exclusive.

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APPROACHES TO KNOWLEDGE MANAGEMENT

•Three schools: 1. The Economic School, 2. The Organizational School, 3. The Strategic School

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The Economic School

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THE ECONOMIC SCHOOL

• According to Earl (2001), the economic school is explicitly concerned with both protecting and exploiting a firm’s knowledge or intellectual assets to produce revenue streams (or rent).

• It is concerned with managing knowledge as an asset, in which knowledge or intellectual assets include patents, trademarks, copyrights and know-how.

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The Economic School 1.Intellectual Capital Accounting

2.Intellectual Capital Management

3.Knowledge Market Framework

Intellectual Capital Accounting

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INTELLECTUAL CAPITAL ACCOUNTING

• Several tools are suggested for measuring intellectual capital. Value is defined by the buyer, not the seller.

• A company, therefore, is worth what the stock market says: price per share x total number of shares outstanding = market value; what the company as a whole is worth.

• One measure of intellectual capital is the difference between its market value and its book equity. The assumption is that everything left in the market value after accounting for the fixed assets must be intangible assets.

• If Microsoft is worth 100 billion dollars, and its book value is 10 billion dollars, then its intellectual capital is 90 billion dollars.

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INTELLECTUAL CAPITAL

• Three components of intellectual capital can be identified:

• 1. Human Capital• 2. Relational Capital• 3. Structural Capital

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• Human capital is the first component, consisting of the know-how, capabilities, skills and expertise of human members of an organization.

• Relational capital is the second component, consisting of any connection that people outside the organization have with it, together with customer loyalty, market share, the level of backorders, and so forth.

• Structural capital embraces the remaining component of intellectual capital, including both systems and networks, and cultures and values, together with elements of intellectual property such as patents, copyrights, trademarks, and so forth.

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• The market-to-book value ratio is sometimes used to indicate the value of intellectual capital in an organization.

• Three decades ago, the market-to-book value ratio was close to one in most businesses. Today, this ratio has grown to four on average.

• Microsoft is an extreme example. The book value of the company was 11 billion dollars in 1997, while the market value was 200 billion. This gives a market-to-book value ratio of 20.

• Afuah and Tucci (2003) argue that this ratio is caused by intellectual capital.

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Intellectual Capital Management

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INTELLECTUAL CAPITAL MANAGEMENT

• Sveiby (2001) developed a knowledge-based theory of the firm in which he distinguished between three families of intangible assets:

• 1. The external structure family• 2. The internal structure family• 3. The individual competence family

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THE EXTERNAL STRUCTURE FAMILY

• The external structure family consists of relationships with customers and suppliers and the reputation (image) of the firm. Some of these relationships can be converted into legal property such as trademarks and brand names. The value of such assets is primarily influenced by how well the company solves its customers’ problems, and there is always an element of uncertainty here.

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THE INTERNAL STRUCTURE FAMILY

• The internal structure family consists of patents, concepts, models, and computer and administrative systems. These are created by the employees and are thus generally owned by the organization. The structure is partly independent of individuals and some of it remains even if a large number of the employees leave.

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THE INDIVIDUAL COMPETENCE FAMILY

• The individual competence family consists of the competence of the professional staff, the experts, the research and development people, the factory workers, sales and marketing - in short, all those that have a direct contact with customers and whose work is within the business idea.

• Competence is a term introduced here. Competence can be defined as the sum of knowledge, skills and abilities at the individual level. With this definition, we say that knowledge is part of competence, and competence is part of intellectual capital.

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Given three families of intangible assets, it is possible to identify nine knowledge transfers. These knowledge transfers can occur within a family and between families, as below:

1. Knowledge transfers between individuals concern how to best enable the communication between employees within the organization.

The strategic question is: How can we improve the transfer of competence between people in the organization?

Activities for intellectual capital management focus on trust building, enabling team activities, induction programs, job rotation and master/apprentice scheme.

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• 2. Knowledge transfers from individuals to external structure concern how the organization’s employees transfer their knowledge to the outer world.

• The strategic question is: How can the organization’s employees improve the competence of customers, suppliers and other stakeholders?

• Activities for intellectual capital management focus on enabling the employees to help customers learn about the products, enabling job rotation with customers, holding product seminars and providing customer education.

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• 3. Knowledge transfers from external structure to individuals occur when employees learn from customers, suppliers and community feedback through ideas, new experiences and new technical knowledge.

• The strategic question is: How can the organization’s customers, suppliers and other stakeholders improve the competence of the employees?

• Activities for intellectual capital management focus on creating and maintaining good personal relationships between the organization’s own people and the people outside the organization.

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4. Knowledge transfers from competence to internal structure concern the transformation of human capital into more permanent structural capital through documented work routines, intranets and data repositories.

The strategic question is: How can we improve the conversion from individually held competence to systems, tools and templates?

Activities for intellectual capital management focus on tools, templates, process and systems so they can be shared more easily and efficiently.

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5. Knowledge transfers from internal structure to individual competence is the counterpart of the above. Once competence is captured in a system it needs to be made available to other individuals in such a way that they improve their capacity to act.

The strategic question is: How can we improve individuals’ competence by using systems, tools and templates?

Activities for intellectual capital management focus on improving human computer interface of systems, action-based learning processes, simulations and interactive e-learning environments.

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• 6. Knowledge transfers within the external structure concern what customers and others tell each other about the services of an organization.

• The strategic question is: How can we enable the conversations among the customers, suppliers and other stakeholders so they improve their competence?

• Activities for intellectual capital management focus on partnering and alliances, improving the image of the organization and the brand equity of its products and services, improving the quality of the offering, and conducting product seminars and alumni programs.

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• 7. Knowledge transfers from external to internal structure concern what knowledge the organization can gain from the external world and how the learning can be converted into action.

• The strategic question is: How can competence from the customers, suppliers and other stakeholders improve the organization’s systems, tools, processes and products?

• Activities for intellectual capital management focus on empowering call centers to interpret customer complaints, creating alliances to generate ideas for new products and research and development alliances.

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• 8. Knowledge transfers from internal to external structure is the counterpart of the above.

• The strategic question is: How can the organization’s systems, tools and processes and products improve the competence of the customers, suppliers and other stakeholders?

• Activities for intellectual capital management focus on making the organization’s systems, tools and processes effective in servicing the customer, extranets, product tracking, help desks and e-business.

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• 9. Knowledge transfers within the internal structure in which the internal structure is the backbone of the organization.

• The strategic question is: How can the organization’s systems, tools, processes and products be effectively integrated?

• Activities for intellectual capital management focus on streamlining databases, building integrated information technology systems and improving the office layout.

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The Economic School

Knowledge market framework

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Knowledge Market:

The first step in any knowledge initiative is recognizing that there are markets for Knowledge and every market system is embedded in and affected by social and political realities.

Players in the knowledge market:1. Buyers

2. Sellers

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Players in the knowledge market:1. Buyers: They look for insights, judgments, and understanding. 15 to 20 percent of managerial time is spent specifically in knowledge search or responding to requests for knowledge. 2. Sellers: knowledge sellers in an organization are people with an internal reputation for having substantial knowledge about a process or a subject. One of the challenges of knowledge management is to ensure that knowledge sharing is rewarded more than knowledge hoarding. 3. Brokers: also known as knowledge keepers and boundary spanners make connection between buyers and sellers. About 10 percent of managers are those who enjoy looking for knowledge in their company and facilitating its sharing. Librarian are another example of knowledge brokers. 120120

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The price system: Within organizations the medium of exchange is seldom money. The most important foundation in this regard in an organization is trust. However, knowledge price normally takes the form of:- Reciprocity: A knowledge seller spends time and effort needed to share knowledge effectively if he expects the buyers to be willing sellers when he is in need in the market for their knowledge.- Repute: A knowledge seller wants others to know and respect him as a knowledgeable person.- Altruism: Knowledge sharers who are motivated in part by a love of their subject and to some degree by altruism, whether for the good of the firm or based on a natural impulse to help others. 121121

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Knowledge market signals: - Position and education: Title or position and education are the most common formal signal indicating who has or should have valuable knowledge, - Informal networks: A very important signal that has its own advantages and drawbacks,

- Communities of practice: Co-workers who have contemporary knowledge form a group called community of practice. It is often self-organized.

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Three key factors in knowledge market inefficiencies:

- Incompleteness of information: About where to find the needed knowledge. - Asymmetry of knowledge: knowledge is not distributed in symmetry in the whole organization.

- Localness of knowledge: People normally get knowledge in face to face interactions which happens in their neighborhood.

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Knowledge market pathologies:Distortions that drastically inhibit the flow of knowledge:- Monopolies: If only one person or one group holds knowledge that others need, a knowledge monopoly exists. - Artificial scarcity: A corporate culture in which knowledge is the norm creates scarcity.- Downsizing can also create knowledge scarcity by eliminating employees whose absence shows them to be owner of essential knowledge. Knowledge often walks out of the door during downsizing. - Trade barriers: Individuals and department in organization establish trade barriers to their knowledge. A CEO could also create a barrier by banning subjects that threatens it.

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Developing effective knowledge market:

- Using information technology wisely: Electronic yellow pages.

- Building market place: Talk room, corporate universities.

- Creating and defining knowledge market value: To establish a consistent culture of knowledge sharing, you have to have money rewards, salary increases, promotions, and so forth.

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The benefits of knowledge market:

- Higher workforce morale: Employees see that their knowledge is valuable,- Greater corporate coherence: An active exchange of information and ideas in an atmosphere of openness and trust enables employees at all levels to understand what is happening in the company,- Richer knowledge stock: Knowledge markets are unlike markets for goods in that every sale increases the total stock knowledge in the organization. A thriving knowledge market continuously tests and refines organizational knowledge,- Stronger meritocracy of ideas: A genuinely open knowledge market will test official beliefs and expose the flaws of the faulty ones before they can do much damage.

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Approaches to Knowledge

The Organizational School

THE ORGANIZATIONAL SCHOOL

• The organizational school describes the use of organizational structures, or networks, to share or pool knowledge.

• Often described as knowledge communities, the archetypal arrangement is a group of people with a common interest, or problem, or experience.

• These communities are designed and maintained for a business purpose, and they can be intra- or interorganizational.

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Three approaches to knowledge management belonging to the organizational school:

1. Managing Common Knowledge

2. Socialization-Externalization-Combination-Internalization Process

3. Managing Knowledge Workers

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Managing Common Knowledge

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MANAGING COMMON KNOWLEDGE

• Dixon (2000) defines common knowledge as the knowledge that employees learn from doing the organization’s tasks.

• Common knowledge is managed through knowledge transfer mechanisms.

• Knowledge transfer in an organization can be defined as the process by which one unit (e.g., a group, department or division) is affected by experiences.

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• Dixon’s (2000) introduces five knowledge transfer mechanisms. The criteria that Dixon used to define these knowledge transfer mechanisms are the following:

• who is the intended receiver, • what is the nature of the task, and • what is the type of knowledge to be transferred. • The five transfer mechanisms for sharing knowledge in the

organization are serial, explicit, tacit, strategic and expert transfers.

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• Dixon’s five transfer mechanisms for sharing knowledge in the organization are:

• serial, • explicit, • tacit, • strategic and • expert transfers.

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MANAGING COMMON KNOWLEDGE• 1. Serial transfer takes place when the same group of knowledge

workers performs the same work one more time by applying their own knowledge.

• The nature of the task is frequent and non-routine, and the type of knowledge that is transferred can be both tacit and explicit.

• Serial transfer is a process that moves the unique knowledge that each individual has constructed into a group or public space so that the knowledge can be integrated and made sense of by the whole team.

• A team can be defined as a group of people with a shared commitment and synergy among members.

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• 2. Explicit transfer takes place when a group of knowledge workers performs the same work another group has done before by applying knowledge from the other group.

• The knowledge from the other group is transferred explicitly as words and numbers and shared in the form of data, scientific formulae, specifications, manuals and the like.

• The nature of the task performed by the team is frequent and routine.

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MANAGING COMMON KNOWLEDGE• 3. Tacit transfer takes place when a group of knowledge

workers performs the same work as another group by applying knowledge from the other group, but in a different context.

• The knowledge from the other group is transferred through social activity as tacit knowledge.

• The nature of the task that the group is engaged in is frequent and non-routine.

• This is also called near transfer, not because of the geography involved but because of the similarity between the source team and the receiving team.

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MANAGING COMMON KNOWLEDGE• 4. Strategic transfer takes place when a team has taken on a

task that happens only infrequently — a one-off project — and wants to benefit from the experience of others within the same organization.

• Typical of this transfer mechanism is that the senior-level managers are often involved and define what kind of knowledge is needed to solve the task.

• The type of knowledge that is transferred can be both tacit and explicit.

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• 5. Expert transfer takes place when generic and explicit knowledge is transferred from an expert source inside or outside the organization to enable the team to solve new problems with new methods and knowledge.

• This knowledge transfer is applicable when the team is performing a task that is infrequent and routine, and faces an unusual technical problem beyond the scope of the team’s own knowledge.

• Typically, the knowledge that is requested is not found in a manual or in standard documentation.

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Management has to emphasize all five mechanisms for successful sharing and creation of common knowledge:

For serial transfer, management has to stimulate meetings and contacts between group members.

For explicit transfer, documentation of work by the previous group needs to be stimulated.

For tacit transfer, management has to stimulate contacts between the two groups. For strategic transfer, strategic knowledge and knowledge gaps have to be

identified. For expert transfer, management has to create networks in which experts can

transfer their knowledge.

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Knowledge Creating CompanySocialization-Externalization-Combination-Internalization (SECI)

Process

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SECI PROCESS

• Nonaka et al. (2000) argue that the most important aspect of understanding a firm’s capability concerning knowledge is the dynamic capability to continuously create new knowledge out of existing firm-specific capabilities, rather than the stock of knowledge that a firm possesses at any one point in time.

• With this view of an organization as an entity that creates knowledge continuously, we need to reexamine our theories of the firm, in terms of how it is organized and managed, how it interacts with its environment, and how its members interact with each other.

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SECI PROCESS

• To understand how organizations create knowledge dynamically, Nonaka et al. (2000) proposed a model of knowledge creation, consisting of these elements:

• (1) the SECI process, the process of knowledge creation through conversion between tacit and explicit knowledge, in which SECI captures socialization, externalization, combination, and internalization

• (2) ba, the shared context for knowledge creation and the place to create knowledge, and

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SECI PROCESS

The first element of the Nonaka et al. (2000) model for knowledge creation is the SECI process.

An organization creates knowledge through interactions between explicit and tacit knowledge.

This interaction is called knowledge conversion. Through the conversion process, tacit and explicit knowledge expand in both quality and quantity.

There are four steps in knowledge conversion: from tacit to tacit, from tacit to explicit, from explicit to explicit, and from explicit to tacit. These four steps are called socialization, externalization, combination and internalization, and they cover the SECI process.

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SECI PROCESS

• The second element is ba, which is the name given the location or context where knowledge creation takes place.

• Knowledge needs a context to be created. The context is defined in terms of who participates and how they participate.

• Knowledge needs a physical context to be created; there is no creation without a place.

• Ba, which can be translated to place, offers such a context. Ba does not necessarily mean a physical place. The Japanese word ba means a place at a specific time.

• Ba is the real cultural, social and historic context where information is understood so that it becomes knowledge.

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SECI PROCESS

Ba lets participants share time and space, and yet it transcends time and space. In knowledge creation, especially in socialization and externalization, it is important for

participants to share time and space. A close physical interaction is important in sharing the context and forming a common

language among participants. Also, since knowledge is intangible, unbounded and dynamic and cannot be stocked, ba

works as the platform of knowledge creation by collecting the applied knowledge of the area into a certain time and space and integrating it.

However, as ba can be a mental or virtual place as well as a physical place, it does not have to be bound to a certain space and time.

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SECI PROCESS

• There are four types of ‘ba’ that correspond to the four stages of the SECI model.

• Each category describes a ba especially suited to each of the four knowledge conversion modes. These ba offer platforms for specific steps in the knowledge spiral process.

• Each ba supports a particular conversion process and there by each ba speeds up the process of knowledge creation.

• The four Ba's proposed by Ikujiro Nonaka are as below: • Originating Ba • Interacting Ba • Cyber Ba • Exercising Ba

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SECI PROCESS

• Originating Ba• It is the world where individuals share feelings, emotions,

experiences and mental model. An individual sympathizes or further empathizes with others, removing the barriers between the self and others. It is the primary ba from which the knowledge creation process begins and represents the socialization phase. Physical and face to face experiences are the key to conversion and transfer of tacit knowledge.

• Nonaka emphasizes that the physical contact is important in originating Ba to facilitate knowledge creation through Socialization. It is the beginning of the knowledge creation process in SECI model.

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SECI PROCESS• Interacting Ba • The interacting ba is more consciously constructed, as compared to

originating ba. Selecting people with the right mix of specific knowledge and capabilities for a project team, taskforce, or cross-functional team is critical. Through dialogue, individual’s mental models and skills are converted into common terms and concepts. Two processes operate in concert: individuals share the mental model of others, but also reflect and analyze their own.

• This is the place where tacit knowledge is made explicit, thus it represents the externalization process. Dialogue and the extensive use of metaphors is one of the conversion skills required. Here, interacting ba for collective reflection is institutionalized in the company culture. Interacting ba provide a place for dialogue where people engage jointly in the creation of meaning and value.

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SECI PROCESS

• Cyber Ba• It is a place of interaction in a virtual world instead of real space and

time. It represents the combination phase. • Here, the combining of new explicit knowledge with existing

information and knowledge generates and systematizes explicit knowledge throughout the organization. The combination of explicit knowledge is most efficiently supported in collaborative environments utilizing information technology. The use of online networks, group-ware, documentation and database has been growing rapidly over the last decade, enhancing this conversion process.

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SECI PROCESS

• Exercising Ba• Exercising ba supports the internalisation phase. Exercising ba

facilitate the conversion of explicit knowledge to tacit knowledge. Focused training with senior mentors and colleagues consists primarily of continued exercises that stress certain patterns and working out of such pattern. Rather than teaching based on analysis, learning by continuous self-refinement through on job training or peripheral and active participation is stressed.

• The SECI model that correspond to Exercising Ba is Internalization. •

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Four modes of knowledge conversion:

SocializationSocialization ExternalizationExternalization

InternalizationInternalization CombinationCombination

Tacit knowledge to Explicit knowledge

Tacit

from

Explicit

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Four modes of knowledge creation:Socialization: - Socialization is a process of sharing experiences and thereby creating tacit knowledge such as shared mental models and technical skills.- Apprentices work with their masters and learn craftsmanship not through language but through observation, imitation, and practice. - Examples of socialization: Honda brainstorming camps (informal meetings for detailed discussions to solve problems in development projects).

Externalization: - Externalization is a process of articulating tacit knowledge into explicit concepts. It is a process of concept creation and is triggered by dialogue or collective reflection.- Externalization is often driven by metaphor and/or analogy. Honda City: - Automobile Evolution; the concept of tall and short car (tall boy); an analogy between the concept of “man-maximum, machine-minimum”. 152152

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Combination: - This form of knowledge conversion involves combining different bodies of explicit knowledge. Individuals combine knowledge through such media as documents, meeting, telephone conversation, or communication networks. - Reconfiguration of existing information through sorting, adding, combining, and categorizing of explicit knowledge (as conducted in computer databases) can lead to new knowledge. - Kraft (dairy and processed food manufacturer) data from the POS (point of sales) system of retailers is utilized not only to find out what does and does not sell well but also to create new “ways to sell” that is, new sales systems.

Internalization:- Internalization is a process of employing explicit knowledge into tacit knowledge. It is closely related to “learning by doing”. - As an example, GE documents all customer complaints and inquiries in a database at its Answer Center in Kentucky, which can be used by members of a new product development team.

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Enabling conditions for knowledge creation: 1. Intention: The knowledge spiral is driven by organizational intention, which is defined as an organization’s aspiration to its goals. Commitment to the goals in Polanyi’s words underlies the human knowledge-creating activity. 2. Autonomy: At the individual level all members of an organization should be allowed to act autonomously as far as the circumstances Permit (self-organizing individuals or autopoietic systems). 3. Fluctuations and creative chaos: To stimulate the interaction between the organization and its environment (different from disorder, breakdown of routines habits). 4. Redundancy: The existence of information that goes beyond the immediate operational requirements of organizational members. Sharing redundant information promotes the sharing of tacit knowledge. 5. Requisite variety: Organization’s internal diversity to match the variety and complexity of the environment. Organizational members can cope with many contingencies if they possess requisite variety.

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Five-phase model of the organizational knowledge creation process:

1. The first phase: Sharing tacit knowledge: Sharing tacit knowledge among multiple individuals with different backgrounds, perspectives, and motivations. 2. The second phase: Creating concepts: Continuous dialogue in the form of collective reflection. The shared tacit mental model is verbalized into words and phrases and finally crystallized into explicit concepts. 3. The third phase: Justifying concepts: Knowledge defined as justified true belief. 4. The fourth phase: Building an archetype: Converting the justified knowledge into something tangible or concrete, namely, an archetype. 5. The fifth phase: Cross-leveling of knowledge: Knowledge creation as a never-ending process. The interatice and spiral process, which is called cross-leveling of knowledge, takes place both intra-organizationally and inter-organizationally. 155155

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Five phases model of knowledge creation:

Enabling conditions:1. Intention2. Autonomy3. Creative chaos4. Redundancy5. Requisite variety

Creating concepts

Sharing tacit knowledge

Justifying concepts

Building an archetype

Cross-leveling knowledge

Tacit knowledge in organization Explicit knowledge in organizations

Socialization Externalization Combination

Internalization

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Managing Knowledge Workers

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knowledge worker can be defined as an employee who is able to find, understand and use knowledge in the organization on his or her own.

A knowledge worker is qualified to explore relevant scientific information from corporate as well as national and international sources.

A knowledge worker is able to use such information in daily knowledge work to solve problems for customers.

Typical knowledge workers are lawyers in a law firm, engineers in an engineering firm, medical doctors in a hospital, product developers in a manufacturing company, professors in a business school, and planning staff in a government agency.

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• Shum (1998) makes distinctions between procedural work and knowledge work. All work is invariably a mix of the two, but increasingly, the procedural features are giving way to knowledge-based features. The distinctions are:

• Knowledge workers are changed by the information in their environment, and they in turn seek to change others through information.

• Diversity and ad hoc behavior patterns are common in knowledge work.

• Communication networks are highly variable, with different patterns and use of media.

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Gartner Group (2001) recommends the following three rules for management of knowledge workers:

Rule 1. Knowledge workers need to be energized intellectually: The most effective workers are those who continuously have new opportunities to learn, assume experiences and strengthen their portfolios.

Rule 2. Shorter employment tenure will be the norm: Tenure in any one position will likely be less than three years as knowledge workers seek new ways to develop and market their experiences. Rule 3. Knowledge work can be all consuming, so design

workloads appropriately: Vacations and shorter work weeks may make work schedules more tolerable, but the actions that will best prevent burnout are the redesign of work, the redefinition of metrics for collaborative assignments.

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The strategic school

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THE STRATEGIC SCHOOL

• The strategic school sees knowledge management as a dimension of competitive strategy. Indeed, it may be seen as the essence of a firm’s strategy.

• Approaches to knowledge management are dependent on management perspective.

• Distinctions can be made between:• The information-based perspective, • The technology-based perspective and • The culture-based perspective:

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• • Information-based perspective is concerned with access to information. I have a problem, and I am looking for someone in the organization who has knowledge that can solve my problem.

• • Technology-based perspective is concerned with applications of information technology. We have all this hardware and software in the firm: how can we use this technology to systematize, store and distribute information to knowledge workers?

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• • Culture-based perspective is concerned with knowledge sharing. We are an organization because division of labor makes us more efficient and because we can draw on each other’s expertise.

• All three perspectives belong in a knowledge management project to be successful. However, the main focus may vary depending on corporate situation.

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If reinventing the wheel all the time is the big problem, then the information-based perspective should dominate project focus.

If the technology in the firm is unable to provide even basic services to knowledge users, then the technology-based perspective should dominate project focus.

If knowledge workers are isolated and reluctant to share knowledge, then the culture-based perspective should dominate project focus.

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• Codification Strategy: • Knowledge is codified using a people-to-documents approach: it is extracted

from the person who developed it, made independent of that person, and reused for various purposes.

• Knowledge objects are developed by pulling key pieces of knowledge such as interview guides, work schedules, benchmark data, and market segmentation analysis out of documents and storing them in the electronic repository for people to use.

• This approach allows many people to search for and retrieve codified knowledge without having to contact the person who originally developed it.

• Hansen et al. (1999) call this the codification strategy for managing knowledge.

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Personalization strategy Knowledge that has not been codified is transferred in brainstorming sessions and one-on-one conversations. Knowledge workers collectively arrive at deeper insights by going back and forth on problems they need to

solve. These companies invest heavily in building networks of people. Knowledge is shared not only face-to-face, but

also over the telephone, by email, and via videoconferences. Networks can be fostered in many ways: by transferring people between offices, by supporting a culture in

which knowledge workers are expected to return phone calls from colleagues promptly, by creating directories of experts, and by using knowledge managers within the firm to assist project teams.

These firms may also have developed electronic document systems, but the purpose of the systems is not to provide knowledge objects. Instead, knowledge workers scan documents to get up to speed in a particular area and to find out who has done work on a topic. They then approach those people directly. Hansen et al. (1999) call this the personalization strategy for managing knowledge.

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Knowledge management strategy will either be people-to-documents for codification or person-to-person for personalization.

People-to-documents implies developing an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge.

Person-to-person implies developing networks for linking people so that tacit knowledge can be shared.

By codification, the company invests heavily in IT, where the goal is to connect people with reusable codified knowledge.

By personalization, the company invests moderately in IT, where the goal is to facilitate conversations and exchange of tacit knowledge.

By codification, the human resource approach will be concerned with training people in groups and through computer-based distance learning.

By personalization, the human resource approach will be concerned with training people through one-on-one mentoring.

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Stock, Flow and Growth Strategy Approaches to knowledge management are dependent on knowledge focus in the

organization. Distinctions can be made between expert-driven business, experience-driven business and efficiency-driven business:

• Expert-driven business solves large, complex, risky, new and unusual problems for customers. Competitive advantage is achieved through continuous improvisation and innovation. Knowledge workers apply general high-level knowledge to understand, solve and learn. Learning from problem solving is important to be able to solve the next new and unknown problem for customers. An expert-driven business is characterized by both new problems and new methods for solution.

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• Experience-driven business solves large and complicated problems for customers. The problems are new, but they can be solved with existing methods in a specific context every time. Competitive advantage is achieved through effective adaptation of existing problem solving methodologies and techniques. Continuous improvement in effectiveness is important to be able to solve the next problem for customers. An experience-based business is characterized by new problems and existing methods for solution.

• Efficiency-driven business solves known problems. The quality of the solution is found in fast and inexpensive application to meet customer needs. Competitive advantage is achieved in the ability to make small adjustments in existing goods and services at a low price. An efficiency-driven business is characterized by known problems and known methods for solution.

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Knowledge focus will be different in expert-driven, experience-driven and efficiency-driven businesses.

In the expert-driven business, learning is important, while previous knowledge becomes obsolete.

In the experience-driven business, know-how concerning problem solutions is important, while knowledge of previous problems becomes obsolete.

In the efficiency-based business, all knowledge concerning both problems and solutions is important in an accumulation of knowledge to improve efficiency.

These differences lead us to make distinctions between the following three knowledge management strategies of stock strategy, flow strategy and growth strategy:

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• • Stock strategy is focused on collecting and storing all knowledge in information bases in the organization.

• Information is stored in databases and made available to knowledge workers in the organization and in knowledge networks.

• Knowledge workers use databases to keep updated on relevant problems, relevant methods, news and opinions.

• Information on problems and methods accumulate over time in databases. • This strategy can also be called person-to-knowledge strategy.

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• • Flow strategy is focused on collecting and storing knowledge in information bases in the organization as long as the information is used in knowledge work processes.

• If certain kinds of knowledge work disappear, then information for those work processes becomes obsolete and can be deleted from databases.

• This is a yellow-pages strategy in which information on knowledge areas covered by individuals in the firm is registered.

• The link to knowledge sources in the form of individuals is made specific in the databases, so that the person source can be identified.

• When a knowledge worker starts on a new project, the person will search company databases to find colleagues who already have experience in solving these kinds of problems.

• This strategy can also be called person-to-person strategy.

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• Growth strategy is focused on developing new knowledge. New knowledge is developed in innovative work processes taking place when

knowledge workers have to solve new problems with new methods for customers. Often, several persons are involved in the innovation, and together they have gone

through a learning process. When a knowledge worker starts on a new project, the person will use the

intraorganizational and interorganizational network to find information on work processes and learning environments that colleagues have used successfully in previous innovation processes.

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• There is a strong link between these three knowledge management strategies and the three alternatives of expert-driven, experience-driven and efficiency-driven business. Typically, efficiency-driven businesses will apply the stock strategy, while experience-driven businesses will apply the flow strategy, and expert-driven businesses will apply the growth strategy.

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Critical success factors of Knowledge Management implementation

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Critical success factors of Knowledge Management implementation:

- Leadership - Culture - Structure and roles/ responsibilities - Information technology - Measurement

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Leadership:

- The impact of leadership on KM is more pronounced than other parts of organization because KM is a relatively new discipline and, therefore, not as established as other disciplines.

- The leader leading the process of KM should primarily believe in and support the message.- Best practices organizations have demonstrated the leadership and commitment to KM.

- CEO of the World Bank: We are not a funding bank, we are a knowledge bank. 178178

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Culture- Culture factor can be the most important to the success of KM within organizations.- Culture is the combination of shared history, expectations, and unwritten rules that affects the behaviour of everyone, from managers to clerks. - If your organization naturally has a tendency to share knowledge, the KM job is easier.- By designing KM initiatives around your culture, you in fact will be initiating a cultural change. - Cultural issues usually arise as a result of the following:

Lack of common perspectives.Lack of timeNonaligned reward systemsNo formal communication.

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Information technology

- KM is not about IT, but it is enabled by IT.

- The trap that most organizations fall into is not lack of IT but rather too much focus on IT only. - A KM initiative is not a software application.

- Organizations fall short in providing an IT infrastructure for sharing when:Use of wrong approachLack of great contentLack of common platformComplicated technologyInadequate technology and inadequate knowledge.

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Taxonomy of KM Software:

- Intranet-based tools;- Electronic Document Management (EDM);- Groupware;- Workflow;- Knowledge-based systems;- Business Intelligence (BI);- Knowledge Map Systems;- Innovation Support tools;- Competitive Intelligence (CI) tools;- Knowledge portals.

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Intranet-based tools: Intranets, as private networks that emphasize the organizational internal information, are becoming an important vehicle between the organizations and their employees. Pull style and as an alternative to the information overload generated by e-mails.

Electronic Document Management (EDM): EDM systems are repositories of important corporate documents (Explicit knowledge stores). Content Management Tool is another name for EDM systems.

Groupware: Groupware technology overcomes the difficulty in the cooperation between geographically dispersed workgroups. Push style where information is sent to the user.

Workflow: is a system that supports standard business processes by establishing the process flow and following its steps and tracking each activity that composes the process.

Knowledge-Based Systems: Expert systems, CBR (Case Based Reasoning) systems, and neural networks are some types of Knowledge-Based Systems.

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Business Intelligence (BI): is a set of tools to manipulate a mass of operational data and to find essential business information (Front-end systems – DSS – and Back-end systems – data warehouses.

Knowledge Map Systems: contains software that clarifies “who knows what” (Yellow Pages).

Innovation Support Tools: is software that contributes to knowledge generation along the product design process by creating a virtual environment that stimulates the proliferation of insights.

Competitive Intelligence Tools: aims at systematically feeding the organizational decision process with information about organizational environment in order to make possible to learn about it and to take better decisions. It depends heavily on the collection and analysis of qualitative information.

Knowledge Portals: function at home pages to integrate heterogeneous information sources, providing a standard interface to the users. 183183

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Category Origin of Concepts Examples

Intranet-Based Systems

Web Technologies Microsoft Internet Information Server

Electronic Document Management

Information Science Excalibur RetrievalWare and File Net

Groupware Computer Supported Cooperative Work (CSCW)

Notes (Lotus) and Exchange (Microsoft)

Workflow Organization and Methods ARIS Toolset (IDS Scheer)

Knowledge Base Systems

Artificial Intelligence Neugents (Computer Associates)

Business Intelligence Data Base Management Business Objects

Knowledge Map Information Science and HRM Gingo (Trivium) and Lotus Discovery

Innovation Support Tools

Innovation and Technology Management

Invention Machine

Competitive Intelligence Tools

Strategic Management and Information Science

Knowledge Works (Cipher Systems) and Vigipro (CRIQ/CGI)

Knowledge Portals Computer Networks and Information Science

Digital Dashboard (Microsoft), Lotus K-station and Sopheon

Categories of KM Software

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Measurement- Most people fear measurement because they see it as being synonymous with ROI and they are not sure how to link KM efforts to ROI.

- Although the ultimate goal of measuring effectiveness of a KM initiative is to determine some type of ROI, many intervening variables also affect the outcome.

-Two types of measurements:- Activities- Outcomes

- Measuring activities is through number of hits on a site, or the number of registered users.- Measuring outcomes is focused on finding a change in the numbers reflecting outcomes, such as sales or margines, hours spend preparing proposals, or cycle of time to respond to a customer request. 185185

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Final word:

In the end, the location of the new economy is not in the technology, be it the microchip or the global telecommunication network.

It is in the human mind.

Webber

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